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Understanding What the Loper Bright and Jarkesy Regulatory Earthquake Means for Gun Owners

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As Dan posted yesterday, the Supreme Court has decided Loper Bright v. Raimondo, and in so doing has officially overruled and destroyed the doctrine of Chevron deference. Under Chevron, federal courts were severely handcuffed when evaluating federal agencies’ interpretations of federal law. Loper Bright followed the Court’s decision the day before in SEC v. Jarkesy, which similarly nuked the Securities Exchange Commission’s power to serve as enforcer, prosecutor, judge, jury, and executioner in administrative proceedings for violating the securities laws. The Court found that the defendants are entitled to a jury trial before an Article III judge.

To non-lawyers, this may seem like very dry legal mumbo-jumbo. But the reality is that these two decision are a huge legal earthquake that will rock D.C. and could likely turn it inside out. 

The nature of the modern American administrative state, in which much of the economy and our daily lives are governed by federal regulations created and enforced by unelected and often unaccountable bureaucrats, exists largely because Chevron deference required courts to defer to the bureaucrats’ interpretations of the laws. The agencies were also allowed to operate their own legal fiefdoms to adjudicate alleged violations of the regulations they created.  

Drunk with such essentially unchecked power, the federal bureaucracy has continually and progressively extended its reach into virtually every corner of Americans’ lives, particularly in areas such as education and environmental regulations where activists have taken up residency in the agencies in order to further their agendas.

In 2014, noted legal scholar and Columbia Law School Professor Phillip Hamburger published Is Administrative Law Unlawful, a hugely influential book in which he persuasively argued that the modern American administrative state simply could not be justified under the Constitution or democratic mores. 

As he later wrote . . .

We thus live in a strange republic. It is a republic in which most law is bureaucratically commanded from above rather than made by our elected representatives, and in which the judges brazenly refuse to say what the law is.

Unfortunately, it gets worse, as administrative power is not a stationary object. On the contrary, it is an evolving threat. Administrative power is best understood as a cascade of evasions. It begins by evading the Constitution’s avenues for legislative and judicial power; then it evades relatively formal administrative processes; then it circumvents even the less formal ones. Like water, it flows down ever lower channels until it reaches the gutter.

What do I mean by this? The cutting edge of administrative power nowadays is not administrative rulemaking. (That is so . . . 20th century.) Rather, the cutting edge of administrative power is sub-administrative pressure and inducement, which is used to secure illicit regulation. When government can’t regulate by statute because of political obstacles, it adopts administrative rules, and when it can’t get administrative rules because of constitutional concerns, it turns to sub-administrative mechanisms to impose what it otherwise could not.

The sub-administrative tools include the threat of regulatory hassle (such as repeated inspections), the threat of denying a license (even on political grounds), and third-party boycotts (most notoriously, Operation Choke Point, which pressured banks to deny financial services to payday lenders and other lawful but disfavored businesses). In addition to such administrative extortion, sub-administrative power includes less obviously coercive mechanisms — unlawful deals, for example, and informal conditions on funding. By such means, there is little that agencies cannot demand.

The administrative state has thereby become much worse than it was in the late 20th century. We once had the rule of law; then the administrative state gave us a pale substitute in the rule of rules; and now we have sub-administrative power, which descends to raw power. Most disturbingly, this is how government imposes censorship.

Just as seminal articles of Don Kates and Sanford Levinson triggered an avalanche of Second Amendment legal scholarship in the 1990’s that ultimately led to the Heller, MacDonald, and finally Bruen decisions, Hamburger’s work led many on the bench, in the bar, and legal academia to begin reexamining very fundamental questions about the modern American administrative state. More importantly, Hamburger also founded the New Civil Liberties Alliance, a think tank which developed and implemented a long-term game plan for attacking the foundations of the modern American administrative state through targeted test cases. The NCLA was also heavily involved in Cargill v. Garland, which successfully overturned the ATF’s ban on bump stocks.

After years of very hard work, the Supreme Court’s decisions this week in Jarkesy and Loper Bright have knocked out two key pillars of the vast administrative state.

In Jarkesy, the SEC tried to punish George Jarkesy and his company for engaging in what the SEC considered to be securities fraud. While the SEC could have referred the matter to the Department of Justice for a criminal indictment and prosecution or filed a civil lawsuit against them, instead the agency opted to proceed under its own administrative law process.   

Unlike a civil or criminal action in a federal court where Jarkesy would have been entitled to a jury and an impartial Article III judge, the SEC’s administrative proceeding involve SEC employees as prosecutors, adjudicators, and appellate reviewers.  They also aren’t bound by things like the federal rules of evidence and can instead rely on evidence that wouldn’t be admissible in court.  

