Three states end judicial deference practices

The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process, and the rule of law.

This edition: 

In this month’s edition of Checks and Balances, we review consolidated lawsuits in the U.S. Court of Appeals for the Eighth Circuit challenging the Securities and Exchange Commission’s (SEC) climate disclosure rule; a federal court ruling in favor of Walmart’s challenge to the constitutionality of the Department of Justice’s (DOJ) administrative law judges; two federal court rulings blocking the Federal Highway Administration’s (FHWA) greenhouse gas emissions rule; and guidance from the Office of Management and Budget directing agency use of artificial intelligence.

At the state level, we take a look at signed legislation in Indiana, Nebraska, and Idaho to end judicial deference practices; and a Mississippi bill aiming to implement Medicaid work requirements in the state.

We also highlight recent commentary from the Institute for Policy Integrity’s Regulatory Policy Director Max Sarinsky proposing an approach for administrative agencies to preemptively rebut major questions doctrine challenges. We wrap up with our Regulatory Tally, which features information about the 148 proposed rules and 249 final rules added to the Federal Register in March and OIRA’s regulatory review activity.

In Washington

Eighth Circuit takes up case challenging SEC climate disclosure rule

What’s the story?

Nine lawsuits from state attorneys general and interest groups challenging the Securities and Exchange Commission’s (SEC) final rule on climate disclosures for publicly traded companies were consolidated on March 21, 2024, and assigned to the U.S. Court of Appeals for the Eighth Circuit through a lottery process. 

The SEC announced on March 6, 2024, that it had adopted a final rule aiming to standardize disclosure requirements for climate-related risks that, in the view of the agency, materially affect public companies. The rule would require public companies to disclose their climate-related risks, relevant environmental governance processes, and the financial impacts of severe weather events. It would also require certain public companies to disclose direct and indirect greenhouse gas emissions. 

The consolidated lawsuits were filed by 25 states, energy companies, business groups, and environmental groups such as The Sierra Club and the Natural Resources Defense Council. Among the lawsuits, a group of state attorneys general led by West Virginia Attorney General Patrick Morrisey (R) and Georgia Attorney General Chris Carr (R) argued that the regulations were not clearly tied to the SEC’s statutory authority and could violate the First Amendment. The Sierra Club, a nonprofit environmental organization, argued in its suit that the SEC was not doing enough to protect investors and inform them about climate risks. 

The SEC on April 4 paused implementation of the climate disclosure rule while the Eighth Circuit reviewed the consolidated lawsuits. The agency argued the rules were legal, but observed in their order that “a stay avoids potential regulatory uncertainty if registrants were to become subject to the Final Rules’ requirements during the pendency of the challenges to their validity.”

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Federal court rules DOJ administrative law judges are unconstitutional   

What’s the story?

The United States District Court for the Southern District of Georgia on March 25, 2024, ruled in favor of Walmart’s challenge to the constitutionality of the Department of Justice’s (DOJ) administrative law judges (ALJ). 

The DOJ initiated administrative law proceedings against Walmart, claiming that the company had violated certain immigration laws. Walmart filed a complaint on June 16, 2023, arguing that the enforcement proceedings should be blocked because they were “being conducted by an administrative law judge [(“ALJ”)] who is unconstitutionally shielded from the President’s supervision.”

Judge Randal Hall of the Georgia district court ruled in favor of Walmart, issuing a permanent injunction and arguing that the department’s ALJs violate Article II of the U.S. Constitution because their for-cause removal protections insulate them from the president’s removal authority. 

Leon Fresco, the former head of the DOJ’s Office of Immigration Litigation during the Obama administration, argued against the court’s decision, stating, “Congress delegated this specific authority … To the extent the Department of Justice is unable to carry out that function, this will be extremely damaging,” according to Bloomberg Law

The decision follows a ruling in November 2023 in the U.S. District Court for the Southern District of Texas in favor of a similar challenge issued by SpaceX against the department’s enforcement proceedings. Judge Rolando Olvera temporarily blocked the DOJ’s proceedings against SpaceX pending further litigation, arguing that the DOJ’s ALJ proceedings were likely unconstitutional. 

The DOJ filed a motion for summary judgment in the Texas court on March 22, 2024, and is expected to appeal the Georgia court’s decision, according to Bloomberg Law

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Federal judges block greenhouse gas emissions rule

What’s the story?

Two federal judges in Texas and Kentucky ruled against the Federal Highway Administration’s (FHWA) greenhouse gas emissions rule, which would require states to set goals to reduce vehicle emissions. Judge James Wesley Hendrix of the United States District Court for the Northern District of Texas ruled on March 27, 2024, that the FHWA did not have the authority to issue the rule, and Judge Benjamin Beaton of the United States District Court for the Western District of Kentucky ruled on April 1, 2024, that the agency could not enforce the rule in the state.

The FHWA on December 7, 2023, issued a final rule requiring state transportation departments and metropolitan planning organizations (MPOs) to establish carbon dioxide measurement targets aimed at reducing greenhouse gas emissions over time. 

Texas Attorney General Ken Paxton (R) on December 19 sued the U.S. Department of Transportation in the U.S. District Court for the Northern District of Texas seeking to block the rule, arguing that the FHWA did not have the authority to enact the rule. A separate lawsuit was filed in December in the U.S. District Court for the Western District of Kentucky by 21 states. 

