Checks and Balances November 2022

By

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 U.S. Supreme Court’s oral argument in cases concerning state regulatory authority and federal agency dynamics, as well as recent activity from the U.S. Court of Appeals for the Fifth Circuit, including a decision that deemed the Consumer Financial Protection Bureau’s funding structure unlawful.

At the state level, we take a look at Kansas voters’ rejection of a proposed constitutional amendment that would have allowed state legislative oversight of executive agency rules, and an Illinois legislative committee’s call for state agencies to return to normal rulemaking procedures.

We also highlight a dissent from Justice Neil Gorsuch highlighting Gorsuch’s objections to what he views as overbroad applications of Chevron deference. As always, we wrap up with our Regulatory Tally, which features information about the 141 proposed rules and 218 final rules added to the Federal Register in October and OIRA’s regulatory review activity.

In Washington

SCOTUS hears trio of constitutional challenges

What’s the story?

Since the last edition of Checks and Balances, the U.S. Supreme Court heard oral argument in three cases concerning interstate commerce, agency structure, and final agency action. 

The court on October 11, 2022, heard oral argument in National Pork Producers Council v. Ross, a case arguing that a California regulation prohibiting the sale of certain pork products in the state unconstitutionally affects interstate commerce. The regulation requires minimum space requirements for certain farm animals and prohibits the sale of products, including pork, from animals raised in facilities that do not meet those conditions. The National Pork Producers Council (NPPC) and American Farm Bureau Federation (AFBF) filed suit, arguing that the regulation effectively imposed California’s law on pork producers in other states in violation of the dormant commerce clause. After lower courts dismissed the case, plaintiffs appealed to the U.S. Supreme Court.

“Both conservative and liberal justices … seemed skeptical of California’s law … even as they expressed concerns about the implications of striking it down,” observed Emily Hoeven of CalMatters. Amy Howe of SCOTUSblog noted that several justices raised questions about how the law could affect “hypothetical state efforts to ban products from out-of-state companies that employ unauthorized immigrants, forbid labor unions, or refuse to fund certain types of health care.” Justice Elena Kagan, moreover, suggested sending the case back to the lower court for a trial on the merits.

The court on November 7, 2022, went on to hear oral argument in Axon Enterprise Inc. v. Federal Trade Commission and Securities and Exchange Commission (SEC) v. Cochran, two cases that question whether an agency must issue a final enforcement action before an individual subject to agency enforcement can raise challenges to the agency’s structure or processes in federal court. “Members of the court’s 6-3 conservative majority appeared sympathetic to the agencies’ challengers,” according to Reuters. 

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Fifth Circuit finds CFPB funding structure unconstitutional, denies rehearing in ALJ challenge

What’s the story?

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit on October 19, 2022, held in Community Financial Services Association of Texas Ltd. v. Consumer Financial Protection Bureau (CFPB) that the funding structure of the CFPB is unconstitutional in violation of the appropriations clause. Judges Don Willett, Kurt Engelhardt, and Cory T. Wilson found that the agency’s funding, which flows directly from the Federal Reserve rather than congressional appropriations, unconstitutionally insulates the agency from congressional oversight and public accountability.

Two groups representing payday lenders filed suit against the CFPB in 2018 to challenge a 2017 payday lending rule that aimed to limit the frequency of lenders’ withdrawals from borrowers’ bank accounts, arguing in part that the agency itself is unconstitutionally structured. The district court ruled in favor of the agency, but the Fifth Circuit panel vacated the rule since it was enacted via what the judges found to be the agency’s unconstitutional funding scheme.

“Wherever the line between a constitutionally and unconstitutionally funded agency may be, this unprecedented arrangement crosses it,” wrote Judge Wilson in the opinion. “The Bureau’s perpetual insulation from Congress’s appropriations power, including the express exemption from congressional review of its funding, renders the Bureau ‘no longer dependent and, as a result, no longer accountable’ to Congress and, ultimately, to the people.”

U.S. Senator Elizabeth Warren (D-Mass.), often credited with creating the CFPB, took to Twitter to call the opinion “a lawless and reckless decision,” adding that “extreme right-wing judges are throwing into question every rule the CFPB enforces to protect consumers and businesses alike.” In a response filed in a separate action, the CFPB argued that the “Fifth Circuit’s decision is without support in law.” The agency may choose to seek review by the full Fifth Circuit or appeal to the U.S. Supreme Court.

