Roberts Court Loses Control of Conservative War on Agency Power

A novel challenge to the Consumer Financial Protection Bureau’s funding structure before the US Supreme Court Tuesday shows how the justices have lost control over the scope and pace of disputes involving separation of powers.

The justices will review a US Court of Appeals for the Fifth Circuit ruling that the indirect funding mechanism for the agency impermissibly limits congressional control over the government’s “purse.” That’s one of lawmakers’ most powerful tools to oversee the executive branch and federal agencies.

The potential implications of Consumer Financial Protection Bureau v. Community Financial Services Association of America are sweeping for the agency, which was born out of the 2008 financial crisis, as well as for the banking system and economy as a whole.

Separation of powers—or the balance of governmental power—has become an increasingly larger part of the court’s shrinking docket, according to administrative law experts.

The justices have invited litigants to bring cases challenging the independence of certain agency heads from the president and administrative law judges who are often the first to rule on constituent disputes. In addition to the CFPB case, the justices will hear two other separation of powers cases this term.

The Fifth Circuit’s ruling in the CFPB case suggests litigants and lower courts now may be leading the separation-of-powers charge—rather than the Supreme Court. That may provide the justices with a reason to tap the brakes, something the justices did in several cases last term where they rejected the Fifth Circuit’s extreme arguments.

“There is a question about the extent to which the court has opened up some issues that may go more rapidly that it was expecting or prepared for them to go,” said Case Western Reserve University School of Law professor Jonathan Adler, who focuses on administrative law.

Administrative State

UCLA law professor Jon Michaels said the court’s separation of powers cases are part of a long-term strategy by conservatives to chip away at the administrative state—the federal bureaucracy that shapes American life from environmental regulations to Social Security benefits.

The goal has been to disable and delegitimize federal agencies, Michaels said, which conservatives call the “deep state” and see as impeding free markets and individual rights. Reining in agency power through the courts is just one pathway groups are using to achieve that goal, he said.

And in the years since John Roberts became chief justice in 2005, a number of his conservative colleagues have been eager to follow that strategy. Conservatives now dominate the high court bench, 6-3.

Early signals show the Roberts Court “was interested in drawing very clear lines between the three different branches,” said University of Chicago law professor Aziz Huq.

For example, the court has recently reinvigorated the “major questions doctrine” in an effort to enhance congressional power. Under that principle, the court assumes Congress didn’t intend for agencies to have the power to adopt policies that have significant economic or societal effects unless clearly stated in the statute.

That goes hand in hand with the nondelegation doctrine, a principle limiting what Congress can delegate to agencies—even if it is clear in doing so.

And in a series of cases, including one involving the CFPB, the justices have strengthened the president’s power over agency heads by reducing obstacles to their removal and appointment.

The Roberts Court “laid the blueprint for these” separation of powers challenges, Michaels said.

Forcing the Issue

But the CFPB case could be the first sign that the field is moving in ways the justices didn’t predict.

“Because we have a more predictable conservative majority, I think people are emboldened to bring challenges they wouldn’t have brought a few years ago,” said University of Michigan law professor Christopher Walker. “Arguments that were off the wall 10 years ago, are now very much on the wall.”

At issue is the funding mechanism Congress set up for the CFPB to isolate it from political pressure. Instead of appropriating money annually, Congress provided for the CFPB to draw from the Federal Reserve, which itself operates outside of the usual appropriations process.

All other courts to have considered the issue, including the DC Circuit which specializes in administrative cases, green-lighted the funding structure. But the Fifth Circuit created a split among the appellate courts when it said the scheme violated the power of Congress to appropriate funds.

The Fifth Circuit said Congress abdicated its power of the purse by setting up an indirect funding scheme. In doing so, Congress relinquished its constitutional duty to check the executive branch and took the CFPB “completely off the separation-of-powers books,” the Fifth Circuit said.

The New-Orleans based court acknowledged that other agencies, most notably the Federal Reserve, operate on an indirect funding scheme. Because the CFPB gets its funding from another independent agency, the “double-insulated funding mechanism” put the CFPB in a category of its own.

It’s sort of an “I-know-it-when-I-see-it approach from the Fifth Circuit,” Hoq said, adding that there’s no evidence the Founders intended to limit congressional appropriations power in that way.

University of Virginia law professor Payvand Ahdout said the Constitution gives very little guidance about what’s required for appropriations. So “anything the court says is new for constitutional doctrine.”

Combined with the potentially drastic outcomes, the justices likely weren’t excited about this case making its way to the court.

The Fifth Circuit’s ruling, effectively ruling the CFPB defunct, meant the Supreme Court all but had to take the case, Ahdout said.

Fifth Circuit

Ahdout noted the Fifth Circuit has recently forced the court’s hand in other cases.

Last term, the justices affirmed only two of nine appeals from the Fifth Circuit.

The justices tossed arguments that would have dragged them further to the right than the conservative majority was willing to go.

The justices have already agreed to hear three other cases out of the Fifth Circuit this term, including a ruling that struck down a federal gun ban for those subject to a domestic violence restraining order. Many observers expect the Supreme Court to reverse that ruling.

And another of the separation of powers cases set for the term comes out of the Fifth Circuit, too. That one, dealing with the Securities and Exchange Commission, has the potential to be a blockbuster as well.

“It’s not entirely clear that the court has control over the speed at which it is going to have address some of these” separation of powers questions, Adler said. “We have to wonder whether the court’s appetite for moving the law in this direction will be constrained by its inability to control the pace.”