Three cases on the Supreme Court’s docket could reshape the foundations of the administrative state and the power the unelected bureaucracy has over the American people and the economy.
The major theme of the coming Supreme Court term is administrative law. Once obscure, this body of statutes, rules, and cases governing the structure and conduct of the federal government’s administrative agencies gained public attention through recent eye-catching cases—like the ones that downed the student loan cancellation plan and set aside the clean power plan that would have shifted the nation’s power grid to all renewable energy sources.
Now, three cases on the fall docket could reshape the foundations of the administrative state and the power the unelected bureaucracy has over the American people and the economy: Loper Bright Enterprises v. Raimondo, Securities Exchange Commission v. Jarkesy, and Consumer Financial Protection Bureau v. Community Financial Services of America.
Agency discretion and independence are motifs in all three cases. Obvious as it may sound, agencies are meant to be agents. They do not carry out their own will; rather, they implement Congress’ commands and assist the president in his constitutional duty to faithfully execute Congress’ laws.
To be effective, an agent needs some flexibility to carry out the principal’s commands. But the greater the latitude, the greater the risk that the agent decides to follow his own agenda over the principal’s. The more that agencies reinterpret laws to make room for their own policy judgments, the more agencies appear to act like judges or legislators, though, under the Constitution, they are neither.
Loper Bright Enterprises v. Raimondo
Loper Bright addresses one source of this discretionary dilemma: Chevron deference. That doctrine, named for the 1984 decision that spawned it, requires courts to defer to any “reasonable” agency interpretation of the ambiguities or silences in a law. In practice, Chevron deference enables agencies to often overstep their authority by treating vague language or doubtful gaps in a statute as authorization for actions that the agencies favor but which Congress never intended.
In Loper Bright, the National Marine Fisheries Service read one such doubtful gap into the Magnuson-Stevens Act and “discovered” a previously unknown power to require small fishing vessels to pay for their federally mandated at-sea monitors who enforce restrictions on methods and amounts of fishing.
To avoid that crippling financial burden, the fishermen argue that Chevron deference lets agencies steal the courts’ power to say what the law is and Congress’ power to write laws, leaving citizens subject to regulators’ whims. Therefore, they contend that the court should overrule Chevron or drastically constrain its application.
Even before the fisherman reached the high court, Chevron deference looked significantly diminished. The Supreme Court, despite a steady diet of administrative law cases, had not deferred under Chevron in over six years.
Increasingly, the Supreme Court has invoked the non-deferential “major questions” doctrine (which requires agencies to identify a clear congressional statement authorizing decisions of substantial political and economic import) to displace Chevron deference in the most significant controversies such as the COVID-19 vaccine mandate, the eviction moratorium during the pandemic, and (to a lesser extent) the administration’s attempt at student loan cancellation.
But the lower federal courts remain fond of the Chevron doctrine, finding ambiguities in roughly 70% of cases across an array of statutory regimes. The Supreme Court seems poised to limit deference to agencies, but it remains uncertain how far the court will go in Loper Bright.
Securities and Exchange Commission v. Jarkesy
Loper Bright will have major implications for citizens fighting administrative agencies in courts, but it won’t have much of an effect if citizens can’t get their cases into courts. Agencies prosecute many of their cases before tribunals within the agencies themselves. There, agency employees called administrative law judges decide those cases in the first instance, and other judge employees hear appeals.
Jarkesy may limit the use of these in-house tribunals. The Securities and Exchange Commission suspected that George Jarkesy Jr. and his investment advisor committed fraud, and it brought an enforcement action against them before one of its judges. The defendants argued that the in-house tribunal violates their Seventh Amendment right to have a jury trial. That right applies to “suits at common law,” of which fraud is one. So, the defendants argue, the Constitution forbids the SEC from bringing their case to its in-house tribunal.
They also argued that Congress gave the agency too much discretion to choose whether to bring cases to courts or to administrative law judges. Under a seldom-enforced rule called the nondelegation doctrine, Congress can’t give an agency power without setting “intelligible” limits on how the agency can use it. Here, the defendants argued, Congress set no limits at all on the SEC’s ability to decide where to send its enforcement cases.
If the defendants win their Seventh Amendment claim, agencies will have to send more of their enforcement cases to federal court. This probably wouldn’t affect that many cases. There aren’t many suits at common law, and most agencies don’t bring them. But for those that do, a win for the defendants would partially dispel the specter of bias that haunts administrative law judges, who rule in their employers’ favor 90% of the time.
If, on the other hand, the defendants win their nondelegation claim, the future of agency tribunals would be in more doubt. Besides the SEC, would other agency administrative law judges be implicated? Would administrative law judges be off limits to agencies until Congress amends their statutes? If not, when could agencies use them? These are all questions that need answers.
Together with a decision in Loper Bright that limits Chevron deference, a decision in Jarkesy that limits administrative law judges would be a double blow to agencies that want to act like self-contained legislatures and courts.
Consumer Financial Protection Bureau v. Community Financial Services Association of America
While agencies often try to make themselves self-contained governments, sometimes Congress lends them a hand. The Consumer Financial Protection Bureau is the most dramatic example. When Congress created the bureau in 2010, it did everything it could to make sure that the CFPB answered to no one but itself.
Relevant to this lawsuit, Congress created an unusual funding mechanism for the CFPB. Whereas most agencies receive their money from congressional appropriations, the CFPB gets to take as much money as it wants (subject to a loose cap) directly from the Federal Reserve.
This makes the CFPB uniquely immune from congressional control. And like the SEC, the CFPB has both rulemaking and law enforcement powers, which can easily be used to advance the CFPB’s own agenda rather than Congress’. Indeed, the CFPB has faced significant criticism for slipping its congressional leash.
The CFPB’s challengers—businesses subject to the CFPB’s payday lending rule—allege the agency’s funding mechanism violates the Constitution’s appropriations clause. That clause says that no money may be drawn from the Treasury except through congressional appropriations. The challengers argue that the CFPB’s choose-your-own-funding scheme is not an appropriation within the meaning of that clause. The CFPB retorts that the clause is satisfied because Congress created the scheme.
The challengers have the better argument. The appropriations clause is an indispensable bulwark of the Constitution’s separation of powers that the 111th Congress deliberately sought to avoid when it created the CFPB.
But lurking in the background of this debate over constitutional meaning is another about practical effects. Other agencies have similar, albeit not identical, funding mechanisms, including the Federal Reserve itself. A ruling against the CFPB might undermine those agencies, too, unless the court can draw a legally salient distinction.
Regardless, if the CFPB loses, then everything the agency has done since it was created will be vulnerable to constitutional challenge. For the CFPB to continue operating, Congress will have to step in and reattach a leash to the agency it really wanted to set free.
These three cases remind us how excessive judicial deference coupled with congressional laziness has created our all-powerful administrative state. Loper Bright gives the court an opportunity to fix its mistake, and the other two cases give it an opportunity to wake Congress up with the only thing that might do the trick: a judicial slap in the face.
Reproduced with permission. Original here.
Jack Fitzhenry is a senior legal policy analyst in the Meese Center for Legal and Judicial Studies of The Heritage Foundation.
GianCarlo Canaparo is a senior legal fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.