The biggest impact is anticipated to come from the Supreme Court overturning the Chevron deference doctrine. Under Chevron, which has been in place for 40 years, if a statute is unclear or ambiguous, courts would typically defer to an agency's reasonable interpretation rather than substituting their own judgement. This type of deference is no more. Instead, courts must apply their independent judgement in determining whether an agency acted within its statutory authority.
In two other decisions, the Supreme Court decided that an SEC enforcement case involving civil penalties must be heard before a jury under the Constitution, and that the statute of limitations in which to challenge an agency action begins with a plaintiff’s injury rather than upon issuance of a final rule.
Finally, going in the other direction, the NRC, and others, have petitioned the Supreme Court for certiorari to review the Fifth Circuit decision in Texas v. Nuclear Regulatory Commission, 78 F.4th 827 (5th Cir. 2023). In that case, the Fifth Circuit ruled that the NRC lacked authority to license a private independent facility for storing nuclear waste, impacting the ongoing debate about how to manage the country's nuclear waste storage, and broadly questioning the NRC’s general licensing authority. We provided an overview of this case in a previous blog.
A. Recent Supreme Court Decisions
Below is a brief summary of the three recent Supreme Court decisions and potential implications for administrative agencies and the regulated community, including the NRC and nuclear industry.
(1) Overturning Chevron—Loper Bright Enterprises v. Raimondo
On Friday, June 28, in Loper Bright Enterprises v. Raimondo, together with Relentless, Inc. v. Department of Commerce, the U.S. Supreme Court overturned a landmark 40-year-old decision that gave federal agencies broad regulatory power. By getting rid of so-called “Chevron deference doctrine,” the Supreme Court reigned in courts’ deference to agencies in interpreting unclear or ambiguous statutes. The Chevron precedent had come under fire in recent years from conservative groups, who believe that agencies should have a smaller role in federal government, and with a more conservative court, many anticipated the Supreme Court’s recent decision overturning Chevron.
- What is “Chevron deference,” and how does it work?
Chevron deference refers to a principle of judicial deference where courts would defer to administrative agencies' interpretations of unclear or ambiguous statutes that they administer as long as those interpretations were reasonable. The deference comes from a 1984 Supreme Court decision, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. Under Chevron, if a statute is unclear or ambiguous, courts would typically defer to an agency's reasonable interpretation rather than substituting their own judgment. This doctrine aims to promote consistency and expertise in regulatory implementation by giving agencies some latitude in interpreting laws within their jurisdiction.
In its decision some 40 years ago, the Supreme Court articulated a relatively simple two-part test for what became known as the Chevron deference doctrine. First, the judges examine the wording and the context of the statute in question to see if Congress’s intent is clear. If yes, then the matter is settled: the agency is obliged to follow the letter of the law.
If the answer to that question is no, then at the second step courts were required to uphold the agency’s decision unless the decision was not a “reasonable” construction of the statute. Consequently, because broad statutes are often susceptible to multiple reasonable interpretations, statutes frequently changed meaning from administration to administration.
Over time, Chevron had been cited in over 18,000 federal court decisions—including a number of cases involving the NRC—and had been invoked to uphold at least hundreds of agency actions.
- The case that overruled the Chevron deference
Loper Bright Enterprises v. Raimondo pitted the owners of a New England fishing company against a federal agency, the National Marine Fisheries Service (“NMFS”) (which is under the U.S. Department of Commerce), in a case involving catch limits for fishing. At issue was the agency’s regulations implementing a federal statute, the Magnuson-Stevens Act, under which Congress set catch limits to help prevent overfishing and required fishing boats to have a government-appointed inspector onboard to monitor compliance.
Fishing companies incur the cost of these monitors—in plaintiff Loper Bright’s case, about $700 a day. In a lawsuit brought by the plaintiff against the Secretary of Commerce, Loper Bright argued that NMFS had no authority to force the company to pay for the government-appointed fishing inspector. A district court disagreed, reasoning that Congress left that question open for the agency to decide. Applying Chevron, the court deferred to NMFS’s choice that the boat owner should pay. A federal appeals court affirmed this decision.
