Regulatory Dissent and Judicial Review

Abstract

The Administrative Procedure Act provides the statutory procedure by which federal agencies must consider and adopt regulations and lays out the standard of judicial review that should be applied to properly adopted agency rules. SEC rules have faced increased hostility—or at least increased scrutiny—from the United States Court of Appeals for the District of Columbia (D.C. Circuit), which often issues the final judicial decision for agency regulations. Indeed, cases like Business Roundtable v. SEC (Business Roundtable II), 647 F.3d 1144, 1148 (D.C. Cir. 2011)––in which the D.C. Circuit struck down an SEC rule––constitute a significant shift in the standard of judicial review for agency regulations.

As the D.C. Circuit appears willing to review not just the process by which regulations are adopted, but also the actual content of such regulations, the bases for the court’s decisions—i.e., the factors the court considers in reviewing regulations—are increasingly important. Specifically, a reviewing court’s ability to endorse the dissenting opinions of minority members of a regulatory commission poses particular problems to that commission’s quasi-legislative activity in promulgating rules. In the wake of Business Roundtable II, where a court’s review of agency procedures is increasingly morphing into substantive review, judicial endorsement of minority views effectively displaces the policy choices of the majority members of regulatory agencies. In other words, when a court’s rejection of an agency rule is a product of judicial reliance on the dissenting opinions of the minority commissioners, the court essentially provides a rubber stamp for what was the minority (and losing) position on the commission. This Note explores how this result conflicts with basic principles of separation of powers, injures the institutional legitimacy of both the SEC and the courts, and threatens the efficacy of a primary financial regulator at a time when the U.S. economy is most in need of effective financial regulation.