Can a ‘Tsunami’ Wash Away a Sea Change? Recent Supreme Court Administrative Decisions and Environmental Regulation

Below, after examining the contours of the current regulatory space where environmental issues are often in the spotlight, we will summarize recent decisions including Loper Bright v. Raimondo, Corner Post v. Board of Governors of the Federal Reserve System, FDA v. Alliance for Hippocratic Medicine, SEC v. Jarkesy, and Ohio v. EPA and briefly discuss how these decisions, and the cases set for hearing next year, may affect the environment.

The Setting

Regulatory issues are increasingly politically salient at the federal level, and the legislative branch has generally lacked the political mandate to weigh in on many hot-button topics. In other words, near-even splits in control in both the US House and Senate between the Democratic and Republican parties doom most efforts by the legislative branch to weigh in on controversial issues to failure.

Accordingly, federal agencies have recently felt compelled to address environmental issues — like other hot-button issues involving access to abortion, immigration, and discrimination — by regulations. These efforts have often been checked by conservative-leaning courts.

Meanwhile, state and local engagement on environmental issues is increasing at a rapid rate. As examples, this year has seen efforts from parties ranging from local governments through state courts taking steps recognizing, and in some cases, beginning to address climate change and energy transition issues. Examples include:

• Various state and local governments have enacted legislation designed to compel the decarbonization of their cities even though a key case — the Ninth Circuit’s decision in California Restaurant Association v. City of Berkeley — found that legislation banning gas hookups for appliances was preempted by federal law.
• State constitutional cases in Hawaii and Montana advancing “public trust doctrine,” that the government was obligated to preserve natural resources for future generations, reached results favorable to groups of young plaintiffs. (See here and here.)
• State tort-related cases focused on reimbursement costs alleged to relate to climate change, including New York and Hawaii.

In contrast, federal efforts to address environmental issues routinely fail, often before federal courts. A year ago, the Court’s term ended with two major decisions on statutory interpretation: Sackett v. EPA (involving the interpretation of the Clean Water Act term “waters of the United States”) and Biden v. Nebraska (dealing with the Biden Administration’s ability to forgive student loans), both of which were resolved when the Supreme Court determined that executive agencies’ construction of federal statutes was incorrect. Consistent with at least the spirit of these decisions, when the Court accepted Loper Bright for review, the Supreme Court agreed early last spring to weigh in on the continued viability of the “Chevron doctrine,” a key tenet of administrative law, under which courts are required to defer to “reasonable” constructions of ambiguous statutes.

This Term’s Decisions

Loper Bright v. Raimondo

With Sackett and Biden v. Nebraska, and cases including West Virginia v. EPA and American Hospital Association v. Becerra the term before them, the Supreme Court declared its primacy in matters of statutory interpretation and skepticism of agency efforts to broadly construe statutory language to address new concerns.

With these decisions all being recent, the Loper Bright decision perhaps should have come as no surprise. In the 6-3 decision, the Supreme Court overruled Chevron and held that courts must “exercise their independent judgment” when interpreting federal statutes and may not defer to agency interpretations simply because they determine that a statute is ambiguous. (See our discussion here).

The decision does not affect agencies’ ability to interpret their own regulations. It leaves open a review process in which agencies retain the ability to marshal expertise and evidence supporting their legal interpretations, which are to be given “respect” but not “deference,” and purports to not be retroactive. While the three dissenting justices portrayed Justice John Roberts’ majority as essentially reimagining federal administrative law, the long-term impacts of Loper Bright may take longer to assess as various Chevron-related issues will be revisited by courts. One early test of these issues is in the Fifth Circuit’s review of Utah v. Su, evaluating the US Department of Labor’s ERISA rules permitting consideration of ESG-related factors in making investment decisions. (See here for more on this case.)

Corner Post

Hot on the heels of Loper Bright came the Court’s decision in Corner Post v. Board of Governors, which relates to when some federal administrative challenges must be filed. (For a detailed discussion, see here). Corner Post involves a challenge to a Federal Reserve Board cap on debit charge interchange fees. In a six-justice majority, Justice Amy Coney Barrett held that the default limitations period for APA challenges runs from when a particular plaintiff is injured by the agency action, even if the injury was years or even decades after the agency action which is the subject of the challenge.

By anyone’s evaluation, Corner Post opens the door for at least certain administrative challenges to be lodged years after the six-year period which the APA provides as a default so long as a plaintiff is newly injured by the determination. A dissent authored by Justice Jackson notes that “there is effectively no longer any limitations period for lawsuits that challenge agency regulations on their face” and that “well-heeled litigants [will now] game the system by creating new entities or finding new plaintiffs whenever they blow past the statutory deadline.” The dissent predicts that the majority’s decision, coupled with the Loper Bright decision, will “wreak havoc on Government agencies, businesses, and society at large” and lead to a “tsunami of lawsuits” challenging agency regulations.

