Back when I was in law school, the fringier aspects of conservative legal thought were laying the ground work for attacking several key doctrines of the New Deal. Now those fringier elements are at the core of the conservative theory, and we are seeing the fruits of those efforts. This week, there were several key decisions by the Supreme Court in cases dealing with the “Administrative State” and labor unions.
Prior to the New Deal, the Supreme Court had stood in the way of attempts empower executive branch agencies. By the 1940s, the Supreme Court had made several key decisions that allowed independent agencies and executive branch departments to operate. These decisions included: 1) limiting the scope of the non-delegation doctrine (the doctrine that Congress could not delegate the power to make laws to administrative agencies); 2) deference to the decisions of executive branch agencies; 3) the existence of independent agencies (agencies whose heads could only be removed for cause); and 4) quasi-judicial administrative hearings in which “administrative law judges” reviewed the claims of parties with their decisions reviewed by courts rather than political appointees. In recent years, we have seen cases calling into question all of these doctrines. This week, we got decisions in two cases involving two of these issues.
Up first is Collins. This case, in which Justice Alito wrote the majority opinion, is the latest involving the independence of executive branch agency heads. For certain agencies, Congress has attempted to protect the agencies from political interference by giving the agency head a set term with the president only being able to remove that appointee for cause. This case involves some of the reforms enacted in response to the mortgage crisis. The specific statute created the Federal Housing Finance Agency as part of the rescue of two private companies — the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac) — to oversee those two corporations. The agency is managed by a single director who is removable for cause. Part of this director’s authority is to act as a receiver for these two organizations. In that capacity, the director negotiated changes to the terms of the loan that the U.S. Treasury made to Freddie Mac and Fannie Mae. Because these two organizations are technically private organization (although chartered by the federal government to serve specific roles in the housing market), they have private investors who sued to challenge the renegotiated agreement. Following up on prior decisions, the Supreme Court continued its war on limitations on the power of the president to remove an agency head. At some point, this war will have serious policy impact when a president chooses to remove an agency head for following the law and replaces that agency head with somebody who will not follow the law.
For the plaintiffs in this case, their win on the constitutional issue will not do them much good. While the opinion allows a remand to the lower court to permit further argument, the Supreme Court adopts a general rule that — if the director was validly appointed — the limitations on removal do not invalidate any action by that director. While there may one day be a case in which the courts are dealing with the actions of a director who refuses to leave after being fired, this case is not that case. As has become somewhat common, this case involves several splits making it hard to determine the exact line-up. By my read, the liberal justices are taking the position that there are some circumstances in which a “for cause” restriction on removal of agency heads are justifiable. Only Justice Gorsuch takes the position that the restriction on the removal power automatically invalidates any action by the agency head. Going forward, the Supreme Court’s position makes challenges to the removal clause almost theoretical. The Supreme Court is going to generally strike down these provisions, but, absent an actual attempt by a president to remove an agency head, this rule will not invalidate any agency action. So we are looking at long term rather than immediate harm.
The second case, Arthex, involves administrative law judges for the Patent Office. The primary issue in the case is whether administrative law judges — officials who are supposed to be neutral decision-makers on claims raised by parties with no power to write regulations — are “principal” officers or “inferior” officers. Under the Appointments Clause of the Constitution, principal officers must be confirmed by the Senate but Congress can permit agency heads to appoint inferior officers. This distinction is crucial and limits who needs Senate confirmation. For example, junior officers in the military do not need Senate confirmation but senior officers and flag officers do need Senate confirmation (meaning every promotion to general or admiral has to be Senate confirmed). Similarly, assistant U.S. attorneys do not need Senate confirmation but each of office heads (the U.S. Attorney) do need Senate confirmation. The Constitution is not clear on what makes an officer a principal officer, and the test that the courts have used is, unfortunately, not that clear either. Essentially, it requires the courts looking at the power of the inferior officer to make decisions and what feels like to much power that is not subject to review by a superior. If an inferior officer’s decisions (for example charging decisions by an assistant U.S. attorney) are subject to review by a Senate confirmed official, they are still an inferior officer. But, if there decisions are not subject to such review, they might be a principal officer.
