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Constructing a More Constitutional Administrative State

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Constructing a More Constitutional Administrative State

The Supreme Court’s Seila ruling could suggest a path forward. July 9, 2020
Politics and law

Last week, the Supreme Court concluded that the Consumer Financial Protection Bureau’s novel structure and independence is unconstitutional. The agency generally remains intact, wielding powers barely limited by statutes or Congress’s power of the purse, but at least its director is now fully accountable to the president, whom the Constitution vests singularly with “the executive Power” and with a constitutional duty to “take Care that the Laws be faithfully executed.” Seila Law v. CFPB represents an important step in re-grounding the modern administrative state on firmer constitutional footing; the question remains what steps the Court might take next.

The Court saw its task in Seila as no more than straightforward application of constitutional principles and modern precedents—not the making of new law or the overturning of old precedents, but rather applying clear rules long on the books. From the very beginning—the Constitution’s ratification and its implementation by the first Congress—James Madison and the other Founding Fathers recognized that the Constitution’s express vesting of “executive power” in the president, with a duty of faithful execution, necessarily required presidential control of the executive branch. Departures from this basic rule—such as the Tenure of Office Act, enacted to restrain the unelected President Andrew Johnson after Abraham Lincoln’s assassination, or the post-Watergate Independent Counsel statute—have been short-lived, and for good reason.

The longstanding lacuna in this constitutional order has been “independent” commissions, like the Federal Trade Commission or the late Interstate Commerce Commission. Beginning in the nineteenth century, Congress created these commissions as substitutes for the courts that had regulated industries. These were multimember and bipartisan regulatory boards, operating with protection against plenary presidential control—usually through statutes allowing the president to fire them only for “malfeasance,” “neglect of duty,” “inefficiency,” or other forms of “good cause.” The Supreme Court sustained the constitutionality of this independence in Humphrey’s Executor v. FTC (1935), over President Franklin Roosevelt’s objections, only because the justices held that the commissions’ powers were “neither political nor executive, but predominantly quasi judicial and quasi legislative . . . a body of experts ‘appointed by law and informed by experience.’” More recently, in Morrison v. Olson (1988), the Court created another (and still more dubious) exception for even some executive officers, so long as their powers are sufficiently limited.

In the Dodd-Frank Act, however, President Barack Obama and Congress tried to have their cake and eat it too, creating a CFPB controlled by one person who enjoyed all the benefits of independence but without the structural constraints that justified such independence: not a bipartisan commission but a single director limited by none of the internal checks and balances that chairmen of today’s FTC, FCC, and other agencies face. Congress exacerbated this constitutional problem by giving the CFPB director full financial independence from both Congress’s appropriations and the president’s budget. In Seila Law, the Court rightly voided this independence.

Eleven years ago, in a case involving the Sarbanes-Oxley Act’s accounting regulatory board, which operated with two layers of independence from presidents, Chief Justice Roberts’s opinion warned that the Court would not allow further expansion of agency independence beyond the boundaries already drawn by prior “exceptions” to the constitutional rule. Seila reiterates that limit: only agencies or officers meeting the specific requirements of Humphrey’s Executor (for bipartisan, non-executive commissions) and Morrison (for inferior executive officers) can enjoy these limited forms of independence from presidential oversight.

The question now is whether the Court should take the additional step of erasing those two precedential “exceptions,” too. Even in applying the Humphrey’s Executor and Morrison precedents to the CFPB and the Sarbanes-Oxley board, the Roberts Court has recognized that they seem in tension—to say the least—with the Constitution’s vesting of “executive” power and duties in the president. Several justices already have called for further reform: in Seila, Justices Thomas and Gorsuch called on their colleagues to overturn the Humphrey’s and Morrison precedents and put an end to agency “independence.”

Justice Brett Kavanaugh could join them. In a 2016 interview, Kavanaugh (then a judge on the D.C. Circuit) quipped that Morrison “has been effectively overruled and I would put the final nail in,” ending independence for inferior executive officers. Kavanaugh has not called for elimination of the Humphrey’s Executor precedent for “quasi legislative and quasi judicial” regulatory commissions, but he has criticized it for creating “independent agencies that exercise executive power.”

Yet Kavanaugh did not write separately in the Seila case, and the Roberts opinion that he (and Justice Alito) joined without reservation might point another way forward for independent regulatory commissions. In Seila, the Court emphasized that Humphrey allows independence only for “multimember expert agencies that do not wield substantial executive power”—but in a footnote, the Seila majority recognized that this original notion of independent agencies not wielding any “executive” power “has not withstood the test of time.”

Perhaps, then, if the Court is not ready to declare agency “independence” inherently unconstitutional, then future rulings could at least reinforce Humphrey’s Executor’s own stated limits by challenging independent commissions’ assertions of genuinely executive power, such as the power to enforce laws and regulations unilaterally. In this approach, independent commissions could still initially adjudicate disputes (subject to judicial review), and could even promulgate regulations translating broad statutes into specific standards to apply in those adjudications; but beyond those genuinely “quasi legislative” and “quasi judicial” powers, independent commissions could not wield executive power.

Judicial prioritization of this “split-enforcement model” would not accomplish the goal—expressed by former Trump adviser Steve Bannon, among others—of deconstructing the administrative state, but it would help construct a more constitutional one, by continuing the Court’s work of vindicating limits that its own precedents set nearly a century ago. If this achievement would not represent a return to constitutional first principles, it would at least mark an effort both to preserve judicial precedent and repair constitutional institutions.

Photo: DoraDalton/iStock

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