Effects of SCOTUS Ruling Undermining Regulatory Authority Are Already Emerging

For headline-grabbing drama, few Supreme Court decisions could equal the justices’ July ruling that former presidents are immune from criminal prosecution for virtually all of their official acts. But a decision in the seemingly humdrum realm of administrative law could end up having far broader consequences, affecting vast areas of American life by slashing the power of federal regulatory agencies that police pollution, food safety, health care and countless other aspects of modern society.

Lower court judges have already cited the Supreme Court’s 6-3 decision, in a case known as Loper Bright, to halt implementation of Biden administration rules on overtime pay and health care discrimination. In the past three months, Loper Bright also has been invoked to challenge regulations on everything from hidden airline fees to gun sales to abortion referrals.

Justice Neil Gorsuch, who was part of the conservative majority in Loper Bright, described it as placing “a tombstone” on a doctrine that had existed for 40 years. That doctrine, known as Chevron deference, was named after the 1984 Supreme Court case in which it emerged, and it offered an answer to a recurring question: What happens when Congress passes a law granting power to a federal agency but fails to precisely define the boundaries of that power?

In such situations, the doctrine of Chevron deference instructed federal judges to rely on the interpretations made by federal agencies, as long as those interpretations were reasonable, since agencies typically have greater expertise in their subject areas than judges. The Loper Bright decision erased that, commanding federal judges to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”

Dissenting, Justice Elena Kagan noted that federal courts had cited Chevron deference 18,000 times, making it “part of the warp and woof of modern government, supporting regulatory efforts of all kinds — to name a few, keeping air and water clean, food and drugs safe, and financial markets honest.” She warned of “large-scale disruption.”

Legal experts view Loper Bright as a major transfer of power from agencies to judges. “You have incredibly technical areas of law for which the U.S. Supreme Court in Loper Bright has now paved a path for individual judges, or panels of three judges, to make decisions without having the technical expertise,” said Sanne Knudsen, a professor at the University of Washington School of Law, whose scholarship on deference doctrines has been cited by the Supreme Court.

Critics of the Chevron doctrine argued that letting agencies make legal interpretations led to constant uncertainty, with each presidential administration appointing new agency leaders who theoretically could change their interpretation of the law. But critics of the Loper Bright ruling counter that the same risk exists today — at the hands of judges rather than regulators.

Dan Weiner, director for elections and government at the Brennan Center for Justice, sees Loper Bright as the capstone of a series of recent Supreme Court rulings that limit agency power. Weiner called it the “culmination of a broader project to just cut the legs out from under government as we’ve known it since the New Deal.”

In theory, Congress could respond by writing more detailed legislation when it comes to federal agency power. But in the current political landscape, Knudsen said, that’s unlikely. As she put it, “cases like Loper Bright put more power in the hands of individual judges to decide policy questions, taking them further from the hands of the experts that Congress has otherwise delegated power to.”

Loper Bright has been celebrated by foes of regulation. The decision “gives us the thunder and lightning we need to beat back the aggressive anti-gun agenda of the rogue Biden Administration,” Gun Owners of America exulted in a press release after the ruling.

The advocacy group Democracy Forward counted 110 federal cases in which parties or judges have cited Loper Bright as of Sept. 6 — and that figure will only rise in the coming months and years. Here are some of the most consequential pending cases.

Labor

Who Is Eligible for Overtime Pay?

It took only hours for the decision to ripple into a lower court. On June 28, the day Loper Bright was announced, a federal judge in Texas issued a preliminary injunction against a new Department of Labor rule expanding eligibility for overtime pay. The judge blocked the rule from being enforced against the state of Texas as an employer, explaining that his decision “carefully follows Loper Bright’s controlling guidance.”

Among other things, the regulation seeks to prevent employers from deeming someone an “executive,” and thus exempt from overtime pay, if that person’s salary is below $43,888 (or below $58,656 next year). “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay,” acting Secretary of Labor Julie Su said when the regulation was announced in April. “That is unacceptable.”

Texas challenged the rule, arguing the DOL had exceeded the authority granted by Congress in the Fair Labor Standards Act; the judge wrote that he expects to reach a final decision “in a matter of months.”

Health Care

Does Obamacare Protect Transgender People From Discrimination?

On July 3, three federal judges in different states, all citing Loper Bright, issued orders blocking implementation of a new rule from the Department of Health and Human Services that would prohibit discrimination in health care based on gender identity.

Mary Rouvelas, legal advocacy director for the American Cancer Society’s Cancer Action Network, said her group had supported the regulation because “nondiscrimination is critical for LGBTQ individuals, who suffer a disproportionate cancer burden.” However, the rule had become “a political football” amid debates over gender affirming care, Rouvelas said, and under Loper Bright federal judges no longer had to defer to HHS’ determination that gender identity is protected under the Affordable Care Act, which prohibits discrimination “on the basis of sex” but does not use the phrase “gender identity.”

Fifteen states sued in Mississippi federal court, arguing that HHS overstepped its authority. The states claimed the rule would force them to “use taxpayer funds to pay for unproven and costly gender-transition interventions through Medicaid and state health plans — even for children who may suffer irreversible harms.” District Judge Louis Guirola Jr. issued a nationwide injunction against the rule. The case will continue while the regulation is on hold, as will similar cases in Texas and Florida.

