By John Kruzel
WASHINGTON, June 5 (Reuters) – The U.S. Supreme Court in a pair of rulings backing the power of federal agencies has reaffirmed limits it previously imposed on government regulators but rejected bids by challengers to push those constraints into new territory.
The court, which has a 6-3 conservative majority, issued decisions on Thursday in two cases that went in favor of the Federal Communications Commission and Securities and Exchange Commission. It ruled against challenges to the FCC’s system for levying fines and the SEC’s broad power to recover illegal profits using a financial remedy called disgorgement.
While the court in several major cases in recent years has embraced challenges to the so-called “administrative state” – the government bureaucracy that regulates many aspects of American business and life – the justices on Thursday stood squarely behind the authority of the two agencies.
Georgetown University law professor David Super described the rulings as “small, largely technical wins” for the FCC and SEC.
“These cases should be understood as the court telling Congress and administrative agencies that, if they adhere to the rigid limits on public regulation in its prior decisions, the court will not come back and move the goalposts,” Super said.
President Donald Trump’s administration defended the agencies in both cases.
A LOSS FOR AT&T AND VERIZON
In the FCC case, the court ruled 8-1 in favor of the agency, rebuffing a challenge by wireless carriers AT&T and Verizon. The case was the latest to test whether a federal agency’s internal enforcement arrangement violates the constitutional right to a jury trial after the Supreme Court in 2024 curbed the power of in-house proceedings at the SEC in a case called SEC v. Jarkesy.
The justices on Thursday rejected the argument by AT&T and Verizon that the Jarkesy ruling should dictate a similar outcome in the FCC case.
The court did, however, underscore that financial penalties issued by the agency, known as forfeiture orders, do not stop parties from bringing legal challenges to the agency’s fines.
“The court didn’t take the opportunity to expand the reach of its prior decision in Jarkesy, but it also stressed that companies have no legal obligation to comply with the FCC’s forfeiture orders until a jury weighs in,” University of Michigan Law School professor Daniel Deacon said.
Deacon said he was not surprised by the outcome or that Trump’s administration had defended the agency’s power.
“The Trump administration knows that it can use the administrative state for its own ends, and it hasn’t uniformly opposed agencies’ claims to authority,” Deacon said.
DISGORGEMENT AUTHORITY
The court’s 9-0 ruling backing a broad reading of the SEC’s disgorgement authority buttressed one of the Wall Street watchdog agency’s key powers.
At issue in the dispute was whether the agency must show that victims suffered economic harm, also known as pecuniary loss, before it can seek the surrender of illegal profits.
A defendant named Ongkaruck Sripetch had asked the court to expand on one of its prior rulings, as he challenged a court order issued at the SEC’s request that required him to repay more than $3 million in ill-gotten gains and interest related to a financial fraud case. The 2020 ruling in a case called Liu v. SEC limited the scope of what can be sought via disgorgement to no more than the net profits of the conduct at issue.
On Thursday, the court said the Liu decision did not bolster Sripetch in his challenge to the SEC.
Jose Lopez, an attorney at the law firm Dorsey & Whitney and a former SEC lawyer, said the court’s ruling “preserved one of the SEC’s most potent weapons in its enforcement arsenal.”
The court has reined in federal agencies in several key rulings.
For example, the court in recent years has formalized a conservative legal principle, called the major questions doctrine, that gives judges broad discretion to invalidate executive agency actions of “vast economic and political significance” unless it is deemed that Congress clearly authorized them.
In another blow to federal regulatory power, the court in 2024 overturned a landmark 1984 precedent that had given deference to U.S. agencies in interpreting laws they administer. This doctrine, known as “Chevron deference,” had been long opposed by conservatives and business interests.
Brianne Gorod, chief counsel at the Constitutional Accountability Center, a liberal legal group that filed briefs backing the SEC and FCC in their cases, called Thursday’s rulings a win for the regulators and “everyone who benefits from these agencies being able to do their jobs.”
“While this court has a history of favoring big business interests and making it more difficult for federal government agencies to do their jobs, today’s decisions are a reminder that it’s not always possible to predict what this court will do,” Gorod said.
(Reporting by John Kruzel; Additional reporting by Andrew Chung; Editing by Will Dunham)
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