The Daily Signal - How 3 Supreme Court Cases Could Impact Administrative State

Episode Date: September 11, 2023

With the Supreme Court‘s 2023-2024 term just three weeks away, there are three cases before the nation’s highest court that two legal fellows write “could shake up the administrative state.�� The three cases are Loper Bright Enterprises v. Raimondo; Securities and Exchange Commission v. Jarkesy; and Consumer Financial Protection Bureau v. Community Financial Services Association of America.  GianCarlo Canaparo and Jack Fitzhenry, both legal fellows in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation, join today’s episode of “The Daily Signal Podcast” to discuss each of these cases; how the cases might be decided, given the 6-3 conservative-liberal makeup of the Supreme Court; and the “SCOTUS 101” podcast, which Canaparo co-hosts. (The Daily Signal is the news outlet of The Heritage Foundation.) Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Daily Signal podcast for Monday, September 11th. I'm Samantha Sherris, and today I'm joined by Giancarlo Canaparro and Jack Fitzhenry, legal fellows at the Heritage Foundation. The Supreme Court is preparing for its 2023-24 term. Giancarlo and Jack recently wrote for the Daily Signal that there are three cases before the nation's highest court that could shake up the administrative state. Those cases are Loper Bright Enterprises versus Romando, Securities and Exchange Commission versus Jarkacy, and Consumer Financial Protection Bureau versus Community Financial Services Association of America, which John Carlo and Jack break down on today's episode. We'll get to our conversation right after this.

Conservative women are problematic women. Why? Because we don't adhere to the agenda. of the radical left. Every Thursday morning on the Problematic Women podcast, Kristen I-Cammer, Lauren Evans, and me, Virginia Allen, are joined by other conservative women to break down the big issues and news you care about. Whether you're interested in hot takes and conversations on pop culture or what Congress

is up to, Problematic Women has you covered. We sort through the news to keep you up to date on the issues that are of particular interest to conservative leaning that is. is problematic women. Find problematic women wherever you like to listen to podcasts and follow the show on Instagram. Joining us in studio is John Carlo Canaparo and Jack Fitzhenry, both legal fellows here at the Heritage Foundation. Thank you both so much for joining us today. Thanks for having us. Of course. Now, the Supreme Court will be back in session for its 2023, 24 term next month. and there are three cases that you say in a recent Daily Signal piece could shake up the administrative state.

The first of those cases is Loper Bright Enterprises versus Romando. Can you both start by just breaking down this case for us? Sure. So some of the basic background facts, you know, case always requires actual parties and not just legal issues. So the plaintiffs in this case are actually a bunch of fishermen from the North Atlantic, I think most of them from New Jersey. They're subject to regulation by the federal government, specifically the National Marine Fisheries. The Fisheries Service is empowered by a statute known as the Magnuson-Stevens Act, an old statute enacted by Congress, of course.

And this empowers the agency to regulate the nation's fisheries, which are divided by region. What the Marine Fisheries Service has lately discovered the power to do supposedly in the Magnuson-Stevens Act is to require fishermen to pay the salaries of federal monitors who have to ride aboard their boats and make sure that the fishermen comply with restrictions on fishing methods, on catch requirements, things like that. Now, the Magnuson-Stevens Act is quite clear that these federal monitors are allowed aboard. That's not in dispute, but the question of who pays for them is very much in dispute. The statute does not directly speak to the subject. All parties to the case agree about that fact, but they draw two very different conclusions from it. The fishermen say that since Congress didn't put that authority in the statute, the National Marine Fisheries Service doesn't have it. The Fisheries Service says, well, Congress was quiet about it, so that gives us discretion to decide when we're going to invoke this power.