Alliance for Hippocratic Medicine v. FDA

As in prior years, some court decisions were driven by “standing,” i.e., the legal doctrine on whether a plaintiff is permitted to file a claim. Last term’s main standing-related dispute was contained in Biden v. Nebraska, which hinged on whether Missouri should be permitted to challenge a Biden Administration’s student loan forgiveness plan by virtue of its allegations that MOHELA, a state-created loan servicing agency that was not party to the case, had been injured. (See here for more details). Adopting an extremely liberal interpretation of the standing doctrine, the Court allowed Missouri’s challenge to proceed.

The Court’s Alliance decision adopts a more restrictive view of standing. The plaintiffs in Alliance included a medical association that sought to challenge the US Food and Drug Administration’s (FDA) regulation of mifepristone, a drug often used in combination with a second to terminate pregnancies, despite neither plaintiff having used or been prescribed the drug. (Our detailed discussion is here). The Court’s unanimous decision, authored by Justice Brett Kavanaugh, rejected four separate standing theories offered by the plaintiffs:

• The FDA’s relaxed regulation of mifepristone could result in more emergency abortions and that women could seek treatment from some of the plaintiff doctors. The Court rejected this argument because plaintiffs failed to provide any instances where this hypothetical situation actually happened or demonstrate that federal conscience laws which continue in effect, and that protect doctors with objections to the morality of abortion from providing them, were insufficient to protect them from liability. 
• The regulations caused downstream economic injuries, such as time spent treating patients who had used mifepristone. The Court rejected this argument, noting that the law does not permit doctors to challenge loosening of public safety requirements simply because more patients might be injured. In essence, the doctors here were merely “concerned bystanders” who had no right to pursue claims in court. 
• The medical organizations who were plaintiffs were “impaired” in their ability to provide services and incurred costs to oppose the FDA’s actions. Costs included drafting citizen petitions to the FDA and engaging in public advocacy and education, resulting in the diversion of resources from other priorities. The Court rejected this theory, noting that “an organization that has not suffered a concrete injury cannot spend its way into standing” by expending money to argue against a policy.
• Finally, the Court rejected that the plaintiffs here must have standing because otherwise “no one” would have standing to challenge the FDA’s loosening of mifepristone regulations. In the Court’s view, the remedy in such situations is through the political branches. 

SEC v. Jarkesy

In SEC v. Jarkesy, the Supreme Court held in a 6-3 decision that when the US Securities and Exchange Commission (SEC) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial in an Article III court, so the SEC cannot proceed before an in-house administrative law judge (ALJ).

The decision has potentially wide-sweeping implications, not only for the SEC, but also for numerous other federal agencies, including the US Environmental Protection Agency (EPA), that often rely upon ALJs to determine whether to levy civil penalties without a jury trial. As the dissent notes, there are more than two dozen agencies that can impose civil penalties in administrative proceedings for hundreds of statutory violations. In addition, many such statutes permit the agency to seek such penalties only in administrative proceedings (i.e., those agencies have no option to proceed in federal court if they are barred from making agency determinations). The constitutionality of those other civil penalty schemes are now potentially open questions and challenges to the constitutionality of those other statutory schemes are expected.

Ohio v. EPA

The Ohio v. EPA case, while rooted in the Clean Air Act (CAA), is important primarily for what it says about legal procedure, specifically how appellate courts evaluate motions to stay litigation.

As a matter of substance, the case begins with federalism. In 2015, EPA revised air quality standards for ozone, triggering a “SIP Call,” under which states are required to submit new CAA State Implementation Plans (SIPs). Many years later, EPA announced its intention to disprove 20 of these SIPs on the grounds that they failed to address obligations under the Good Neighbor Provision and opened a notice-and-comment period. SIP-related litigation ensued and some of the involved SIPs were overturned.

Meanwhile, EPA issued a proposed Federal Implementation Plan (FIP) to bind the 20 states. Importantly, the FIP was designed to be implemented collectively and commentors indicated that the failure to achieve all of the SIP disapprovals would require reassessment of the plan in the FIP. Instead of addressing this concern, EPA announced that each state was severable without addressing commentators’ concerns that the FIP was designed to work by including 20 states, or not at all.

Unsurprisingly, states subject to the FIP challenged it in the DC Circuit. They asked that EPA’s decision to apply the FIP to fewer than the original 20 states was arbitrary and capricious and asked for the FIP to be stayed while the appeal unfolded. After the DC Circuit denied their request to stay, they raised the issue to the Supreme Court.

