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Newswise — BLOOMINGTON, Ind. -- The confirmation hearing for U.S. Supreme Court nominee Brett Kavanaugh has revolved around his views on judicial independence, gun laws and abortion. A new scholarly article released this week by two legal studies professors at the Indiana University Kelley School of Business suggests that the Senate should be equally concerned with the nominee's thinking about regulatory matters and the power of federal agencies.
In their article, "Judge Kavanaugh, Lorenzo v. SEC & the Post-Kennedy Supreme Court," professors Matthew Turk and Karen Woody explain why, by focusing on a dissenting opinion that Kavanaugh wrote last year as a D.C. Circuit Court judge in a financial fraud case, Lorenzo v. Securities Exchange Commission. The Supreme Court is expected to hear the case in the next session.
That dissent contains a "scathing assessment" of regulatory practices at the SEC and how the agency has interpreted deceptive conduct under the federal securities laws, Turk and Woody write. More importantly, they argue, the dissent also "identifies how the legal deficiencies specific to Lorenzo also motivate Judge Kavanaugh's broader skepticism toward the constitutional legitimacy of the administrative and regulatory state as a whole, a view that represents his signature contribution as a federal judge."
The case therefore "provides a unique window into the (Supreme) Court's future" if Kavanaugh is ultimately confirmed, because it would be an occasion where "the defining judicial philosophy of an incoming Supreme Court justice is on full display."
According to Turk and Woody, the critical passage in Kavanaugh's dissent is his assertion that the SEC's application of the securities laws at issue in Lorenzo "deserves judicial repudiation, not deference or respect." That language implicates an important Supreme Court decision from 1984, Chevron USA Inc. v. Natural Resources Defense Council Inc., which established a key principle of judicial review, known as "Chevron deference."
The legal test developed in Chevron requires federal courts to uphold a regulatory agency's rules whenever the congressional statute that authorizes those regulations does not provide judges with a clear, unambiguous answer as to their legality. Because Congress often passes laws that are vague on the details, that doctrine has had a wide-ranging impact. In fact, according to one estimate, Chevron has been referenced in judicial opinions or other legal sources over 80,000 times, making it one of the most cited Supreme Court precedents of all time.
As Turk and Woody conclude, "Judge Kavanaugh no doubt favors overturning Chevron in full or otherwise redefining its holding out of existence." In addition to his dissent in Lorenzo, "Judge Kavanaugh has criticized the Chevron doctrine in a number of speeches and non-judicial writings," they write.
As a further example, they cite his 2016 article for the Harvard Law Review in which the nominee wrote, "Judges should strive to find the best reading of the statute. They should not be diverted by an arbitrary initial inquiry into whether the statute can be characterized as clear or ambiguous."
If the Senate votes to confirm Kavanaugh to replace Justice Anthony Kennedy, it would be adding one of Chevron's loudest critics to the Supreme Court and placing the continuing viability of that precedent in jeopardy, said Turk and Woody, who both are assistant professors of business law and ethics at Kelley.
Although Turk and Woody detail how Kavanaugh's opinions often touch on Chevron and similar themes, they point to one feature that makes Lorenzo undeniably unique: The Supreme Court decided to take the case upon an appeal just a month before Kavanaugh's nomination by President Trump and will issue a ruling on the D.C. Circuit's decision sometime in 2019. If Kavanaugh is confirmed, he would inevitably need to recuse himself from the case, leading to an eight-justice vote on a nine-justice court.
Lorenzo would have been a significant case even before Kavanaugh's nomination. Yet the Supreme Court's "eventual decision in Lorenzo is even more intriguing with a future Justice Kavanaugh recused." It may be a revealing of how "Kavanaugh's membership on the court would affect the votes of other justices," they wrote, because the dissent lays out his critique of Chevron and related principles while also providing his new colleagues a roadmap for how to apply those abstract critiques in practice.
In deciding Lorenzo, the Supreme Court's "reception of those arguments promises some early suggestive evidence on the question of whether Judge Kavanaugh will be a successful judicial entrepreneur for his views on administrative law" and thereby influence the legal framework under which regulators operate.
Editors: For further assistance in obtaining a copy of the paper, contact George Vlahakis at the IU Kelley School of Business at [email protected] or 812-855-0846.