The US Supreme Court is turning its anti-regulatory campaign against federal agencies that scrutinize Wall Street banks and seek to break them up
On Monday, the judges will consider the question of whether to file complaints from the parties
A ruling against the government could undermine the work of two of the most powerful federal regulators. In the last fiscal year, the SEC filed more than 700 enforcement actions and won $6.4 billion in judgments and injunctions, including from investment banks. The FTC, which is also investigating
The decision would continue a string of Supreme Court decisions that undermine the federal administrative state. In June, the court and its 6-3 conservative majority
“This court could potentially curtail the agencies’ rulemaking powers, their enforcement powers, and their adjudicative powers,” said
Recent cases have focused on advocacy issues that can have a large practical impact. A key question is whether federal district courts have jurisdiction to hear opposition to the agency’s system of using full-time administrative law judges, known as ALJs, to hear many of their cases.
The suitors are accountant Michelle Cochran in the SEC case and body camera maker Axon Enterprises Inc. in the FTC case—argued that the system violates the Constitution because the job protections granted to administrative law judges too insulate them from presidential oversight. Cochran and Axon cite a 2010 Supreme Court decision
“It’s really crazy,” said Margaret Little, senior litigation counsel for the New Alliance for Civil Liberties and one of Cochran’s attorneys. “It doesn’t make any sense to force people to drag out years of proceedings that are destined to be delayed because they are unconstitutional.”
But the US Solicitor General
Axon is fighting the FTC’s efforts to block the company’s acquisition of a competitor. In addition to challenging the tenure protections for the Commission’s single administrative law judge, the company seeks to challenge the process by which the FTC and the Justice Department decide which agency will review the deal. Unlike the FTC, the Justice Department hears cases only in federal court.
A Supreme Court defeat by the commissions could reduce their use of administrative law judges, something that has already begun to happen at the SEC after the 2018 Supreme Court
“The ultimate goal is to move enforcement agencies out of their domestic courts, which rule for them 100 percent of the time, and back into the federal courts, where people have constitutional protections,” Little said.
The Biden administration disputes the characterization of domestic courts as one-sided, saying research shows agencies lose a significant percentage of those cases.
“If you look at the difference between what happens when agencies go to federal court and when the FTC takes it in-house, you see a bit of a disconnect,” said Dorsey, who worked at both the FTC and the Justice Department during the Trump administration. .
More broadly, a Supreme Court defeat for the agencies could make them more vulnerable to new litigation, legal experts say.
The Axon case “may really open the door for other types of FTC challenges,” he said
“Given the guidance of the Supreme Administrative Law Court, now is not the best time to use your authority to the maximum,” Gavill said.
Supreme Court last year
The Securities and Exchange Commission (SEC) is already operating in the shadow of a Supreme Court decision by the EPA that could fuel expected legal challenges to the agency’s proposal to require public companies to disclose information about the climate risks they face. And the federal appeals court in May
The Supreme Court’s show of concern about how administrative agencies operate “has allowed companies and individuals to challenge agency actions on multiple grounds,” said Harold Krent, a professor at the Chicago-Kent College of Law at the Illinois Institute of Technology. The pending cases could “change the legal landscape incredibly,” he said.
“The conservative majority believes that smaller government is better government,” he said
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