SCOTUS New Ruling Limits Govt. Agencies’ Reinforcement Abilities

Uncertainty surrounds the boundaries of the authority of agencies to penalize lawbreakers following the recent reprimand of the SEC by the Supreme Court. 

In a 6-3 decision, the Supreme Court upheld the right to a jury trial for civil penalties against securities fraud brought by the SEC. According to attorneys, this calls into doubt the authority of several government bodies to levy fines for infractions of consumer, labor, and environmental protection statutes and regulations. Environmental Protection Agency, Consumer Financial Protection Bureau, Labor Department, and National Labor Relations Board enforcement authorities that have been in place for decades are now threatened by new possibilities.

Neither the Justice Department nor the EPA often resorts to litigation when dealing with enforcement proceedings; instead, they rely on administrative processes. Michael Regan, administrator of the Environmental Protection Agency, stated that he was still processing the news and that other federal agencies would need to determine its consequences.

With the Wall Street regulator having already drastically reduced its use of its in-house courts, the SEC is not expected to be drastically changed by the court’s decision in SEC v. Jarkesy. Financial regulators investigating fraud charges are having a hard time avoiding Jarkesy, but other watchdogs have been warned. Both the National Labor Relations Board and the Department of Labor are embroiled in continuous litigation and heavily rely on its so-called administrative law judges.

The Clean Water Act’s penalty system was upended by the Supreme Court’s verdict, which has left the EPA with several unanswered problems. The agency and courts will need to determine whether the regulatory framework being applied is closer to common law or unique, given the similarities in structure between the Safe Drinking Water Act and the Clean Air Act. The judgment also begs the concerns of whether or not it matters if an appeal of an EPA administrative decision is brought to a district court or an appellate court and whether or not a defendant might opt to go through administrative enforcement processes instead of judicial action. Both questions have a negative response, according to Justice Neil Gorsuch’s concurring opinion.

The Federal Mine Safety and Health Review Commission, which is responsible for supervising administrative law judges who decide cases involving enforcement measures related to mine safety, might potentially see changes under Jarkesy. The verdict might increase the time and money required in adjudicating challenged citations by forcing judges to impanel juries instead of settling cases individually. When asked how the mine commission’s activities will be affected by the Supreme Court decision, neither the commission nor its current head, Mary Lu Jordan, provided any responses.

The ruling has the potential to disrupt proceedings at the Federal Energy Regulatory Commission (FERC). However, the impact on the agency’s capacity to impose civil fines under the Federal Power Act and the Natural Gas Act is still being considered by legal experts.