In Robinhood Financial LLC v. Secretary of Commonwealth, the Massachusetts Supreme Judicial Court sided with the government and reversed a Suffolk County Superior Court decision in a high-stakes administrative law case. Robinhood had challenged the scope of the Secretary of the Commonwealth’s authority to enforce state securities law, and it was successful in the lower court. Overruling that decision, the Supreme Judicial Court offered a doctrinal tour of how one state—Massachusetts—deals with some of the most pressing issues in administrative law today: statutory interpretation, nondelegation, and preemption. Although it is grounded in an interpretation of state constitutional law, the court’s nondelegation analysis fleshes out a vision of the separation of powers that has kept the Article I nondelegation doctrine at bay for nearly a century at the U.S. Supreme Court.

The Massachusetts Uniform Securities Act (MUSA) prohibits “unethical or dishonest conduct or practices in the securities, commodities or insurance business.”[1] To effectuate this prohibition, the Secretary of the Commonwealth promulgated the fiduciary-duty rule. This rule brought “the fiduciary obligations of broker-dealers in line with those of investment advisers, making uniform the duties owed by those engaged in the business of providing investment advice regardless of label.”[2] The Secretary had brought an enforcement action against Robinhood pursuant to the fiduciary-duty rule, alleging “that Robinhood provided investment recommendations to its Internet-based customers without considering whether those recommendations were in each customer's best interest.”[3] To defend against the enforcement proceeding, Robinhood challenged the validity of the fiduciary-duty rule itself. Robinhood won in the Suffolk County Superior Court when Judge Ricciuti declared the rule invalid.[4] But the state appealed to the Massachusetts Supreme Judicial Court.

Robinhood made three arguments against the rule on appeal, but none of them were successful in the Supreme Judicial Court. First, Robinhood contended that the rule exceeded the Secretary’s delegated authority under MUSA. Second, Robinhood claimed that if the rule was consistent with the statute, then MUSA violated the nondelegation doctrine. Third, Robinhood submitted that the federal Securities and Exchange Commission had preempted the rule by imposing “a national ‘best interest’ standard of care on broker-dealers.”[5] The court rejected all three of these legal theories.

Statutory Interpretation

MUSA’s prohibition is broad: it outlaws “unethical or dishonest conduct or practices in the securities, commodities or insurance business.”[6] The fiduciary-duty rule interpreted this statutory provision to impose a fiduciary duty on broker-dealers when they provide investment advice to retail customers.[7] In its initial slate of arguments, Robinhood submitted that MUSA and the fiduciary-duty rule were at odds. Robinhood made a straightforward statutory interpretation argument and a non-abrogation-of-common-law argument. The court was not persuaded.

The court acknowledged that MUSA confers “broad-ranging authority” on the Secretary, but it concluded that this capacious grant of power merely “evinces the Legislature’s determination that the Secretary is best ‘suited to the task of clarifying the Legislature’s plan through specific rules.’”[8] Moreover, the court saw this provision as demonstrating the Legislature’s “conclusion that the Secretary, because of his ‘experience, technical competence, and specialized knowledge’ is well positioned to address the program of . . . investor protection.”[9] Without explicitly saying as much, the court evoked some of the justifications that federal courts give for deferring to permissible agency interpretations of ambiguous statutes.[10] Given the Legislature’s silence on exactly what conduct is “unethical or dishonest,” the court allowed the Secretary “to fill the gap with appropriate regulation.”[11] Robinhood made several arguments to the contrary—citing industry norms and a policy of uniformity in interpreting MUSA—but the company was unsuccessful.

