Legal Docket: A seismic legal shift

MARY REICHARD, HOST: It’s The World and Everything in It for this first day of July, 2024. If you’re way up north, Happy Canada Day! Thanks for joining us! Good morning! I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. It’s time for Legal Docket.

Today we expect the U.S. Supreme Court to hand down the final opinions of the term. Those include former President Trump’s appeal of immunity for official acts, and cases on social-media censorship.

Last week, the court handed down ten opinions, and we’re going through them slowly. And because of limited time, we’re spreading them out instead of cramming them all in this one space. We want to give them the time they deserve. So we’ll analyze three more today.

First, the power of the administrative state.

The ground may not have shifted, but it’s a seismic legal shift: a 6-to-3 court overturned case precedent from 40 years ago. The so-called Chevron Doctrine is no more!

Under Chevron the courts allowed executive-branch agencies to use federal statutes written with broad and often ambiguous provisions, and then give bureaucrats the power to spin out of them narrow and highly specific rules.

Courts then had to defer to the agency’s interpretation of law so long as it was “reasonable.”

But then along came two disputes: Loper-Bright Enterprises v Raimondo and Relentless v Department of Commerce. To say last week’s result took the power of legal interpretation away from executive-branch agencies and returned it to the judiciary is probably to understate the case.

REICHARD: Agree. Because with Chevron gone, it should return lawmaking to legislators to write clear laws and then face political accountability for their work.

Loper-Bright and Relentless involved commercial fisheries that had specific clashes with federal regulators that in the Chevron era they couldn’t hope to win. To illustrate the point, I called up a woman involved in the Relentless case. Meghan Lapp has worked in the fishing industry for 15 years, starting out building commercial fishing nets. She’s now the liaison for fishing vessels dealing with regulators.

Lapp told me the law for years required the boats to take on government observers in order to enforce federal law.

MEGHAN LAPP: So we do that, no problem. But then the government wanted more of them on our boats, but Congress hadn't given them appropriations, any money to expand their own program. So they said, “Well, you can pay for it directly.” And they forced us to pay for this directly, out of pocket.

EICHER: The out-of-pocket amount was steep: up to 20 percent of revenues, putting serious strain on profit margins.

The agency claimed authority to set the fees because the law Congress wrote said nothing about who paid for what. An ambiguous law that the National Marine Fisheries Service cleared up on its own: writing a rule saying the fisheries had to pay!

The stakes were high enough that the fisheries lawyered up. They turned to a group called the New Civil Liberties Alliance, a libertarian effort to rein in the administrative state.

REICHARD: One of its lawyers was in the courtroom as Chief Justice John Roberts announced the opinion. So I called him up. John Vecchione described the chief as unequivocal:

JOHN VECCHIONE: Chevron is overruled. When I heard that, I was like, that is perfect. Because there was a lot of commentators were saying, well, they might kaiserize it, which is a cutting back of the deference, but not getting rid of it. …and “Chevron is overruled,” is what you wanted, because he's often accused in his opinions of having overruled something, and won't say it. Kagan accuses him of that a lot of times. So here he was. He was brooking no nonsense. He overruled it. He overruled it on statutory grounds, saying that the Administrative Procedure Act…says that we decide what the law is.

EICHER: The three justices in dissent were Elena Kagan, Sonia Sotomayor, and Ketanji Brown-Jackson. They made the point that federal agencies are filled with subject-matter experts who understand the complexity of the industries they regulate. And for the courts to sweep that expertise aside will cause large-scale disruption.

But Vecchione expounded on the court’s own experience:

VECCHIONE: The chief had a good answer to the fact that the Supreme Court has had to make up a lot of doctrines to get around using Chevron. And he says, "We've been doing this since 2016. We haven't used Chevron. So we should get rid of it for the lower courts too. Because when it gets up here, we try to avoid it. We're sort of wiggling around trying to, you know, avoid the doctrine. So why keep it?"

REICHARD: Some headlines I saw protested that this was pure “judicial arrogance.” And there is some truth in it; it just depends upon whose arrogance they don’t like.

After all, it was the late conservative justice Antonin Scalia who helped develop the Chevron Doctrine and came to regret it in practice. He witnessed creeping agency power as each new administration came in with different agendas.

Vecchione says the new ruling will bring a neutrality.

VECCHOINE: The lack of Chevron means in the Biden administration, they've got to match it up to the statute. If Trump wins, Trump's got to match it up.

EICHER: One criticism of the court’s action here is that it will collapse the entire federal regulatory framework, some of which has been operative for four decades. Vecchione says the court’s opinion specifically addressed that.

VECCHOINE: The Chief said all the old Chevron decisions on what statutes can do are not overruled. You know, everything we said before stays. This is going forward. Now that has a lot of handles on it, but the fact of the matter is, it's like a game of musical chairs. Well, the musical chairs just stopped in the Biden administration, their rulings on Chevron and the environmentalist ruling on Chevron. They all got Chevron deference, and all those laws were passed and have approval. So it stopped now, and it's got, they've got to show it. But it's not like the whole world comes apart right now.

