SCOTUS Could Strike Down EPA’s Unconstitutional Overreach

The EPA under the Biden Administration crafted a cap-and-trade scheme to allocate market share in the multibillion-dollar hydrofluorocarbons industry — including to “new market participants” based on the promotion of “equity.” Now, one of the businesses the EPA rendered a market-share loser under the federal agency’s unconstitutional take-over of the hydrofluorocarbon industry seeks review by the Supreme Court. And that pending petition represents a sleeper case that could implode much of the administrative state if it makes it onto the high court’s docket next term.

Next Thursday, the Supreme Court will conference over the pending petition for review, called a petition for certiorari, in the case of RMS of Georgia, LLC, dba Choice Refrigerants v. EPA. The petitioner, known more widely as Choice Refrigerants, is a small business operating out of Georgia which invested in patented blends of refrigerants for air conditioning and other products in the early 2000s. At the time, the EPA encouraged the development of hydrofluorocarbons to replace the ozone-depleting refrigerants then on the market.

In December of 2020, Congress passed a statute called the AIM Act, short for the American Innovation and Manufacturing Act of 2020, which mandated a phasedown in the United States of hydrofluorocarbons using a cap-and-trade program. The AIM Act provided for a phased elimination of 85% of hydrofluorocarbons produced in, or imported to, the United States.

While Congress detailed in the AIM Act the cap for each phase of the plan to reduce hydrofluorocarbons, the statute provided no direction for the EPA to decide who should receive “allowances” under the law. With no guidance from Congress, the EPA invented its own standards for doling out allowances, with the EPA reserving millions of allowances for “new entrants.” The EPA’s final rule from October 5, 2021, also expressly provided multiple times that, in allocating market share, it could consider “equity.”

The EPA later issued a final rule in July of 2023 to cover allocation of hydrofluorocarbons from 2024 through 2028. That final rule continued to provide for allowances to “new market” entrants, prejudicing Choice Refrigerants and other businesses to the advantage of those deemed worthy by the Biden Administration.

When Choice Refrigerants challenged the EPA’s scheme, the EPA initially defended its allocation of market-share by claiming it “was free to issue the allowances in a reasonable manner, reasonably explained,” based on Chevron deference. However, the Supreme Court would later overrule the Chevron doctrine — a doctrine which required courts to defer to an agency’s interpretation of a statute so long as it was reasonable. 

Nonetheless, the lower court rubberstamped the EPA’s cap-and-trade program, holding Congress could leave it up to the EPA to decide how to allocate market share. The ramification of this reasoning is truly boundless, as Choice Refrigerants explained in its petition for certiorari to the Supreme Court: The lower court’s decision “leaves EPA free to choose which companies may participate in a multibillion-dollar industry, and which may not, based entirely on the agency’s policy preferences, whether grounded in preserving orderly markets, advancing social justice, achieving environmental ends, or bare revenue raising.”

In fact, the EPA had previously proposed handing out allowance by “prioritizing applications for new market entry from ‘minority- and woman-owned small businesses’ that may have faced ‘challenges entering the HFC import market due to systemic racism, market-access barriers, or other challenges, . . . .’” While the final rule only spoke of the EPA considering “equity, human dignity, fairness, and distributional considerations” in establishing market share, the government’s reasoning — if upheld — would allow federal agencies to decide winners and losers based on race or sex.

The EPA’s entire cap-and-trade scheme is antithetical to America’s free market system, but there is an even more fundamental flaw, which serves as the basis for Choice Refrigerants’ request that the Supreme Court hear its appeal. As noted above, Congress, in passing the AIM Act, said nothing to the EPA concerning who should receive allowances to continue to produce or import hydrofluorocarbons. The lower court just invented its own standard — a clear violation of our Constitution’s foundational principle that lawmaking authority is vested in the legislative branch, not the unelected bureaucrats that run the EPA and the scores of other federal agencies.

The Supreme Court has branded this concept “the nondelegation doctrine,” although it stems from Article I, Section 1 of the Constitution which provides: “All legislative Powers herein granted shall be vested in a Congress of the United States, . . . .” However, while Article I, Section 1 vests “all legislative Powers” in Congress, the Supreme Court currently acquiesces in the delegation of power to agencies so long as the statute establishes an “intelligible principle” to direct the bureaucrat’s exercise of power.

The AIM Act contains no such “intelligible principle,” though, when it comes to divining who is entitled to receive hydrofluorocarbon allowances. Yet, the lower court upheld the EPA’s regulation against Choice Refrigerants’ nondelegation doctrine challenge.

Not only did the lower court err, as Choice Refrigerants argued in its petition for certiorari, but “[m]ultiple Justices have written . . . to underscore the need for ‘further consideration’ of the rules governing delegations of power to decide important questions of national policy.” And in this regard, the Chief Justice, along with Justices Gorsuch, Alito, and Thomas, believe the Supreme Court should abandon the “intelligible principle” and nondelegation doctrine and return to “the Constitution’s original meaning and historic practice.”

Yet the Supreme Court has, to date, been reticent to reinvigorate the nondelegation doctrine. Choice Refrigerants’ petition, however, presents the perfect opportunity for the high court to return to first principles and make clear that Congress cannot delegate away its power to make the law. Doing so would also solve the teeth-gnashing of late over President Trump’s exercise of control over executive branch agencies, for if the agencies lack the authority to make law, Trump cannot use his Article II power to commandeer the country. When it conferences on June 18, 2026 over Choice Refrigerants’ petition, the Supreme Court will likely have those recent legal battles in mind.

Over the last several years, the current Supreme Court has made great strides in restraining the administrative state by returning to the Constitution’s design of separation of powers. But until the Court addresses the flawed and non-textual nondelegation doctrine, federal agencies will continue to make laws — and pick winners and losers.

Disclosure: The New Civil Liberties Alliance represents Choice Refrigerants. Ms. Cleveland is Of Counsel at NCLA but is not an attorney of record on the case.

Margot Cleveland is an investigative journalist and legal analyst and serves as The Federalist’s senior legal correspondent. Margot’s work has been published at The Wall Street Journal, The American Spectator, the New Criterion, National Review Online, Townhall.com, the Daily Signal, USA Today, and the Detroit Free Press. She is also a regular guest on nationally syndicated radio programs and on Fox News, Fox Business, and Newsmax. Cleveland is a lawyer and a graduate of the Notre Dame Law School, where she earned the Hoynes Prize—the law school’s highest honor. She later served for nearly 25 years as a permanent law clerk for a federal appellate judge on the Seventh Circuit Court of Appeals. Cleveland is a former full-time university faculty member and now teaches as an adjunct from time to time. Cleveland is also of counsel for the New Civil Liberties Alliance. Cleveland is on Twitter at @ProfMJCleveland where you can read more about her greatest accomplishments—her dear husband and dear son. The views expressed here are those of Cleveland in her private capacity.