The court described Robinhood’s next argument as being “that the fiduciary rule is invalid because it abrogates the common law.”[12] This argument has echoes of “the canon against implied repeals to well-established doctrines of common law” that Will Baude discussed in his recent Scalia Lecture at Harvard Law School.[13] The point here is not exactly that the rule itself abrogates the common law. Rather, the contention is that the statute does not abrogate the common law, so any regulation abrogating the common law is inconsistent with the statute. In Robinhood’s view, the Legislature would have needed to speak more clearly in the statute to depart from the common law. And because the regulation must flow from the statute, the statute’s failure to abrogate the common law means that no regulation can do so. Notwithstanding this argument, the court concluded that the Legislature was merely providing protections that “extend beyond those available under the common law without abrogating [it].”[14]

Nondelegation

Robinhood took another tack: accepting that perhaps the statute confers authority as broad as the court described in the statutory interpretation section, Robinhood contended that the statute “impermissibly delegates legislative authority” to the Secretary.[15] This theory is known as the nondelegation doctrine. While federal courts usually discuss this doctrine in the context of Article I of the U.S. Constitution,[16] Robinhood made its nondelegation argument in connection with Article 30 of the Massachusetts Declaration of Rights. The existence of this argument raised the stakes of Robinhood’s statutory interpretation argument, because resolving the case on statutory grounds would have given the court an off-ramp if it preferred not to get into thorny constitutional issues.[17]

Federal Article I nondelegation arguments turn on contested interpretations of the U.S. Constitution.[18] But Article 30 of the Massachusetts Declaration of Rights is more straightforward. It provides that “[i]n the government of this commonwealth, . . . the executive shall never exercise the legislative and judicial powers, or either of them.”[19] Robust state constitutional “nondelegation” provisions like this one are not uncommon; Ben Silver has a terrific article that analyzes the nondelegation doctrine in state constitutions and state courts.[20] Yet as Silver points out: although the test in Article 30 “seems rather strict,” Massachusetts courts have not been receptive in recent years to nondelegation challenges.[21]

Silver’s understanding held up in Robinhood. The court was not persuaded by Robinhood’s nondelegation argument, citing the U.S. Supreme Court’s recent decision in Gundy v. United States.[22] Here, the Massachusetts Supreme Judicial Court looked to a three-factor test, asking whether the Legislature (1) delegated “the making of fundamental policy decisions, rather than just the implementation of legislatively determined policy;” (2) gave “adequate direction for implementation;” and (3) provided “safeguards such that abuses of discretion can be controlled.”[23] Concluding—among other things—that the Legislature fashioned “an intelligible principle to direct the Secretary’s exercise of his authority,” the court sustained the delegation.[24] In so doing, the court grounded its analysis in the federal standard.[25]

Still, even if the U.S. Supreme Court pivots in the future to a more robust form of Article I nondelegation review, the Massachusetts Supreme Judicial Court is not obliged to follow that path. As Judge Sutton has written, state courts need not interpret their state constitutions to mirror the protections of the federal constitution.[26] This approach—described by some as “anti-lockstepping”[27]—is gaining steam. One recent example is the Supreme Court of Virginia’s opinion about the Constitution of Virginia’s free exercise of religion clause; the court departed from the U.S. Supreme Court’s interpretation of the federal First Amendment’s Free Exercise Clause, adopting a more rigorous protection.[28] Of course, just as an anti-lockstepping Massachusetts Supreme Judicial Court can decline to interpret its state constitution to embody a robust nondelegation principle, another state supreme court is free to go beyond the U.S. Supreme Court’s “intelligible principle” standard.

Preemption

Robinhood’s final argument was that the Securities and Exchange Commission had preempted the fiduciary rule. Robinhood cited the SEC’s Regulation Best Interest, in which the federal agency “proposed a general obligation on broker-dealers.”[29] Robinhood’s argument on preemption was that the SEC’s regulation precluded states—like Massachusetts—from going any higher than the ceiling that the SEC placed “on broker-dealers’ fiduciary obligations to preserve retail investor access to [certain] investment options.”[30] Operating against the backdrop of an assumption against preemption, the court determined that the SEC’s Regulation Best Interest set only a floor, not a ceiling, on broker-dealer obligations.[31] The court therefore declined to conclude that the SEC regulation preempted the state fiduciary-duty rule.[32]

*The views expressed in this essay do not necessarily reflect those of the author’s employer

[1] Mass. Gen. Laws ch. 110A, § 204(a)(2)(G) (2002).

