CED Makes Recommendations for Navigating New Regulatory Environment in Wake of Supreme Court Decisions

The Committee for Economic Development (CED), the public policy center of The Conference Board, has issued a new Solutions Brief, The Future of Administrative Law. The study details how recent Supreme Court decisions have remade the regulatory landscape and offers recommendations for Congress, regulatory agencies, the courts, and businesses on navigating this new environment.

The Solutions Brief—the latest in CED’s Sustaining Capitalism series—comes as a series of recent Supreme Court decisions have dramatically restricted regulatory agencies’ powers while increasing those of the courts. These decisions, in cases such as Lucia v. SEC, SEC v. Jarkesy, and Loper Bright Enterprises v. Raimondo, are likely to lead to increased litigation and restrictions of agencies’ powers, regulations, and enforcement actions.

“These recent Supreme Court decisions are likely to affect virtually every business in the country. Enterprises large and small, spanning all industries, should prepare themselves to navigate this new regulatory landscape. At the same time, this era of uncertainty and change presents an opportunity for companies to engage in dialogue with agencies, comment on proposed regulations, and work with associations to ensure their point of view is heard,” said David K. Young, President of CED.

Recent Supreme Court Decisions

• Lucia v. SEC: Held that administrative law judges (ALJs) at the Securities and Exchange Commission are “Officers of the United States” under the Appointments Clause of the Constitution (Article II, § 2, Clause 2) and thus must be appointed either by the President, an agency head, or a court; any other method of appointment is unconstitutional.
• SEC v. Jarkesy: Eliminated the right of the SEC to bring suits for fraud before ALJs and took a major step towards restricting agencies’ use of ALJs more broadly.
• Loper Bright Enterprises v. Raimondo: Overturned a 40-year precedent that courts should defer to agency interpretations of statutes if a statute is ambiguous.

Key Recommendations

These recommendations are designed to help Congress, agencies, and business adapt to the new era and ensure that administrative law fulfills the purposes which Congress intends.

Recommendations for Congress

Congress must speak with greater clarity in delegating authority to agencies and ground those delegations in constitutionally permissible areas.

In response to an expected increase in enforcement matters and questions on agencies’ regulations coming to trial, Congress may wish to increase the number of Federal judges.

Recommendations for Agencies

• Agencies should keep their regulations within the bounds Congress has delegated and follow the Administrative Procedure Act in letter and spirit.
• Agencies should keep merit-based appointment of administrative law judges (ALJs) and ensure their impartiality, high standards, decisional independence from the agency, and removal protections.
• Openings for ALJs should be publicized widely to ensure a diverse range of candidates; selection criteria should be published, and procedures for selection developed. Agencies should ensure the hiring of ALJs who will act with impartiality and maintain the appearance of impartiality, and should avoid politicizing the appointment process. An ethics code for ALJs should be adopted.
• Agencies can adopt operating manuals to guide the work of ALJs and the hearings they conduct, in particular regarding standards of evidence and precedential decisions.

Recommendations for Courts

• Courts should exercise their renewed powers with care. They should be reluctant to reopen settled litigation, be cautious about issuing quick procedural injunctions without examining the facts, and seek to address regulatory matters quickly for the benefit of all parties.

Recommendations for Business

• Returning to the framework of the Administrative Procedure Act will require business’ active participation in the regulatory process. Business should not fear this participation.
• Businesses should prepare now to navigate this new regulatory environment. Business leaders should consider active membership of trade associations, and businesses in highly regulated industries should not be afraid to engage in dialogue with agencies that regulate them, meeting with regulators and submitting comments to proposed regulations.