Dr. Seuss, Amtrak, and Dentists at the Supreme Court

Font Size:

The Court’s decisions this term ranged from agencies’ regulatory interpretations to Congress’ power to delegate authority.

Font Size:

Dr. Seuss, Amtrak train delays, and North Carolina’s dental licensing board all featured in decisions the Supreme Court handed down during its term that concluded last week. Although the Court’s high-profile decisions involving the Affordable Care Act and marriage equality have captured widespread media attention, a variety of other decisions made by the Court over the last nine months will have significant impacts on government regulation in the United States.

The Court’s regulatory opinions from this past term range from a unanimous decision that Amtrak is sometimes a government entity, to a 5-4 decision that fish are not considered “tangible objects” under the Sarbanes-Oxley Act.

In a narrowly decided case, the Court heard an appeal filed by the North Carolina State Board of Dental Examiners seeking to challenge a lawsuit filed against the Board by the Federal Trade Commission (FTC). The FTC alleged that the State Board, which is responsible for regulating dentistry in the public interest, acted as a trade group in violation of antitrust laws when the Board forbade non-dentists from offering low-cost teeth whitening at mall kiosks.

The Court disagreed with the Dental Board’s claim that it was immune from antitrust charges because it was a state actor when passing regulations. Antitrust immunity that is normally given to state actors generally also applies to a non-state actor if a state entity articulates the policies a non-state actor implements and if the state oversees that implementation.

Although the parties agreed that the Dental Board’s action constituted North Carolina’s articulated policy, the Court sided with the FTC in holding that the state did not actively supervise the policy’s implementation. To determine whether a state actively supervises a state licensing board, a controlling number of the board’s decision-makers cannot currently participate in regulating the industry. However, the members of the State Board were all North Carolina dentists, which the Court found means they must face the FTC’s antitrust claims.

A less contentious matter among the justices was the Court’s unanimous decision in a case called Perez v. Mortgage Bankers Association. In that case, the Court overturned a ruling by a lower appellate court that required administrative agencies to publish a notice in the Federal Register and solicit public comment when changing a previous interpretation of an agency regulation.

Perez involved a Department of Labor regulation that defined which employees were subject to overtime and minimum wage rules. The Labor Department initially interpreted its rule to exclude mortgage loan officers, but then in 2002 changed its interpretation without providing public notice and going through the step of soliciting comments. The Court held that it was permissible for the Labor Department to change its previous interpretation without issuing a formal notice or inviting the public to comment on its interpretive change.

In another case, DOT v. Association of American Railroads, the Court faced the question of whether Amtrak, a private corporation the federal government set up, could be given authority to formulate a legally binding regulation. The regulation, which Amtrak jointly issued with the Federal Railroad Association within the Department of Transportation, created standards for ensuring trains run on time. Although normally private entities cannot create binding laws, the Court unanimously held that for the purpose of setting standards authorized by Congress, Amtrak is part of the government.

Unlike the unanimity of Association of American Railroads and Perez, the Court decided the case of Yates v. United States on a 5-4 vote.

Yates determined what counts as a “tangible object” under the Sarbanes-Oxley Act, a law which Congress passed in 2002 to counteract corporate fraud in the wake of the Enron and WorldCom collapses. Instead of involving claims of fraud in a corporate boardroom, Yates involved a fisherman who, in order to escape a fine when he encountered a Florida Fish and Wildlife officer, threw 72 undersized red grouper overboard.

Federal prosecutors sought charges under the Sarbanes-Oxley Act against the boat’s captain for throwing the bounty overboard. Among other things, the Act makes it illegal to destroy tangible objects in an attempt to obstruct justice. Its usual targets are accused of shredding documents to cover up financial fraud, not covering up impermissible fishing.

The Supreme Court held that fish were not tangible objects under the law. The majority made clear that the Act’s definition of “tangible object” only includes objects “used to record or preserve information.” Dissenting, Kagan argued, that a “fish is, of course, a discrete thing that possesses physical form” – and for that proposition, she cited Dr. Seuss’s book, One Fish Two Fish Red Fish Blue Fish, in her opinion.

From defining the scope of financial fraud regulation to expanding the ways agencies may revise interpretations of their own rules, the Supreme Court’s regulatory decisions this term will shape the exercise of governmental authority for years to come.


This essay is part two of a five part series, The Supreme Court’s Regulatory Term.