Texas Bar Journal • December 2024

Antitrust and Business Litigation

Written by Emily Westridge Black And Virginia Kain

The U.S. Supreme Court’s decisions in Loper Bright Enterprises v. Raimondo, SEC v. Jarkesy, and Macquarie Infrastructure Corp. v. Moab Partners L.P. each highlight the court’s ongoing engagement with the boundaries of regulatory and administrative powers.

Loper Bright Enterprises v. Raimondo
This year, in Loper Bright Enterprises v. Raimondo,1 the U.S. Supreme Court overruled Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,2 ending 40 years of precedent.

Loper Bright arose from challenges to the Magnuson-Stevens Fishery Conservation and Management Act (MSA), under which regional fishery management councils develop fishery management plans, which are then approved by and promulgated as regulations by the National Marine Fisheries Service (NMFS).3 In relevant part, the plans may require that observers be carried on board domestic vessels,4 but the MSA does not address “whether Atlantic herring fishermen may be required to bear costs associated with any observers a plan may mandate.”5 The NMFS later issued a rule requiring that the fishing vessels themselves must pay for the observers.6 Two fishermen challenged the rule, arguing that the MSA does not authorize the NMFS to mandate that the fishermen pay for observers.7 The district courts ruled for the government in both cases, and the U.S. Courts of Appeals for the 1st and D.C. circuits affirmed, deferring to the NMFS’ interpretation of the statute under the Chevron framework.

Chevron applied a two-step framework to judicial review of agency action: a court was first required to determine whether Congress had “directly spoken to the precise question at issue”; if so, the court must “reject administrative constructions which are contrary to clear congressional intent.”8 But if the statute was silent or ambiguous, a “reviewing court could not ‘simply impose its own construction on the statute,’”;9 rather, the court must “defer to the agency’s interpretation if it ‘is based on a permissible construction of the statute.’”10

The Supreme Court overruled Chevron, calling it “fundamentally misguided”11 and holding that it directly conflicted with the Administrative Procedure Act’s “traditional understanding of the judicial function, under which courts must exercise independent judgment in determining the meaning of statutory provisions.”12 The court opined that decades of “tinkering with”13 Chevron resulted in an unworkable framework, rendering it “nothing more than a distraction from the question that matters: Does the statute authorize the challenged agency action?”14

In sum, “delegating ultimate interpretive authority to agencies is simply not necessary to ensure that the resolution of statutory ambiguities is well informed by subject matter expertise.”15 Thus, following Loper Bright, courts—not agencies—have the final say in interpreting statutes administered by agencies.

Securities and Exchange Commission v. Jarkesy
In SEC v. Jarkesy,16 the Supreme Court affirmed the U.S. Court of Appeals for the 5th Circuit’s holding that when the Securities and Exchange Commission (SEC) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment requires that the defendant be given a jury trial, and not just a proceeding before the SEC’s in-house tribunal. The court likened the SEC’s action seeking civil penalties for securities fraud to a “‘suit at common law,’”17 based on the civil penalties being “designed to punish and deter, not to compensate,” which thus implicates the protections of the Seventh Amendment.18 In short, following this decision, “[a] defendant facing a fraud suit has the right to be tried by a jury of his peers” before an Article III court.19

Macquarie Infrastructure Corp. v. Moab Partners, L.P.
In Macquarie Infrastructure Corp. v. Moab Partners, L.P.,20 the Supreme Court further shaped the landscape for the SEC’s administrative proceedings, unanimously reversing the U.S. Court of Appeals for the 2nd Circuit’s holding that the failure to make a disclosure required by an SEC regulation could support a claim for fraud under Section 10(b) of the Securities and Exchange Act.21 The court held that a “pure omission” does not rise to the level of fraud as defined by SEC Rule 10b-5(b), unless “the omission renders affirmative statements made misleading.”22

NOTES

1. Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024).
2. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), overruled by Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024).
3. See Loper Bright Enterprises, 144 S. Ct. at 2254-55.
4. Id. at 2255 (quoting MSA § 1853(b)(8)).
5. Id.
6. Id.
7. Id. at 2256.
8. Chevron, 467 U.S. at 842 (1984); Id. at 843 n.9.
9. Loper Bright Enterprises, 144 S.Ct. at 2247 (quoting Chevron at 843).
10. Id. at 2254 (quoting Chevron at 843).
11. Id. at 2247.
12. Id. at 2262.
13. Id. at 2272.
14. Id. at 2269.
15. Id. at 2267.
16. SEC v. Jarkesy, 144 S. Ct. 2117 (2024).
17. Jarkesy at 2135 (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 56 (1989)).
18. Id. at 2130.
19. Id. at 2139.
20. Macquarie Infrastructure Corp. v. Moab Partners, L.P., 144 S.Ct. 885 (2024).
21. Id. at 890.
22. Id. at 891-92.

Headshot of emily black who is wearing a white blouse and black suit jacket. she has auburn hair and is smiling.EMILY WESTRIDGE BLACK is a partner in the Austin office of A&O Shearman, where she specializes in complex commercial litigation and white- collar defense.

Headshot of virginia kain who is wearing a white blouse and dark suit jacket. she has long blond hair. the background is a solid blueVIRGINIA KAIN is a litigation associate in the firm’s San Francisco office.

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