Notice & Comment

Another Way to Rebut Major Questions Arguments, by Todd Phillips and Beau J. Baumann

Earlier this week, Max Sarinsky published an excellent piece about how agencies could get ahead of major questions doctrine (MQD) challenges to new rules. That blog post, which drew heavily from Sarinsky’s new law review article with Richard Revesz, argues that agencies should follow the lead of the Environmental Protection Agency and articulate specific regulatory antecedents to counter allegations that their rules violate the MQD. Because the MQD only punishes “exceptional” agency actions that are “transformative” and “unheralded,” identifying regulatory antecedents suggests that new actions are business as usual and do not require the MQD’s exaggerated level of clarity. 

In the same spirit as Sarinsky’s blog post, we articulate another way to rebut MQD challenges to new agency actions. However, rather than discuss how agencies can buttress their rules against MQD challenges during their promulgation, this mode of argumentation helps agencies litigate the scope of the MQD. It draws on our work, The Major Questions Doctrine’s Domain. In that piece, we suggested that the MQD is limited to legislative agency actions that are major and exceptional. The Supreme Court’s MQD case law has always been preoccupied with these kinds of legislative agency actions that prospectively bind regulated parties. 

Like the EPA in Sarinsky’s piece, agencies should follow the good example of the Securities and Exchange Commission in SEC v. Coinbase[1] (bonus points to folks at the FTC and NLRB, who adopted the same mode of argument even more quickly)[2]. Earlier this week, the SEC scored a big win. For the last several years, the SEC has brought enforcement actions to bring crypto assets under the agency’s regulatory umbrella. That effort turns in large part on a standard called the Howey test, which the Supreme Court crafted to identify whether something is an “investment contract,” and therefore a “security,” under the New Deal’s securities legislation. Several defendants have invoked the MQD and argued that the SEC’s actions are economically significant and transformative thanks to the crypto markets’ size and novelty. 

As the SEC was bringing enforcement actions, we published an article called The Major Questions Doctrine’s Domain. There, were made several arguments flowing from the same observation—the heartland of the MQD’s “domain” has always been nationwide and legislative agency actions that prospectively bind regulated entities or the public at large. This is illustrated by the cases involving the student-loan plan (Biden v. Nebraska); the COVID-19 vaccine-or-test mandate (NFIB v. Department of Labor); the COVID-19 eviction moratorium (Alabama Ass’n of Realtors); the Clean Power Plan (West Virginia v. EPA); and all the older cases based in Chevron deference. 

From there we channeled the excellent literature on Chevron’s domain[3] to argue that that judicial enforcement actions—agency actions that start with the filing of an agency’s complaint-like instrument in federal court—should be outside the MQD’s domain. In the article and an amicus brief filed with the incredible help of Democracy Forward, we made several points. First, judicial enforcement actions (that is, enforcement actions brought in Article III courts) against individual firms or pockets of firms, even if they are pricey or politically salient, are not transformative in the MQD sense because they inherently require case-by-case adjudication. Judicial enforcement actions are just law enforcement at its most basic. The SEC has been doing this and slowly bringing new markets under its control for decades. 

This is where a lot of crypto-related commentary is fundamentally confused. They often will argue that the SEC’s lawsuits, in alleging that particular crypto assets are securities, are “exceptional” and therefore violate the MQD because those assets are not securities under Howey or because Howey does not truly do justice to congressional intent. As we suggested to Brian L. Frye on his Ipse Dixit podcast, that’s an argument about the scope of the securities laws. It doesn’t really engage with the concerns undergirding the MQD.

Our second argument was more ontological. There are material differences between the nature of judicial enforcement actions and the types of cases implicating the MQD. When the SEC brings a case to federal court, it is merely asking a court to apply the law as Congress wrote it. This is materially different from a legislative rule, which involves agencies stepping in Congress’s shoes and fashioning new legal obligations. These differences should be salient for the MQD fans who believe that the doctrine enforces the separation of powers. Unlike with legislative rules, enforcement actions are the core of executive power.

