Supreme Court News - Fall 2023

Here we are writing in mid-December, and the Supreme Court has granted certiorari in about 40 cases. This is a small number, but many address general issues of administrative law. The Big Four include:

• Consumer Financial Protection Bureau v. Community Financial Services Assoc., No. 22-448, which addresses whether the Consumer Financial Protection Bureau’s (CFPB’s) funding mechanism violates the Appropriations Clause and separation of powers;
• Securities and Exchange Commission v. Jarkesy, No. 22-859, which asks whether administrative enforcement proceedings violate the Seventh Amendment right to jury, the Nondelegation Doctrine, and Article II; and
• Loper Bright Enterprises v. Raimondo, No. 22-451, and Relentless v. Department of Commerce, No. 22-1219, which both raise the question of whether to overrule our dear friend of 40 years, the Chevron doctrine.

A few observations about the Big Four follow, and, after that, we list other administrative law cases to watch as well as the questions they present.

The Big Case That Has Been Argued

CFPB v. Community Financial Services Assoc., No. 22-448 (argued October 3)

Does the CFPB’s funding mechanism violate the Appropriations Clause?

Rather than relying on annual appropriations, the CFPB obtains its funding from earnings of the Federal Reserve System. 12 U.S.C. § 5497(1). Subject to a statutory cap currently standing at about $600 million, the Federal Reserve Board transfers the amount that the CFPB Director determines is “reasonably necessary” to carry out the agency’s duties.

Associations of companies, including the Community Financial Services Association (CFSA), challenged the CFPB’s Payday Lending Rule, contending that its funding mechanism violates the Appropriations Clause’s injunction that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Art. I, § 9, cl. 7. This argument failed at the district court, as it had in six other district courts and the D.C. Circuit. But the Fifth Circuit agreed with it. For a remedy, the court ordered vacation of the Payday Lending Rule because its promulgation had relied on unconstitutional funding.

Before the Supreme Court, the government argued that text, history, and precedent all required reversal. The Appropriations Clause’s text “does not limit Congress’ authority to determine the specificity, duration, and source of appropriations.” Brief for the Petitioners at 10. The Constitution confirms this general rule by specifically creating an exception for appropriations to raise and support an army, which must not extend beyond two years. Art. I, § 8, cl. 12.

Turning to historical practice, the government observed that Congress has, ever since the Founding, enacted a wide variety of funding mechanisms, including “provid[ing] federal entities … with standing appropriations that remain in place unless and until Congress repeals them” and that Congress has “fund[ed] agencies through fees, assessments, investments, or other similar sources.” Brief for Petitioners at 11. As for precedent, before the Fifth Circuit’s decision, “no court ha[d] ever held that an Act of Congress violated the Appropriations Clause.” Id.

The government also emphasized the disruptive effects of the Fifth Circuit’s decision. Its holding that the CFPB’s funding mechanism violated the Appropriations Clause threatened the funding mechanisms of other financial regulators. Its remedy of vacatur, applied across the CFPB’s more than 200 final rules, would disrupt “countless transactions involving both regulated entities and individual consumers every day.” Id. at 47.

The respondents, for their part, sought to characterize the CFPB’s funding mechanism as a unique departure from historical practice that enabled the agency “to operate free of any political accountability, including fiscal oversight.” Brief for Respondents at 9. Under this scheme, the agency, not Congress, decides for itself how much money it gets. Plus, the agency’s “perpetual” funding mechanism “flipped the appropriations baseline” insofar as altering it in the future would require approval by both the House and Senate as well as a presidential signature (or veto override). Id. At oral argument, former Solicitor General Noel Francisco, arguing for respondents, insisted that, if the CFPB’s funding mechanism were legal, Congress could “authorize the President to spend whatever he deems reasonably necessary as long as he doesn’t exceed $10 trillion, and that would work a sea change in the separation of powers.” Tr. at 49.

Several justices made observations indicating some sympathy for respondents’ argument. Chief Justice Roberts characterized the government’s understanding of congressional appropriations authority as “very aggressive,” and, striking a nondelegation chord, added that “it struck me the reason you would want to defend that is because it gives them [Congress] more power to give away.” Id. at 10. Justice Gorsuch suggested that the government’s approach could allow Congress to leave the president with discretion to choose whether “to take a trillion dollars” or none at all. Id. at 15-17. Justice Alito, who seemed most sympathetic to respondents, expressed concern over limiting principles. Id. at 28.

