Regulatory uncertainty ahead as Supreme Court rulings encourage companies to sue government

Litigation lawyers, fasten your seatbelts: you’re about to have a lot more to do.

In the case of the last three cases — Loper Bright Enterprises v. Raimondo, SEC vs. Jarkesy and Corner Post v. Board of Governors — The Supreme Court has significantly limited the regulatory powers of the executive branch.

The decisions also gave corporations new impetus to challenge regulations in court, lawyers experienced in handling regulatory disputes told Legal Dive.

This Loper Bright’s decision ended 40 years of court deference to federal agencies; the Jarkesy ruling undermines the future of agency internal administrative proceedings; and Corner post ruling effectively abolished the statute of limitations allowing plaintiffs to challenge agency regulations.

In her dissenting opinion in the Corner Post case, Justice Ketanji Brown Jackson predicted “tsunami of lawsuits” will flood the federal courts following the court’s rulings in this case and the Loper Bright decision issued three days earlier.

This Loper’s ruling offers a virtual invitation for in-house lawyers to go to federal courts to ask judges to interpret the law and its underlying legislative intent. Writing for the majority, Chief Justice John Roberts said federal courts are inherently suited to that role.

“There will be a race to the courts to finalize judicial review of what the law means,” said Varu Chilakamarri, a partner at K&L Gates and a former deputy assistant attorney general in the Justice Department’s civil division. “The courts will decide.”

This seismic shift In the ongoing dispute between regulators and the industries they oversee, power is shifting from the White House to the courts and is likely to limit the sweeping policy changes that are common when agency leadership changes with an administration, said Randolph Elliott, a veteran Washington litigator and partner at Mccarter & English.

As a result of the Loper case, the way companies challenge regulatory decisions has changed, as has the path to successful court outcomes, Elliott said.

“We’re going to see more and more of these people in federal district courts and appellate courts fighting these issues,” said Elliott, who practices energy and environmental regulatory cases. “Judges are now going to have to make decisions and apply the tools of statutory interpretation that the (Supreme) Court says are theirs to use.”

“So now you can tell your client we have to convince the judge that the agency is wrong,” he said. “The odds are better, and I think you’ll be able to use traditional legal arguments in some of these cases, and fewer technical arguments.”

The decision in the Loper case could limit the political goals of the new president taking office, he said.

Such philosophical shifts have become common among regulators, depending on whether the administration is Republican or Democratic. “New administrations don’t have as many opportunities to come in and change their minds as they used to,” Chilakamarri said.

The regulator “will have to have a statutory basis” to seek to change the rules for the industry and to guide policy outcomes, Elliott said of regulators’ policy choices. “So it will constrain them as well. In the short term, (Loper) will certainly guide the agencies.”

In terms of the impact on individual industries and agencies, Elliott said the Court Jarkesy’s Strike may have an impact on administrative proceedings first and foremost, environmental, antitrust and labor policy.

The Environmental Protection Agency has taken on broad authority under the Clean Air Act to advance climate policy goals, he said, and businesses can target individuals in district and appellate courts. The Federal Energy Regulatory Commission also oversees natural gas markets through administrative judges.

“The Jarkesy case will apply to any agency that uses administrative judges, although the exact scope of its application is unclear because it allegedly does not cover all enforcement actions,” Elliott said.

The Federal Trade Commission and the National Labor Relations Board have also sought to advance policy goals set by the Biden administration, often through administrative law courts.

Elliott and Chilakamarri agreed that the rulings would likely deter regulators from interpreting the law more aggressively, given their limited ability to challenge each case in federal courts.

“I think agencies will just have to be more careful about justifying regulations and interpretations when deciding cases,” she said.