Supreme Court News - Summer 2023

Here we are in August (or whenever you might be reading this column) already looking forward to a 2023 term that will decide things like whether the Consumer Financial Protection Bureau (CFPB) gets its money unconstitutionally and whether Chevron was a 40-year mistake. See CFPB v. Community Financial Services Ass'n, No. 22-448 (set for argument on Oct. 3, 2023); Loper Bright Enterprises v. Raimondo, No. 22-451. But review, we are told, is good. So, without further ado, here are some highlights for general administrative law from the barrage of opinions that the Supreme Court issued at the end of the 2022 term. These include a major appearance of the major questions doctrine (MQD), a new federalism canon, three justices strongly suggesting that courts have been doing Administrative Procedure Act (APA) remedies all wrong for a very long time, and some discussions of the degenerative disease known as constitutional standing doctrine.

Biden v. Nebraska, 143 S. Ct. 2355 (2023): The Major Questions Doctrine Redux

Only one term after its decision in West Virginia v. EPA, 142 S. Ct. 2587 (2022), the Court returned to the MQD in another high-profile case. In 2022, President Biden instructed the Secretary of Education to create a student loan-forgiveness program that would have cancelled approximately $430 billion in federal student debt. The program was created under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act), which states that the Secretary “may waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [Education Act] as the Secretary deems necessary in connection with a . . . national emergency.” When the Secretary exercises the power to waive or modify under the Act, they are then required to publish a notice in the Federal Register “‘includ[ing] the terms and conditions to be applied in lieu of such statutory and regulatory provisions’ as the Secretary has waived or modified.” 143 S. Ct. at 2371 (quoting 20 U.S.C. § 1098bb(b)(2)) (emphasis added by Court).

The Court, in a 6-3 opinion by Chief Justice Roberts that was divided along ideological lines, held that the debt relief program was neither a modification nor a waiver of an existing student loan provision under the plain text of the statute. Put simply, the majority held that the program was too broad and impactful to be a modification because “to ‘modify’ does not authorize ‘basic and fundamental changes in the scheme’ designed by Congress.” Id. at 2368 (citation omitted). Somewhat ironically, the debt relief program was also not a waiver of a statutory provision, for two reasons. First, the program is not a waiver because the Secretary did not identify a specific provision to be waived, as had been done on prior applications of the Act, but rather “‘waiv[es] the elements of the discharge and cancellation provisions that . . . would limit eligibility to other contexts.’” Id. at 2370 (quoting Tr. of Oral Arg. 64-65). Second, the program is not a waiver because it added “new and substantially different provisions” by specifying “particular sums to be forgiven and income-based eligibility requirements.” Id. The government had argued that it has authority to make these additions, as the Act allows it to announce “the terms and conditions to be applied in lieu” of waived provisions. The Court responded that this provision is “no more than . . . a humdrum reporting requirement,” and “the Secretary’s ability to add new terms ‘in lieu of’ the old is limited to his authority to ‘modify’ existing law.” Id. at 2371. Because the debt relief program is too significant to be a modification and adds provisions inconsistent with status as a waiver, it fails to fit within either statutory term and therefore falls outside of the Secretary’s authority under the Act.

Not content to dispose of the debt relief program based on its plain text analysis of the HEROES Act, the Court seized its chance to reaffirm and reapply the MQD. Citing West Virginia, it held that because the economic and political significance of the program (43 million borrowers and $430 billion dollars) is “staggering by any measure,” such a decision must rest with Congress itself or an agency acting pursuant to a clear statutory delegation that was absent in the HEROES Act. Id. at 2373.

Most importantly for the future of the MQD, the Court rejected arguments that this doctrine should not apply to the debt relief program because, unlike the program at issue in West Virginia, the loan-forgiveness program provides benefits rather than regulates. The government argued that, compared to regulatory programs, benefits programs do not have the same effect on individual rights and do not pose the same threat of executive overreach during a national emergency. The majority rejected this argument on the grounds that it was not supported by precedent and that, because the power of the purse is one of Congress’s most important powers, “[i]t would be odd to think that separation of powers concerns evaporate simply because the Government is providing monetary benefits rather than imposing obligations.” Id. at 2375. The majority concluded that, pursuant to its holding in West Virginia, “‘[t]he basic and consequential tradeoffs’ inherent in a mass debt cancellation program ‘are ones that Congress would likely have intended for itself.’” Id.

