Author

Jace Lington

Jace Lington is a staff writer at Ballotpedia. Contact us at editor@ballotpedia.org.

U.S. Supreme Court: CFPB structure is unconstitutional but the agency survives

In a 5-4 decision, the U.S. Supreme Court ruled in Seila v. CFPB that limiting the power of the president to remove the director of the Consumer Financial Protection Bureau (CFPB) violates the separation of powers of the U.S. Constitution. Congress created the CFPB as an independent agency with a director insulated from direct presidential control in the 2010 Dodd-Frank Act.

The court recognized historical exceptions to the president’s removal power in Humphrey’s Executor (1935) and Morrison v. Olson (1988), but refused to apply those precedents to the CFPB because it held that the agency exercised significant executive power unlike the actors involved in those cases. The court also held that even though the removal power restrictions were unconstitutional, they could be severed from the Dodd-Frank Act, which left the rest of the agency intact.

Chief Justice John Roberts delivered the opinion of the court saying, “While we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power.” Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh joined the first three parts of Roberts’s opinion. Part IV of his opinion, which did not receive support from the full majority, argued in favor of eliminating the removal power restriction and leaving the rest of the law intact.

In an opinion concurring in part and dissenting in part, Justice Clarence Thomas, joined by Neil Gorsuch, supported the decision to limit Humphrey’s Executor’s defense of congressional limitations of the president’s removal power, but Thomas said he would overrule that precedent entirely in a future case. He disagreed with Roberts’s decision to sever the removal restrictions from the rest of the law establishing the CFPB.

Justice Elena Kagan, joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor, wrote a separate opinion concurring in part and dissenting in part. She argued that the majority’s decision “commits the Nation to a static version of governance, incapable of responding to new conditions and challenges.” She agreed with the judgment that the removal power provision was severable from the rest of the law, but disagreed that the removal power restrictions were unconstitutional.

Now, the U.S. Court of Appeals for the 9th Circuit will conduct further proceedings in light of the Supreme Court’s opinion.

Click here to learn more about Seila, or click here to learn about the executive removal power.
Want to go further? Learn more about the five pillars of the administrative state here.

Additional reading:



Which states require people to exhaust administrative appeals before challenging agency actions in state court?

A Ballotpedia study of all 50 state constitutions and administrative procedure acts (APAs) revealed that 18 states require people to exhaust administrative remedies offered by an agency before they can challenge that agency’s adjudication actions in state court.

Agency adjudication is a quasi-judicial process that takes place in the executive branch of the state government instead of the judicial branch. Often, the procedural protections associated with adjudication are different from those found in a traditional courtroom setting.

Adjudication proceedings include agency determinations outside of the rulemaking process that aim to resolve disputes between either agencies and private parties or between two private parties. The adjudication process results in the issuance of an adjudicative order, which serves to settle the dispute and, in some cases, may set agency policy.

For this study, Ballotpedia started by looking into whether states limited who could challenge the outcome of agency adjudication actions in court. Most states allowed any aggrieved party to challenge agencies in court. Aggrieved parties are those involved in a case and anyone else adversely affected by an agency’s action in a case. The survey revealed that even though some states limited who could take agencies to court, they differed about what a person had to do before reaching a state court.

18 states limited appeals from agencies to state courts until after the plaintiffs had exhausted all available administrative remedies at the agency. These requirements varied among states and even among agencies within states but involved steps like asking the agency to reconsider a decision or requesting that the head of the agency review an adjudication action.

The Utah and Washington APAs allowed state courts to waive the requirement that parties first exhaust administrative remedies if those remedies are inadequate or if those remedies would result in irreparable harm.

Understanding limits on access to state courts for judicial review of agency actions provides insight into procedural rights at the state level. Procedural rights is one of the five pillars key to understanding the main areas of debate about the nature and scope of the administrative state.

To learn more about Ballotpedia’s survey related to procedural rights, click here.