[2] Robinhood Financial LLC v. Secretary of Commonwealth, 214 N.E.3d 1058, 1062 (Mass. 2023).

[3] Id. at 1062-63 (footnotes omitted).

[4] See Robinhood Financial LLC v. Galvin, 2022 WL 1720131 (Mass. Super. Ct. Mar. 30, 2022).

[5] Robinhood, 214 N.E.3d at 1062.

[6] Mass. Gen. Laws ch. 110A, § 204(a)(2)(G) (2002).

[7] 950 Code Mass. Regs. § 12.207(1)(a) (2020).

[8] Robinhood, 214 N.E.3d at 1070 (quoting Goldberg v. Bd. of Health of Granby, 444 Mass. 627, 633-34 (2005)).

[9] Id. (quoting Souza v. Registrar of Motor Vehicles, 462 Mass. 227, 229 (2012)).

[10] See Ronald J. Krotoszynski, Jr., Why Deference?: Implied Delegations, Agency Expertise, and the Misplaced Legacy of Skidmore, 54 Admin. L. Rev. 735 (2002) (describing these justifications); see also Eli Nachmany, Deference to Agency Expertise in Statutory Interpretation, 31 Geo. Mason L. Rev. 587, 589-96 (2024) (collecting examples of deference to different kinds of agency expertise).

[11] Robinhood, 214 N.E.3d at 1070 (quoting McCauley v. Superintendent, Mass. Correctional Inst., Norfolk, 491 Mass. 571, 585-86 (2023)).

[12] Id. at 1073.

[13] William Baude, Beyond Textualism?, 46 Harv. J.L. & Pub. Pol’y 1331, 1341 (2023).

[14] Robinhood, 214 N.E.3d at 1073.

[15] Id. at 1074.

[16] See Eli Nachmany, Bill of Rights Nondelegation, 49 B.Y.U. L. Rev. 513, 520 (2023).

[17] Cf. Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Const. Trades Council, 485 U.S. 568, 575 (1988) (“[W]here an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress.”).

[18] Compare Eric A. Posner & Adrian Vermeule, Interring the Nondelegation Doctrine, 69 U. Chi. L. Rev. 1721 (2002), with Larry Alexander & Saikrishna Prakash, Reports of the Nondelegation Doctrine’s Death Are Greatly Exaggerated, 70 U. Chi. L. Rev. 1297 (2003).

[19] Mass. Declaration of Rts. art. 30.

[20] See generally Benjamin Silver, Nondelegation in the States, 75 Vand. L. Rev. 1211 (2022).

[21] Id. at 1221.

[22] Robinhood, 214 N.E.3d at 1074 (citing Gundy v. United States, 139 S. Ct. 2116 (2019)).

[23] Id. (quoting Chelmsford Trailer Park, Inc. v. Chelmsford, 393 Mass. 186, 190 (1984)).

[24] Id. at 1075.

[25] See Gundy, 139 S. Ct. at 2123 (describing the “intelligible principle” standard for nondelegation review of federal statutes).

[26] See Jeffrey S. Sutton, 51 Imperfect Solutions 174 (2018) (“There is no reason to think, as an interpretive matter, that constitutional guarantees of independent sovereigns, even guarantees with the same or similar words, must be construed in the same way.”).

[27] Jonathan Papik, Laboratories of Jurisprudence?: The Role of State Supreme Courts in a Federal System, 74 Vand. L. Rev. En Banc 271, 274 (2021).

[28] See Vlaming v. W. Point Sch. Bd., 895 S.E.2d 705 (Va. 2023); see also State v. Wilson, 543 P.3d 440 (Haw. 2024) (departing from the U.S. Supreme Court’s interpretation of the Second Amendment when interpreting an analogous provision in the Hawai’i Constitution).

[29] Robinhood, 214 N.E.3d at 1066.

[30] Id. at 1076.

[31] See id. at 1080.

[32] See id at 1080-81.

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