And that's sort of the core controversy in this case. The reason that may sound absurd to anyone who's not familiar with a doctrine known as Chevron deference. Chevron deference stems from a 1984 Supreme Court decision by Justice Stevens. The basic premise of that decision is that courts owe deference to agencies when they're interpreting a statute that they administer. The statute is either silent or ambiguous on a particular subject. and the agency's interpretation is quote unquote reasonable. And so that's why you can actually have this controversy where an agency looks at a statute, sees nothing there,

and yet can kind of hallucinate this power that's enormously consequential and enormously burdensome. And of course, the reason that the case is big is not just for the fishermen, but because Chevron deference is the vehicle through which agencies typically and aggressively expand their power in all sorts of fields. So this case challenges Chevron deference directly. So you could see the Supreme Court say, you know, we're not going to defer to your interpretations

anymore. You are limited to the specific terms of your grant of power from Congress, which could have enormous effects in reining in and increasingly runaway administrative state across all sorts of agencies. And just to transition to the second one, it's SEC versus Jarkacy. Same idea here. What is this case about? Yeah, sure. So if Chevron deals with, you know, fighting agencies in courts and how courts interpret statutes, jarkacy involves the sort of related problem of what if you don't get into court at all. So a lot of administrative agencies, in this case, the Securities and Exchange Commission, which regulates certain financial industries, have they have their own in-house

courts of a sort. They're not really courts, but they operate like courts. And the agency has the choice to either fight disputes with you or the people it regulates in federal courts or it can choose to bring these cases in its in-house courts where its own in-house employees decide the case. Now, unsurprisingly, these in-house employees who are called administrative law judges tend to side for their employer 90% of the time. And there's all sorts of challenges. You know, if you have constitutional challenges to the agency, do you have to bring them in that court?

Recently, the Supreme Court said, no, you can sort of take those straight to district courts. But you can get caught up inside an administrative tribunal for a decade before you ever get a real court here. And so Jarkasie is a man who the SEC went after for alleged fraud. And it brought that case inside its in-house tribunal. Now he raises an interesting Seventh Amendment defense. The Seventh Amendment to the Constitution says that in any suits at common law is the turn of phrase, you have the right to a jury trial. Well, one of the suits at common law is fraud.

So he says, you know, the SEC can't bring this. a suit against me for fraud in its in-house court. I have a right to a jury, which means I get to go to federal court. So that's the nuts and bolts of the case. The implications for the administrative state are, of course, again, bigger. A lot of administrative agencies having house courts. So if Mr. Jarkasie wins, the extent to which in-house courts are, to be sure, suits at common law, those historical cases can't be brought in them. But there will be a lot of other questions. about the extent to which other agency tribunals are acceptable going forward. One of the other questions in the cases, in addition to the Seventh Amendment one,

and again with agency discretion, Congress didn't give a really clear guidance to the agencies in when they should bring cases in-house or when they should bring them to federal courts. There's a doctrine called the non-delegation doctrine. It's sort of a derelict doctrine. It hasn't been used for decades. But it says that if the courts are going to give an agency discretion, there needs to be some sort of intelligible principle. It doesn't seem to be one here.

And if the court agrees with Mr. Jarkasie that there isn't one, it could really throw doubt on the availability of agency tribunals much larger than just those suits at common law. Jack, anything to add? No, I think John Carlo got that one pretty well covered. Yes, I agree, I agree. Third and final case that you both write about is the Consumer Financial Protection Bureau versus Community Financial Services Association of America.

Same idea here as the past two cases. Tell us a little bit more about it, break down for us. Sure. So if Loper Bright and Jarkasy are about the kind of decisions that agencies make once they're formed, the CFPB case, the Consumer Financial Protection Bureau case, is about the kind of decisions that Congress makes when it's constructing these agencies. Folks might know that the CFPB is a relatively recent entrant into the kind of vast bureaucratic archipelago.

It was created by the Dodd-Frank Act. So within all of our lifetimes, it's come into existence. So it's much newer than agencies like the Environmental Protection Agency or Federal Trade Commission, which have 20th century routes. The CFPB is not just newer. It's sort of constructed in a bunch of unusual ways. It has a single-member director. Lots of similar regulatory agencies have multi-member boards.