Want to go further? Learn more about the five pillars of the administrative state here.

Additional reading:



U.S. Supreme Court limits SEC enforcement powers

The U.S. Supreme Court’s June 22 ruling in Liu v. SEC limited the Securities and Exchange Commission’s (SEC) enforcement powers.

The court ruled 8-1 that the SEC could ask courts to issue disgorgement orders, which require wrongdoers to give up money gathered illegally, with some restrictions. The court held that valid disgorgement orders must be less than or equal to the wrongdoer’s net profits and go toward repaying any victims.

Justice Sonia Sotomayor, writing for the majority, argued, “First, equity practice long authorized courts to strip wrongdoers of their ill-gotten gains, with scholars and courts using various labels for the remedy. Second, to avoid transforming an equitable remedy into a punitive sanction, courts restricted the remedy to an individual wrongdoer’s net profits to be awarded for victims.”

Justice Clarence Thomas wrote in his dissenting opinion that the court should have ruled that disgorgement orders were never allowed. He argued that the relevant law “authorizes the Securities and Exchange Commission (SEC) to seek only ‘equitable relief that may be appropriate or necessary for the benefit of investors,’ and disgorgement is not a traditional equitable remedy.”

The decision in Liu “struck a middle ground, rejecting the broad argument that the SEC could never obtain disgorgement of profits from unlawful activity in securities litigation, but sharply cutting back the remedy as the SEC has envisioned it in recent years,” Columbia Law professor Ronald Mann argued in an article for SCOTUSblog.

“Three years ago, the Supreme Court cast doubt on whether disgorgement was among the remedies the agency could seek in civil lawsuits,” but with Liu the court approved the practice, according to New York Times Supreme Court reporter Adam Liptak.

The court sent the case back down to the Ninth Circuit for another hearing based on the Liu ruling.

To learn more about Liu v. SEC, click here.

Additional reading:

Link to the SCOTUS decision:
https://www.supremecourt.gov/opinions/19pdf/18-1501_8n5a.pdf

Link to Mann article:
https://www.scotusblog.com/2020/06/opinion-analysis-justices-accept-but-cabin-secs-right-to-disgorgement-in-securities-litigation/

Link to Liptak article:
https://www.nytimes.com/2020/06/22/us/supreme-court-sec.html



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

In a 5-4 decision, the U.S. Supreme Court ruled 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 go through the APA rulemaking process.

The court’s ruling argued that DHS failed to provide required analysis of all relevant factors associated with ending the DACA program. The majority opinion argued that rendered the decision arbitrary and capricious under the APA. The court thus remanded the issue back 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 saying, “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 Sonia Sotomayor joined most of the majority opinion, giving it the fifth vote it needed to become the official decision of the court.

Justice Sotomayor agreed with the court that DHS improperly followed the APA, but she wrote separately to argue that the court should have given those challenging the agency the opportunity to develop claims that the agency violated the equal protection guarantee of the 5th amendment to the U.S. Constitution.

In a dissenting opinion, Justice Thomas argued that an administration should be able to rescind policies not lawfully implemented: “To state it plainly, the Trump administration rescinded DACA the same way that the Obama administration created it: unilaterally, and through a mere memorandum.” He argued that the court’s decision was “an effort to avoid a politically controversial but legally correct decision.” Justices Samuel Alito and Neil Gorsuch joined Thomas’s opinion.

Justice Kavanaugh defended DHS’s reasons for ending DACA as adequate in a separate opinion. He added that the court’s decision applied precedent incorrectly when it held that a memo written by former DHS Secretary Kirstjen Nielsen came too late to provide the analysis the court said DHS needed to end the program.

Additional reading:

Pelosi press release: https://www.speaker.gov/newsroom/61820-0
Trump tweet: https://twitter.com/realDonaldTrump/status/1273666793362673665



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) revealed that 42 states place limits on access to state courts to challenge agency actions.