The full Fifth Circuit on October 21, 2022, denied a rehearing en banc in Jarkesy v. Securities and Exchange Commission (SEC). A three-judge panel of the court on May 18 found that the SEC administrative law judges’ (ALJs) two layers of removal protections unconstitutionally insulate them from presidential oversight; that the agency’s adjudication proceedings violate the Seventh Amendment right to a jury trial; and that Congress unconstitutionally delegated legislative power to the SEC by failing to provide the agency with an intelligible principle to guide its enforcement actions. The SEC had yet to respond to the denial as of November 21, 2022.

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In the states

Kansas voters reject proposal seeking legislative oversight of agency rules 

What’s the story? 

Kansas voters on November 8, 2022, rejected a legislatively referred constitutional amendment that would have allowed state lawmakers to revoke or suspend agency rules. The proposed amendment would have created a new Section 1 of the state constitution granting the state legislature “oversight of state executive branch agencies and officials by providing the legislature authority to establish procedures to revoke or suspend rules and regulations,” according to a legislative summary.

Unofficial results as of November 15, pending certification, found that 50.48% of Kansas voters rejected the amendment while 49.52% voted in its favor.

Attorney General Derek Schmitt (R) had previously argued that the proposal would strengthen legislative oversight of administrative agency rules. State Representative Dennis “Boog” Highberger (D), an opponent of the proposal, had referred to the amendment as “election-year grandstanding,” according to the Kansas Reflector.

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Illinois lawmakers object to emergency rule, call for return to normal rulemaking procedures

What’s the story? 

The Illinois General Assembly’s Joint Committee on Administrative Rules (JCAR) on October 18, 2022, passed a voice vote objecting to an emergency rule issued by the state Department of Public Health (IDPH). The rule aimed to address a shortage of forensic pathologists by waiving visa requirements to allow certain foreign forensic pathologists to practice in the state. 

The state legislature passed a law in 2021, which took effect on January 1, 2022, that waived visa requirements for forensic pathologists in order to address a shortage of qualified practitioners in the state. IDPH on September 18, 2022, issued an emergency rule to implement the law. JCAR members objected to the rule, arguing that the agency had sufficient time since the law’s enactment to issue the regulation through the standard rulemaking process, rather than through a last-minute emergency rule.

“The pandemic is over,” said state Rep. Steven Reick (R). “It is time for us to get back to normal way of doing business, and the normal rulemaking process should be the one that is used instead of emergency rulemaking when the time is available to do that.”

No JCAR members dissented to the voice vote, according to Capitol News Illinois. The agency must respond to the objection within 90 days.

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Gorsuch argues against broad applications of Chevron deference

Justice Neil Gorsuch on November 7, 2022, dissented from the U.S. Supreme Court’s decision not to take up Buffington v. McDonough, a case concerning veterans’ benefits issued by the U.S. Department of Veteran Affairs (VA). In his dissent, Gorsuch “suggested that the Chevron [deference] doctrine had been expanded well beyond its original intent, and as a result gives too much power to bureaucrats, at the expense of ‘ordinary Americans,’” according to SCOTUSblog analyst Amy Howe.

The following excerpt from Gorsuch’s dissent illustrates what Gorsuch considers to be the problems that arise for individuals when courts apply Chevron deference too broadly:

“Today, administrative law doesn’t confine itself to the regulation of large and sophisticated entities. Our administrative state ‘touches almost every aspect of daily life.’ Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477, 499 (2010). And often it is ordinary individuals who are unexpectedly caught in the whipsaw of all the rule changes a broad reading of Chevron invites. Mr. Buffington’s case illustrates the impact on disabled veterans. Those who left active service before the VA changed its rule received all their promised benefits; those who served later do not. Not because of any change in law, only a change in an agency’s view. So many other individuals who interact with the federal government have found themselves facing similar fates—including retirees who depend on federal social security benefits, immigrants hoping to win lawful admission to this country, and those who seek federal health care benefits promised by law.”

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  • Click here to read the full text of Gorsuch’s dissent. 

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Regulatory tally

Federal Register

Office of Information and Regulatory Affairs (OIRA)

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

  • Review of 43 significant regulatory actions. 
  • Five rules approved without changes; recommended changes to 35 proposed rules; three rules withdrawn from the review process.
  • As of November 1, 2022, OIRA’s website listed 116 regulatory actions under review.
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