Hope Springs Eternal the Administrative State Will Fall by Summer.

THE ADMINISTRATIVE STATE is perhaps my biggest legal bête noire, and I have quite a few. The U.S. Supreme Court is poised to rule on a case that may have the effect of tamping down its misuse/abuse in a case styled S.E.C. v. Jarkesy which was heard on Nov. 29th. 

The S.E.C. brought an enforcement action against Jarskey, who it believed was using his hedge fund firm to perpetrate fraud. He was ordered by the agency to pay roughly $1 million in fees, fines, and restitution. The S.E.C. never took the case to federal court (or have the D.O.J. do so). Instead, an administrative law judge  heard the matter. About 30 federal agencies do this, avoiding adjudication by Art. III courts altogether, which essentially means, or at least appears to mean, the agencies are acting as investigator, prosecutor, judge, jury, and executioner. It’s unconstitutional on the face of it.

Jaskesy won an appeal at the 5th Circuit Court of Appeals, which found the enforcement action unconstitutional for three reasons. The first asks whether the guarantee of a jury trial pursuant to the 7th Amendment applies. The second, whether it is constitutional to permit an agency to elect to enforce laws in-house instead of going through (Art. III) courts. The third, whether ALJs have too much protection from being fired. My view is the first two require affirmative answers, but the third probably does not, but it’s anyone’s guess how this will play out.

These administrative agencies are overseen by the executive branch of government. They are not, as Art. III courts are, independent co-equal branches of government. This necessarily means the potential for political rulings is much higher. This is not acceptable to ensure fundamental fairness and due process. Token safeguards put into effect, such as with the S.E.C., that its five-member commission can only have three members from the same party, do not ameliorate potential politicalization and prejudice. Even though the executive cannot directly control agency decisions, there is an indisputable appearance of impropriety. This is not acceptable for fundamental fairness and to ensure due process.

The appeal to the Fifth Circuit is here. The video of the oral argument before the Fifth Circuit is here. The Petition for a Writ of Certiorari is here.  S.E.C. Reply Brief is here. Docket markings are here including multiple amicus curiae briefs. 

Coming Attractions at the U.S. Supreme Court

BEFORE MANY HAVE EVEN digested this term’s Supreme Court’s greatest hits, we have the following oral arguments (among others) as coming attractions in the Court’s 2023-2024 term, beginning in October.

In CFPB v. Community Financial Services Association of America, the CFPB’s funding mechanism is challenged. The Fifth Circuit Court of Appeals previously found that funding the CFPB through the Federal Reserve was a violation of the Constitution’s Appropriations Clause, which gives Congress the sole “power of the purse” in appropriating taxpayer money. The appellate court’s decision should properly be upheld.

In Acheson Hotels, LLC v. Laufer, the Court will consider whether an Americans with Disabilities Act ‘tester’ has standing to sue a hotel, like 600 others that she never visited, for failing to offer disability accommodations. It’s difficult to see why a ‘tester’ would have standing when so many defendants in real cases and controversies have found to be lacking it despite having suffered actual damages.

In Alexander v. South Carolina State Conference of the NAACP, the Court is asked by G.O.P. lawmakers to decide whether the lower court “disregarded the publicly available election data” and failed to examine the South Carolina General Assembly’s intent in this case alleging racial gerrymandering. 

My most anticipated Supreme Court decision (already argued here) will be in Loper Bright Enterprises v. Raimondo, challenging the National Marine Fisheries Service issuance of a rule that would require fishing companies to pay for those who observe their fishing practices for compliance in a political regulatory or agency  capture scenario.

The rule is seemingly self-serving, in that it keeps the government from bearing those costs, but also builds in inherent bias in the agency that could improperly influence its fair and impartial application of the rule.

That said, the case sets up an opportunity for a more conservative Court to overrule or at least continue to unwind the judicial principle from Chevron U.S.A. Inc. v. Natural Resources Defense Council, a 1984 case which delegated tremendous powers to administrative agencies to adjudicate disputes, based on the notion that these bureaucrats are experts and should therefore be deferred to when there is ambiguity in a statute. Known as the “Chevron Deference,”many unfortunate decisions have been reached by relying on it.

A bête noire of mine, with the Third Party Doctrine!