Judicial review is available only after the entire administrative process has run its course, and even then the reviewing court is obliged to defer to the agency’s findings of fact if there’s support for them in the record. Not surprisingly, the SEC prevails in virtually all of these administrative proceedings.

After the SEC imposed a $300,000 fine and other penalties, Jarkesy and his company sought judicial review, arguing that they were entitled under the Seventh Amendment to a trial by jury before an Article III judge. Jarkesy was supported in his efforts by the NCLA.)  

Finding for Jarkesy, the United States Court of Appeals for the Fifth Circuit held that because the SEC’s claims were akin to a traditional civil action, the Seventh Amendment applied. Because Jarkesy wasn’t given his Seventh Amendment rights, the sanctions against him were vacated.

The SEC then appealed the case to the Supreme Court. In this week’s 6-3 decision written by Chief Justice Roberts, the Court held that an action to impose a fine for securities fraud was sufficiently close to common law tort claims, and thus the Seventh Amendment should have applied . . . 

In sum, the civil penalties in this case are designed to punish and deter, not to compensate. They are therefore “a type of remedy at common law that could only be enforced in courts of law.” That conclusion effectively decides that this suit implicates the Seventh Amendment right, and that a defendant would be entitled to a jury on these claims.

Concurring, Justices Gorsuch and Thomas also noted that the Due Process clause of the Fifth Amendment and the requirements of Article III (which sets the requirements of federal judges) also applied and rendered the SEC’s internal procedures inadequate.

In her dissent, Justice Sotomayor (joined by Justices Kagen and Jackson) erupted in a primal scream in defense of the bureaucracy, essentially arguing that because the use of internal administrative procedures has become so widespread, it simply can’t be discontinued . . .

Against this backdrop, our coequal branches will be surprised to learn that the rule they thought long settled, and which remained unchallenged for half a century, is one that, according to the majority and the concurrence, my dissent just announced today. Unfortunately, that mistaken view means that the constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress.

(My response to Justice Sotomayor’s last sentence: Good!)

In Loper Bright, federal law (specifically, the Magnuson-Stevens Fishery Conservation and Management Act) created various fishery management practices which are administered by the National Marine Fisheries Service.   At issue was a regulation imposed by the Service that required fishing vessels in certain fisheries to pay for a government-approved at-sea observer on their boat — at a cost of up to $710 per day — to ensure compliance with regulations. 

The plaintiffs, backed by the NCLA, challenged the regulation as not being authorized by the MSA. The lower courts concluded that Chevron required them to defer to the agency’s interpretation of the MSA, and thus ruled against the plaintiffs. This set up a test case whereby the Supreme Court could, if is wanted, reconsider Chevron, as Justices Thomas and Kavanaugh have long indicated was necessary.

The specific issue was whether Chervon should be overruled. Yesterday’s opinion makes for pretty dry reading, even for attorneys, but suffice it to say that a six-justice majority flatly overruled Chevron as being inconsistent with the constitutional requirements of Article III courts and the requirements under the Administrative Procedures Act that courts review agency rules de novo.  

Justice Kagan dissented, joined by Justices Sotomayor and Jackson. Kagan largely reprised Justice Sotomayor’s primal scream in Jarkesy, lamenting the demise of Chevron and the fact that “expert” bureaucrats, rather than legislators or judges, will no longer determine what the law is.  

ATF headquarters (Courtesy Dicklyon, Wikimedia Commons)

What will all this mean for the firearms community? It means ATF won’t be able to create stricter limits on gun rights through rulemaking that would never get through Congress.

For starters, courts will no longer be handcuffed in evaluating the propriety of ATF’s ever-shifting regulations and interpretations of the law on things like pistol braces or “frame or receiver” definitions. Such regulations will now have to be reviewed de novo…without worrying about how ATF or courts have ruled in the past. And as ATF’s recent track record proves, the agency’s elastic and often contradictory interpretations of the law are unlikely to engender much support.  

Similarly, I can see challenges to things like the Biden administration’s recent ban on the importation of UTM siminutions for sale to non-military or law enforcement customers as being based on nothing more than animus toward the civilian firearms community…especially if such challenges are brought in venues where judges aren’t particularly sympathetic to the ATF’s regulatory record.  

And, of course, there’s ATF’s practice of seeking to fine FFL’s through its own internal administrative proceedings for alleged violations of ATF rules would now seem to be barred under Jarkesy. ATF will be required to file a civil lawsuit or a criminal indictment…which I suspect it will be far less likely to do.  

