Checks and Balances – Federal Housing Finance Agency structure ruled unconstitutional

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Ballotpedia staff

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 latest administrative law activity from the U.S. Supreme Court, including a decision calling for increased supervision of administrative patent judges (APJs) and a holding that the structure of the Federal Housing and Finance Agency (FHFA) is unconstitutional; three Congressional Review Act resolutions that, for the first time, repealed regulations issued under a Republican administration; and a closer look at the Biden administration’s first Unified Public Agenda of Regulatory and Deregulatory actions. 

At the state level, we take a look at an effective ban on judicial deference by the Mississippi Supreme Court and a new Maryland law that shifts agency responsibilities to state administrative law judges (ALJs).  

We also highlight new commentary that questions whether Congress granted the Centers for Disease Control and Prevention (CDC) more authority than the president. As always, we wrap up with our Regulatory Tally, which features information about the 170 proposed rules and 319 final rules added to the Federal Register in June and OIRA’s regulatory review activity.

In Washington

SCOTUS finds Federal Housing Finance Agency structure unconstitutional

What’s the story? The United States Supreme Court issued decisions in two administrative law cases since our last edition concerning oversight of administrative patent judges (APJs) and the structure of the Federal Housing Finance Agency (FHFA).

In United States v. Arthrex, the court held 5-4 that the U.S. Constitution’s Appointments Clause does not allow administrative patent judges (APJs) to resolve patent disputes without increased supervision from higher-level agency officials. In its June 21 decision, the court decided to sever the parts of the patent statute that prevented the director of the Patent and Trademark Office (PTO) from unilaterally reviewing APJ decisions.

Chief Justice John Roberts delivered the opinion of the court, writing that the PTO director’s lack of review power over APJ decisions gave APJs power that conflicted with the “design of the Appointments Clause ‘to preserve political accountability.’”

The court’s ruling preserved the authority of the secretary of commerce to appoint APJs while increasing the supervision powers of the director of the Patent and Trademark Office. 

In Collins v. Yellen, the court held that restrictions on the president’s authority to remove the director of the FHFA violated the separation of powers. In its June 23 decision, the court also rejected the argument that the FHFA actions at issue in the case went beyond the agency’s legal authority.

Justice Samuel Alito delivered the opinion of the court, writing that “the Constitution prohibits even ‘modest restrictions’ on the President’s power to remove the head of an agency with a single top officer.”

The court’s decision to hold the structure of the FHFA unconstitutional articulated limits on the types of administrative agencies Congress may create and reaffirmed the court’s 2020 decision in Seila Law v. Consumer Financial Protection Bureau (CFPB), which held that the CFPB director’s removal protections unconstitutionally insulated the agency from presidential control.

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Biden signs three Congressional Review Act resolutions repealing Trump-era rules

What’s the story? President Joe Biden (D) on June 30 signed three Congressional Review Act (CRA) resolutions that, for the first time, reversed regulatory actions taken by a Republican administration. All three resolutions passed both chambers of Congress largely along party lines with Democrats in favor and Republicans opposed.

  • The first resolution, S.J.Res.13, reversed an Equal Employment Opportunity Commission (EEOC) rule issued under the Trump administration that changed the agency’s information-sharing requirements with companies accused of discrimination. 
  • The second resolution, S.J.Res.14, reversed an Environmental Protection Agency (EPA) methane rule issued under the Trump administration and restored methane emissions standards set under the Obama administration. 
  • The third resolution, S.J.Res.15, reversed a Comptroller of the Currency (OCC) rule issued under the Trump administration that changed regulations governing third-party lending. 

The CRA is a federal law passed in 1996 that creates a 60-day review period during which Congress, by passing a joint resolution of disapproval later signed by the president, can overturn a federal agency rule issued in the final months of a presidential administration. Since the law’s creation in 1996, Congress has used the CRA to successfully repeal 20 agency rules. 

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Biden administration releases first Unified Agenda

What’s the story? The Biden administration on June 11 released the Spring 2021 Unified Agenda of Federal Regulatory and Deregulatory Actions–a semiannual publication of recently completed, ongoing, and anticipated federal regulatory actions. 

A White House press release announcing the new agenda outlined the following priority regulatory categories: “protect health and safety,” “support a robust economic recovery that strengthens the middle class,” “advance equity,” “confront the climate crisis,” and “build a fair, orderly, and humane immigration system.”

The agenda features 3,959 rules in the active, completed, and long-term stages.

