Recent trends in how federal district courts exercise their power of judicial review underscore the changing nature of regulatory litigation. In the first installment of this two-part series, we discussed three trends—the rise of multidistrict litigation, the increase in discovery and the decline of judicial deference. In this second installment, we discuss two additional trends—the rigorous enforcement of the Administrative Procedure Act's standard of review and the rise of nationwide injunctions.

The Administrative Procedure Act has teeth.  

On the merits, courts are rigorously enforcing the Administrative Procedure Act's mandate to set aside agency decisions that are arbitrary and capricious or contrary to law.

First, courts are carefully scrutinizing agency explanations to ensure there is a rational connection between the facts and the agency's decision. It has not sufficed for an agency to provide a conceivable rationale for its decision. Courts are insisting that the agency's explanation be persuasive, supported by facts in the record, and consistent with the statutory scheme.

Second, courts are willing to review claims that the agency offered pretextual reasons that conceal the agency's true motivation. In the census case, the U.S. Supreme Court held that the secretary of commerce's stated rationale for reinstating a citizenship question seemed to be "contrived" based on the record in that case. Now that the Supreme Court has blessed this type of claim, expect plaintiffs to continue alleging that the government offered pretextual reasons for its policy decisions.

Third, courts are insisting that agencies carefully weigh reliance interests when they reverse a prior administration's policy. The Supreme Court ruled in Federal Communications Commission v. Fox Television Stations that an agency may need to provide a more detailed justification for reversing course if its prior "policy has engendered serious reliance interests." The court later struck down an Obama-era regulation in Encino Motorcars v. Navarro because the agency failed to account for "decades of industry reliance on the department's prior policy." These precedents have recently had bite, as lower courts have faulted the Trump administration for failing adequately to weigh reliance upon policies adopted by the Obama administration. Expect plaintiffs in future cases to continue alleging the government failed to consider reliance interests.  

Nationwide injunctions are on the rise, but so is judicial skepticism.

In an earlier era, the remedy for unlawful agency action was an injunction against the policy—or vacatur of the rule—as applied to the specific plaintiffs in that case. But that modest approach has yielded to the trend of nationwide injunctions blocking the government from enforcing a policy against anyone in the country.

Having faced dozens of nationwide injunctions, the Trump administration has been vocal about this practice. Not only does a nationwide injunction prevent the government from enforcing a new policy, but it also forces the government to seek extraordinary remedies from appellate courts—including the Supreme Court—to obtain complete relief.  

The explosion of nationwide injunctions has also been met with skepticism. Justice Clarence Thomas wrote in Trump v. Hawaii that "universal injunctions are legally and historically dubious." Even the U. S. Court of Appeals for the Ninth Circuit has cut back on some nationwide injunctions that extended beyond the specific parties in the case. Look for the Supreme Court to weigh in on this trend if presented with the right vehicle. 

These recent trends have altered the course of regulatory litigation. Federal district courts are now exercising their power of judicial review by considering multiple challenges to executive branch policies, ordering discovery, avoiding deference, applying a rigorous standard of review, and entering broad injunctive relief. Each of these trends should be taken into account before engaging in regulatory litigation.     

Donald F. McGahn II leads the government regulation practice at Jones Day. Before rejoining Jones Day in 2019, he served as counsel to the president of the United States. Brett A. Shumate is also a partner in the government regulation practice. Before joining Jones Day, he served in the U.S. Department of Justice as deputy assistant attorney general for the civil division's federal programs branch. This article represents the personal views and opinions of the authors and not necessarily those of the law firm with which they are associated.