The plaintiffs then appealed to the Supreme Court, which in May 2023 announced that it would take up the case. The Supreme Court held, by a 6-3 vote, that Chevron deference is incompatible with the Administrative Procedure Act (“APA”) and with courts’ paramount duty to interpret the laws that Congress enacts. In reaching this conclusion, the majority relied on the language of the APA, which assigns to federal courts the authority to “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action,” as well as pre-New Deal decisions stressing that agency determinations are entitled to respect but not blind allegiance. Therefore, under the newly minted Loper Bright doctrine, the majority wrote, “[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”
While Loper Bright signals the end of an era, whether its impact will be gradual or revolutionary remains to be seen. Mindful of the potential flood of lawsuits challenging old decisions that relied on Chevron, the majority stressed that “holdings [in] cases that specific agency actions are lawful … are still subject to statutory stare decisis despite our change in interpretative methodology,” and that “[m]ere reliance on Chevron” is not a reason for overruling a precedent. At the same time, however, the Court noted that a prior decision’s reliance on Chevron may suggest that the precedent “was wrongly decided.”
- What this could mean for administrative agencies, including the NRC
Chevron was an important case for administrative agencies in that it made its decisions more difficult to challenge in court. As noted by scholars cited by both sides in the dispute, it was probably the most important, and certainly the most-cited precedent, in all of administrative law. The Biden administration’s chief litigator before the Supreme Court, Solicitor General Elizabeth Prelogar, argued that Chevron should be upheld and predicted grave consequences if it is overturned. She told the court there are “thousands of decisions that could stand to be displaced and create chaos if Chevron is overruled,” and that this decision would cause “an unwarranted shock to the legal system.”
Predictions by some that overruling Chevron will lead to the swift demise of the regulatory state will likely prove to be overstated, but the decision will likely change how Congress writes and how courts read statutes—and it may reshape internal agency decision-making as well.
The general rule under Chevon was that when a statute is vague, the agency interpreting the statute gets deference as long as their interpretation is reasonable (not a super-high bar), but the NRC historically had among the highest deference available to any agency. The Supreme Court has stated, for example, that when courts review NRC determinations, these determinations are “its area of special expertise, at the frontiers of science,” and thus “a reviewing court must generally be at its most deferential.” Baltimore Gas & Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 103 (1983) (emphasis added).
When applied to the NRC, therefore, it is possible that a Court may come to the same outcome, even without applying Chevron. For example, the Baltimore Gas & Electric case was issued before the Chevron deference doctrine was established. Moreover, according to the majority in Loper Bright, courts will still need to defer to agencies if they find a statute has a clear congressional delegation of authority.
One predictable result is that litigation challenging agency decisions and regulations will likely increase, and courts’ willingness to overturn an agency decision is likely to increase as well. Litigants who were previously deterred from challenging federal government policies because of their poor odds under the Chevron doctrine may take a different posture. On the flip side, agencies may also feel more pressure to shore up the reasoning they provide for the policy decisions they make and Congress to ensure the laws it write are clear and unambiguous.
(2) Right to a Jury Trial to Challenge Agency Civil Penalties—Securities and Exchange Commission v. Jarkesy
On Thursday, June 27, the U.S. Supreme Court issued a decision in Securities and Exchange Commission v. Jarkesy impacting agency enforcement matters. In a 6-3 decision, the Court ruled that respondents to a U.S. Securities and Exchange Commission (“SEC”) enforcement action, which alleged securities fraud and sought to impose civil penalties, had a right to a federal jury trial under the Seventh Amendment.
- Overview of SEC v. Jarkesy
Under the facts set forth in SEC v. Jarkesy, the SEC had initiated an enforcement action against investment advisor George Jarkesy, Jr. and his investment firm for alleged securities fraud under securities law. While the SEC could have pursued the action in an Article III court under the Dodd-Frank Act, the agency chose to pursue the enforcement action at an SEC administrative court. An SEC-appointed Administrative Law Judge (“ALJ”) found that Jarkesy and his investment firm had committed securities fraud and levied a civil penalty of $300,000; required disgorgement of $685,000; and barred Jarkesy from participating in the securities industry. The ALJ’s decision was affirmed by the SEC Commissioners.
