The Court Curtails the Administrative State

Over the past century, perhaps nowhere has the U.S. Supreme Court departed more from constitutional structure and principles than in the area of administrative law. In the wake of the Great Depression and amid Franklin Roosevelt’s New Deal, the Court abruptly ceased enforcing such basic structural provisions of the Constitution as federalism, separation of powers, and limited government. The Court’s withdrawal from these areas would lead to a massive increase in the size and power of the federal administrative state, which has continued to attract criticism from conservative and libertarian jurists and scholars.

The so-called federalism revolution waged by the Rehnquist Court during the 1990s sought to revive some of the constitutional structures long ago abandoned during the New Deal constitutional revolution, as did the Tea Party political movement of 2010. However, curbing the growth of the administrative state has been a task with few rewards.

Into this arena now steps the Supreme Court with a pair of decisions announced one day apart. In Securities and Exchange Commission v. Jarkesy, the Court held that the Securities and Exchange Commission could not deprive a defendant charged with investor fraud of his Seventh Amendment jury trial right. More broadly, Jarkesy limited an administrative agency’s power to conduct juryless, in-house adjudications of common law claims. In the second case, Loper Bright Enterprises v. Raimondo, the Court overruled the infamous Chevron doctrine, which gave administrative agencies the power to interpret federal statutes deemed ambiguous. Loper may not only be the most far-reaching decision of this Court’s term, but may significantly restrain the overall power of the entire administrative state.

The Court’s opinion in Loper, authored by Chief Justice Roberts, and in which Justices Thomas and Gorsuch concurred, struck down perhaps the most notorious doctrine in administrative law. In the 1984 case Chevron v. Natural Resources Defense Council, the Court ruled that administrative agencies have the right and power to interpret ambiguous federal statutes and that the judiciary cannot override those interpretations.

Almost immediately, this Chevron doctrine attracted criticism, which has only intensified over the decades. To its critics, Chevron deference violated the basic separation of powers principles by transferring a judicial function to the executive branch. As Chief Justice John Marshall wrote in Marbury v. Madison, the seminal case on the doctrine of judicial review, “It is emphatically the province and duty of the judicial department to say what the law is.” A long line of case law had likewise ruled that courts, not the executive branch, should interpret statutes.

Reviewing the history of judicial review of agency decisions, Chief Justice Roberts found that even though the New Deal had ushered in a vast and rapid expansion of the administrative process, the courts had never relinquished their power to decide questions of law or statutory interpretation. Thus, despite the growth of the administrative state, courts had never deferred to agency interpretations of law in the way that Chevron commanded in 1984.

The Court in Loper then dismantled the foundations of Chevron, which were constructed from presumptions of congressional intent. Chevron deference could not be reconciled with the Administrative Procedure Act, enacted by Congress in 1946 to govern the administrative process and the judicial review of that process. Moreover, such deference actually defied the directives of the APA. Loper also dismissed the presumption that ambiguity in a statute necessarily reflected Congress’s specific intent that such ambiguity be resolved by the agency charged with administering the statute. As the Loper Court stated: “Ambiguity is not a delegation of law-interpreting power.” Consequently, the presumption in Chevron of such delegating intent was a mere fiction.

After dismissing the congressional intent basis of Chevron, the Court traced the history of problems and inadequacies with the doctrine. In part because ambiguity is difficult to define, and in part because the application of Chevron led to results clearly unintended by Congress, the Loper Court concluded that “experience has shown Chevron is unworkable” and that Chevron has “proved to be fundamentally misguided.” Consequently, the Supreme Court has not used or relied on Chevron since 2016.

In their dissenting opinion, Justices Kagan and Sotomayor passionately defended Chevron. Justice Kagan repeated the argument that statutory ambiguity did, in fact, reflect a congressional intent to delegate authority to the agency. The dissent also relied on the progressive view that experts were best positioned and equipped to manage the increasingly complex American society and economy. As Justice Kagan wrote, agency bureaucrats are “experts in the field” and therefore should be given authority to dictate the meaning of congressional statutes. By ending Chevron deference, the majority was rolling back agency authority, which, the dissenters implied, threatened the health and vitality of American democracy.

Not surprisingly, the dissent also attacked the majority on grounds of stare decisis, or deference to standing Court precedent. Overruling Chevron means overruling precedent, regardless of how much that precedent had overruled centuries of American jurisprudence. However, as Justice Gorsuch answered in his concurring opinion: Chevron was “a revolution masquerading as the status quo.”

