Donald Trump has nominated Judge Neil Gorsuch of the Tenth Circuit to the Supreme Court. Gorsuch, who assumed his judgeship in 2006 after over a decade in private practice, is an originalist who cites the Federalist Papers in support of separation of powers. The key implication on securities regulation is Gorsuch’s eagerness to scrap the Chevron doctrine of deference to agency interpretations of ambiguous legislation. While in private practice, Gorsuch also wrote about securities class action reform.
Gorsuch’s former firm, Kellogg Huber Hansen, praised his nomination, stressing that Gorsuch had "served a variety of clients, ranging from entrepreneurs, to major corporations, to small companies, to a class of persons victimized by ‘payday loans.’" In 2005, during his tenure at the firm, Gorsuch co-authored a journal article identifying what the authors saw as problems with securities fraud class-action suits and suggesting reforms. Among other issues, the article suggested that follow-on private litigation duplicates the SEC’s work in redressing consumer harms, a task specifically authorized by Congress in Sarbanes-Oxley.
Chevron deference. From the bench, Gorsuch returned to the theme of congressional delegations of authority to agencies, particularly in the context of agency deference. Last summer, Gorsuch concurred in an opinion constraining an executive agency’s ability to overrule judicial precedent. "Chevron and Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design." In Gorsuch’s view, Chevron transfers the job of interpreting the law from the judiciary to the executive, raising "the very sort of due process (fair notice) and equal protection concerns the framers knew would arise if the political branches intruded on judicial functions."
Gorsuch’s concurrence specifically contemplates "a world without Chevron." Although he notes that courts often retain mistaken decisions because of reliance interests, "Chevron is a procedural rule, and procedural rules generally receive little precedential consideration when experience proves them problematic in their administration." It is particularly hard to see the reliance interests around Chevron, Gorsuch writes,when its "very point is to permit agencies to upset the settled expectations of the people by changing policy direction depending on the agency’s mood at the moment."
These views on agency deference have clear implications for securities law. There is a circuit split as to whether Dodd-Frank’s whistleblower anti-retaliation provision is ambiguous and the SEC’s implementing rule entitled to Chevron deference. The district court in D.C. exercised Chevron in upholding the DOL fiduciary rule; the case is on appeal to the D.C. Circuit. Courts have also deferred to the SEC in upholding Reg A+ preemption of state laws, and the doctrine has been cited as a potential barrier to respondents challenging the SEC’s use of administrative law judges. That constitutional debate is also the subject of a circuit split.
Presaging a confirmation battle. Gorsuch’s position on Chevron represents one point of departure from President Obama’s nominee to fill the Supreme Court vacancy. In 2007 Merrick Garland dissented from a majority opinion vacating the SEC’s fee-based brokerage rule under the Investment Advisers Act. Garland wrote that he would have deferred to the SEC’s reasonable interpretation with a nod to the Chevron doctrine. Gorsuch had, in 2002, chided the Senate’s delay in confirming Garland to the D.C. Circuit. "Garland was left waiting for 18 months before being confirmed over the opposition of 23 senators," he observed, adding that while "responsibility for the current morass does not rest with any one party or group … litmus tests, grudge matches and payback are not the ways forward." There is speculation that Senate Democrats may filibuster Gorsuch’s confirmation after Senate Republicans foreclosed Garland’s.
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