Third, we argued that judicial enforcement actions do not implicate the same concerns with jurisdiction expansion that motivates some MQD applications. The Roberts Court Era has seen a resurgence in concerns with having agencies be the masters of their own jurisdiction. Here, the SEC’s jurisdiction is determined in consultation with the federal judiciary. Federal judges use Howey to gauge the lawfulness of the SEC’s actions from go and they exist as an early check on the threat of executive aggrandizement. So, what do we need the MQD for? Thinks of SEC enforcement actions as the opposite of the huge jurisdiction expansion we saw in cases like Brown & Williamson

We made some other arguments that you can find in our Article. 

Earlier this week, Judge Katherine Polk Failla issued an opinion denying, “in large part,” Coinbase’s motion for judgement on the pleading in an enforcement action involving crypto assets. Pertinent here, Judge Failla found that the MQD did not apply to SEC enforcement actions against crypto assets. She concluded that the enforcement action was not economically significant compared to other MQD cases or the markets the SEC already regulates. Failla also found that the SEC was not asserting a “transformative” power because “the SEC is exercising its Congressionally bestowed enforcement authority.” Finally, Failla adopted the “domain” argument. She cast significant doubt on whether the MQD was compatible with “the very concept of enforcement actions[.]” This opinion joins some precedent involving the FTC to constrain the potential reach of the MQD’s domain. 

The Coinbase litigation (and the other SEC enforcement actions[4]) provides a roadmap for how agencies should be thinking and arguing about the MQD. The SEC and FTC have both won on these arguments. Other agencies (*cough* DOJ *cough*) could pick up this mode of domain-based arguments to limit the scope of the MQD. You can apply the same framework to agency adjudications (as Fred B. Jacob has already realized[5]) and other non-legislative agency actions. For example, a few months ago a judge in the Eastern District of Texas applied the MQD to guidance.[6] It may be that domain-based arguments could forestall similar outcomes. While we have only taken a position on judicial enforcement actions, practitioners and scholars can benefit from MQD-based work.

Todd Phillips is an Assistant Professor at the J. Mack Robinson College of Business. He welcomes all comments via email.

Beau J. Baumann is a Ph.D. candidate at Yale Law School. He welcomes all comments via email.

[1] See SEC v. Coinbase, Inc., No. 1:23-cv-04738 (KPF), 2024 WL 1304037 (S.D.N.Y. March 27, 2024) (dismissing “in large part” Coinbase’s motion for judgment on the pleadings, which contained a MQD argument).

[2] See FTC v. Kochava Inc., No. 22-cv-377 (BLW), 2023 WL 3249809, at *13 (D. Idaho May 4, 2023) (holding that the MQD was inapplicable against an FTC enforcement action because the FTC was “merely asking a court to interpret and apply a statute enacted by Congress”); Fred B. Jacob, The National Labor Relations Act, the Major Questions Doctrine, and Labor Peace in the Modern Workplace, 65 B.C. L. Rev. (forthcoming 2024) (arguing that an agency’s case-by-case, common law adjudication of open-textured statutes should be outside the MQD’s domain).

[3] See, e.g., Thomas W. Merrill & Kristin E. Hickman, Chevron’s Domain, 89 Geo. L.J. 833 (2001); William N. Eskridge, Jr., Expanding Chevron’s Domain: A Comparative Institutional Analysis of The Relative Competence of Courts and Agencies to Interpret Statutes, 2013 Wisc. L. Rev. 411; Jonathan H. Adler, Restoring Chevron’s Domain, 81 Mo. L. Rev. 983 (2016); Kent H. Barnett & Christopher J. Walker, Chevron Step Two’s Domain, 93 Notre Dame L. Rev. 1441 (2018); Kristin E. Hickman & Aaron L. Nielson, Narrowing Chevron’s Domain, 70 Duke L.J. 931 (2021).

[4] E.g., SEC v. Binance Holdings Ltd., No. 1:23-cv-01599 (D.D.C. June 5, 2023); SEC v. Payward, Inc., No. 3:23-cv-06003 (N.D. Cal. Nov. 20, 2023); Beba LLC v. SEC, 6:24-cv-153 (W.D. Tex. Mar. 25, 2024).

[5] See generally Jacob, supra note ii (arguing that the MQD should not apply to the NLRB’s common law-like adjudications). 

[6] Chamber of Commerce v. CFPB, NO. 6:22-cv-00381, 2023 WL 5835951 **8–9 (E.D. Tex. Sep. 8, 2023).

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