For this survey, Ballotpedia set out to learn whether states limited who could challenge the outcome of agency adjudication actions in court. Most states allowed any aggrieved party to challenge agencies in court. Aggrieved parties include those involved in the case and anyone adversely affected by the agency’s decision.

Agency adjudication is a quasi-judicial process that takes place in the executive branch of the state government instead of the judicial branch. Often, the procedural protections associated with adjudication are different from those found in a traditional courtroom setting. State constitutional provisions declaring state courts open to those who suffer injuries might not apply to all actions by state agencies.

Anyone who suffers an injury or wrong to their person, property, or character because of an agency action might have the constitutional right to challenge that agency in the state court system. These constitutional provisions are not any more specific and do not explain who exactly has the standing to challenge the results of agency adjudication actions in court but imply broad access to the courts.

Understanding limits on access to state courts for judicial review of agency actions provides insight into procedural rights at the state level. Procedural rights is one of the five pillars key to understanding the main areas of debate about the nature and scope of the administrative state.

The procedural rights pillar refers to debates about individual due process and standing before administrative agency adjudication and enforcement actions. Procedural rights also include citizen access, agency rulemaking processes, and decisionmaking proceedings.

To learn more about Ballotpedia’s survey related to procedural rights, click here.

Want to go further? Learn more about the five pillars of the administrative state here.

Additional reading:



Ballotpedia study examines statutes governing state-level judicial deference to agency interpretations

Two Ballotpedia surveys of all 50 state constitutions and administrative procedure acts (APAs) analyzed the different ways states approach judicial deference to administrative agencies.

Judicial deference — the principle of judicial review in which a court yields to an agency’s interpretation of a statute or regulation — is one of five pillars key to understanding the main areas of debate about the nature and scope of the administrative state.

The first survey found that 14 states require judges to review agency actions on a de novo basis in at least some circumstances. Under de novo review, courts weigh the facts of a case and decide the meaning of laws and regulations for themselves instead of deferring to the conclusions and interpretations of administrative agencies.

In 37 states, the constitution or APA discussed judicial review but either required deference to agency actions in some cases or did not require judges to consider agency actions on a de novo basis.

The second survey found that no state constitutions or APAs set different standards for judicial deference depending on whether the court is reviewing administrative agency actions in a criminal or civil context.

While the surveys focused on the 50-state constitutions and state-level administrative procedure acts, a number of states have in recent years limited or prohibited judicial deference through legislative action and judicial decisions, as well as through citizen referenda.

Supporters of judicial deference suggest that the practice gives agencies more flexibility and allows them to apply technical expertise to policy challenges. Opponents of judicial deference argue that the practice violates the separation of powers because they believe judges who do not interpret statutes for themselves give away core powers of the judicial branch.

To learn more about Ballotpedia’s surveys related to judicial deference and state approaches and responses to judicial deference, see here:

State responses to judicial deference

Additional reading:


Trump vetoes CRA resolution that aimed to block student loan rule

On May 29, President Trump vetoed a resolution passed under the Congressional Review Act (CRA) to block a U.S. Department of Education (DOE) rule related to government forgiveness of certain student loan debt. Congress would now have to override his veto to block the rule.

In his veto message, Trump said, “Whereas the last administration promoted a regulatory environment that produced precipitous school closures and stranded students, this new rule puts the needs of students first, extends the window during which they can qualify for loan discharge, and encourages schools to provide students with opportunities to complete their educations and continue their pursuit of economic success.”

House Speaker Nancy Pelosi (D-Calif.) responded to the veto with this statement, “The House will soon vote to overturn this veto, which poses a grave harm to the financial security and futures of America’s students, particularly as America’s students are hurting more now than ever during the COVID-19 crisis.”

On January 16, 25 Democrats and six Republicans voted to pass the resolution in the U.S. House while 179 Republicans and Justin Amash (L-Mich.) voted nay. A version of the resolution passed the U.S. Senate on March 11 with 42 Democrats, 10 Republicans, and Angus King (I-Maine) voting to pass the resolution while 42 Republicans voted nay.

