24 July 2024 • 5 minute read

US Supreme Court round-up: Business impacts for in-house counsel to know

During its 2023–2024 term, the US Supreme Court issued a number of rulings with major implications for businesses, especially those in regulated industries.

The Court’s decision in Loper Bright Enterprises v. Raimondo, decisively overruling the Chevron deference doctrine, stood out, grabbing headlines and warranting careful examination. But Loper Bright was not the Court’s only important regulatory ruling this term. Indeed, it was one of several decisions that, taken together, promise to reshape the regulatory landscape and invite challenges to federal agency actions. Plus, rulings on a range of other issues – from arbitration to whistleblower retaliation claims – warrant the attention of in-house counsel.

DLA Piper attorneys have been tracking these legal developments and their potential implications throughout the Supreme Court’s momentous term. Below we summarize some of the Court’s key business decisions and preview what’s ahead.

2023-24 term

Reshaping the administrative state

The end of Chevron deference

In Loper Bright Enterprises v. Raimondo, the Supreme Court overruled the Chevron deference doctrine, an administrative law precedent that provided the framework for judicial review of federal agencies’ formal interpretations of statutes for the past 40 years. This blockbuster ruling makes clear that courts can no longer defer to a federal agency’s views simply because the underlying statute does not clearly address the issue at hand and the agency’s interpretation seems reasonable. Rather, courts must employ the traditional tools of statutory construction to independently determine the “best reading” of the statute. For many regulated entities, the ruling will clear the way to successfully challenging federal regulations or agency adjudications. More broadly, it may carry important consequences for how agencies and Congress approach their respective regulatory roles.

Read our insights on Loper Bright’s impact, including implications for tax law, environmental regulation, and the life sciences.

Opening the door to new agency challengers

In Corner Post, Inc. v. Board of Governor of the Federal Reserve System, the Supreme Court opened the door to facial challenges to longstanding regulations. The Court held that the period in which a party may bring an Administrative Procedure Act (APA) challenge begins to run when the plaintiff is injured by the agency’s action, regardless of when the final agency action occurred. The result is that a newly affected plaintiff (such a new market entrant) will have the opportunity to challenge applicable regulations, no matter how much earlier they were promulgated. In short, Corner Post invites new challenges to agency rules, and Loper Bright could make it a particularly appealing invitation for many potential litigants.

Limits on the use of agency’s administrative courts

In SEC v. Jarkesy, the Supreme Court dealt another blow to agencies when it held that the SEC cannot rely on in-house administrative courts when it brings securities fraud claims for civil penalties. The decision has broad implications for the SEC and other agencies that rely on in-house adjudicative enforcement proceedings asserting any claims that are “legal in nature.” The Court explained that the SEC’s securities fraud claims were “legal in nature” (rather than, for example, equitable claims) because they “replicate[d] common law fraud” and sought civil penalties, a traditional common law remedy. As a result, the administrative enforcement proceeding violated the defendants’ Seventh Amendment right to a jury trial on those claims in an Article III court. The Court viewed the “public rights exception” to a defendant’s jury-trial right narrowly and concluded it did not apply to the SEC’s antifraud claims.

What’s next for the CFPB?

In CFPB v. Community Financial Services Association of America, Ltd., the Supreme Court affirmed the constitutionality of the funding scheme for the Consumer Financial Protection Bureau (CFPB). The Court held that it meets the minimum requirements of the Appropriations Clause by specifying the source and purpose of the funds. The decision paves the way for the CFPB to resume its rulemaking and enforcement activities, including implementation of three significant rules: the Payday Lending Rule, the Small Business Rule, and the Credit Card Penalty Fees Rule. Companies should consider revisiting the CFPB’s Fall 2023 Regulatory Agenda, as well as recent supervisory highlights and reports, for an indication of where the agency will focus its efforts while also monitoring for future challenges to the authority of the CFPB and other regulatory agencies. But keep in mind: Considering the historic rulings in Loper Bright and Jarkesy, future challenges to CFPB authority may yield closer decisions than this term’s challenge to the funding scheme.