Their requirements that the board be composed of so many Democrats, so many Republicans. And then more salient in this case is the fact that all of its funding is derived outside the regular annual congressional appropriations process. So most agencies that we could come up with offhand have to go every year to Congress and say, this is our budget, this is what we need, please give us this money. Why? Because only Congress has access to the federal treasury. Only Congress can draw public funds or can allow for agencies to draw public funds. What Congress did with the CFPB instead is they said, you are going to have power in perpetuity to draw certain large sum of money annually from the Federal Reserve. The Federal Reserve also happens to get its funds outside the annual appropriations process.

The reason for this, they made it quite clear, was that they wanted the CFPB to be permanently independent of congressional politics. They wanted to be insulated. They did not want a future Congress with a different composition to interfere with the agency's mission. And the question now presented in this case is whether that arrangement is constitutional or not. Can you just sort of spin off agencies into the ether equipped fully with quasi-legislative powers to write rules, equipped with the power to bring enforcement actions, to adjudicate them in-house, and then also have this funding mechanism that doesn't touch on Congress either? So entirely self-sufficient, little like globules of government power that exist outside. side of our normal constitutional structure. And, you know, the Supreme Court is going to have to tell us,

is this a permissible innovation somehow within the constitutional structure, or does it, as the plaintiffs in this case, contend, violate the Constitution, particularly the appropriations clause in Article 1, which basically says no money shall be drawn from the public treasury, accepting consequence of an appropriation made by law? Anything to add? No, that's about it. Now, in addition to those three cases, are there any other cases that you are watching getting ready for this term? We just got the decision in the Harvard and UNC cases where the Supreme Court said that

you can't use race in college admissions anymore. There are a couple cases down the pipeline. They're not at the Supreme Court yet, but which may very well end up there and where the court will have an opportunity to further articulate what that decision means, both in the context of schools and outside of them. So you're probably familiar Thomas Jefferson High School just over the river in northern Virginia did something very similar to what Harvard did in discriminated against Asians, but in a more technically sophisticated manner than Harvard did. Harvard, you recall, just said, look, we don't really want Asians here, so we're going to categorically give them bad personality scores and raise the standards of test scores, et cetera, for Asians. But what Thomas Jefferson did instead is it targeted, among other things, geographically targeted applicants.

So it would reduce the number of people it took from neighborhoods where it knew that there were statistically a lot of Asians. And it would boost admissions from neighborhoods where it knew that there were a lot of blacks and Hispanics. The question is, you know, does that discriminatory means also? violate the Supreme Court's prohibition on, you know, discriminatory ends. It seems that it would, my reading of the Harvard case, suggests that that would also be inappropriate. But that's somewhat of an open question. The school won in the Court of Appeal below, so that's on petition to the Supreme Court now.

I wouldn't be surprised if they take it. And then another recent case at a Tennessee called Ultima Services involved a challenge to a preference in government contracting given to businesses that are owned by non-whites. And the district court there looked at students for fair admissions and said, oh, well, look, what the Supreme Court there is concerned about, among other things, is how arbitrary these categories we use are. You know, we all sort of assume without thinking that we know what it means to be black or Asian or white.

But if you really break into those categories, you realize very quickly that they make almost no sense, right? So Asian includes 60% of the world's population. Like what does somebody from, say, Pakistan have in common with somebody from Japan that matters legally? And he said, you know, the preferences given to non-white certain categories of non-white business owners in government contracting are like wildly arbitrary if you break it down. And so he struck down this automatic preference. So that one is probably going to. to be fast-tracked through the courts of appeal. That one I could also see getting to the Supreme Court because not only is government preferences

outside of the educational context, sort of the next front in the fight over the use of race, but also the Supreme Court has in the past said that these sort of government preferences in contracting and other sorts of things are typically not appropriate, but they exist anyway. are just all sorts of ways around the Supreme Court opinions that have tried to rein them in. So the Supreme Court might decide, you know, we're sort of, we'd sort of like to be taken seriously now, and this is a good vehicle through which they could do that. Just one other question that popped into my head regarding the three cases that you wrote about that we were talking about earlier. Given the makeup of the court, do you have any idea

or, you know, is there sort of any indication or clue of how these cases might be decided in terms of, well, we obviously haven't heard the arguments yet, but what you're kind of expecting? Yeah, well, very briefly on Loper Bright and Chevron deference, I think that at one point in time, at different points in time, a majority of the current members of the court have expressed skepticism about Chevron deference. Am I right about that, Jack? I wouldn't swear it's a majority, but certainly a majority the conservative wing has. Fair enough. So, you know, there's a healthy skepticism on the court about Chevron deference.