What of ATF’s current jihad against FFLs, in which it seeks to terminate federal licenses based on even the slightest technical mistakes? That could be a tougher call, as the issuance of licenses may fall under the “public rights” aspect of the law that doesn’t implicate the Seventh Amendment. We’ll have to see how the post-Jarkesy case law shakes out.

In a post-Jarkesy communication with Prof. Hamburger, he told me that he expects the feds will try to take a very narrow view of the Court’s opinions, and more fights will undoubtedly be needed. Fortunately, the NCLA has already set up a “Relentless Working Group” which is tasked with monitoring and identifying agencies that are resisting the Supreme Court’s holdings, and they’ll bring test cases where appropriate. The administrative state is down, but it’s by no means out.

In the meantime, let’s all raise a glass to Professor Hamburger, who has severely wounded the regulatory Leviathan. And maybe we should celebrate June 28 going forward as “Phillip Hamburger Day.” 

37 Responses

  1. Our Congress critters will be big mad. Now they will need to actually do their jobs and write specific laws that make sense rather than grandstanding for the press.

    1. Hardest hit: the various DC law firms and consultants (typically staffed by activists and/or former agency employees) who are the “inside baseball” fixers for industries that have to deal with particular agencies, and who are often involved in shaping the agencies’ practices to favor their clients.

      1. Could we see larger corporations that may have used agency capture to push products and practices that may have been harmful or substandard compared to alternatives take a hit?

          1. If so this will please me on half a dozen levels……but not at the state level stuff.

    2. Pro-tip. They won’t. They will continue to write vague, confusing and internally inconsistent laws. We have just exchanged bureaucratic tyranny for judicial tyranny except the bureaucrats are more consistent.

      1. Uh-huh. Are you seriously suggesting the ATF bureaucrats behave consistently? Or even competently?

        With judicial review, it’s at least in the open, with meaningful appellate review / relief and dramatically less chance of regulatory capture.

    3. Expect to see substantially increased congressional staffs to research & tell congress-critters how to vote, amend, etc. Many of these new staff employees wiil be transfers from the regulatory agencies…
      But campaigns might get more interesting!

  2. Thanks for the article.

    the rule they thought long settled, and which remained unchallenged for half a century

    That sounds familiar. They’re cleaning up the mess that was made decades ago. We’d be living in a very different world with Hillary’s picks.

  3. LKB, you are the reason I continue to read this blog. I very much appreciate your clear and concise explanations.

    Seems to me the left is in a real pickle now. On the one hand, they continually alarm everyone about “our democracy” and about “threats to our democracy” (while not understanding that our governmental structure is not, in fact a democracy, but that’s beside the point). They harp and whine and bloviate about “our democracy” while, simultaneously, they support and encourage and build a government of bureaucracy.

    Jarkesy and Loper Bright specifically return power to elected officials instead of unelected officials. These decisions are the very essence of “preserving democracy”. Instead of governing by rules written by unelected bureaucrats, we return to governing by laws written by elected officials and enforced by elected officials.

    >>erupted in a primal scream in defense of the bureaucracy, essentially arguing that because the use of internal administrative procedures has become so widespread, it simply can’t be discontinued . . .<<
    Allow me rephrase that for you: "The bureaucracy is too big to fail."

    Today is a great day for the Republic. Today is a great day for freedom. Freedom is messy and dangerous, I suspect things will get messier and more dangerous as the bureaucracy is dismantled, but thank God for the USSC.

    1. “ LKB, you are the reason I continue to read this blog. I very much appreciate your clear and concise explanations.”

      Thanks. As you’ll see on the SNW “about us” page, my informal role as the SNW’s volunteer legal commentator is now more “official.”

      1. LKB, that’s a well-done summary; I suspected that a lawyer must have written (I am a lawyer, too).

        1. Eric, LKB is an intellectual property attorney and member of the Supreme Court bar. He’s also a gun guy an has been a friend of SNW and TTAG before it for over a decade, helping us break down rulings like these.

    2. The bureaucracy has become so big that it is in a constant state of failure.
      These two decisions can now be used to RIF major portions of that bureaucracy.

  4. If the administration can’t define a law anymore, can we get some laws thrown out on vagueness grounds (Chicago v. Morales etc.)?

    1. Interesting thought, but probably not.

      Getting a federal statute (which is all Chevron deference applies to) struck as unconstitutionally vague is a *huge* lift. Most “void for vagueness” challenges are in the context of various state or local laws, often drafted by people who didn’t really know what they were doing or didn’t really care because they were wanting to pass something to score political points. Federal statutes, having gone through all the Congressional hoops required, are far more likely to have had someone knowledgeable analyze them for a potential vagueness challenge at the committee stage.