In dissent, Justice Kagan argued that the majority misapplied the statutory text by “pick[ing] the statute apart piece by piece in an attempt to escape the meaning of the whole. But the whole—the expansive delegation—is so apparent that the majority has no choice but to justify its holding on extra-statutory grounds.” Id. at 2391. She reiterated objections to the MQD raised in her dissent in West Virginia, characterizing it as a “made up” doctrine that improperly seizes political power. Id. at 2397, 2400. She also assailed the majority for expanding the reach of the MQD by applying it to a “core provision of a recently enacted statute” that squarely implicated agency experience and expertise. See id. at 2398-99 (citing and contrasting Alabama Ass'n of Realtors v. HHS, 141 S. Ct. 2485 (2021)). By rejecting the government’s regulation-benefits distinction and Justice Kagan’s limitation based on agency expertise, the Court in Biden v. Nebraska confirmed both the breadth and durability of the MQD.

The majority and dissent both closed their opinions with discussions of judicial overreach. Justice Kagan accused the majority of “depart[ing] from the demands of judicial restraint. At the behest of a party that has suffered no injury, the majority decides a contested public policy issue properly belonging to the politically accountable branches and the people they represent.” Id. at 2400. Chief Justice Roberts responded that “[i]t has become a disturbing feature of some recent opinions to criticize . . . decisions . . . as going beyond the proper role of the judiciary. . . . We do not mistake this plainly heartfelt disagreement for disparagement. . . . Any such misperception would be harmful to this institution and our country.” Id. at 2375-76. As even more controversial and potentially impactful administrative law decisions come before the Court in the upcoming term, it will be interesting to see what role, if any, this issue of judicial overreach and the public perception thereof will play.

Calcutt v. FDIC, 143 S. Ct. 1317 (2023): A Very Strict Approach to Chenery

The Federal Deposit Insurance Corporation (FDIC) brought an enforcement action against petitioner, a former CEO of a community bank. After a hearing, an FDIC administrative law judge (ALJ) recommended that petitioner be barred from the banking industry and fined $125,000. Petitioner appealed to the FDIC Board, which imposed the penalties recommended by the ALJ.

On appeal to the Sixth Circuit, the appellate court found that the FDIC Board had erred in two ways. First, it did not apply a proximate causation standard, which the court concluded was required under the Federal Deposit Insurance Act. Second, the Board wrongly attributed all of the harm suffered by the bank to petitioner, when in fact he was only responsible for part of it. Despite these errors, the Sixth Circuit affirmed the Board’s decision on the grounds that it was nonetheless supported by substantial evidence and any further consideration by the Board would be a “useless formality.” Id. at 1321.

The Supreme Court reversed unanimously. It cited the “well-established maxim of administrative law that . . . if the grounds propounded by the agency for its decision ‘are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis.’” Id. at 1320-21 (quoting SEC v. Chenery, 332 U.S. 194, 196 (1947)). The “proper course” for the Sixth Circuit, according to the Court, was to remand to the Board for reconsideration of its decision in light of the errors identified by the reviewing court. In response to the Sixth Circuit’s assertion that remand would be a “useless formality,” the Court explained that the only exception to the Chenery rule is for instances where an agency was required to take a particular action, such that further consideration could not lead to a different result. Because the FDIC was not required to reach its conclusion in the enforcement action against petitioner, the Court held that the Sixth Circuit erred in failing to remand to the Board.

Sackett v. EPA, 143 S. Ct. 1322 (2023): Another Clear Statement Rule for Statutory Interpretation?

Sackett v. EPA is a vitally important environmental law case. It involved a dispute over the scope of the EPA’s authority to regulate the use of private property under the Clean Water Act (CWA). More specifically, it involved whether land owned by the Sacketts included wetlands that were part of the regulatable “waters of the United States” under the CWA. The Court, in an opinion authored by Justice Alito, narrowed the definition of covered wetlands from those “adjacent” or with a “significant nexus” to “traditional navigable waters” to only those “wetlands with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that they are ‘indistinguishable’ from those waters.” Id. at 1335, 1344 (internal quotation marks omitted). This new constraint on the EPA’s authority over wetlands is a significant development in environmental law. See id. at 1368 (Kavanaugh, J., concurring) (“The Court’s [decision] . . . will matter a great deal in the real world.”). The details of its holding, however, are largely beyond the scope of this humble column.

