Supreme Court Decisions Could Impact Federal Agencies

In June 2024, the U.S. Supreme Court handed down two decisions that could have far-reaching impacts on how federal agencies operate. Below is a review of these two key decisions.

SEC v. Jarkesy

On June 27, in a 6-3 ruling, the high court dealt a significant setback to the Securities and Exchange Commission (SEC). In this case, the agency had imposed a $300,000 civil penalty against George Jarkesy Jr., a hedge fund manager, for securities fraud. It also ordered his company to repay $685,000 in illegal profits.

The justices determined that the Seventh Amendment allows the defendant the right to a jury trial, so the SEC overstepped in calling for civil penalties. The SEC has long used civil penalties as enforcement tools, so this decision will restrict the agency’s ability to levy fines. The decision will undoubtedly impact the power of various government agencies, including the Food and Drug Administration, Environmental Protection Agency, and National Labor Relations Board.

In her dissent, Justice Sonia Sotomayor noted that Congress has enacted numerous laws that have empowered government agencies to impose civil penalties, and the Supreme Court has consistently approved this practice.

Chevron v. Natural Resources Defense Council

On June 28, in another 6-3 decision, the Supreme Court overturned a decades-old legal doctrine that allowed federal regulators to interpret unclear laws. This ruling calls into question longstanding principles and puts more pressure on Congress to enact new laws to address vague policy issues. It urges judges to rein in regulators that exceed their authority.

This case involves a dispute over a fishing industry regulation that required fishermen to pay independent observers to monitor their catch. Federal agencies relied on the Chevron decision to support dozens of regulations in various industries. However, business groups and those opposed to big government have long targeted the decision, arguing that it gave agencies too much power.

Among those pressing for the reversal of the Chevron decision were the tobacco, agriculture, homebuilding, timber, and gun industries. In addition, last year, the U.S. Chamber of Commerce filed a brief asserting that the application of Chevron had “fostered aggrandizement’’ of federal agencies at the expense of legislators and the courts.

The six judges of the majority determined that the Chevron decision had erroneously transferred the ability to interpret laws from the judiciary to federal agencies. In accordance with Chevron, judges were mandated to defer to agencies offering reasonable interpretations of ambiguous statutes. This ruling will inhibit a wide range of actions from consumer and environmental agencies.

Final Thoughts

Both of these rulings were decided along ideological lines, with the six conservative judges ruling for them and the three more liberal judges in dissent. No doubt, employers will celebrate the easing of regulations and the lessening of federal agency reach. However, environmental groups and consumer watchdog organizations are concerned that weakened agency authority will do great harm. It will be interesting to see how the decisions play out in the years ahead.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

About the author: Trent Cotney is a partner and Construction Practice Group Leader at the law firm of Adams and Reese LLP and NRCA General Counsel. For more information, call (866) 303-5868 or email [email protected].