The liberal defense of precedent and status quo carries suspect credibility, given the Left’s history of dismissing and even attacking precedent and tradition. The Warren era, exalted within liberal circles, fed at the trough of overruled precedent. When later Courts issued opinions contrary to liberal views on sexuality and marriage, the first call from the Left was to overrule those opinions. When the Court in 2010 issued Citizens United v. FEC, which struck down certain campaign finance restrictions, the Left waged a frontal attack against the Court and began a heated campaign to reverse the decision—this, of course, occurred before the Democrats became the party of wealthy donors. Even more broadly, the Left revived the court-packing campaign of 1937 when conservatives during the Trump Administration attained a clear majority on the Court.

Loper revealed the Left’s almost blind loyalty to a government run by administrative agencies, with the power and autonomy of agency “experts” transcending any other consideration. This blind support of the administrative state also appeared in the Jarkesy dissent.

The day before the Court announced Loper, it handed down another administrative law decision that likewise restricts a vast power acquired by the administrative state. In SEC v. Jarkesy, the Court restored the Seventh Amendment jury trial right to defendants against whom the Securities Exchange Commission seeks civil penalties for securities fraud. 

Jarkesy involved two investment funds launched by George Jarkesy between 2007 and 2010. The SEC charged Jarkesy with violating the anti-fraud provisions contained in various securities regulation statutes.  Relying on the Dodd-Frank Act of 2010, which conferred on the SEC the ability to enforce the civil penalty provisions of these various statutes through in-house proceedings before an administrative law judge, the SEC brought such an action against Jarkesy. This juryless action, according to the Court, violated Jarkesy’s right to a jury trial in an Article III court.

The Seventh Amendment preserves the right to a jury trial for all actions at common law. Even though the SEC was seeking to enforce statutory antifraud provisions, the Court, in an opinion authored by Chief Justice Roberts, ruled that those provisions replicated common law fraud and hence warranted a jury trial. 

The Court stated that the mere labeling of the fraud claims as “statutory” was irrelevant to the determination of whether they were common law in nature. Courts must look to the substance of an action, not to whether the action originated in some regulatory scheme. As Chief Justice Roberts wrote: “Congress cannot conjure away the Seventh Amendment by mandating that traditional legal claims be taken to an administrative tribunal.” When in doubt about the need for a jury trial, Roberts wrote, the presumption must be in favor of Article III courts.

While the majority in Jarkesy focused on the jury trial right and its hallowed place within the American constitutional scheme of liberty, the dissent concentrated on the power of administrative agencies to conduct their affairs free of judicial interference. To the dissent, the great threat was not a loss of liberty but a possible decline in administrative efficiency and autonomy.

The dissent called the Court’s decision “a massive sea change” and “a power grab” on the part of the judiciary. In both Loper and Jarkesy, the dissents condemned the “judicial hubris” of the majority, as if courts should never be so bold as to curtail the power of the administrative state. According to the Jarkesy dissent, “the American People should not mistake judicial hubris with the protection of individual rights.” How many times, one wonders, was such a statement made by conservative critics during the liberal ascendancy on the Court? Suddenly, to the dissent, tradition and precedent achieved almost untouchable status. It was as if the dissent completely forgot about how often liberal justices had ridiculed any conservative attachment to precedent and tradition. 

Often, it seems as if conservative legal thought constantly fights an uphill battle. And yet, liberalism seems to increasingly adopt the language of conservatism, as it has with its newly-found arguments on originalism. Take, for instance, the arguments of the dissent in Jarkesy. When the dissenting justices derided the “judicial hubris” of the minority, they mimicked Justice Scalia’s language of judicial restraint. The dissent cited George Washington for his belief in the separation of powers, even though the Left elsewhere marginalizes Washington as a racist.

The dissent, arguing that the majority’s opinion violated the separation of powers, claimed that the Court’s decision “offends the Framers’ constitutional design so critical to the preservation of individual liberty.” For nearly a century, liberal jurists and scholars have belittled similar conservative and libertarian arguments in defense of the separation of powers. Indeed, the modern administrative state rests on a dismissal of separation of powers principles. But for the Left to even use the language of separation of powers suggests some victory for conservatism.

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