      Chevron allowed Congress to be rather loose when it came to the details of legislation, because the Congresscritters knew that the various agency involved would be filling in all the details. The agencies can still do that, but now they’ll have to “show their work” on why their interpretation / implementation comports with the statute to an Art. III judge, rather than just say “we’re the experts.” And Congress won’t be sure that a judge on the left or the right won’t take any ambiguity as license to bend the law in a way it didn’t want or intend. I thus suspect we are going to see a lot more language in legislation that at least expresses what Congress is intending to do, even if they still allow the agencies some room to fill in the details.

      On paper, it’s of course possible that a federal statute could be so vague or contradictory that nobody can possibly figure out what it means. (Potential example: the Senate bill that was introduced in the wake of the Cargill decision, that purported to ban anything that “increases a firearm’s rate of fire.”) But courts will use all kinds of Canons of Statutory Construction to come up with *some* rational interpretation, rather than use the big stick of declaring a statute void for vagueness.

      1. ” often drafted by people who didn’t really know what they were doing or didn’t really care because they were wanting to pass something to score political point”
        This is different from Federal statues how?

        ” Federal statutes, having gone through all the Congressional hoops required, are far more likely to have had someone knowledgeable analyze them for a potential vagueness challenge at the committee stage.”
        Remember how last month most Republicans voted to declare Christianity a hate crime? Remember “We have to pass the bill so that you can find out what is in it”? Nobody reads the stuff they vote on in Congress.

        1. Exactly so. Also remember that Obamacare was far from the only 2000 page bill that nobody read. These bills are actually written by lobbyists and metaphorically stapled together by Congressional staff who possibly read the stuff their boss was especially interested in.

          1. The 2,000 page Obamacare bill was followed up by over 20,000 pages of administrative regulations. Some of those regulations categorically conflicted with the actual wording of the bill.

        2. My point is that while federal statutes are indeed often exceedingly complex, and individual Congresscritters don’t read every one, they are drafted by people who know enough to avoid “void for vagueness” challenges.

          Proof point: Can you point to a SINGLE federal statute that has EVER been struck down as unconstitutionally vague?

          I’ll wait . . . .

          1. The “residual clause” of the Armed Career Criminal Act was overturned for being unconstitutionally vague in Johnson v. United States.

      2. The other thing you will see is packages of soon to be federal law, handed over to friendly congressmen, or senators, for clandestine insertion into the law at reconciliation, along with delicious bribes campaign donations, either from corporations, or from public employee unions. One hopes that legislators who don’t get particular donations know to read thoroughly, and vote against bad law.

      3. “Federal statutes, having gone through all the Congressional hoops required, are far more likely to have had someone knowledgeable analyze them for a potential vagueness challenge at the committee stage.”

        ???

        Have you never heard of Joe Biden and the Democrat party? Their whole thing has been to make it ‘vague’ so it can be exploited later.

        😁

  5. >>And maybe we should celebrate June 28 going forward as “Phillip Hamburger Day.” <<

    I think June 28 should be celebrated as 2AR day (which you can read as "Second Amendment Rights" day or "Second American Revolution" day", whatever you prefer. And it should be just like the 4th of july, and we should all picnic with Hamburgers. We'll have to ask Philip what makes a genuine "Philip Hamburger" so we do it right.

    1. My suggested recipe: Chevron Celebration Hamburgers

      Combine 70% grass-fed American Wagyu ground beef and 30% Texas Iberico ground pork (I source both in bulk from friends who raise them), with Worcestershire sauce and Panko bread crumbs.

      Grill 1/4 lb patties to medium rare on a cast iron flattop. Serve on a toasted Kaiser roll with grilled sweet onions, kosher dill/2x garlic pickles, and butter lettuce (the last three from my kitchen gardens and pickling vats).

      And, because it’s Texas, Whatburger Spicy Ketchup.

      Thoughts?

      1. I believe you know what you are talking about with that recipe. I’m going to give that a shot on the 4th.

  6. Typical of a Democrat like Obama who was in office at that time to believe small businesses are made of money.

    If the ‘National Marine Fisheries Service’ felt an observer was necessary on fishing boats, they damn well could have paid for it themselves, not charging small family businesses $710 PER DAY to do so. That’s $21,300 per month on a typical offshore fishing trip.

    LKB, where does that leave us now with regards to 80 percent frames and receivers, and pistol braces, as far as federal regulations? And what about states who decided to weigh in on those devices with laws of their own?

