Did the Supreme Court Just Make it Harder to Regulate the Banking Industry?

July 5, 2022 at 8:43 am Leave a comment

As one of the most heavily regulated industries in the country, how the Courts are interpreting regulations is a big deal.  So when the Supreme Court articulates a new doctrine in ruling that a major federal agency lacks the authority to promulgate high profile regulations, it’s certainly a case of which industry lawyers should take note.

Among its closing flurry of cases decided by the Supreme Court last week was West Virginia v. EPA (West Virginia v. Environmental Protection Agency, 2022 WL 2347278. In this case, the court ruled that EPA lacked the statutory authority to promulgate industry wide emission caps on power plants.  But for our purposes, what it did is not as important as the rationale it used in reaching its decision.  In other words, I’m not writing this blog to debate climate change or the best way to regulate global warming; I’m writing it because the same legal principles articulated by the Court could have an impact on virtually every high profile regulatory dispute for decades to come. 

As readers of this blog know, I have been noting for a while that federal courts are growing increasingly frustrated by the expansive authority given to federal agencies under arguably poorly written federal statutes.  For decades, when courts have been confronted with a challenge to a new regulation, the first question they ask themselves is whether the statute is clear enough to make the regulation unnecessary and if it is not, the court will generally defer to the agencies determination under so called Chevron deference.  This was the basic framework the Court of Appeals used when upholding NCUA’s expansive definition of local community for Field of Membership purposes. 

In the EPA case, the Court majority conceded that there was statutory language that arguably could be interpreted as permitting the EPA to promulgate its industry wide power plant regulations.  But the Court ruled that under what it termed the “major questions” doctrine, the Court will only recognize certain regulatory power if Congress is crystal clear in its delegation of authority.  In the EPA’s case, the Court reasoned that industry wide caps affecting large portions of the economy constituted a “major question.”  As a result, the EPA could not rely on a relatively obscure statute to exercise this power.  If Congress wanted the EPA to exercise this power, it would have been more clear.

Why is this potentially such a big deal?  Because it means that if an agency action is expansive enough, it could be challenged on grounds that given its importance, Congress should have spoken more clearly before the agency acted.  You can bet that the smart lawyers they have at the CFPB have already started skimming the Bureau’s enacting legislation to brace itself for challenges to its authority. 

Conversely, it is of course possible that the Court will limit its holding to this specific case, but I don’t think so.  As Justice Roberts explained in his majority opinion:  the “major question” doctrine was being used because  “it refers to an identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted. Scholars and jurists have recognized the common threads between those decisions. So have we. See Utility Air, 573 U.S. at 324, 134 S.Ct. 2427 (citing Brown & Williamson and MCI); King v. Burwell, 576 U.S. 473, 486, 135 S.Ct. 2480, 192 L.Ed.2d 483 (2015) (citing Utility AirBrown & Williamson, and Gonzales).

The concerns raised by Justice Roberts are by no means unique to the EPA. 

Entry filed under: General.

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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