Checks and Balances: July 2020

The Checks and Balances Letter delivers news and information from Ballotpedia’s Administrative State Project, including pivotal actions at the federal and state levels related to the separation of powers, due process and the rule of law.

This edition:

In this month’s edition of Checks and Balances, we review the U.S. Supreme Court’s decision not to end the Deferred Action for Childhood Arrivals (DACA) program; the culmination of Raymond Lucia’s eight-year challenge of the U.S. Securities and Exchange Commission (SEC); the U.S. Supreme Court’s holding that the director of the Consumer Financial Protection Bureau’s (CFPB) protections against removal by the president were unconstitutional; and new legislation that aims to make temporary regulatory suspensions due to the coronavirus pandemic permanent.

At the state level, we review updates to judicial deference practices in Mississippi and Georgia; a failed Separation of powers challenge to block a Maine ballot initiative; and the creation of a new central office for state administrative law judges (ALJs) and administrative proceedings in Indiana.

We also highlight new scholarship examining the effect of agency automation practices on the administrative state as well as new findings from Ballotpedia’s survey of all 50 state constitutions and administrative procedure acts regarding limits on who can challenge agency actions in state courts. As always, we wrap up with our Regulatory Tally, which features information about the 188 proposed rules and 281 final rules added to the Federal Register in June and OIRA’s regulatory review activity.

In Washington

Supreme Court rules DACA ended improperly; dissenting opinion argues ruling creates double standard 

  • What’s the story? The U.S. Supreme Court on June 18 ruled 5-4 in DHS v. Regents of the University of California that the U.S. Department of Homeland Security (DHS) did not properly follow Administrative Procedure Act (APA) procedures when it sought to end the Obama-era Deferred Action for Childhood Arrivals (DACA) program in 2017. DHS started the program in 2012 with a memo that itself did not follow the APA rulemaking process.
  • The court held that DHS’ decision to end DACA was arbitrary and capricious under the APA because DHS failed to analyze all of the relevant factors associated with ending the program. The court remanded the case to DHS, which can reattempt to end the program by providing a more thorough explanation for its decision.
  • Chief Justice Roberts delivered the majority opinion of the court, writing, “The dispute before the Court is not whether DHS may rescind DACA. All parties agree that it may. The dispute is instead primarily about the procedure the agency followed in doing so.”
  • Justices Ruth Bader Ginsburg, Stephen Breyer, and Elena Kagan joined the full opinion. Justice Sotomayor agreed with the majority that DHS improperly followed the APA, but argued in a separate opinion that the court should have allowed the respondents to develop claims that the agency violated the Fifth Amendment’s equal protection guarantee.
  • Justices Clarence Thomas, Samuel Alito, and Brett Kavanaugh filed dissenting opinions. Thomas’ dissent, joined by Justices Samuel Alito and Niel Gorsuch, argued that an administration should be able to rescind policies not lawfully implemented. He also claimed that the decision creates incentives for outgoing administrations to bind their successors to unlawfully created programs. An agency is now “not only permitted, but required, to continue administering unlawful programs that it inherited from a previous administration,” according to Thomas.
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Lucia settles with SEC after eight years of litigation

  • What’s the story? Raymond Lucia, the plaintiff in the 2018 U.S. Supreme Court case Lucia v. SEC, reached a settlement with the U.S. Securities and Exchange Commission (SEC) on June 17 after eight years of litigation. The settlement requires Lucia to pay a $25,000 fine and allows him to reapply for reinstatement as an investment advisor.
  • The Lucia case challenged the constitutionality of the SEC’s appointment of its administrative law judges (ALJs). The U.S. Supreme Court ruled in June 2018 that the agency’s ALJ appointments violated the Appointments Clause of the U.S. Constitution. The court found that the SEC’s ALJs are inferior officers (rather than agency employees) who must be appointed by the agency’s commissioners as required by the Appointments Clause. The court sent Lucia’s case back to the SEC for a new hearing before a different, constitutionally appointed ALJ.
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CFPB structure ruled unconstitutional, agency survives