The DOE issued the 146-page rule in September 2019. The rule changed the process students must follow to discharge their loans and empowered the agency to collect money from schools to cover financial losses following successful student challenges. Education Secretary Betsy DeVos argued in a December 2019 press release that the new rule “ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm.”

The CRA gives Congress a chance to review and reject any new regulatory rules created by federal administrative agencies. Since the law’s creation in 1996, Congress has used the CRA to repeal 17 out of the over 90,767 rules published in the Federal Register during that time.

Additional reading:

Administrative State Project

To read the text of the DOE rule, click here.
To read Trump’s Veto Message, click here.
To read Pelosi’s statement, click here.


Unanimous U.S. Supreme Court rejects appointments clause challenge to Puerto Rican debt board

On June 1, a unanimous U.S. Supreme Court ruled that the Appointments Clause of the U.S. Constitution does not require members of the Puerto Rican Financial Oversight and Management Board (FOMB) to face confirmation by the U.S. Senate.

The Appointments Clause gives the president authority to appoint officers of the United States, subject to confirmation by the U.S. Senate. These officers include ambassadors, heads of Cabinet-level departments, and federal judges. The U.S. Supreme Court ruled that because FOMB members have primarily local powers and duties that the Appointments Clause does not restrict how they are selected.

Congress created the FOMB in 2016 and authorized the board to begin debt adjustment proceedings on behalf of the Puerto Rican government. The seven-member board is made up of one member chosen at the president’s discretion and six other members selected by the president from a list written by members of Congress.

Aurelius Investment LLC and the Unión de Trabajadores de la Industria Eléctrica y Riego challenged the FOMB’s authority, arguing that board members’ appointments violated the Appointments Clause. Aurelius and the union claimed that the board members are “Officers of the United States” who must be nominated by the president and confirmed by the Senate. The board argued that because its activities are primarily local in nature its members do not qualify as “Officers of the United States.” The U.S. Supreme Court ruled in favor of the board and sent the case to the U.S. Court of Appeals for the First Circuit for further proceedings.

Justice Clarence Thomas wrote a concurring opinion arguing that the court made the right decision for the wrong reasons. He would have relied on the original public meaning of the phrase _officers of the United States_ to resolve the case.

Justice Sonia Sotomayor wrote a separate concurring opinion arguing that “territorial status should not be wielded as a talismanic opt out of prior congressional commitments or constitutional constraints.” She stated that because the parties in the case did not address the implications of Puerto Rican home rule on the Appointments Clause she chose to concur in the judgment of the court.

Additional reading:

Administrative State Project

Click here to read the U.S. Supreme Court decision.


Group of states and cities sue Trump administration over rollback of Obama administration fuel efficiency standards

A group of 23 states, 4 cities, and the District of Columbia are challenging in court Trump administration efforts to change federal fuel efficiency requirements established by the Obama administration. On May 27, the group filed a lawsuit in the United States Court of Appeals for the D.C. Circuit asking the court to review new fuel efficiency standards set by federal agencies in April.

The Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) set the new standards in a final rule published in the Federal Register on April 30. The rule gives the auto industry more time to decrease how much gasoline their vehicles use and how much carbon dioxide they emit.

In a press release announcing the lawsuit, California Attorney General Xavier Beccera argued that the Trump administration rule violates the Clean Air Act and the Administrative Procedure Act (APA), and that new standards are too loose. He wrote, “The rule takes aim at the corporate average fuel efficiency standards, requiring automakers to make only minimal improvements to fuel economy—on the order of 1.5 percent annually instead of the previously anticipated annual improvement of approximately 5 percent. The rule also guts the requirements to reduce vehicles’ greenhouse gas emissions, allowing hundreds of millions of metric tons of avoidable carbon emissions into our atmosphere over the next decade.”

