HWG Client Advisory

By: Sean Lev, Christopher J. Wright, and Jason E. Neal

On June 27 and June 28, the Supreme Court released decisions in two very significant administrative-law cases. In Loper Bright Enterprises v. Raimondo,1 the Court overruled the “Chevron doctrine,” which required courts in many situations to defer to administrative agencies’ interpretations of ambiguous statutes. Instead, “courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” affording Executive Branch views limited persuasive weight. In Securities and Exchange Commission v. Jarkesy,2 the Court held that the Seventh Amendment requires that parties facing civil penalties from an agency have the right to a trial by jury, rather than an administrative proceeding, in all but fairly limited circumstances.

Important questions remain regarding the scope of both decisions and how lower courts will apply them. But there is no question that Loper Bright will have a significant impact on the ability of administrative agencies, including the Federal Communications Commission, to take actions based on imprecise congressional directions. It will rightly draw more attention and immediate scrutiny. But at least as important for parties facing administrative enforcement proceedings, Jarkesy creates new openings for potentially powerful challenges.

Loper Bright Enterprises v. Raimondo

For four decades, the Chevron doctrine has been a bedrock principle of administrative law: when courts are reviewing agency action, they must defer to reasonable agency interpretations of ambiguous statutory provisions. Over time, the Supreme Court has clarified and limited the doctrine, such as requiring that the agency’s interpretation reflect its considered judgment through some formal mechanism and that the statute at issue be one which the particular agency is tasked with implementing. In recent years, the Supreme Court relied on the doctrine much less, casting doubt on its continued viability, but lower courts continued to follow it as binding precedent.

In Loper Bright, the Supreme Court overruled Chevron in a 6-3 vote. In an opinion by Chief Justice Roberts, the Court discussed several reasons why Chevron was contrary to traditional understandings of the judicial role, but its holding was that Chevron deference is inconsistent with the Administrative Procedure Act (APA). The APA states that a court reviewing agency action “shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action” and shall set aside agency conclusions “found to be … not in accordance with law.”3

In the Court’s view, the APA requires that, rather than defer to agency interpretations, “[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” A court may still “seek aid from the interpretations of those responsible for implementing particular statutes,” and may even treat those issued “contemporaneously with the statute” and remaining “consistent over time” as “especially useful in determining the statute’s meaning.”

Importantly, the Court recognized that “the statute’s meaning may well be that the agency is authorized to exercise a degree of discretion,” such as where (as is the case in some circumstances with regard to the FCC) the relevant statute expressly delegates the agency authority to “give meaning to a particular statutory term” or grants the agency authority to act “subject to the limits imposed by” terms such as “appropriate” or “reasonable.” In such cases, the court “fulfills [its] role by recognizing constitutional delegations, fixing the boundaries of the delegated authority, … and ensuring the agency has engaged in reasoned decisionmaking within those boundaries.”

Finally, the Court stated that its decision does not “call into question prior cases that relied on the Chevron framework.” More specifically, holdings in those cases that “specific agency actions are lawful” remain “subject to statutory stare decisis.” However, as the Court made clear, stare decisis might not apply where there is some “special justification” for overruling the holding beyond just the court’s reliance on Chevron. Parties may well seek to take advantage of that opening to ask courts to reconsider their decisions in some cases.

The Court’s overruling of the Chevron doctrine will affect essentially every administrative agency, including the FCC. Many FCC actions are based on statutory provisions that are at least arguably ambiguous, and litigants affected by those decisions will in some cases have a greater chance to prevail in federal court. At the same time, as noted, many of the statutory provisions implemented by the FCC also incorporate standards such as “appropriate” or “reasonable.” The meaning of the Court’s reasoning regarding those instances where Congress clearly has authorized some amount of discretion will be important (and surely contested) moving forward both in FCC proceedings and in court cases reviewing FCC decisions. Likewise, the scope and durability of the Court’s assurance regarding the continued vitality as precedent of previous decisions upholding FCC action based on Chevron deference could prove important in many cases.

Securities and Exchange Commission v. Jarkesy

Jarkesy addresses a much narrower set of cases than Loper Bright: agency enforcement proceedings. The FCC, like the SEC and many other administrative agencies, has authority both to investigate violations of its rules and the statutes it is charged with implementing and to hold administrative proceedings to enforce purported violations. Parties found liable in those enforcement proceedings often face steep civil penalties.

In Jarkesy, the Supreme Court addressed the SEC’s use of administrative proceedings to seek civil penalties for securities fraud. The Court (in another 6-3 vote and with another majority opinion by the Chief Justice) concluded that an agency proceeding seeking civil penalties for securities fraud is a “suit at common law” within the meaning of the Seventh Amendment, thus requiring a trial by jury. The Court reasoned that the nature of the remedy—civil penalties meant to punish or deter, rather than solely to compensate victims—was “all but dispositive.” Because such remedies are “legal in nature,” rather than equitable, the Court reasoned that established precedent places them within the scope of the Seventh Amendment. The Court also noted that the “close relationship between” securities fraud under federal law “and common law fraud” “confirm[ed] that conclusion” regarding the Seventh Amendment’s application.

The Court rejected the government’s argument that a government proceeding for civil penalties based on a federal statute falls within an exception to the Seventh Amendment for “public rights.” The history and full meaning of the “public rights” exception is beyond the scope of this advisory. But after Jarkesy, in the Seventh Amendment context, the exception’s scope is quite narrow. Indeed, the same considerations the Court had relied on to find that the cause of action was a suit at common law under the Seventh Amendment (the penalty and the resemblance to a common-law cause of action) were the considerations to which it pointed to conclude that the public-rights exception did not apply.

Jarkesy’s impact will differ significantly across different agencies and across agency enforcement actions. It appears fairly clear that agencies seeking civil penalties based on violations closely resembling common-law claims must do so in federal court, rather than through agency enforcement proceedings. But there remains at least some scope for agencies to use enforcement proceedings for remedies other than civil penalties, and potentially for violations with no resemblance to traditional claims at common law.

Moreover, the Court did not explore in detail what is required to satisfy the Seventh Amendment. In the FCC context, for example, a party found liable and directed to pay a forfeiture or fine need not pay the fine until the United States brings a civil suit in federal district court to collect the unpaid forfeiture, in a “trial de novo.”4 The FCC may contend (as it has before the Supreme Court’s decision) that the availability of that trial de novo, even after a lengthy FCC enforcement proceeding resulting in a forfeiture order, satisfies the Seventh Amendment’s requirements.

Both of these cases will have significant impacts in their areas of administrative law, and how they apply may vary significantly by context.

* * * *

For more information, please contact Chris Wright, Sean Lev, or Jason Neal.

This advisory is not intended to convey legal advice. It is circulated publicly as a convenience and does not reflect or create an attorney-client relationship.

1 Loper Bright Enterprises v. Raimondo, Nos. 22-451, 22-1219 (U.S. June 28, 2024), available at https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.

2 Securities and Exchange Commission v. Jarkesy, No. 22-859, available at https://www.supremecourt.gov/opinions/23pdf/22-859new_kjfm.pdf.

3 5 U.S.C. § 706.

4 47 U.S.C. § 504(a).