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Agency ‘Winners and Losers’ at Stake in Supreme Court Challenges

March 1, 2021, 9:45 AM

The Supreme Court will take up a pair of cases exploring the power of administrative agencies, a topic of renewed interest among the expanded majority of conservative justices.

The cases this week involving a federal patent appeals board and the Social Security Administration are the latest in a string of separation of powers challenges questioning how much authority agencies can wield independent from the president.

Concerns that the so-called unelected fourth branch of government, or the administrative state, has too much power over business and everyday life and that the executive branch must be able to rein in those agencies have found a sympathetic audience among conservative justices.

Among the several cases the court has heard in recent terms, the justices have curbed the independence of the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB) in rulings on when administrative adjudicators are appointed and when the president can dismiss them.

Potential challenges to come could impact many of the 12,000 administrators who resolve legal disputes outside the federal judiciary and affect entities like the Office of Special Counsel, the Merit Systems Protection Board, and statutory inspectors general.

The outcome of “who controls these agencies—the Congress or the Executive—will determine who decides the winners and losers,” said Tully Rinckey attorney Dan Meyer. “And, by the way, who is ignored.”

This Week

The cases to be argued on Monday and Wednesday involve medical device company Arthex Inc. and the patent office, and another centered on challenges to Social Security Administration administrative law judges.

In the Arthex argument, the question is who must appoint administrative patent judges under the Constitution’s Appointments Clause. Should it be the president, with the advice and consent of the Senate, or the department head?

In the case involving the Social Security Administration, the question is about when litigants must make a challenge. Must it be done before the agency, or can they be brought for the first time in federal court?

Cases involving separation of powers aren’t new, but “there is certainly more interest in right now” from the current membership of the court, said Pacific Legal Foundation’s Elizabeth Slattery.

The cases overall aim to strike a balance between efforts to hold the executive branch accountable for the actions of agencies and a desire by Congress to make them less vulnerable to the whims of changing administrations. Three challenges have come in this term alone.

So far, those advocating for stronger executive power have prevailed at the high court. And the so-called administrative state “appears primed to lose these upcoming battles,” too, said Federal Practice Group attorney Debra D’Agostino.

Both Ends

Separation of powers fights come in waves, Meyer said, pointing to several cases from the 1930s to 1950s, and in the mid-1980s to 1990s. The current surge could reflect the change in membership of the court, Slatterly said of the six-justice conservative majority.

Justices Neil Gorsuch and Brett Kavanaugh, in particular, wrote powerful separation of powers opinions while on the circuit courts, she said.

The current crop of disputes “tackle separation of powers issues from both sides,” D’Agostino said—that is, when administrative adjudicators are appointed and when they can be dismissed by the president.

While the patent and the Social Security cases involve the Appointments Clause, another argued earlier this term centered on the president’s power to terminate the head of the Federal Housing Finance Agency (FHFA).

The latest wave began with the court’s 2018 ruling in Lucia v. SEC, finding that administrative law judges under that agency are “officers” subject to the requirements of the Appointments Clause.

That ruling could have easily been expanded to other agencies without having to hear cases individually, Slattery said. But the justices do so because they involve slightly different questions.

Flipping Sides

A key in all of these disputes how to balance attempts to insulate agency officials from presidential control with those seeking to increase the power of the president. Some argue that particular agencies need special protections from presidential interference, especially from administrations hostile to an agency’s statutory purpose.

Meyer said it isn’t surprising that “these constitutional fights erupt over agencies charged by the Congress with correcting market distortions in consumer finance, the trading of securities, and the housing market.”

On the flip side, are those noting that thes agencies live within the executive branch although created by Congress, and that the president has the constitutional command to faithfully execute the law.

Given the court’s ruling in Lucia and its decision last term finding that Congress went too far in trying protect the CFPB from presidential interference, D’Agostino said it is difficult to “view the Court’s willingness to hear these cases as anything other than a signal to those interested in limiting the existence or reach of the administrative state.”

The result is a politicization of the civil service—something she said has continued under the Biden administration’s first months.

President Joe Biden recently announced three nominees to the U.S. Postal Service Board of Governors, a move D’Agostino said is seen as one to get around his inability to directly fire Postmaster General Louis DeJoy, who was appointed by Trump.

One of Biden’s first moves was to fire Trump’s general counsel for the National Labor Relations Board, Peter Robb. Some say that violates the National Labor Relations Act.

To contact the reporter on this story: Kimberly Strawbridge Robinson in Washington at krobinson@bloomberglaw.com

To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com; John Crawley at jcrawley@bloomberglaw.com

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