US business regulations have been undermined by back-to-back court rulings

The Supreme Court has dealt federal regulators a double blow by eliminating a legal doctrine that gave them an advantage in court and then allowing challenges to the regulations long after they were finalized.

In an ideologically divided opinion, the court ruled Monday that the six-year statute of limitations for regulatory claims does not begin to run until a plaintiff is harmed by the agency’s conduct. That ruling, combined with the court’s June 28 decision to reject Chevron This doctrine will destabilize the country’s regulatory system, lawyers and experts say.

Taken together, the decisions “will undoubtedly lead to more challenges to federal agency actions in court and more successful challenges,” said Daniel Jarcho, a partner in the litigation and trial group at Alston & Bird who served as a trial attorney in the Justice Department during the Bush administration.

“They go hand in hand,” he said.

Agencies under fire

Decision on Monday Corner Post Inc. v. Board of Governors occurred after the court overturned Chevron IN Loper Bright Enterprises v. Raimondo three days earlier. The rejected legal doctrine required courts in regulatory disputes to defer to the agency’s reasonable interpretation when the statutory language is ambiguous. Leaving Chevron at the back, Chief Justice John Roberts said the majority did not overturn all the rulings in the cases on which the ruling was based.

But Corner post decision now allows new companies to challenge old regulations that previously applied under that framework, said Sambhav Sankar, senior vice president of programs at Earthjustice, a nonprofit that advocates for public interest environmental law.

Judge Ketanji Brown Jackson warned in his rulings that the court was authorizing a “tsunami of agency lawsuits” that could cripple the functioning of the federal government with its rulings.

“I hope he’s wrong, but I fear he’s right,” Sankar said. “These two cases, along with the Supreme Court’s overall approach to administrative law, are a full-frontal assault on the administrative state and the entire enterprise of federal regulation of corporations.”

The justices this term also restricted the Securities and Exchange Commission’s ability to use in-house judges to decide securities fraud claims in a decision that could have a broader impact on other agencies that impose penalties through administrative proceedings. The court in SEC vs. Jarkesy once again showed scepticism about broad administrative and executive powers.

Not everyone believes the decisions are as big a blow to the agency’s authority as some suggest.

In each decision, the justices say the courts are open and that there will be an equal opportunity for people who want to challenge the agencies’ exercise of their powers, said Jesse Panuccio, who served as deputy attorney general at the Justice Department in the Trump administration.

“I think the notion that regulators no longer have tremendous power over the citizens of this country and the businesses that operate in it is greatly exaggerated,” he said.

Panuccio, who is now a partner at the law firm Boies Schiller Flexner, noted that the court last week sided with the Biden administration in a case accusing it of pressuring social media companies to censor online speech, a practice known as “jawboning.”

“Agencies exercise authority in many ways, and even the threat of prosecution can force regulated entities to change their behavior,” he said.

Old Decisis

The universe of old laws that are now subject to legal challenge under Corner post is also limited. The decision applies to sections of the Administrative Procedures Act, not all federal laws, said Kara Rollins, litigation counsel for the New Civil Liberties Alliance, a right-wing legal group.

As she explained, this section of the APA provides a default six-year statute of limitations for challenging regulations, but many statutes provide different time limits for filing a lawsuit to invalidate regulations.

The Supreme Court noted, for example, that the Hobbs Act requires a plaintiff challenging regulations of the Federal Communications Commission, the Department of Agriculture, or the Department of Transportation to file suit within 60 days of the issuance of the challenged regulation.

However, Corner post The decision means that regulations with statutes of limitations set by the APA are essentially indefinitely exposed to lawsuits seeking to strike them off the books, said Aaron Saiger, a professor of administrative law at Fordham University.

The Supreme Court cleared the way for lawsuits seeking to invalidate the old rules, while also raising the bar on what agencies must do to defend those rules by striking down Chevron doctrine, he said.

This Loper Light This opinion was intended to reduce the number of lawsuits against the old rules that were upheld under Chevron saying that these decisions retain a special binding force known as “statutory” old decisions.”

But those earlier decisions were based on whether the court found the challenged provision was reasonable, not whether it was valid, Saiger said. Chevronbeing reasonable is not enough.

Moreover, the reservation regarding the statutory principle of stare decisis appeared in a non-binding fragment of the commentary and not in a binding judgment, he added.

Lower courts, and perhaps even judges themselves, will have to decide this issue during the course of the court proceedings, alongside other important issues raised in Corner post, Loper LightAND Jarkesy– said Renée Landers, professor of administrative law at Suffolk University.

Until these issues are clarified, we will all have to face uncertainty surrounding many federal regulations, she added.

“Whether you like a particular rule or not, there’s value in knowing what the rule is,” Landers said. “If the rules are constantly being challenged, no matter how much time has passed, it seems like that would be very destabilizing for any sensible regulatory system.”