In terms of its relevance to more general administrative law principles, Sackett is noteworthy for its treatment of the EPA’s interpretation of the CWA. Not surprisingly, the EPA asked the Court to defer to its existing definition of “waters of the United States,” which included the significant nexus test. The Court declined. After reiterating that the agency’s interpretation was inconsistent with the text and structure of the CWA, the majority announced that “this Court ‘require[s] Congress to enact exceedingly clear language if it wishes to significantly alter the balance between federal and state power and the power of the Government over private property.’” Id. at 1341 (quoting United States Forest Serv. v. Cowpasture River Preservation Ass'n, 140 S. Ct. 1837, 1849-50 (2022)). Noting that water and land regulation “lie[] at the core of state authority,” the Court cited the vastness of the area covered by wetlands and the problems raised by applying a vague standard like the significant nexus test to impose criminal penalties under the CWA as reasons not to defer to the agency’s judgment in the absence of clear authorization by Congress, which it also found lacking. Id. at 1343. It is unclear if the Court’s argument against deference stakes out new ground or is limited to the idiosyncrasies of the CWA. The majority did not cite any traditional deference decisions such as Chevron or Skidmore in its analysis, nor did it expressly refer to the MQD, but its use of a clear statement rule and reference to the magnitude of agency authority are clearly evocative of the MQD.

Justice Kagan read the Court’s deference explanation the same way. In her concurrence, she described the majority’s deference analysis as “putting a thumb on the scale for property owners” that is not justified by the CWA’s text, and she revisited her objection to the MQD from last term by arguing that the “court may not rewrite Congress’s plain instructions because they go further than preferred. . . . Today’s pop-up clear-statement rule is explicable only as a reflexive response to Congress’s enactment of an ambitious scheme of environmental regulation.” Id. at 1361.

United States v. Texas, 143 S. Ct. 1964 (2023): States Lack Standing to Challenge Federal Enforcement Discretion (and Three Justices Suggest That the APA Does Not Authorize "Universal Vacatur")

In 2021, the Secretary of Homeland Security promulgated guidelines establishing priorities for immigration enforcement that, among other things, prioritized the arrest and removal of dangerous criminals and suspected terrorists. Texas and Louisiana challenged the new guidelines, contending that they violated statutory provisions commanding that certain noncitizens “shall” be arrested pending removal. Writing for five, Justice Kavanaugh held that the states lacked constitutional standing to contest the Secretary’s exercise of enforcement discretion. Three justices (Thomas, Barrett, and Gorsuch) concurred in the judgment; Alito dissented.

Justice Kavanaugh’s analysis opened by observing that standing is a “bedrock” constitutional requirement, and he proved this point with a string-cite to Supreme Court precedents dating back almost fifty years—which, one must admit, is a decent fraction of the Republic’s existence.

The district court had based its conclusion that the states had standing on a finding that they would incur various costs due to the federal government’s failure to make mandatory arrests. Justice Kavanaugh did not reject this finding, and he credited that “[m]onetary costs are of course an injury.” Id. at 1970. Not every injury, however, is enough for standing; an injury must be “legally and judicially cognizable.” “[H]istory and tradition” are good places to look for guidance on which types of injuries can support a case or controversy. Id. (citations and quotation marks removed).

This inquiry proved fatal to the states’ claims of standing to challenge federal enforcement. The Court observed that the states had not “cited any precedent, history, or tradition of courts ordering the Executive Branch to change its arrest or prosecution policies so that the Executive Branch makes more arrests or initiates more prosecutions.” Id. Moreover, on the flip side of the ledger, the “leading precedent,” Linda R. S. v. Richard D., 410 U.S. 614 (1973), stood squarely for the proposition that, in “American jurisprudence at least, a party lacks a judicially cognizable interest in the prosecution . . . of another.” Texas, 143 S. Ct. at 1970 (quoting 410 U.S. at 619 (quotation marks removed)).

Good reasons for this stance include: (a) a decision not to arrest or prosecute “does not exercise coercive power over an individual’s liberty or property, and thus does not infringe upon interests that courts often are called upon to protect”; (b) allowing lawsuits to control executive enforcement discretion would impinge on Article II’s vesting of executive power in the president; (c) in the immigration context, such interference would also impinge on presidential control over foreign affairs; and (d) courts lack meaningful standards to control enforcement discretion, which must exist given that the executive lacks resources to prosecute every violation of every law. Id. at 1971-73.