On the other side of the ledger, it probably was not a good sign for respondents when Justice Barrett said to Mr. Francisco, “I mean, I think we’re all struggling to figure out then what’s—what’s the standard that you would use.” Tr. at 61. Or when Justice Kavanaugh suggested that CFPB’s funding was not “perpetual” insofar as Congress could change it any time. Id. at 66-67. Or when Justice Kagan declared, “[s]o you’re just flying in the face of 250 years of history.” Id. at 70. Or when Justice Sotomayor said, “I’m sorry, I’m trying to understand your argument, and I’m at a total loss.” Id. at 71. Or (maybe) when Justice Thomas queried, “Mr. Francisco, just briefly, I’d like you to complete this sentence. Funding of the CFPB … violated the Appropriations Clause because?” Id. at 86.

The Three Other Big Cases That Have Not Yet Been Argued

Securities and Exchange Commission v. Jarkesy, No. 22-859 (argument on November 29)

The other bomb the Fifth Circuit threw at the administrative state.

Way back in 2013, the Securities and Exchange Commission (Commission) initiated an administrative enforcement action against Jarkesy and his advisory firm, Patriot28, L.L.C. (respondents). An administrative law judge found that the respondents had violated various securities laws, and the Commission affirmed in pertinent part. The Commission ordered Jarkesy to pay a civil penalty, barred him from various activities, and ordered Patriot28 to disgorge illicit profits. Respondents petitioned for review by the Fifth Circuit, which, in about 14 pages of legal analysis and by a 2-1 vote, held that: (a) Congress violated the Seventh Amendment by authorizing the Commission to seek civil penalties for fraud via administrative enforcement proceedings; (b) Congress’s decision to grant the Commission power to choose between judicial and administrative enforcement actions to seek civil remedies violated the Nondelegation Doctrine; and (c) the APA’s eighty-year-old system of insulating ALJs from removal unconstitutionally impinged on the President’s Article II executive authority. Along the way, the court cited The Federalist at least four times, Blackstone, Jefferson, Adams, Locke, Hamburger, and Elrod. It also referenced with approval President Reagan’s dictum that the “Nine Most Terrifying Words in the English Language” are “I’m from the Government, and I’m here to help.” Jarkesy v. SEC, 34 F.4th 446, 457 (5th Cir. 2022).

The Seventh Amendment. The Fifth Circuit concluded that the Commission’s adjudication violated respondents’ Seventh Amendment rights as the enforcement action was “akin to traditional actions at law to which the jury right attaches” and did “not concern public rights alone.” Id. at 451. The government countered that, where Congress has properly assigned a matter to a non-Article III tribunal, “the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.” Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53-54 (1989). Agencies can adjudicate “public rights” without impinging on the Article III judicial power. The concept of “public rights,” however fuzzy it may be on the margin, at minimum “allows Congress to create ‘new statutory obligations,’ impose ‘civil penalties for their violation,’ and then commit ‘to an administrative agency the function of deciding whether a violation has in fact occurred.’” Brief of Petitioner at 22 (quoting Atlas Roofing Co. v. OSHRC, 430 U.S. 442, 450 (1977)). The Commission’s adjudication directed at respondents enforced public rights in exactly this manner.

The government added that the Fifth Circuit’s contrary conclusion mistakenly relied on inapt Supreme Court precedents that either: (a) determined jury rights in purely private disputes not involving the government; or (b) determined jury rights in actions brought in federal court rather than in an agency adjudication. See id. at 26-29 (contending the Fifth Circuit had misapplied Granfinanciera and Tull v. United States, 481 U.S. 412 (1987)). The Fifth Circuit’s public rights analysis also relied on an exaggerated sense of the similarity of fraud claims under federal securities laws and the common law.

The Nondelegation Doctrine. The Fifth Circuit concluded that Congress had, by giving the Commission authority “to decide which defendants should receive certain legal processes (those accompanying Article III proceedings) and which should not,” delegated “a power that Congress uniquely possesses.” 34 F.4th at 462 (emphasis in original). As Congress had not supplied the Commission with an “intelligible principle” to make this choice, this grant of authority violated the Nondelegation Doctrine.

The government countered that the Commission’s authority to choose between judicial and administrative fora involves the exercise of traditional executive discretion. No one bats an eye at the fact that prosecutors enjoy discretion to choose whether to bring an enforcement action and over what charges to bring. Decisions regarding whether to initiate an enforcement action in court or an administrative proceeding should not be regarded differently.

Moreover, the Court’s nondelegation cases address the concern that Congress has granted an agency too much discretion to create broadly applicable, binding rules governing private conduct. The Commission’s discretion to choose between administrative and judicial fora does not implicate this problem.