On appeal by Jarkesy and his investment firm, the U.S. Court of Appeals for the Fifth Circuit reversed the SEC decision, holding Congress lacks the power to give the SEC the ability to adjudicate securities fraud cases under the nondelegation doctrine; that ALJs are unconstitutionally protection from removal in violation of Article II and separation of powers; and, most importantly for the Supreme Court decision, that the Seventh Amendment mandates a jury trial in this case. The Seventh Amendment provides that “[i]n Suits at common law. . . the right of trial by jury shall be preserved.” The Supreme Court accepted the case in June 2023.
In its decision last week, the Supreme Court agreed with the Fifth Circuit on the Seventh Amendment issue and held that when the SEC seeks civil penalties against a defendant for securities fraud, the defendant is entitled to a jury trial rather than an administrative hearing. Namely, a securities fraud cause of action is analogous to common law fraud; since the Seventh Amendment requires jury trials for “[s]uits at common law,” a securities fraud action falls under the purview of the Seventh Amendment and must be pursued in an Article III court. The court declined to determine the other two issues the Fifth Circuit discussed—whether the delegation of judicial powers to agencies violates the nondelegation doctrine, and whether ALJs are improperly insulated from removal under Article II and separation of powers—and affirmed the Fifth Circuit on the Seventh Amendment ground alone.
The Jarkesy decision marks the end of several years of debate about the SEC’s enforcement authority, which was significantly expanded in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Dodd-Frank was a sweeping financial law passed in response to the Great Financial Crises of 2009 to try to reduce vulnerabilities and loopholes in the financial system and reduce systemic risk. But since Dodd-Frank was enacted, some have criticized the latitude granted the SEC in securities fraud cases to bring cases before the internal ALJs as unfair and unconstitutional. Under Dodd-Frank, Congress significantly expanded the SEC’s authority to bring securities fraud enforcement actions either within its in-house tribunal structure or in federal court. The SEC in-house proceedings are overseen by Commission-appointed ALJs, who are able to impose large monetary penalties and significant sanctions.
While the majority opinion was confined to the SEC, the dissent pointed out that it would affect other agencies with civil penalty enforcement powers. In her dissenting opinion, Justice Sonia Sotomayor, joined by Justices Elena Kagan and Ketanji Brown Jackson, noted that Congress “has enacted more than 200 statutes authorizing dozens of agencies to impose civil penalties for violations of statutory obligations,” and warned of “chaos” that the majority opinion “would unleash” on these agencies. She further criticized the majority’s attempt to limit the power of the many government agencies that are legislatively enabled to impose civil penalties only through administrative proceedings, not in court.
- What this could mean for the NRC and the nuclear industry
Ultimately, it remains to be seen how the Jarkesy case will be applied with respect to the NRC, which has a different enforcement process than the one challenged in Jarkesy. The NRC does impose civil penalties and, in some cases, imposes bans from engaging in licensed activities, but enforcement actions historically do not often make their way to the NRC’s internal hearing process. Among other things, the NRC does not use its hearing process to bring a suit against a licensee or individual for enforcement. Rather, an enforcement action undergoes a long and proscribed process with multiple opportunities for settlement or other resolution, and only after that point does a licensee or individual have a right, in certain instances, to request an internal hearing to challenge the NRC’s enforcement decision.
The NRC seeks civil penalties as an escalation from or addition to notices of violation and orders when it believes there are serious consequences to radiological health and safety. But it is rare for licensees to seek to challenge an NRC enforcement decision in a hearing, as it is generally much less expensive and time consuming to either pay the civil penalty or use the NRC Alternative Dispute Resolution process to resolve enforcement matters. It is possible that the Supreme Court’s decision may impact how a licensee disputes a penalty, when such occasions arise, but it is unlikely to impact the process leading up to the challenge, where the overwhelming majority of NRC enforcement matters have traditionally come to an end one way or another.
