SCOTUS Kneecaps the Fourth Branch; Effect on Healthcare Regulations Is Uncertain

In the final ten days of the just-concluded Supreme Court Term, SCOTUS delivered two gut punches and an upper-cut amounting to at least a TKO to federal administrative agencies. Sometimes it's only the independent agencies that are called the "fourth branch of government," and other times the term refers to all federal agencies. The underlying rationale for the term is that most agencies exercise power closely resembling the powers under Articles I (rule-making), II (enforcement), and III (adjudication) of the U.S. Constitution. This concentration of power in the hands of unelected government officials has been a matter of concern for many observers and for others a welcome innovation to meet the evolving needs -- technical, scientific, economic, and political -- of our society. (Count me as having a foot planted in both camps.)

In an email message to subscribers, WaPo editor and columnist Ruth Marcus had this to say about the three decisions:

Lost in the immunity news was the last step in this term's anti-regulatory trifecta. First, the court made enforcement harder, ruling that agencies seeking civil fines can't use in-house judges but have to go to federal court for jury trials.[1] Next, the court made regulation harder, overturning the doctrine of Chevron deference.[2] Monday, the court junked the usual six-year deadline and said regulations can be challenged at any time by someone newly affected.[3] Taken together, as Justice Jackson noted, this means "chaos."

My annotations:

[1] Securities and Exchange Commission v. Jarkesy, No. 22-859 [Opinion: Roberts, C.J.; decided 6.27.2024; 6-3] 
Held: "When the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial rather than adjudication by an administrative law judge."

From Justice Sotomayor's dissent:

Throughout our Nation’s history, Congress has authorized agency adjudicators to find violations of statutory obligations and award civil penalties to the Government as an injured sovereign. The Constitution, this Court has said, does not require these civil-penalty claims belonging to the Government to be tried before a jury in federal district court. Congress can instead assign them to an agency for initial adjudication, subject to judicial review.  This Court has blessed that practice repeatedly, declaring it “the ‘settled judicial construction’” all along; indeed, “‘from the beginning.’”  Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n, 430 U. S. 442, 460 (1977).  Unsurprisingly, Congress has taken this Court’s word at face value. It has enacted more than 200 statutes authorizing dozens of agencies to impose civil penalties for violations of statutory obligations.  Congress had no reason to anticipate the chaos today’s majority would unleash after all these years. (emphasis added) 

Today, for the very first time, this Court holds that Congress violated the Constitution by authorizing a federal agency to adjudicate a statutory right that inheres in the Government in its sovereign capacity, also known as a public right. According to the majority, the Constitution requires the Government to seek civil penalties for federalsecurities fraud before a jury in federal court.  The nature of the remedy is, in the majority’s view, virtually dispositive. That is plainly wrong. This Court has held, without exception, that Congress has broad latitude to create statutory obligations that entitle the Government to civil penalties, and then to assign their enforcement outside the regular courts of law where there are no juries. 

[2] Loper Bright Enterprises v. Raimondo, No. 22-451 [Opinion: Roberts, C.J.; decided 6.28.2024; 6-3]
Held: "The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Chevron is overruled." Notice: Another opinion by the Chief Justice that overrules a sturdy precedent that has long been vilified by conservatives.

Chevron U.S.A. v. Natural Res. Def. Council is was a 40-year-old mainstay of federal administrative law. It recognized that statutes may contain silences or ambiguities, whether intentionally or not, that need to be resolved by agencies as part of their enforcement duties. Chevron stated that in such cases, if the agency interpretation is reasonable, federal courts should defer to the agency, even if the court would not have adopted the agency's reasonable interpretation if it were writing on a clean slate.

In Loper Bright, the Court ruled that such deference violates § 706 of the federal Administrative Procedure Act (and intimated that it was unconstitutional as either a violation of separation of powers or a violation of the nondelegation doctrine). Section 706 provides that a "reviewing court shall decide all relevant questions of law." It doesn't say how a reviewing should go about this task, and (imho) it takes a singular lack of imagination to conclude that deferring to a reasonable interpretation by an expert agency isn't a a way of deciding relevant questions of law. At the same time, it take an audacious imagination to conclude, as the majority does, that affected parties and federal judges will know the difference between "respect" for agency interpretations (which is okay) and deference to agency interpretations (which is not).

The result of the Court's overruling of Chevron is that federal judges at the trial, appeals, and Supreme Court level, are now free to substitute their preferred interpretation of Congressional silence or ambiguity in place of an agency's interpretation. 

Consider for a moment that many of these disagreements will concern technical, scientific, or policy expertise that agencies typically have in abundance and that courts usually lack. Justice Gorsuch illustrated just such a contrast in an opinion in the past two weeks in which he confused nitrogen oxide (a pollutant that was the subject of EPA regulation at issue in Ohio v. Environmental Protection Agency, No. 23A349 [Opinion: Gorsuch; decided 6.27.2024]) with nitrous oxide ("laughing gas"). Unfortunately, this is no laughing matter.

Just a comment -- for the time being -- on the implications for healthcare regulations. This industry may be the most regulated in the country. The Department of Health and Human Services -- along with its "subsidiary" agencies: the Food and Drug Administration, Center for Medicare and Medicaid Services,  Center for Disease Control and Prevention, Public Health Service, Indian Health Service, Office of Civil Rights, National Institutes of Health, etc. -- issues tons of regulations, opinions, and guidance documents each year. The statutes it enforces are among the most complex ever conceived by Congress, and they are replete with ambiguities and critical gaps, all of which require the HHS agencies in the first instance to interpret and enforce. If reasonable agency interpretations are subject to second-guessing by generalist judges -- not to mention politically-partial generalist judges -- expect a lot of chaos.

[3] Corner Post, Inc. v. Board of Governors of the Federal Reserve System, No. 22-1008 [Opinion: Barrett, .J.; decided 7.1.2024; 6-3]
Held: "An Administrative Procedures Act claim does not accrue for purposes of 28 U.S.C. § 2401(a) — the default 6-year statute of limitations applicable to suits against the United States — until the plaintiff is injured by final agency action."

The majority opinion disagrees with the decisions of eight circuit courts of appeals (a majority). The lower courts ruled that an agency's promulgation of a final rule constitutes "final agency action," which starts the six-year clock running for facial challenges to the rule. After that, only litigants who can show that they were injured in some specific way as a result of the application of an agency's rule can challenge the rule "as applied" to them.

The majority's position on when a cause of action "accrues" under the APA may be the most radical of the three decisions Ruth Marcus identified above. As Justice Jackson wrote in her dissenting opinion:

The Court’s baseless conclusion means that there is effectively no longer any limitations period for lawsuits that challenge agency regulations on their face. Allowing every new commercial entity to bring fresh facial challenges to long-existing regulations is profoundly destabilizing for both Government and businesses.  It also allows well-heeled litigants to game the system by creating new entities or finding new plaintiffs whenever they blow past the statutory deadline. 

The majority refuses to accept the straightforward, commonsense, and singularly plausible reading of the limitations statute that Congress wrote. . . .

Justice Jackson concludes with an apt epitaph that applies to all three of these administrative-procedure cases --