  • What’s the story? The U.S. Supreme Court on June 29 ruled 5-4 in Seila v. Consumer Financial Protection Bureau (CFPB) that limiting the power of the president to remove the CFPB director violates the separation of powers of the U.S. Constitution. Congress created the CFPB under the 2010 Dodd-Frank Act as an independent agency with a single director who could only be removed by the president for cause.
  • The court recognized historical limitations on the president’s removal power in Humphrey’s Executor v. United States (1935) and Morrison v. Olson (1988), but refused to apply those precedents to the CFPB because, unlike the actors involved in the prior cases, the court argued the CFPB exercises significant executive power. The court also held that the unconstitutional removal restrictions could be severed from the Dodd-Frank Act—leaving the rest of the agency intact.
  • Chief Justice John Roberts delivered the opinion of the court. Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh joined the first three parts of Roberts’s opinion concerning the unconstitutional removal restrictions.
  • Part IV of Roberts’ opinion, which argued in favor of severing the removal power restriction and leaving the rest of the law intact, was joined by Justices Alito and Kavanaugh and supported in a separate opinion by Justices Elena Kagan, Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor.
  • In an opinion concurring in part and dissenting in part, Justice Thomas, joined by Justice Gorsuch, agreed with the majority’s limitations on the scope of the Humphrey’s Executor precedent. However, Thomas stated that he would vote to overrule the Humphrey’s Executor precedent in a future case. He also disagreed with the decision to sever the removal restrictions, arguing that severability could exceed the scope of the judicial power by allowing judges to speculate on the legislative branch’s preferred remedy.
  • Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, wrote a separate opinion concurring with the judgment that the removal power provision was severable from the rest of the law, but dissenting from the holding that the removal power restrictions were unconstitutional. Kagan argued that the majority’s decision could stagnate the government’s ability to respond to changing circumstances.
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Legislation seeks to make coronavirus regulatory suspensions permanent

  • What’s the story? Representative Chip Roy (R-Texas) and Senator Rand Paul (R-Ky.) introduced legislation in Congress during May and June, respectively, aimed at making the temporary suspension of federal regulations due to the coronavirus pandemic permanent.
  • The Coronavirus Regulatory Repeal Act would require Congress to reaffirm any temporarily suspended regulations within 60 days of the end of the national emergency before they could take effect again.
  • In May, President Donald Trump’s (R) Executive Order 13924 directed federal administrative agency heads to determine whether regulations modified or waived during the pandemic should be repealed permanently.
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In the states

Mississippi Supreme Court reaffirms end of state-level Chevron deference; Georgia legislation to end deference to state tax agency fails to pass

  • What’s the story? The Mississippi Supreme Court on May 28 unanimously held in a tax and gambling case that a state tax statute requiring judicial deference to a state agency’s interpretation of an unclear law—a doctrine known as Chevron deference at the federal level—was unconstitutional because it prohibited the court from exercising its constitutional duty to interpret the law.
  • The court reaffirmed its 2018 ruling in King v. Mississippi Military Department, which ended the state-level Chevron deference doctrine on the grounds that the practice violated the separation of powers prescribed by the state constitution. The King decision instituted a new standard of de novo review.
  • The court further clarified in the tax case that the King decision applied to any state statute requiring the Chevron deference doctrine.
  • In Georgia, legislation that would have ended judicial deference to the state Department of Revenue’s interpretations of constitutional provisions, state statutes, and agency regulations failed to pass the state Senate in the final days of the legislative session. The state House of Representatives approved the bill by a 158-8 vote on February 18.
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Separation of powers challenge fails to block Maine ballot initiative