To help agencies evaluate the new standard, the Jarkesy court did lay out a test to determine when the Seventh Amendment dictates the right to a jury trial: any suit that could have been brought at common law must be heard by a jury. To determine whether a suit could have been brought at common law, agencies should look at a couple of factors. First, agencies should examine whether the cause of action is legal in nature. A cause of action is legal in nature if it “is designed to punish or deter the wrongdoer rather than solely to restore the status quo.” Additionally, agencies can look to the types of actions traditionally brought at common law, an analysis that looks to the general trends of common law rather than those frozen in time at the Seventh Amendment’s ratification. Second, agencies should examine whether the remedy is the sort traditionally obtained in common law. Specifically, if the remedy is "money damages”—e.g., to punish or deter, granted only in courts of law—and not just monetary relief, which is granted at law or at equity, then the remedy is a common law one.
(3) Statute of Limitations for Challenging Regulations—Corner Post Inc. v. Board of Governors of the Federal Reserve System
On Monday, July 1, the Supreme Court effectively changed the precedent pertaining to the statute of limitations for challenging regulations in a 6-3 decision in Corner Post Inc. v. Board of Governors of the Federal Reserve System by holding that the statute of limitations to challenge a regulation begins to run when a plaintiff suffers actual injury, not when the agency publishes a final rule.
The core background on this case comes from two important (and still-relevant) 1940s statutes. The Administrative Procedure Act (“APA”) of 1946 permits those injured by final agency action to sue the United States or one of its agencies, officers, or employees. The time to bring such a suit has been governed by 28 U.S.C. § 2401(a), codified in 1948 shortly after the APA, and which states that a civil action (such as a complaint against an agency) against the United States must be brought within six years after the cause of action “first accrues.” Six Circuit Courts, including the Eighth Circuit (where this case was heard) and the D.C. Circuit, have held that a challenge against a final agency action begins to accrue—and the statute of limitations begins to run—upon publication of the final rule. This interpretation of the APA and 28 U.S.C. §2401(a) became the central legal issue in this case.
- Overview of the Corner Post case
In another Dodd-Frank related decision, the case Corner Post Inc. v. Board of Governors of the Federal Reserve System concerns a truck stop and convenience store in North Dakota. Like most merchants, Corner Post Inc. accepts debit cards. Any transaction involving a debit card incurs an “interchange fee” from the bank that issued the card. To prevent these fees from ballooning, the Dodd-Frank Act authorized the Federal Reserve Board to promulgate regulations capping interchange fees. The Federal Reserve Board published its final rule in 2011. Corner Post Inc. opened seven years later in 2018 and quickly began to take issue with the interchange fees; in 2021, it joined a suit against the Federal Reserve Board alleging that the regulation was unlawful because it capped interchange fees at a higher level than the Dodd-Frank Act allowed.
The District Court for the District of North Dakota dismissed the suit, and the Eighth Circuit affirmed the dismissal, both finding the case was brought outside the statute of limitations—ten years after the final rule rather than the six permitted under 28 U.S.C. §2401(a). The Supreme Court accepted the case in September 2023.
The Supreme Court held that a right of action, even against an administrative agency, “first accrues” when the plaintiff suffers an injury. Therefore, the statute of limitations begins when the plaintiff suffers an injury and cannot begin before then—the six-year limit begins when the plaintiff is injured, not when the final rule is published. The majority reached this decision by applying what it describes as the “well-settled meaning” of the term “accrue,” which means when the plaintiff suffers damage. Per the majority, this meaning of accrue is both contemporary with the 1940s statutes and still-applied today, and resultingly it must be applied to interpreting 28 U.S.C. §2401(a) and its six-year statute of limitations.
Justice Kentanji Brown Jackson dissented, with Justices Sonia Sotomayor and Elena Kagan joining. Justice Jackson argued that the meaning of “accrues” is context-specific; in an administrative context, “accrues” begins at the moment of agency action. Looking to consequences, the dissent warned that the majority’s opinion “wreaks havoc” on agencies by effectively removing the statute of limitations for agency action and consequently making it easier for clever litigants to “game the system.”