There's not obviously a clear or consensus about what they should do with it. Now, on the CFPB funding case, the CFPB has already been up to the Supreme Court a couple times and had its other parts of it, which Congress created other ways of keeping it independent. So, for instance, the independent director, its solo director couldn't be fired by the president. The Supreme Court said that's unconstitutional. So the Supreme Court is definitely skeptical

of the CFPB's unique sort of unaccountability to the Democratic branches. But whether it goes to the, this next step, I couldn't tell you. I think part of the problem with trying to forecast an answer in advance is that in each case there's a spectrum of answers and solutions available to the court. It's not simply we rule against the CFPB, we rule against National Marine Fisheries Service. It matters immensely how they do that if they do choose to rule against these agencies.

And of course, it's not entirely obvious that they will in any case or in all three. You know, we mentioned in our Daily Signal piece with respect to the CFPB, and I alluded to it in my earlier answer to your question, that the CFPB is kind of a unicorn in the way it's constructed, but individual features are shared with longerstanding agencies. I mentioned the fact that the Fed is funded in its own way outside of annual congressional appropriations. Now, it's not strictly speaking proper for the court to think about things in a purely pragmatic and sense and say, oh, well, we don't care about the CFPB, but we really care about the Fed. And so to make sure we save the Fed, we're going to save the CFPB. That's not how they're going to think about it. But they're also aware of the kind of practical implications of certain decisions they make.

it may incentivize them to choose a route that has the least amount of collateral damage. So I agree with John Carlo that with respect to Chevron, it's probably clearest that we have a lot of skepticism. Even there, it's not entirely clear how far they'll go in addressing the doctrine.

The petitioners, the fishermen, have asked the court to overrule the decision, but they've also given the court a less extreme out and said, you can also clarify that deference is not owed to agencies when the matter is simply a statutory silence, right? Ambiguity, we can reserve for another day, but silence is not a delegation of interpretive authority. So it's entirely possible that the court could rule against National Marine Fisheries Service in this case, but leave some vestige of Chevron alive. It's not at all clear that they will

get rid of the doctrine wholesale. Even if they choose to overrule Chevron, it's not clear that we'll live in a world without agency deference. They may try to revert to an earlier, less dramatic form of deference. They may try to fashion something new. But this is this sort of inherent difficulty in trying to forecast specific results because it's not a simply matter. It's not a sports competition.

It's not one team wins and the other loses. it matters immensely what remedy they choose and how they choose to reach it. Now, just before we go, I wanted to give you a chance to talk about another podcast that you co-host, SCOTUS 101. Break it down for us. I knew you're gearing up for another season, so tell us a little bit about it. Sure. I and Zach Smith, another one of our colleagues in the Me Center, run a podcast called SCOTUS 101, where we have an episode pretty much every week that the Supreme Court,

is in session and we just, you know, give you the news, the rundowns, oral arguments, if we've got opinions, we dissect those. And we feature an interview every week with either a federal judge or a Supreme Court advocate or a law professor to break down some of these issues and how judges go about doing what they do. Awesome. Well, thank you both so much for joining us. I appreciate it. I'm sure we'll have you back on the show in the future as we get fully back into the Supreme Court's term. So thank you both so much for joining us. Thank you, Samantha. And that's going to do it for today's episode.

Thanks so much for listening to my interview with John Carlo, Kenaparo, and Jack Pettenri. Make sure you subscribe to the Daily Signal wherever you get your podcast and help us reach even more listeners by leaving a five-star rating and review. We read and appreciate all of your feedback. Thanks again for listening. Have a great day. And we'll be back with you all this afternoon for top news. The Daily Signal podcast is brought to by more than half a million members of the Heritage Foundation. Executive producers are Rob Luey and Kate Trinko.

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