Hendrix argued in his court opinion that the FHWA did not have the authority to issue the rule, arguing that, “An agency can only do what the people authorize it to do, and the plain language of Section 150(c)(3) and its related statutory provisions demonstrate the DOT was not authorized to enact the 2023 Rule.” Beaton issued a similar statement in his court opinion, arguing that the rule was invalid and was “a statutorily unsupported and substantively capricious exercise of the Administrator’s rulemaking authority.”

The court decisions blocked enforcement of the rule in the 22 states that joined the lawsuits. The Department of Transportation had not responded to the decisions as of April 10, 2024. 

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Office of Management and Budget issues guidance on agency use of artificial intelligence 

What’s the story?

The Office of Management and Budget (OMB) on March 28, 2024, issued guidance directing each executive agency to hire a chief artificial intelligence (AI) officer and establish an AI governance board. The guidance follows an executive order issued by President Joe Biden (D) in October 2023 that introduced AI safety standards. 

The guidance aims to address potential AI risks “result[ing] from any reliance on AI outputs to inform, influence, decide, or execute agency decision or actions, which could undermine the efficacy, safety, equitableness, fairness, transparency, accountability, appropriateness, or lawfulness of such decisions or actions.” It directs agencies to hire a chief AI officer and establish an AI governance board within 60 days of the guidance’s issue date. The document also outlines reporting requirements for agencies to follow when using AI. 

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In the states

Three states end judicial deference practices 

What’s the story? 

Lawmakers in Indiana, Nebraska, and Idaho passed bills in March 2024 to end judicial deference practices in each state. The bills were based on model legislation developed by The Goldwater Institute and the Pacific Legal Foundation, titled the Judicial Deference Reform Act. 

Nebraska Governor Jim Pillen (R) on March 27, 2024, and Idaho Governor Brad Little (R) on March 29, 2024, signed bills into law to end judicial deference to agency interpretations of statutes or rules and require courts to apply de novo review—a standard of judicial review that examines executive agency action without deference to a previous interpretation of the underlying statute in question.  

Indiana Governor Eric Holcomb (R) on March 13, 2024, signed a bill into law to end judicial deference to agency interpretations of constitutional provisions, statutes, and regulations. The bill included additional provisions aimed at promoting the separation of powers in the state and aimed to “give average Hoosiers a fair shot in court and rebalance the scales of justice,” according to The Goldwater Institute. 

Ballotpedia has identified thirteen other states since 2008 in which voters, courts, or lawmakers have taken action to limit or prohibit judicial deference practices: Arkansas, Arizona, Colorado, Florida, Georgia, Kansas, Michigan, Mississippi, Ohio, Tennessee, Utah, Wisconsin, and Wyoming. 

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Mississippi State Senate advances Medicaid work requirements

What’s the story? 

The Mississippi State Senate on March 28, 2024, passed a bill by a vote of 36-16 to establish Medicaid eligibility for people between the ages of 19 and 64 who earn 100% or less of the federal poverty level and meet work requirements. 

The bill, HB 1725, directs the Mississippi Division of Medicaid to apply for a waiver from the federal Centers for Medicare and Medicaid Services (CMS) to implement the proposed Medicaid plan. The plan would require individuals to work at least 120 hours a month, be enrolled in school or a workforce training program, or be the primary caregiver to a child under six or an individual with a disability to be eligible for Medicaid coverage. Unlike a previous version of the bill passed by the House, the Senate version would end the expanded Medicaid eligibility if CMS or a court terminates the work requirement. 

Mississippi Today reported that Governor Tate Reeves (R) privately told a group of Republican senators that he would veto any Medicaid expansion bill.  Reeves said in a Facebook post following the bill’s passage, “This week was not a great week in our fight to beat Obamacare Medicaid Expansion.”

State Senator Kevin Blackwell (R) stated, “[The bill] gives a hand up to those trying to be successful, not in the form of cash or big screen TVs, but in the form of an opportunity to go see a doctor and not go bankrupt when they get sick. … This is not Obamacare expansion,” according to WLBT3

The bill, which proposes more limited Medicaid eligibility expansion than the previous version passed by the Mississippi House, was pending before a House conference committee as of April 12, 2024. 

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A preemptive approach to major questions doctrine challenges

In a recent post for the Yale Journal on Regulation’s Notice and Comment blog, the regulatory policy director at the Institute for Policy Integrity Max Sarinsky argued that administrative agencies should aim to preemptively rebut major questions doctrine challenges by citing previous agency actions. Sarinsky identified new Environmental Protection Agency (EPA) vehicle pollution standards as an example:

This persuasive rebuttal is especially significant because some of the major questions doctrine’s leading proponents often misapply it. While the Supreme Court outlined a nuanced doctrine that focuses on the history and breadth of the agency authority at issue, many litigants and lower-court judges now falsely assert that the doctrine prevents any economically or politically significant agency activity. Comprehensive rebuttals like EPA’s, which properly situate the major questions doctrine and address it point-by-point, help dispel this caricature. 

EPA’s thorough analysis also offers a critical roadmap for Department of Justice litigators who will soon brief this issue. Other agencies should study EPA’s approach and follow suit.

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  • Click here to read the full text of “This is How To Rebut Major Questions Arguments” by Max Sarinsky

Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s March regulatory review activity included the following actions:

  • Review of 63 significant regulatory actions. 
  • One rule approved without changes; recommended changes to 58 proposed rules; one rule withdrawn from the review process; three rules subject to a statutory or judicial deadline.
  • As of April 1, 2024, OIRA’s website listed 159 regulatory actions under review.
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