The agenda’s searchable interface on reginfo.gov (the website for the Office of Information and Regulatory Affairs) no longer includes distinctions between regulatory and deregulatory actions. Those distinctions were previously prompted by President Donald Trump’s (R) Executive Order 13771, which required federal agencies to eliminate two old regulations for each new regulation issued. President Joe Biden (D) revoked E.O. 13771 on January 20, 2021.

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In the states

Mississippi Supreme Court rejects Auer deference, ends judicial deference in state

What’s the story? The Mississippi Supreme Court on June 10 ruled 8-1 in Mississippi Methodist Hospital and Rehabilitation Center Inc. v. Mississippi Division of Medicaid to end the state practice of deferring to agency interpretations of regulations, a doctrine known as Auer deference at the federal level. The court’s decision, combined with its prior rejection of state-level Chevron deference, effectively banned judicial deference practices in the state, according to an analysis by Pacific Legal Foundation attorney Daniel Ortner.

Justice Leslie King wrote the opinion for the court, noting that the practice of “[d]eferring to agency interpretations of rules and regulations is inconsistent with the standard of review for statutory interpretation, causes confusion, causes inconsistencies in application and within our own caselaw, and violates article 1, section 2, of Mississippi’s Constitution.” The court’s decision institutes a new period of de novo review over agency regulatory interpretations.

The court ended the state-level Chevron deference doctrine, which requires courts to defer to agency interpretations of unclear statutes, in the 2018 case King v. Mississippi Military Department. The justices argued that the practice violated the separation of powers prescribed by the state constitution. The King decision instituted a new standard of de novo review over such agency interpretations, which the court later reaffirmed in a 2020 tax and gambling case.

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Maryland agency responsibilities shift to ALJs

What’s the story? A new Maryland law effective July 1 shifted the responsibility of determining compensation for individuals who served time in prison for crimes they did not commit from the Maryland Board of Public Works to state administrative law judges (ALJs). 

Maryland Governor Larry Hogan (R) first proposed the change in September 2019. Hogan argued that state ALJs are more qualified than the members of the Board of Public Works to make compensation determinations because the board lacks the “expertise, capacity [and] personnel” to evaluate damages, pain, and suffering.

The Board of Public Works is made up of three elected officials: the governor, the state comptroller, and the state treasurer. State law previously authorized the board to compensate wrongly incarcerated individuals. However, the board had not done so since the last wrongly incarcerated individual received compensation in 2004.

Five wrongly incarcerated men had petitioned the board for compensation over the months leading up to Hogan’s proposal. Walter Lomax, for whom the new law is named, spent 39 years in prison for a crime he did not commit. Lawyers had asked the board to award $100,000 to each man for each year he spent behind bars for a total of roughly $12 million. 

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Can agencies have more power than the president?

New commentary from Reason senior editor Jacob Sullum questions whether Congress granted the Centers for Disease Control and Prevention (CDC) more power than the president.

In “Did Congress Give the CDC More Authority Than the President?” Sullum claims that the agency’s legal defense of its eviction moratorium in Alabama Association of Realtors v. Department of Health and Human Services suggested that the agency has unlimited authority to take “reasonably necessary” actions in order to prevent the spread of communicable diseases. Sullum argues that the agency’s mandate could exceed the president’s authority:

“Nor is the power asserted by the CDC limited to overriding rental contracts. It clearly would authorize a national mask mandate of the sort that Joe Biden conceded was beyond his powers as president, not to mention nationwide business closures and home confinement of every American who is not engaged in activities the CDC’s director deems essential.

Transforming its recommendations into commands, the CDC could have legally required all of us to keep our distance from members of other households. It even could have forced us to ‘clean and disinfect frequently touched objects and surfaces using a regular household cleaning spray or wipe,’ back when it thought that was a sensible safeguard against COVID-19. …

Where does the CDC get these vast powers, which somehow exceed even the president’s? It cites the Public Health Service Act, which authorizes the secretary of health and human services to issue regulations that ‘in his judgment are necessary’ to control ‘communicable diseases,’ and one of those regulations, which delegates that authority to the CDC’s director.”

Though the U.S. Supreme Court on June 29 declined to lift a stay on the CDC’s eviction moratorium (set to expire at the end of July), a concurring statement by Justice Brett Kavanaugh indicated that at least five of the justices considered the moratorium to be unlawful.

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Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

OIRA’s June regulatory review activity included the following actions:

  • Review of 32 significant regulatory actions. 
  • Two rules approved without changes; recommended changes to 29 proposed rules; one rule withdrawn from the review process.
  • As of July 1, 2021, OIRA’s website listed 59 regulatory actions under review.
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