May it please the C-suite:
The Supreme Court’s expansion of presidential immunity will be the case everyone remembers from this term, but the justices got up to plenty more over the preceding nine months. Quite a few of those other decisions could affect the work of CFOs, so we put together a roundup of some of the big ones. Grab your robe and join us on the dais.
They’ll be the judge of that. Justices took a lot of power from federal agencies this term. The biggest of those rulings ended the nearly four-decade precedent of the Chevron deference, where courts trusted agencies to interpret laws—a decision that, as Vox has reported, could put thousands of cases before judges who don’t have the niche technical expertise of career agency staff.
The result: “an uncertain future of regulatory change and jurisdictional inconsistency” for companies—but also more chances for them to overturn laws and regulations they don’t like, according to a PwC analysis of the decision.
See you in court. Another blow against the administrative state came in Securities and Exchange Commission v. Jarkesy. In a 6-3 decision, justices said that the SEC can’t use administrative tribunals, which are overseen by specialized judges, in cases that can fine and penalize companies. Cases will now need to go trial in a federal judicial system that has already struggled with staffing.
Justices also broadened the window for challenges to federal regulations under the Administrative Procedure Act. Writing for the 6-3 majority, Justice Amy Coney Barrett said that the six-year statute of limitations to sue over a regulation should not begin when a regulation takes effect but “when the plaintiff is injured by final agency action.” That, according to Suffolk University law professor Renée Landers, “means that the statute of limitations is now infinite.” On a webinar reviewing the recent term with other experts, she echoed the concern that regulations will now be open to challenges from corporations expressly created to challenge them.
So mysterious. Like dialogue in Bridgerton, some court opinions are regarded as much for what they’re hinting about intentions as for what their words actually say. The court’s upholding of a one-time repatriation tax from the 2017 Tax Cuts and Jobs Act may be one of those cases. The dispute got such outsized attention because it gave justices the chance to say it is constitutional to tax unrealized capital gains such as the wealth taxes proposed by Sen. Elizabeth Warren and President Joe Biden.
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The justices did not take that opportunity this time around, ruling 7-2 that the government could tax investors because the company in question had realized earnings. But the limited ruling was less important than what it signaled, Gary Scanlon, principal for international tax at KPMG, told CFO Brew, because four conservative justices went on record in support of a requirement that gains can’t be taxed unless they’re realized. That means just one of two other conservatives would need to join them to shoot down a wealth tax, said Scanlon. “I think that was the whole point of this case in the first place,” he said. “This is sort of a shot across the bow for those proposals.”
Dis(case is)closed. We’ll end this list with some relief for any CFO who has ever lay awake the night before filing a 10-K, fretting whether they’ve included everything. Investors can’t sue a company for omitting material risks in SEC filings, the justices said in a unanimous ruling. Under SEC Rule 10b–5(b), companies are liable for misleading investors with half-truths, wrote Justice Sonia Sotomayor, but “pure omissions” are okay.
Your Honor-able mentions.
- The court decided the administrative state could have a little regulatory stability, as a treat. Their ruling to uphold the funding structure of the Consumer Financial Protection Bureau denied the independent agency’s opponents a way to prevent it from functioning and calling into question regulations it had created in its 13-year history, the New York Times reported.
- In its rejection of Purdue Pharma’s $7 billion settlement with opioid victims, the court said non-debtor parties to a bankruptcy settlement (e.g., members of the Sackler family) can’t use the process to shield themselves against future lawsuits unless the people who brought the suit agree to it.