The material part of a 5-4 decision authored by Justice Neil Gorsuch opened by noting that “[s]tay applications are nothing new.” The interests in allowing the FIP to move forward — meaning cleaner air in downwind states — needed to be balanced against the sovereign interests in states attacking the FIP in regulating their own industries and citizens. The stay proponents noted that compliance costs could cost “hundreds of millions, if not billions of dollars” which were “nonrecoverable.” With each side having strong arguments on harms, the court turned to a preliminary evaluation of the merits.

On the merits, the majority found that EPA’s final FIP likely runs afoul of APA requirements because EPA “simply ignore[d] ‘an important aspect of the problem.’” No explanation of how the FIP could cost-effectively function appeared in the final rule approving the FIP. Further, the Court rejected EPA’s explanations that states could be served from the FIP, that commentators failed to raise their concerns with sufficient specificity, and that the stay should have filed a motion with EPA seeking it to ask it to reconsider its final rule before presenting it in court.

Four justices joined a dissent authored by Justice Barrett indicating that the Court enjoined the FIP even though challenges to it were “based on an underdeveloped theory that is unlikely to succeed on the merits.” The dissent notes that because there are incentives for downwind states to “underregulate the pollution that they send downwind,” the CAA requires EPA to determine whether a state “has failed to submit an adequate SIP.” (Citation omitted.) The dissent rejects the argument that the FIP’s emission limits “would have been different for a different set of States” and that EPA had calculated the limits on nationwide data. EPA’s FIP was based on nationwide data and EPA had received petitions seeking reconsideration of the FIP on the ground that it should not be implemented in just a subset of the original states. The denial was in the record and presented a basis supporting the FIP and the arguments that the stay proponents made, in the dissent’s view, should not be credited as any errors EPA made had been harmless.

The substantial divergence in opinion in how the Court views the factual record are troubling. That Justice Barrett — not liberal — questions the factual basis of the majority’s decision provides little insight into how or whether this decision should be viewed as precedent.

Although the FIP continues to be stayed, the merits case continues before the DC Circuit with argument expected later this year. Stay tuned.

What to Watch Next Term

At this point, the Court has agreed to review two environmental cases next term, City and County of San Francisco v. EPA, involving the Clean Water Act (CWA), and Seven County Infrastructure Coalition v. Eagle County, Colorado, which involves the National Environmental Policy Act (NEPA). We summarize these cases below.

City and County of San Francisco v. EPA

City and County of San Francisco involves whether CWA National Pollutant Discharge Elimination System (NPDES) permits may permissibly contain narrative as opposed to numeric limits.

Under the CWA, NPDES permits are required to discharge “any pollutant by any person” from any “point source” into the navigable waters of the United States. 33 U.S.C. §§ 1311(a)-(b), 1342(a). EPA issued an NPDES permit to San Francisco in 2019, allowing the city to discharge from its wastewater system into the Pacific Ocean. The city challenged the permit, claiming that its “narrative” limitations were too vague and failed to impose specific limits, making the city vulnerable to enforcement proceedings. The permit’s “narrative” limitations prohibited discharges that “cause or contribute to a violation of any applicable water quality standard” and barred the creation of “pollution, contamination, or nuisance” as defined by a provision of state law.

The Ninth Circuit denied the city’s petition for review, holding that the CWA authorized EPA to use general narrative prohibitions on discharges and that the agency’s decision was rationally connected to the evidence in the administrative record.

Seven County Infrastructure Coalition v. Eagle County, Colorado

The Supreme Court also granted certiorari in a case challenging the DC Circuit’s interpretation of NEPA. The Court will consider whether NEPA requires an agency to study environmental impacts beyond the immediate effects of the action over which the agency has regulatory authority.

This case involves an application to the Surface Transportation Board (STB) to construct and operate a new 88-mile railway track in Uinta Basin, Colorado. Under NEPA, all federal agencies are required to examine the environmental effects of proposed federal actions and then inform the public of the environmental concerns considered. The STB’s final order exempted the Uinta Basin project from the agency’s formal rail line application requirements. Challengers argued that the STB needed to consider the environmental effects of the project on properties “downline” from Uinta Basin. They also argued that the STB needed to study the effects of extracting and transporting crude oil, even though the STB does not regulate the production of oil.

The DC Circuit held that NEPA requires agencies to identify and disclose the environmental effects of increased oil drilling and refining in the area, even if it lacks the authority to control those activities. This case provides the Court an opportunity to resolve a circuit split on the interpretation of its opinion in Department of Transportation v. Public Citizen, which held that an agency is not required to review environmental effects where it has limited statutory authority over the relevant actions.

ArentFox Schiff routinely monitors the Supreme Court’s docket for cases of interest to the regulated community. For any questions, please contact members of the firm’s Complex Litigation, Environmental, Food, Drug, Medical Device & Cosmetic, and Reproductive Health Task Force teams.

Additional research and writing from Hee Soo Jung, a 2024 summer associate in ArentFox Schiff’s Chicago office and a law student at The University of Chicago Law School.