The future of challenges to FDA decision-making

In FDA v. Alliance for Hippocratic Medicine, the Supreme Court unanimously held that the plaintiffs – several doctors and associations who sought to challenge the availability of the abortion medication mifepristone – did not have standing to sue based on their “desire to make [the] drug less available for others.” Notably, the Court did not rule out entirely the possibility of doctors’ alleged “conscience injury” conferring standing in other FDA challenges and highlighted several past decisions in which the regulation of others affected an “unregulated plaintiff” in such a way as to confer standing. The Court’s discussion of standing is unlikely to deter suits challenging agency action by those with more concrete downstream economic injuries.

Easing the path for discriminatory transfer claims

In Muldrow v. City of St. Louis, Missouri, the Supreme Court held that a job transfer based on sex can be considered discrimination under Title VII even if the transfer does not cause significant harm to the employee. Beyond job transfers, the Court’s new standard may be invoked to more easily satisfy the adverse action requirement of Title VII and other anti-discrimination statutes with similar textual wording. Muldrow underscores the importance of documenting the legitimate, non-discriminatory reasons for transfers and other job-related actions.

FAA’s transportation worker exception not limited to transportation industry

In Bissonnette v. LePage Bakeries Park St., LLC, the Supreme Court unanimously held that a worker need not work in the transportation industry to satisfy the “transportation worker” exception from coverage under Section 1 of the Federal Arbitration Act (FAA). The decision could spur more workers to challenge arbitration agreements. Employers are encouraged to reevaluate which workers’ roles may fall within the FAA exception and to exercise caution when drafting employment agreements for workers who engage in the transportation of goods across state borders.

National Labor Relations Board reeled in

In Starbucks Corp. v. McKinney, the Supreme Court held that the National Labor Relations Board (NLRB) must satisfy the traditional equitable criterion when petitioning federal district courts for injunctive relief under Section 10(j) of the National Labor Relations Act. The Court’s decision removes a powerful tool from the NLRB’s arsenal aimed at securing earlier employer action with the threat of an injunction. Notwithstanding the Starbucks decision, employers facing unionization activity or difficult employee disciplinary decisions during organizing campaigns are encouraged to consider measures to minimize labor risk.

Worker-friendly standard for whistleblower retaliation claims

In Murray v. UBS Securities, LLC, the Supreme Court unanimously held that a whistleblower bringing an anti-retaliation claim under the Sarbanes-Oxley Act must prove that their protected activity was a contributing factor in the unfavorable personnel action but need not make a further showing that the employer acted with retaliatory intent. The decision resolves a circuit split and may be invoked by plaintiffs in retaliation cases involving other federal laws that include similar language regarding the burden of proof for whistleblower claims.

We previously wrote about the circuit split and predicted Supreme Court review here.

Other key decisions

Federal courts must stay cases compelled to arbitration

In Smith v. Spizzirri, the Supreme Court unanimously held that Section 3 of the Federal Arbitration Act (FAA) requires a court to issue a stay of underlying litigation proceedings when a party seeks to compel arbitration pursuant to an arbitration clause. The decision reinforces the US policy favoring arbitration and prevents litigants from delaying or avoiding arbitration by appealing the dismissal of the court action.

Limiting chapter 11 as tool for collective resolution of mass tort liabilities

In Harrington v. Purdue Pharma L.P., the Supreme Court held that the US Bankruptcy Code does not permit a debtor to confirm, over objections, a chapter 11 plan that releases non-debtors from claims the creditors could assert directly against the non-debtors. The decision is significant in that it limits the use of injunctions and releases in chapter 11 cases for the collective resolution of mass tort liabilities. It is likely that litigation – for example, over what is required for consent and what constitutes a permissible “full-satisfaction release” – will continue, as corporate debtors in financial distress will continue to pursue collective resolution to mass tort liability.

Pure omissions not misleading under Rule 10b-5b

In Macquarie Infrastructure Corp. v. Moab Partners, L.P., the Supreme Court unanimously held that pure omissions of information, without an accompanying misleading statement, cannot give rise to liability under Rule 10b-5(b) of the Securities Exchange Act. The decision resolves a circuit split and should stem expanded liability under Section 10(b) for alleged violations of other provisions of Regulation S-K.