  • What’s the story? Cumberland County Superior Court Justice Thomas Warren on June 29 held that a Maine ballot initiative seeking to overturn a state agency decision to allow construction of a high-voltage power line can remain on the November 2020 ballot despite a separation-of-powers challenge.
  • Opponents of the initiative argued in Avangrid Networks v. Matthew Dunlap that the ballot measure violates the separation of powers provision in Article III of the Maine Constitution because it would allow Maine citizens to exercise executive authority by reversing an agency order and judicial authority by overturning a related court decision.
  • Warren held that the separation of powers challenge presented in the case was not ripe for review because the initiative might fail to pass. However, Wagner stated that “the court does not mean to suggest that the plaintiffs have not raised a significant separation of powers issue.”
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Indiana moves administrative law judges to central panel

  • What’s the story? The state of Indiana on July 1 launched the new Office of Administrative Law Proceedings (OALP) to serve a central hub for the state’s administrative law judges (ALJs) and agency adjudicative proceedings.
  • The Indiana General Assembly passed legislation in 2019 authorizing the creation of the OALP.
  • The new central office transitions ALJs away from direct employment or contractual relationships with state agencies. The OALP seeks to promote the independence of ALJs by ensuring that ALJs serve as neutral adjudicators in administrative proceedings, according to the office.
  • Twenty-seven other states centralize their ALJ corps and provide ALJs to state agencies on request. ALJs in the remaining states—and the federal government—are appointed by agency heads or hired as employees to conduct administrative proceedings at specific agencies.
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Feature section

Does agency automation contribute to a crisis of legitimacy?

New scholarship from law professors Ryan Calo and Danielle Keats Citron argues that increased automation in agency processes has resulted in inconsistent outcomes that, according to the authors, have eroded faith in agency expertise and contributed to what they call a crisis of legitimacy surrounding the administrative state. The authors claim that poor automation practices deployed by agencies have undermined the confidence in agency expertise that justifies their existence. In response, the authors propose that agencies should limit their use of automation to only those practices that deliver positive outcomes in order to retain their subject-matter expertise:

“The question we ask in this article is not how to restore the status quo ex ante given that machines have supplanted people. We ask instead whether technology obligates a fundamental reexamination of why Congress is permitted to hand off power to agencies in the first place.

The new direction we advocate is critical but ultimately constructive. We do not recommend the dissolution of the administrative state, which has turned to automation largely in response to a hostile political economy. Nor do we hope to foreclose the use of technology by state or federal agencies. Our ultimate recommendation is that agencies should consciously select technology to the extent its new affordances enhance, rather than undermine, the rationale that underpins the administrative state. This would be so even absent a looming legitimacy crisis. We observe that, far from demand a return to the status quo, new technology invites us to heighten and extend our expectations of what government can offer its citizens. Such examples exist in the literature and media; we believe they deserve greater attention and collect them here.”

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50-state survey reveals state limits on who can challenge agency actions in court

A Ballotpedia survey of all 50 state constitutions and administrative procedure acts (APAs) concluded that 42 states place limits on access to state courts to challenge agency actions.

  • 42 states limited who was eligible to appeal agency adjudication actions to a state court
  • The New Jersey Administrative Procedure Act banned third parties (those not directly denied a permit) from appealing permit decisions and blocked state agencies from making rules allowing third-party appeals
  • 33 states, 66%, had constitutions that allow anyone who suffers an injury or wrong to their person, property, or character, to have recourse in the state court system.
  • 8 states had no clear limits on who could challenge agency adjudication actions in state court (Ariz., Calif., Ill., Kan., Miss., N.H., N.J., N.Y.)

Some states limited appeals from agencies to state courts until after the plaintiffs had exhausted all available administrative remedies at the agency. Ballotpedia examined those provisions here.

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Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s June regulatory review activity includes:

  • Review of 56 significant regulatory actions.
  • Thirteen rules approved without changes; recommended changes to 40 proposed rules; three rules withdrawn.
  • As of June 1, 2020, OIRA’s website listed 139 regulatory actions under review.
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  • Every month, Ballotpedia compiles information about regulatory reviews conducted by OIRA. To view this project, visit: Completed OIRA review of federal administrative agency rules