Justice Kavanaugh emphasized that the Court was not “suggest[ing] that federal courts may never entertain cases involving the Executive Branch’s alleged failure to make more arrests or bring more prosecutions.” Id. at 1973. A lawsuit might be proper in cases involving: (a) selective prosecution; (b) situations where Congress has “elevate[d] de facto injuries to the status of legally cognizable injuries redressable by a federal court”; (c) challenges to the executive’s complete abdication of its enforcement responsibilities; (d) challenges not just to enforcement priorities but also to the provision of legal benefits or legal status; and (e) challenges to policies “governing the continued detention of noncitizens who have already been arrested.” Id. at 1973-75.

Justice Kavanaugh also included a footnote addressing the role of “indirect” injuries on state claims for standing. He observed, “in our system of dual federal and state sovereignty, federal policies frequently generate indirect effects on state revenues or state spending. And when a State asserts, for example, that a federal law has produced only those kinds of indirect effects, the State’s claim for standing can become more attenuated.” Id. at 1972 n.3 (citing Massachusetts v. Laird, 400 U.S. 886 (1970); Florida v. Mellon, 273 U.S. 12, 16–18 (1927)). This observation would seem to be in some tension with the Court’s declaration in Massachusetts v. EPA that states should enjoy “special solicitude” in determining constitutional standing. 549 U.S. 497, 520 (2007).

Of the three additional opinions, Justice Gorsuch’s concurrence, joined by Justices Thomas and Barrett, is the most interesting. For him, the real standing problem in the case was redressability because Congress has “provided that ‘no court (other than the Supreme Court) shall have jurisdiction or authority to enjoin or restrain the operation of’ certain immigration laws, including the very laws the States seek to have enforced in this case.” Texas, 143 S. Ct. at 1978 (quoting 8 U.S.C. § 1252(f)(1)). The district court, in short, lacked authority to fix the states’ purported injury.

The district court had sidestepped this problem by “purport[ing] to ‘vacate’ the Guidelines pursuant to § 706(2) of the APA, 5 U.S.C. § 706(2).” Id. at 1978. This evasion did not work, however, since vacation, unlike an injunction, would not compel executive authorities to alter how they exercise their enforcement discretion. The plaintiffs’ prediction that federal officials would shift their conduct to comply with a judicial opinion rejecting the Guidelines did not alter this conclusion, as the Court does not “measure redressability by asking whether a court’s legal reasoning may inspire or shame others into acting differently,” but instead by whether a “court’s judgment will remedy the plaintiff’s harms.” Id. at 1979; see also Haaland v. Brackeen, 143 S. Ct. 1609, 1639-40 (2023 (explaining that redressability is a function of judicial power, not persuasion).

Most notably for the administrative law world, Justice Gorsuch (again, joined by Justices Thomas and Barrett) opined that that the federal government had made a strong case against “the essential premise” of the district court “that the APA empowers courts to vacate agency action.” Texas, 143 S. Ct. at 1980. A core idea behind this argument is that remedies are supposed to provide party-specific relief and to affect nonparties only incidentally. Courts have justified a longstanding, contrary practice of “universal vacatur” of agency actions based on the APA’s instruction at § 706(2) to “set aside” illegal agency action. There are, however, “many reasons to think” that “set aside” merely means that a court should “disregard” an illegal agency action in resolving an individual case, not that a court should “vacate” a rule in a way that may directly affect millions of people. See id. at 1981-82.

At oral argument, the Chief Justice had responded to this argument by exclaiming, “[w]ow.”

Biden v. Nebraska, 143 S. Ct. 2355 (2023): A State Can Rely on Injury to Its "Instrumentality" for Standing

As discussed above, Biden v. Nebraska, one of the two student loan cases from the last term, contains a ringing affirmation of the Court’s new MQD, but it also includes a notable wrinkle on third party standing doctrine.

Six states, including Missouri, challenged a mass loan-forgiveness program promulgated by the Secretary of Education pursuant to authority granted by the HEROES Act to waive or modify statutory or regulatory provisions relating to student loans in response to national emergencies. As it was not self-evident how forgiving student loans injured these states, the suit naturally provoked a great deal of briefing and argument about constitutional standing to challenge a major, politically controversial Biden administration initiative.

The Court’s resolution of the problem turned out to be very brief and simple. Missouri claimed standing based on injury to MOHELA, a nonprofit corporation created by the state to service student loans, which, according to Missouri, would lose business if student loans were canceled as per the Secretary’s plan. This theory prompted argument over whether Missouri could claim third party standing based on the purported injury to MOHELA. It turned out, however, that Missouri did not need to rely on third party standing because, for standing purposes, MOHELA was not a third party at all but instead an “instrumentality” of Missouri. Injury to MOHELA was an injury to Missouri.