And the current test does not fit well with administrative law judges. As that title suggests, administrative law judges are a hybrid-type position. Regular “Article III” judges are Senate confirmed, but, over the years, Congress has desired to create an expedited process for reviewing certain types of claims. (Do you really want every Social Security disability claim to have to compete for judicial time with civil rights cases and federal criminal cases?) So rather than having these claims reviewed by the courts, Congress has created an expedited hearing process (which do not necessarily strictly follow the rules that would apply in court) overseen by executive branch appointees. And because Congress wants these individual decisions to be impartial and nonpolitical, Congress has created the concept of an administrative law judge. In many agencies, the decision of the administrative law judge is nominally reviewable by a political appointee, but such decisions are usually rubber-stamped. (Frequent intervention by agency heads would undermine the perceived “fair and independent” status of the administrative claim process.)
The majority opinion in Arthex, written by the Chief Justice, looks at this issue in the context of patent reviews. As is not unusual, the administrative law judges in the patent office are appointed by the head of the Patent Office without Senate confirmation. Their job, at least the ones at issue in this case, is to review disputed patents to determine if the agency properly granted a patent (or alternatively if the grant of the patent should be reversed). (Typically, the review request comes from a competitor who already has a patent and thinks the new invention is a copy of their original invention.) However, unlike some other agencies, the judges’ decision on patent reviews is final in the sense of being the final decision of the Patent Office, but that decision can be reviewed in federal court. And they are supposed to apply the statutes and regulations that govern the patent process to the facts of the individual disputed patent. While the head of the patent office gets to decide which administrative judges get assigned to these types of claims and which decisions are designated as precedential, the head of the Patent Office is not able to set aside a decision of any panel. Additionally, as regular employees, the administrative law judges have civil service protection. Thus, while the head of the Patent Office can control what cases a judge gets, the head of the Patent Office can only fire an administrative law judge for cause.
This structure created problems as reflected by the split decision. This structure left the Supreme Court with a weird 4-1-3-1 split. Five justices (all of the conservative justices but Justice Thomas) found that this structure converted the administrative law justices into principal officers who should have been confirmed by the Senate. However, four of the justices (the Chief Justice, Justice Alito, Justice Kavanaugh, and Justice Barrett) thought that Congress meant for these judges to be inferior officers and, therefore, the remedy was to grant the head of the Patent Office the power to review decisions of these panels. The three liberal justices thought that these administrative law judges were inferior officers under the current structure, but, if the structure needed to be remedied, the proper remedy was to allow the director of the Patent Office to review panel decisions. Justice Gorsuch thought that this structure was one more problem with the review process (which is less than a decade old) and would strike down the entire statute. Justice Thomas agrees with the liberal justices that the administrative law judges are inferior officers (and finds the majority opinion a departure from Thomas’s version of originalism), but finds that the plurality’s remedy merely reflects the flaw in the finding that the current law gives the power reserved to principal officers to inferior officers.
Finally, there is Cedar Point, another Roberts opinion. This opinion is another dagger to the heart of the labor movement from the Roberts Court. While the opinion is technically a Takings Clause case, it can also be understood as a Free Speech decision or simply a pro-business, anti-labor decision. California has a law that requires businesses to grant labor union officials access to their members on the work site. In a 6-3 decision, the conservative justice finds that this law effectively creates an easement (a right to go on somebody else’s property) on business property for labor organizers. And an easement is a property right. Thus, the law takes a property right (the decision on whether to grant access) which, in the absence of compensation, violates the Takings Clause. To the majority, it did not matter that the easement was constructively created by a regulation rather than an actual easement taking the property filed in the appropriate office as part of the title to the property. As noted above, this decision can equally be understood as a Free Speech case (employers do not have to subsidize the speech of an opposing viewpoint by providing them space) or simply an anti-Labor, pro-business decision (making it hard for labor unions to organize and, once organized, to represent their membership). In any case, this result should surprise nobody and is simply the cost of losing the 2016 election and allowing conservatives to firm up their majority on the Supreme Court.
As noted in yesterday’s post, there are five cases left including a key Free Speech case and a Voting Rights case. Expect to see a post talking about this year’s Free Speech decisions (including this past week’s cursing cheerleader’s decision) and another post about this year’s election cases over the next several weeks.