- What this could mean for administrative agencies, including the NRC
Corner Post Inc. could result in increased litigation for administrative agencies, including the NRC, and including to well-established rules. However, the burden to prove actual injury still remains, so it is yet to be seen how significantly this decision will expand agency-focused litigation.
B. Separately, the NRC and licensees petition for the Supreme Court to review Fifth Circuit decisions to overturn waste storage licenses
Moving in the other direction, the NRC is looking to the Supreme Court to seek review of an August 2023 Fifth Circuit decision, Texas v. Nuclear Regulatory Commission, that overturned an NRC license and undermined the NRC’s licensing authority. In June 2024, the NRC and Interim Storage Partners, LLC ("ISP"), the licensee of the affected facility, separately submitted petitions for a writ of certiorari for the Supreme Court to review the Fifth Circuit’s decision.
This Texas v. NRC case concerns the NRC’s authority to grant a license to ISP for its temporary spent nuclear fuel storage facility in Texas. Texas asserted that the NRC did not have the requisite statutory authority under federal law to issue licenses for private parties to store spent nuclear fuel away from the reactor site. We provided an in-depth summary of this case in a previous blog.
In that decision, the Fifth Circuit found that although the Atomic Energy Act (“AEA”) provides the NRC with authority over the construction and operation of nuclear power plants, as well as special nuclear material, source material, and byproduct material, the NRC does not have the specific authority to license storage facilities for spent nuclear fuel away from reactor sites. The court listed the enumerated purposes for which a license can be issued (research, medical uses, industrial uses, to name a few), and determined that because storage of spent fuel is not enumerated, then the NRC had no jurisdiction over it pursuant to the AEA. The court also turned to the Nuclear Waste Policy Act—or NWPA—to conclude further that the NRC does not have the authority to license the waste storage facility and that the NWPA provides a “comprehensive statutory scheme for dealing with nuclear waste generated from commercial nuclear power generation,” foreclosing the NRC’s claimed authority.
Additionally, the court stated that “even if the statutes were ambiguous, the [NRC]’s interpretation wouldn’t be entitled to deference,” under the “major questions doctrine,” citing last year’s Supreme Court decision West Virginia v. Environmental Protection Agency (EPA), wherein the Supreme Court adopted the major questions doctrine for the first time. We previously wrote about that case when the decision was first issued. As the Fifth Circuit stated in Texas v. NRC, the “major questions” doctrine provides that courts should not defer to agencies on matters of "great economic and political significance" unless Congress has explicitly given the agencies the authority to act in those situations.
Following the Fifth Circuit's August 2023 decision that the NRC lacked authority to issue the Texas storage license, the NRC and ISP each filed a petition for the Fifth Circuit to rehear the case (en banc review) in October 2023. However, this request was denied by a vote of 9-7 in March 2024, letting the original decision stand.
Along a similar line, following the NRC and ISP's petitions to the Supreme Court to hear the Fifth Circuit decision, Holtec International also filed a petition last week requesting the Supreme Court review a different Fifth Circuit decision, Fasken Land and Minerals v. NRC, which was issued in March 2024. In that decision, the Fifth Circuit also overturned Holtec’s NRC license for a waste storage facility similar to ISP’s on the same grounds set forth in Texas v. NRC. Holtec originally received a license from the NRC for its New Mexico facility in 2023.
The two Fifth Circuit decisions are noteworthy for both their interpretation of the NRC’s authority and the application of the major questions doctrine. The NRC has issued licenses for away-from-reactor nuclear waste storage facilities before, and its authority to do so under the AEA was upheld in both the Tenth Circuit and the D.C. Circuit. Again, more information on Texas v. NRC and the relevant legal landscape can be found here.
For more information or questions, please contact Amy Roma, Partner, Stephanie Fishman, Senior Associate, or Cameron Tarry Hughes, Associate.