Chief Justice Roberts’s majority opinion relied heavily on a couple of paragraphs from a seventy-year-old opinion predating modern standing law, Arkansas v. Texas, 346 U.S. 368 (1953). In that case, Arkansas, invoking the original jurisdiction of the Supreme Court, had sued Texas to prevent the latter from interfering with a contract involving the University of Arkansas. Texas contended that Arkansas was not the proper plaintiff because the University did “not stand in the shoes of the state.” Biden v. Nebraska, 143 S. Ct. at 2366 (quoting Arkansas, 346 U.S. at 370). The Chief Justice explained that the Court had rejected Texas’s argument because harm to the University caused harm to Arkansas given that the University was an “official state instrumentality.” Id. at 2367. The University held this status because: (a) the state had labeled the University as such by statute; (b) the University served a public purpose; and (c) the University was created by the state legislature, controlled by gubernatorial appointees, and reported all expenditures to the legislature. The Chief Justice added, “[w]here a State has been harmed in carrying out its responsibilities, the fact that it chose to exercise its authority through a public corporation it created and controls does not bar the State from suing to remedy that harm itself.” Id. at 2368.

Justice Kagan’s dissent criticized the majority for misconstruing Arkansas, which she characterized as permitting Arkansas to sue for injuries to the University precisely because the University was not legally and financially separate from the state. Id. at 2389 (Kagan, J., dissenting). By contrast, Missouri’s “treasury will not be out one penny because of the Secretary’s plan,” and “[t]he revenue loss allegedly grounding this case is MOHELA’s alone.” Id. at 2387. Justice Kagan also found it significant that MOHELA, unlike the University, had authority to sue or be sued in its own name (a point the majority contested).

In the last paragraph of her discussion of standing, Justice Kagan lobbed this bomb:

The author of today’s opinion once wrote that a 1970s-era standing decision “became emblematic” of “how utterly manipulable” this Court’s standing law is “if not taken seriously as a matter of judicial self-restraint.” [Massachusetts v. EPA, 549 U.S. 497, 548 (2007) (Roberts, C.J., dissenting).] After today, no one will have to go back 50 years for the classic case of the Court manipulating standing doctrine, rather than obeying the edict to stay in its lane.

Id. at 2391. Readers curious to determine for themselves who read Arkansas better can find all of that precedent’s analysis in two short paragraphs. 346 U.S. at 370-71.

Department of Education v. Brown, 143 S. Ct. 2343 (2023): Unanimous Rejection of Standing in the Other Student Loan Case

Perhaps the only remarkable thing about the Supreme Court’s unanimous rejection of standing in the other student loan case is that the suit made it as far through the judicial process as it did—presumably because it was sliding along in Biden v. Nebraska’s slipstream. Still, we briefly mention Brown as it would feel a little odd to us to leave it out.

Two student loan debtors sued in federal district court in Texas, claiming that the Department of Education had improperly failed to use notice-and-comment and negotiated-rulemaking procedures to promulgate its loan-forgiveness program under the HEROES Act. Justice Alito, writing for the entire Court, offered the following summary of the plaintiffs’ evolving theory of standing:

First, because the HEROES Act does not substantively authorize the Plan, the Department was obligated to follow the typical negotiated-rulemaking and notice-and-comment requirements. Second, if the Department had observed those procedures, respondents might have used those opportunities to convince the Department (1) that proceeding under the HEROES Act is unlawful or otherwise undesirable, and (2) that it should adopt a different loan-forgiveness plan under the HEA [Higher Education Act of 1965] instead, one that is more generous to them than the HEROES Act plan that they allege is unlawful. They assert there is at least a chance that this series of events will come to pass now if we vacate the Plan.

Brown, 143 S. Ct. at 2352. This description did not create a lot of suspense regarding how the Court’s standing analysis would turn out.

Justice Alito observed that “[i]t is difficult to see how such an injury could be particular (since all people suffer it) or concrete (since an as-yet-uncreated benefits plan is necessarily abstract and not real).” Id. at 2352 (cleaned up). The biggest problem, however, was traceability—there was no good reason to think that the government’s decision to grant loan relief under the HEROES Act (regardless of its legality) caused the plaintiffs to miss out on greater loan relief under the HEA.