Vecchione pointed out that some states have not used Chevron in years.

VECCHIONE: Congress has given the agencies a lot of power. Now they have to exercise it responsibly and show why their regulations comport with statutes. And that's a good thing. California hasn't had Chevron for years, and no one's ever told me that California regulatory authorities don't have enough power.

REICHARD: Back to our fisheries liaison, Meghan Lapp. Her take away from all of this?

LAPP: When you're fighting the government, when you're David, fighting Goliath, you have to refuse to lose. Refuse to lose, because that's how you win. And when they come at you again, you come back and you come back again until you win. And you know, this is a huge win for American fishermen. But it’s not just a win for fishermen. It's a win for all Americans. Finally, the little guy has a chance, has a shot in court. Finally, the American citizen has the same level of rights as the US Government in a court, and that's huge.

It’s also huge that this ruling will make it easier for courts to strike down things like the Biden administration’s new rules on Title IX. That’s the law aimed at protecting the rights of women and girls. The Biden Department of Education read into the statute definitions Congress simply didn’t write. On its own, the agency read in subjective feelings of “gender identity” and let them outweigh the physical protections for women and girls the law specifically intended.

EICHER: Next: another clipping of administrative agency power.

Here, the Securities and Exchange Commission ruled in an in-house proceeding that investment adviser George Jarkesy committed securities fraud. It ordered him to pay a $300,000 fine, plus nearly double that in what the SEC determined were illicit gains.

Jarkesy sued, arguing the SEC’s in-house system violates his right to a jury trial under the Seventh Amendment.

REICHARD: And the high court agrees with him: by a 6-3 vote, liberal justices in dissent. The decision says defendants facing civil penalties are entitled to a trial by jury before a neutral adjudicator.

Chief Justice Roberts announced the opinion, saying that allowing the executive branch agency to be prosecutor, judge, and jury is the “very opposite of the separation of powers” demanded by the Constitution.

I called up one of Jarkesy’s lawyers, Karen Cook.

KAREN COOK: The Dodd-Frank provision gave the SEC the ability to bring an enforcement action against anybody for anything in its in house courts, whether they regulated you or not. So this was an extraordinary grant of power that we had not seen before in other agencies. And it also gave the SEC the extraordinary power to decide which defendants got to go to federal court and have their constitutional rights protected and which ones would be relegated to their in-house courts, where there their own employees would judge their accusations.

EICHER: During oral argument in November, the Chief Justice made note of how expansive agency power has become:

JUSTICE ROBERTS: The extent of impact of government agencies on daily life today is enormously more significant than it was 50 years ago. I mean, the government is much more likely to affect you and proceed against you before one of its own agencies than in court.

Yet the dissenting justices thought this was another “power grab” by the majority that’ll throw the system into chaos. Though for lawyer Cook, it’s the opposite:

COOK: I think it was grabbing the power back that was taken away by the Dodd-Frank delegation of authority that allowed the administrative agency to decide if people got constitutional rights or not. You know, you have way more transparency in federal court than you do in these administrative proceedings. So you're not going to have more chaos. You're going to have less chaos. And so this is a separation of powers issue that one branch of government does not have the right to extinguish the authority of another.

REICHARD: As for George Jarkesy, an 11 year legal odyssey comes to a close. And Nick and David will talk about the economic impact in just a few minutes.

EICHER: Last opinion today involves January 6th Capitol riot defendants. This one is titled Fischer v. United States. A majority six justices tossed out the charges against one of those defendants.

REICHARD: And not the majority six you might expect! Liberal Justice Jackson agreed with her conservative colleagues. Conservative Amy Coney Barrett sided with the liberals.

The defendant was Joseph W. Fischer. He was charged under what the lawyers refer to as “(c)(2).” It deals with evidence tampering and was passed after the Enron financial scandal.

It all came down to how to interpret a catch-all phrase tacked onto the end of the law. It lists several actions that are illegal related to physical evidence: things like mutilating or concealing a document with the intent to impair its use in an official proceeding. But the tack on uses the words “otherwise obstructs, influences, or impedes any official proceeding …”

EICHER: The key word otherwise. Jeffrey Green on behalf of Fischer had the winning argument back in April:

JEFFREY GREEN: Until the January 6th prosecutions, the "otherwise" provision had never been used to prosecute anything other than evidence tampering, and that was for good reason. This Court has said that "otherwise," when used in a criminal statute, means to do similar conduct in a different way. The government would have you ignore all that or disregard all that and instead convert (c)(2) from a catchall provision into a dragnet.

Dragging in conduct Congress never anticipated, including a 20 year sentence for that charge alone.

The dissenters found it sufficient that Fischer’s actions delayed an official proceeding, and that was good enough to meet the statute’s intent.

REICHARD: Fischer still has to return to lower court to see whether the indictment survives under this narrower interpretation of that law.

This is also a charge that Special Counsel Jack Smith brought against former President Donald Trump, among other charges. But as do most other January 6 defendants, he’ll still face other charges brought by the DOJ. Very few were charged only with this violation.

That’s it for today’s opinion analysis; more tomorrow, until we finish them all.

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