ALJs Layered Protection From Removal. In Free Enterprise Fund v. PCAOB, the Supreme Court rejected a good cause restriction on the authority of Commissioners to remove members of the Public Company Accounting Oversight Board (Board). 561 U.S. 477 (2010). The Court assumed, although no statutory provision expressly provides, that the President can remove Commissioners only for cause. As such, Board members were protected from presidential control by two layers of statutory removal restrictions. This double insulation violated Article II by excessively interfering with the President’s executive power.

Read in isolation, the holding of Free Enterprise might threaten layered statutory removal protections for SEC ALJs. As just noted, the Court has treated as given that Commissioners are protected from presidential removal by a good cause restriction. Under the Administrative Procedure Act (APA), an agency can remove an ALJ “only for good cause established and determined by the Merit Systems Protection Board.” 5 U.S.C. § 7521(a). Members of the Merit Systems Protection Board (MSPB) are also protected from presidential removal by a good cause restriction. Recognizing this issue, the Free Enterprise majority expressly stated that its holding did not extend to ALJs. 561 U.S. at 507 n.10. To justify this distinction, the Court noted both that there was controversy regarding whether ALJs were “Officers of the United States” and that many of them perform adjudicative or recommendatory functions. Id. Eight years later, the Court threw a potential wrench in the works by determining that SEC ALJs do indeed qualify as “Officers of the United States” for purposes of the Appointments Clause. Lucia v. SEC, 138 S. Ct. 2044, 2051-55 (2018).

The Fifth Circuit resolved this problem in three pages of analysis. The court reasoned that, given that Lucia had determined that SEC ALJs are “inferior officers,” they must be “sufficiently important to executing the laws that the Constitution requires that the President be able to exercise authority over their functions.” 34 F.4th at 464. Moreover, Free Enterprise established that multiple levels of statutory protection from removal interfere too much with presidential control to be constitutional. See id. As for the carve-out for ALJs in Free Enterprise, the court explained, while working through its third alternative constitutional holding, that this was just dicta. It followed that the statutory restriction on removal of ALJs, a key component of the APA since 1946, was unconstitutional.

The government thinks this conclusion is wrong for reasons including:

1. The rationale for presidential removal authority does not apply so strongly to adjudicators;
2. The Commission has ample means to control ALJs other than removal, including plenary authority over ALJ decisions;
3. Overturning ALJs’ statutory protection from removal under § 7521 would subvert a key provision of the APA designed to increase the fairness and appearance of fairness of agency proceedings.

Loper Bright Enterprises v. Raimondo, No. 22-451, and Relentless v. Department of Commerce, No. 22-1219 (argument set for January 2024 session)

Hey! Have we been doing deference doctrine all wrong for forty years in violation of separation of powers?

The Court is set to answer that question in two consolidated cases, Loper Bright and Relentless. These cases raise the issue of whether to overrule the Chevron doctrine, which, since 1984, has instructed courts to defer to an agency’s reasonable construction of a statute that it administers. (We recognize that this simplification leaves out many epicycles.) Justice Jackson has recused herself from Loper Bright because she took part in the oral argument of the case while on the D.C. Circuit. The Court’s grant of certiorari in mid-October in Relentless ensures, however, that the future of Chevron deference will be decided by the full Court.

Both cases address the same regulatory issue involving the National Marine Fisheries Service (NMFS) and the Magnuson-Stevens Act (MSA). The MSA empowers the NMFS to require commercial fishing vessels to carry federal monitors, who are tasked with evaluating the vessels’ compliance with fishery management plans. While other provisions of the MSA allow for monitors to be paid by the regulated parties, the provision relied on by the NMFS in Loper Bright and Relentless to require monitors is silent as to who must pay them. The NMFS interpreted that silence to allow it to require that the regulated parties pay for the monitors. Both the D.C. and First Circuits deferred to that interpretation as reasonable under Chevron. Relentless, 62 F.4th 621, 634 (1st Cir. 2023); Loper Bright, 45 F.4th 359, 365 (D.C. Cir. 2022). The Court granted certiorari in both cases on the question of whether to overrule Chevron outright or, more narrowly, to “clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.”

While a frequent topic of academic debate, Chevron deference has for decades been a bedrock principle of the Court’s administrative law jurisprudence. Recently, however, the doctrine has come under increasingly strong critiques from conservative justices. Justice Thomas contends that deferring to agency statutory interpretations interferes with the judiciary’s “ultimate interpretive authority ‘to say what the law is.’” Michigan v. EPA, 576 U.S. 743 (2015) (Thomas, J., concurring). Justice Gorsuch, while still a member of the Tenth Circuit, explained that “a doctrine that defers to the executive at the first sign of ambiguity is nothing short of an ‘abdication of the judicial duty.’” Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1152 (10th Cir. 2016) (Gorsuch, J., concurring).