What's ahead

What’s ahead

As of July 22, 2024 , the Supreme Court has agreed to hear more than two dozen cases during its October 2024 term. Below we highlight several upcoming cases, which promise to have important implications for businesses.

Securities fraud

The Court will consider two appeals that could have far-reaching implications for pleading requirements in securities fraud class actions.

In NVIDIA Corp. v. E. Ohman J:or Fonder AB, the Court has agreed to consider the heightened pleading standards for scienter and falsity in securities fraud claims under the Private Securities Litigation Reform Act (PSLRA). The petition presents two questions: (1) whether securities fraud plaintiffs attempting to plead a “strong inference” of scienter based on allegedly contrary internal reports must plead details about the contents of those reports, and (2) whether falsity can be adequately alleged based on an expert’s after-the-fact opinion instead of pleading contrary, contemporaneous facts.

In Facebook, Inc. v. Amalgamated Bank, a case arising from the alleged misuse of Facebook user data by Cambridge Analytica, the Court has been asked to clarify whether “risk factor” disclosures provided by a public company in its periodic reports can be the basis for claims of securities fraud if they do not disclose the previous materialization of an identified risk, even if that previous instance did not result in any known threat of business harm.

Employment

The Supreme Court is set to address several employment and benefits issues.

In E.M.D. Sales, Inc. v. Carrera, the Supreme Court is expected to resolve a longstanding circuit split: What burden of proof must employers satisfy to demonstrate the applicability of a Fair Labor Standards Act (FLSA) exemption? While six circuits have held that employees must show that employees are exempt from the FLSA by only a preponderance of the evidence, the US Court of Appeals for the Fourth Circuit has long imposed a clear and convincing standard.

In Stanley v. City of Sanford, Florida, the Supreme Court will address whether former employees may bring discrimination suits under the Americans with Disabilities Act (ADA) related to the distribution of post-employment benefits. Here, too, the Court’s ruling should resolve a longstanding circuit split – this one concerning the scope and significance of the definition of a “qualified individual” under the ADA.

Environmental regulation

In the coming term, the Supreme Court will decide several issues related to environmental protection and regulatory clarity.

Seven County Infrastructure v. Eagle County, Colorado concerns the scope of federal agency review under the National Environmental Policy Act (NEPA), which requires agencies to evaluate the environmental impacts of proposed government actions and to inform the public of those assessments and corresponding decisions. The Supreme Court will consider whether NEPA requires an agency to study environmental impacts beyond the proximate effects of the action over which the agency holds regulatory authority, and is expected to resolve a circuit split over the breadth of the environmental assessments statutorily required.

In City and County of San Francisco v. Environmental Protection Agency, the Court agreed to consider whether the Clean Water Act authorizes the Environmental Protection Agency (or authorized state regulators) to include general prohibitions in wastewater discharge permits (known as National Pollutant Discharge Elimination System or NPDES permits) that subject permitholders to enforcement for violating water quality standards but do not specify the limits with which their discharges must conform. The Court will seek to resolve whether permitholders must be on notice of how much they must control their discharges, or whether a general prohibition against too much pollution suffices.

The outcomes of these cases could have significant implications for regulatory decision-making and environmental assessments.

Civil procedure and civil remedies

In Royal Canin U.S.A. Inc. v. Wullschleger, the Court is set to address key procedural questions: If a complaint is amended after the case is removed to federal district court and the basis for federal question jurisdiction is removed, does the district court still have a basis for subject matter jurisdiction? Can the court still exercise supplemental jurisdiction over the plaintiff’s remaining state-law claims pursuant to 28 U.S.C. § 1367?

Other cases will have the Supreme Court examine the standard that must be met to qualify as a prevailing party for purposes of attorney’s fees under 42 U.S.C. § 1988 and consider whether an award of “the defendant’s profits” under the Lanham Act may require the defendant to disgorge the profits of non-party corporate affiliates.

We will continue monitoring these cases and more in the coming year. In the meantime, please contact the authors of the alerts linked above or with your DLA Piper contacts if you have questions about how the Supreme Court’s decisions this term or next term may impact your business and workforce.