Transportation

Can a Federal Agency Force Airlines to Reveal Fees?

The Department of Transportation issued a rule in April that requires airlines to, in the words of Secretary Pete Buttigieg, “inform you, before you buy a ticket, of fees they will charge you.” The rule specifies that baggage, change and cancellation fees must be disclosed the first time an airline quotes a price to a customer. At present, according to DOT court filings, “surprise costs” cause consumers to “overpay by half a billion dollars annually.”

In May, a group of airlines sued to stop the rule, claiming that the DOT exceeded its authority. According to the airlines, the agency can order them to halt unfair or deceptive practices after they’ve occurred, but it cannot tell them what their practices should be going forward. The airlines sought a stay. The DOT counters that its new regulation is based on “well-established” legal authority.

On July 1 — the Monday following the Friday issuance of the Loper Bright ruling — lawyers for the airlines cited the case, telling the 5th U.S. Circuit Court of Appeals that “resolving this statutory-interpretation issue is a task for this Court, especially because, with Chevron overruled, only courts have ‘the power to authoritatively interpret the statute.’”

At the end of July, a panel of three 5th Circuit judges stayed the rule, concluding that the airlines had “made a strong showing that the Rule exceeds the agency’s authority.” They placed the case on an expedited path toward a final determination of whether the rule should be struck down.

Employment

Can the FTC Ban Agreements That Prohibit Employees From Joining a Rival Company?

In April, after six years of study, the Federal Trade Commission issued a rule banning noncompete agreements, which restrict workers from accepting employment with competitors for a period of time after leaving their current jobs. The FTC determined the rule was needed because such contracts impair “the fundamental freedom of workers to change jobs,” harm innovation and are “often exploitative.” Of the more than 26,000 comments the agency had received about the proposed ban, over 25,000 were supportive, the FTC said. A group of plaintiffs that includes the U.S. Chamber of Commerce filed suit in federal court in Texas, arguing the FTC had exceeded its authority.

On Aug. 20, citing Loper Bright, the judge in this case agreed with the plaintiffs and issued a final order that set aside the ban on noncompetes, declaring that the FTC had “promulgated the Non-Compete Rule in excess of its statutory authority.” The Chamber of Commerce called it a “significant win” in the group’s “fight against government micromanagement of business decisions.” An FTC spokesperson told ProPublica that the agency is “seriously considering a potential appeal” and added that the “decision does not prevent the FTC from addressing noncompetes through case-by-base enforcement actions.”

Guns

Can the Government Require Background Checks for Firearms Sold at Gun Shows?

In April, the Bureau of Alcohol, Tobacco, Firearms and Explosives issued a rule that would close a loophole through which guns are sold without background checks online and at gun shows. Attorney General Merrick Garland called it “one of the most significant gun regulations in decades.” Under the rule, he said: “It does not matter if guns are sold on the internet, at a gun show or at a brick-and-mortar store. If someone sells a gun predominantly to earn a profit, they must be licensed, and they must conduct a background check to ensure that the buyer is not barred by law from having a gun.”

In May, 21 states sued to block the regulation in federal court in Arkansas. The complaint noted that the Supreme Court would soon be hearing arguments in Loper Bright and contended the ATF had exceeded its authority in adopting the rule.

Another group of plaintiffs filed suit in the Northern District of Texas, also seeking to block the ATF rule. Those plaintiffs include the states of Texas, Louisiana, Mississippi and Utah, as well as Gun Owners of America, which has called the rule “tyrannical.” On June 11, weeks before Loper Bright was decided, the judge in the Texas case, Matthew Kacsmaryk, issued a preliminary injunction banning enforcement of the rule against any of the plaintiffs in the Texas case. Kacsmaryk based his decision in part on his belief that the plaintiffs would likely succeed in proving, in further proceedings, that the ATF had exceeded its authority. The Justice Department appealed the preliminary injunction to the 5th Circuit.

On July 10, less than two weeks after the Loper Bright decision, the judge in Arkansas went the opposite direction from the judge in Texas, denying the request from the 21 other states that he block the ATF rule closing the gun-show loophole. In doing this, the Arkansas judge cited a passage in Loper Bright that he views as supporting the ATF’s authority to close the loophole.

Much remains to be argued in the Texas and Arkansas lawsuits; both injunction rulings are being appealed on multiple grounds. But the Arkansas judge’s use of Loper Bright to support an agency’s authority to regulate highlights the still-unsettled nature of the high court’s pronouncements in Loper Bright. As the U.S. Chamber of Commerce noted, there is a need for lower courts to “interpret” certain aspects of the decision going forward.

Abortion

Can Federal Aid for Family Planning Be Withheld From States That Prohibit Abortion?

