Q1: What area of law does SEC v. Chenery Corp. (Chenery II) primarily address?
Administrative Law
Q2: What was the central legal issue in SEC v. Chenery Corp. (Chenery II)?
May an administrative agency announce and apply new principles through adjudication—rather than rulemaking—and apply those principles to the parties before it in a pending matter, consistent with its statutory mandate and without violating prohibitions on retroactivity?
Q3: What rule did the court apply?
An administrative agency has broad discretion to choose between rulemaking and adjudication as the means of making policy, so long as its choice is reasonable and consistent with its statutory authority. Principles announced in adjudication may be applied to the parties before the agency, even if they represent new applications or refinements of policy, provided the agency's action is not arbitrary or capricious, does not contravene statutory or constitutional constraints, and does not impose retroactivity that is so unreasonable or unfair as to constitute manifest injustice. Courts review the agency's order on the grounds the agency itself invoked (Chenery I) and uphold the order if supported by the statute, the record, and reasoned explanation.
Q4: What was the court's holding?
Yes. The SEC permissibly proceeded by adjudication, articulated an adequate statutory rationale, and reasonably applied its policy to the insider-purchased shares in the reorganization. The Supreme Court reversed the Court of Appeals and sustained the SEC's order.
Q5: Why is SEC v. Chenery Corp. (Chenery II) significant?
Chenery II is the canonical authority for agency discretion to choose policymaking by adjudication or rulemaking. It affirms that agencies can announce and apply new principles in individual cases—subject to reasonableness, statutory consistency, and fairness—without first engaging in formal rulemaking. The decision also clarifies the limits and permissibility of retroactivity in administrative adjudication and complements Chenery I's insistence that agency action must be judged on the agency's stated grounds. For students, Chenery II frames modern doctrine on policymaking modes, sets benchmarks for judicial review of agency choices, and informs how agencies manage fairness issues in complex, ongoing regulatory processes.