    1. “Frame or receiver” case is VanDerStok, which SCOTUS granted cert on earlier this year. It was not decided on Chevron grounds — as in Cargill, the Fifth Circuit held that the ATF’s interpretation could not possibly fall within the scope of the federal statute, and thus Chevron did not apply.

      It’s possible that the Court may now DIG (“Dismiss as Improvidently Granted”) the VanDerStok cert petition, as part of the feds’ appeal was that Chevron deference applied, and of course now Chevron is toast. Were that to happen, the “frame or receiver” regs would be struck. Because ATF now knows that the days of them being able to play fast and loose and hide behind Chevron are over, they likely would not be revisited. (Look for new proposed federal legislation on “ghost guns” next session.)

      Similarly, the pistol brace case (Mock) is being argued in the Fifth Circuit in August. While I have always thought Mock was a weaker case than Cargill or VanDerStok, I expect it to similarly be affirmed, and a cert petition then denied. What will be interesting is if the Fifth Circuit affirms and denies a stay of the mandate pending appeal . . . unlike SCOTUS granting such a stay in Cargill, in light of both Cargill and Loper Bright, I doubt SCOTUS would do so in Mock, and thus we may see the pistol brace rule nuked late this year.

      As far as state / local laws on this, none of the recent SCOTUS cases apply. Those will have to be challenged and decided under Bruen.

      We’ll know a lot more Tuesday morning, when we see the final order of the term, which will include a slew of pending 2A cert petitions, including the appeal from the Seventh Circuit’s decision vacating a preliminary injunction against the IL AWB. (My guess is that they will deny cert (it’s an appeal from an order on a preliminary injunction, so procedurally it’s not a good cert candidate), but we may see dissents or concurrences from the order by Thomas, Alito, and/or Kavanaugh.)

  7. In house legal staff for regulatory agencies will change from collaborators to adversaries.
    Previously, they were organizing the paperwork for a comfortable meeting with an administrative law judge.
    Going forward they will have to be able to defend any expansion of regulation in federal court. They won’t want to go forward unless they have a very winnable case.

    1. And that test case challenges can (and will) be forum shopped and filed in unfriendly venues, in front of judges whose hands are no longer tied by Chevron.

      E.g., imagine a Brady Center type embedded in ATF, who wants to try and declare Glocks to be MG’s because they can be “readily converted” to full auto via an illegal 3d printed Glock switch. (Or AR’s, because of illegal DIAS’s.) In the past, they might well have gotten away with it, because of Chevron deference. Now, the internal conversation is going to be, “You know if we do this, the Firearms Policy Coalition will instantly file a test case in Fort Worth; Judge Pittman or Judge O’Connor will enjoin it immediately; and the Fifth Circuit will back them up. Is it worth spending agency funds on a losing case?”

  8. “Unfortunately, that mistaken view means that the constitutionality of hundreds of statutes may now be in peril, and dozens of agencies could be stripped of their power to enforce laws enacted by Congress.

    (My response to Justice Sotomayor’s last sentence: Good!)”

    I disagree with Sotomayor’s statement. The statutes are no longer constitutional, having not been initiated by congress and approved by the executive. They have also not been denied the ability to enforce the laws enacted by Congress, but they now have to do so under the colour of the judicial branch, as all other laws are currently enforced.

    Because I’m a cynic, I expect that during the next legislative session, every government’s rulebook will simply be submitted as a new bill. The only good thing about that it that it will immediately submit all of these rules to constitutional scrutiny.

  9. [Reply to Ed Minchau, above]

    You are correct. But recall that Johnson overruled two earlier SCOTUS decisions (James and Sykes) that found the residual clause was *not* unconstitutionally vague, and that in Johnson Alito, Thomas, and Kennedy all found it was not too vague.

    Again, I stand my my thesis that the nature of the federal lawmaking process (as opposed to state / local legislating) makes it exceedingly unlikely that a federal law will be struck for vagueness, especially given the reluctance of federal courts to do so (as the issue in Johnson exemplifies). Most successfully “void for vagueness” challenges have been of state or local laws.

  10. I’m not sure if this is related, other than as another example of agency abuse of power. Where does this leave the backdoor funding of an agency’s confreres via the ‘sue and settle’ tactic.

    1. Where the “sue and settle” tactic is used to get a new agency rule / reg / interpretation adopted, the new rule might be subject to separate judicial challenge as Chevron would no longer shield it from judicial scrutiny.

      The use of the tactic as a way to slush fund activist organizations (often with the connivance of other such activists who are embedded inside the agency) is a separate issue. That’s gonna take either some new statutes or some backbone from a new administration.

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