Not surprisingly, the appellants in Loper Bright and Relentless make similar points. They argue that Chevron robs the courts of their Article III power “to say what the law is,” robs Congress of its Article I power over policymaking, and violates due process principles. It also ignores the APA’s command “that the reviewing court shall decide all relevant questions of law.” 5 U.S.C. § 706. Aggressive application of Chevron “strips citizens of their right to control their government at every stage.” Petition for Certiorari at 18 (Relentless). Applying Chevron to authorize an agency to fill statutory silence as it wishes is particularly pernicious as this creates a rule that “[i]f the statute is silent, the government wins.” Brief for Petitioners at 44 (Loper Bright).

The government counters that Chevron respects the separation of powers as, “[w]hen an Article III court applies Chevron to uphold an agency’s interpretation of a statute, the court is exercising the judicial power while also respecting Congress’s Article I decision to vest authority in the agency to resolve an ambiguity or fill a gap within reasonable bounds.” Brief for the Respondents at 9. Moreover, Chevron deference applies only where a court, after exhausting traditional tools of statutory construction, concludes that Congress itself has not spoken to an issue. Chevron gives appropriate weight to expertise, promotes national uniformity in statutory interpretation, and leaves policy decisions to a political branch, rather than the courts. Also, stare decisis strongly favors “adhering to Chevron, which has been a cornerstone of administrative law reflected in thousands of judicial decisions—and which has provided a stable background rule against which Congress has legislated—for 40 years.” Id. at 8.

Yet, perhaps the high-minded existential arguments about Chevron will prove unnecessary. While Loper Bright and Relentless are widely described as referenda on the future of Chevron deference, the specific question presented may offer a third way for the Court. By focusing on the lower courts’ acceptance of agencies’ interpretation of statutory silence, the Court could limit agencies’ ability to use Chevron while not completely eviscerating the doctrine. An anxious public awaits.

Other Administrative Law Cases of Interest and the Questions They Present

Lindke v. Freed, No. 22-611, and O’Connor-Ratcliff v. Garnier, No. 22-324 (argument on Oct. 31)

Whether and under what circumstances an official engages in state action under the First and Fourteenth Amendments when the official blocks a member of the public from viewing or responding to posts on a social-media account.

Department of Agriculture Rural Development Rural Housing Service v. Kirtz, No. 22-846 (argument on Nov. 6)

Whether the civil liability provisions of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., unequivocally and unambiguously waive the sovereign immunity of the United States.

Wilkinson v. Garland, No. 22-666 (argument on Nov. 28)

Whether the agency’s determination that a noncitizen has not “establishe[d]” the “exceptional and extremely unusual hardship” necessary to qualify for cancellation of removal under 8 U.S.C. § 1229b(b)(1)(D) is subject to judicial review as a mixed question of law and fact under 8 U.S.C.
§ 1252(a)(2)(D).

Campos-Chaves v. Garland, No. 22-674

Under 8 U.S.C. § 1229a(b)(5), a noncitizen may be ordered removed in absentia when the noncitizen “does not attend a [removal] proceeding … after written notice required under paragraph (1) or (2) of [8 U.S.C. § 1229(a)] has been provided” to the noncitizen or counsel of record. The question presented is whether the failure to receive, in a single document, all of the information specified in paragraph (1) of 8 U.S.C. § 1229(a) precludes an additional document from providing adequate notice under paragraph (2), and renders any in absentia removal order subject, indefinitely, to rescission under 8 U.S.C. § 1229a(b)(5)(C)(ii).

Federal Bureau of Investigation v. Fikre, No. 22-1178

Whether respondent’s claims challenging his placement on the No Fly List are moot given that he was removed from the list and the government has supplied a sworn declaration that he will not be placed back on it given currently available information.

Devillier v. Texas, No. 22-913

May a person whose property is taken without compensation seek redress under the self-executing Takings Clause even if the legislature has not affirmatively provided them with a cause of action?

Corner Post v. Board of Governors of the Federal Reserve System, No. 22-1008

Does a plaintiff’s APA claim “first accrue[ ]” under 28 U.S.C. § 2401(a) when an agency issues a rule—regardless of whether that rule injures the plaintiff on that date—or when the rule first causes a plaintiff to “suffer[ ] legal wrong” or be “adversely affected or aggrieved”?