In 2021, HHS issued a rule related to Title X grants, which have existed since 1970 and are intended to fund family planning programs. This rule, as described by the 6th U.S. Circuit Court of Appeals, requires states receiving Title X grants to “provide neutral, nondirective counseling and referrals for abortions to patients who request it.” Tennessee had received Title X grants for more than 50 years. But after the Supreme Court overturned Roe v. Wade in 2022, Tennessee banned abortions with exceptions only to “prevent the death of the pregnant woman or prevent serious risk of substantial and irreversible impairment of a major bodily function.” Tennessee said it would provide counseling and referrals only for abortions that are legal in the state. In response, HHS ended Tennessee’s Title X funding. The state sued, seeking an injunction to prevent the grant from ending and claiming that HHS exceeded its authority by requiring unbiased abortion counseling and referrals as a condition for Title X aid.

Just a year earlier, the 6th Circuit, in a similar case, had ruled that HHS did have the statutory authority to condition Title X funding in this manner. In doing so, the 6th Circuit relied on Chevron deference, finding that the new HHS regulation was based on a reasonable interpretation of this ambiguous statute. (The appeals court also cited a second precedent, a Supreme Court decision from 1991 that applied Chevron deference to the same Title X issue.)

Given the end of Chevron deference, should the 6th Circuit’s 2023 decision upholding HHS’ abortion counseling and referral rule be stripped of any precedential effect? Tennessee certainly thought so. But two judges from the 6th Circuit disagreed, pointing to a line in Loper Bright that says “we do not call into question prior cases that relied on the Chevron framework.” Therefore, the 6th Circuit reasoned, its 2023 precedent upholding HHS’ rule had withstood the death of Chevron deference and, as a result, the injunction requested by Tennessee was unwarranted. One judge on the 6th Circuit’s three-judge panel disagreed, however, citing different passages from Loper Bright to reach the opposite conclusion. The case is now continuing in the Tennessee district court where it was originally filed.

Taxes

Can the FTC Stop a Tax-Preparation Company From Making Misleading Claims?

In January, after an investigation prompted by ProPublica’s reporting, the FTC concluded that Intuit, the maker of TurboTax, used deceptive advertising to lure customers into paying for tax preparation services when they were eligible to file for free under a program sponsored by the government. Purchases by such customers generated roughly $1 billion in revenue for Intuit and other tax prep companies in 2019 alone, according to a government audit.

The FTC ordered Intuit to cease and desist from making any misleading “free” claims in its advertising. In response, Intuit appealed the FTC’s ruling to the 5th Circuit and asserted that Loper Bright had strengthened its argument for jettisoning the decision. “Whatever ‘deference’ the FTC claimed its interpretation of the FTC Act was due did not survive the Supreme Court’s intervening holding,” lawyers for the company wrote.

Intuit is also citing a recent Supreme Court decision that found the Securities and Exchange Commission can’t bring certain kinds of suits before its own administrative law judges; Intuit argues the decision, which focused on a securities fraud case in which civil penalties were sought, should apply to the FTC, too. The FTC disagrees, arguing that its action, originally brought before an FTC administrative law judge, is different from the relevant SEC action. For example, no civil penalties were involved in the action against Intuit. In a sign of how much rides on the outcome in this appeal, amicus briefs have been filed on both sides by a group of more than 20 states; numerous consumer advocate groups, including Public Citizen and the Consumer Federation of America; business groups like the U.S. Chamber of Commerce and the National Federation of Independent Business; and the libertarian Cato Institute.

Immigration

Can a Judge Review the Revocation of an Immigrant’s Opportunity for Citizenship by Marriage?

During the Supreme Court’s next term, it will hear a case involving the intricate rules for becoming a U.S. citizen through marriage. The case, Bouarfa v. Mayorkas, asks the justices to consider a very specific scenario, in which a Palestinian national married a U.S. citizen named Amina Bouarfa, who then petitioned to make her new husband eligible for citizenship through marriage. The United States Citizenship and Immigration Services approved Bouarfa’s petition but then, two years later, revoked that approval, saying the couple’s union had been “a sham marriage” for “the purpose of evading immigration laws.” The question in this case is whether that revocation is subject to judicial review.

The case also reveals an unexpected potential consequence of the Loper Bright ruling. It’s typically perceived as a victory for conservative foes of regulation, but liberals may be able to use the ruling to their advantage in certain areas. For example, in the realm of immigration, conservatives typically want more vigorous federal regulation. But in this case, liberal advocates of immigration reform are attempting to use Loper Bright to check the power of an immigration agency. “We’ll see whether the people who advanced Loper Bright might end up having a little bit of buyer’s remorse,” Weiner, of the Brennan Center for Justice, said.

Advocates for immigration reform have filed an amicus brief that supports Bouarfa’s right to judicial review by citing passages from Loper Bright. In addition, lawyers for Bouarfa have cited another major administrative law ruling last term from the Supreme Court’s conservative majority, Corner Post v. Board of Governors of the Federal Reserve, which greatly expanded the possibilities for suing federal agencies. That ruling led dissenting Justice Ketanji Brown Jackson to warn that the “tsunami of lawsuits against agencies that the Court’s holding in this case and Loper Bright have authorized has the potential to devastate the functioning of the Federal Government.”

It’s too early to say whether a legal tsunami is coming, but with the Supreme Court set to open its new term in two weeks, it’s clear that a wave is already growing.