In a press release announcing the new fuel efficiency standards rule, the NHTSA wrote that the rule “reflects the realities of today’s markets, including substantially lower oil prices than in the original 2012 projection, significant increases in U.S. oil production, and growing consumer demand for larger vehicles.” The release quotes EPA Administrator Andrew Wheeler saying, “Our final rule puts in place a sensible one national program that strikes the right regulatory balance that protects our environment, and sets reasonable targets for the auto industry. This rule supports our economy, and the safety of American families.”

The rule is scheduled to go into effect on June 29, 2020.

Additional reading:

 

Link to the lawsuit:
https://oag.ca.gov/system/files/attachments/press-docs/5.27.20%20Petition%20for%20Review.pdf

Text of the fuel efficiency rule:
https://www.federalregister.gov/documents/2020/04/30/2020-06967/the-safer-affordable-fuel-efficient-safe-vehicles-rule-for-model-years-2021-2026-passenger-cars-and

Link to Beccera’s press release:
https://oag.ca.gov/news/press-releases/attorney-general-becerra-files-lawsuit-challenging-trump-administration%E2%80%99s-2

Link to NHTSA press release:
https://www.nhtsa.gov/press-releases/safe-final-rule



New regulation allows U.S. Secretary of Labor to overturn agency appeal decisions

New regulations from the U.S Department of Labor (DOL) might allow the public to hold the agency more accountable for decisions it makes during adjudication.

On May 20, Secretary of Labor Eugene Scalia published a final rule that establishes a system allowing him to review cases decided by the agency Administrative Review Board (ARB) and Board of Alien Labor Certification Appeals (BALCA).

The rule empowers the secretary of labor to oversee appeals from decisions made by agency Administrative Law Judges (ALJs). ALJs are officials who preside over federal administrative hearings. By giving the secretary more responsibility for the outcome of appeals from agency hearings, the rule gives the public an official to hold accountable for agency decisions.

According to the text of the rule published in the Federal Register, previous rules created the ARB and BALCA to make intra-agency appeals decisions in the name of the secretary of labor without giving the secretary a way to review the power exercised on his or her behalf.

In an op-ed announcing the rule, Scalia argued, “Our new system allows the ARB to continue its important work deciding administrative appeals, but gives the Secretary the authority to step in when a case is wrongly decided. The new regulations also contain due process protections so the Department fairly exercises its dual roles as litigant and judge.”

Seth Harris, who worked for the DOL when the ARB was created, opposes the plan, arguing that giving the secretary review authority over appeals might bias agency decision making. “The idea that this is an impartial, quasi-judicial panel is blown to smithereens because the secretary, if he gets lobbied by one party or the other, can simply overturn what the board has decided,” Harris told Bloomberg Law.

Supporters of giving the secretary more control of appeals include David Fortney, who worked for the DOL under George H.W. Bush. Fortney told Bloomberg Law that “I think that, on its face, it sounds modest—it’s not. It is terribly important because every major program that the Labor Department administers and enforces largely goes through the ARB, and this will ensure that there aren’t rogue decisions.”

Adjudication is the way agencies resolve disputes between the agency and people or between two private parties. Through adjudication, agencies will issue an order to settle the dispute and, in some cases, set agency policy for similar cases in the future. This new rule gives the secretary of labor more power in the adjudication process.

The rule is scheduled to go into effect on June 19, 2020.

Additional reading:

Text of the final rule:
https://www.federalregister.gov/documents/2020/05/20/2020-10909/rules-concerning-discretionary-review-by-the-secretary

Link to Scalia op-ed:
https://townhall.com/columnists/secretaryeugenescalia/2020/05/19/new-labor-regulations-help-keep-government-accountable-n2569073

Link to Bloomberg Law article:
https://news.bloomberglaw.com/daily-labor-report/labor-chief-scalia-reins-in-review-board-earning-mixed-reviews



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