Trump Must Order Agencies to Audit Claims of Statutory Authority

President-elect Donald Trump, who has pledged to issue a slew of executive orders once he takes office, should issue one requiring every agency head conduct a comprehensive accountability audit to review interpretive compliance with constitutional and statutory limits on agency authority.

These audits would emphasize aligning agency actions with evolving US Supreme Court precedents that redefine limits of their authority. This effect would be similar to a corporate audit that considers individual liabilities, including assessing risks when a major new decision is announced that makes the corporation vulnerable to litigation and resulting adverse judgments.

The need for such audits comes as federal agencies continue to operate without considering a series of recent, revolutionary high court decisions that have fundamentally changed how the legitimacy of agency actions is evaluated.

The Securities and Exchange Commission, for example, has imposed its authority questionably to bring enforcement actions against cryptocurrencies and mandate climate and other environmental, social, and governance disclosures, due to ill-defined statutes from Congress.

These and similar actions lack statutory foundation and creep far beyond the scope of the SEC’s limited mandate in its 1933 and 1934 Securities and Exchange Acts to protect the financial integrity of capital markets and to protect investors from fraud.

The current leaders of federal agencies don’t seem to have internalized that there have been monumental changes in administrative law ushered in by three particular court decisions. These changes have created more aggressive judicial oversight, an awakened understanding of the abuses of agency remits, and a more realistic view of the dangers of the rising administrative state.

In West Virginia v. EPA, the Supreme Court gave real teeth to the major questions doctrine. When Congress wants to authorize an agency to regulate on big issues—so-called “major questions” such as climate change—Congress must do so through a clear legislative directive. If the language of an agency’s authorizing statute doesn’t do so, the agency can’t presume Congress granted broad authority over a major question, the 2022 ruling concluded.

Neither the 1933 and 1934 SEC authorization acts had items such as environmental, social, and governance on their mind, so agencies should uniformly reassess their interpretations of authority to ensure they haven’t taken positions that run afoul of the major questions doctrine.

Last year, the Supreme Court held in Loper Bright Enterprises v. Raimondo that courts no longer have to defer to federal agencies’ own interpretations of their authorizing statutes, expressly overruling the doctrine of Chevron deference. Agencies are now facing legacy interpretive positions that may be indefensible when no longer shielded by Chevron. Just about every rule that was upheld because of deference will need to be tested to determine if a more robust review without deference can be upheld.

The audits anticipated by the proposed executive order would allow agencies to assess internally the viability of past interpretations if they’re tested by a court’s more robust textual interpretation of the agency’s statutory authority. If an agency finds that it can only defend a new interpretation of its authority in a post-Loper Bright world, then it should engage in new rulemaking to revoke or amend the existing rules to conform with the evolved and presently acceptable interpretive rules and methodologies.

An audit-based corrective action is almost certainly needed following the high court’s decision in Corner Post, Inc., v. Board of Governors, issued one month after Loper Bright, in which the justices arguably have opened the door for litigants to even challenge regulations promulgated decades ago.

Corner Post held that the six-year statute of limitations for “facial challenges” to rulemakings accrues not necessarily when the rule is final but only when a plaintiff is “adversely affected or aggrieved by agency action” under the Administrative Procedure Act.

Proactive measures considering this decision would be worthwhile, as Justice Kentanji Brown Jackson’s dissent recognized agency vulnerabilities from the cross-case effects of Loper Bright and Corner Post, predicting that “every legal claim conceived of in those last four decades—and before—can possibly be brought before courts newly unleashed from the constraints of any such deference.”

Corporate managers have a fiduciary duty to their shareholders to conduct such audits and can be sued for failing to initiate them. Similarly, agencies should be seen as having a fiduciary duty to their principals—Congress and the public—to conduct audits assessing their vulnerabilities to legal challenges, especially when Corner Post broadens the field of potential litigation that may be based on post-Loper Bright interpretive challenges.

Without an executive order from the next administration of the kind proposed here, federal agencies won’t likely adapt their interpretations prudently. The incoming administration has a do-right mandate and a chance to correct this failure of responsible reflection. Adopting level-set assessments is simply good government and effective management.

The cases are West Virginia v. EPA, U.S., 20-1530, 20-1531, 20-1778, and 20-1780, 6/30/22; Loper Bright Enterprises v. Raimondo, U.S., 22-451 and 22-1219, 6/28/24; and Corner Post, Inc., v. Board of Governors, U.S., 22-1008, 7/1/24.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Donald J. Kochan is professor of law and executive director of the Law and Economics Center at George Mason University Antonin Scalia Law School.

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