Brett Kavanaugh And The Administrative State

Last night's announcement that D.C. Circuit Judge Brett Kavanaugh will be the Supreme Court nominee has brought forth much frenzy and gnashing of teeth among the progressive left.  The main focus of the frenzy has been the alleged threat to continued viability of Roe v. Wade.  (From House Minority Leader Nancy Pelosi's statement:  "Judge Kavanaugh’s long history of opposition to the full, fundamental right of every woman to make her own decisions about her body, family and health care poses a grave threat to women’s rights."  I don't know what "long history of opposition" Pelosi is talking about there, but maybe we'll find out soon.) 

Anyway, I doubt that Kavanaugh poses much threat to Roe.  Meanwhile, I'd like to focus on a different subject on which he actually has some record that is important.  That subject is the Administrative State.

First, some background.  Students of American constitutional history will recognize that for more than one hundred years there has been a first-principles constitutional battle going on over the separation of powers set forth in the constitutional structure.  Look at the text of the Constitution, and you can't miss the structure.  In Article I, the first sentence vests "all legislative Powers" in "Congress"; in Article II, the first sentence vests "the executive Power" in "a President"; and in Article III, the first sentence vests the "judicial Power" in the federal court system.  That's it.  No other powers are granted or mentioned.  All powers are either legislative, executive or judicial, and they go to one of only three places.

When the progressive movement came along in the late 19th and early 20th centuries, they had a big problem with this structure.  A main principle of progressivism was (and remains today) that the world had become way too complicated to be figured out by the ordinary people on their own, and what was needed was a group of government "experts" who could run things for us.  That principle is fundamentally in conflict with the idea of periodic elections for President, where the new guy can come in and throw out all the bureaucrats from the last administration and start over with new people and new policies and new direction.  So the progressives began a project of salting the bureaucracies with so-called "independent" agencies that could not have their personnel and direction changed by a subsequent President.  The defining feature of the "independent" agencies is that their heads or commissioners serve for fixed terms that extend beyond the end of the term of the President who appointed them, and they can only be removed from office "for cause."

Woodrow Wilson (worst President ever in my opinion) was explicit in furthering this agenda.  From Stephen Zierak, "Woodrow Wilson and the Rejection of the Founders’ Principles," (2012):

It is this very principle of separation of powers that caused Wilson the most distress, and which he most frequently and intently criticized.  Such divided powers are too limiting and mechanical, preventing the very flexibility required to deal with changes in the historical environment. . . .  In early essays and in his first book, Congressional Government, Wilson advocated major reductions in separation of powers.

As President, Wilson oversaw the creation of several of these "independent" agencies, most notably the FTC (1914) and the Federal Reserve (1916).  Of course, this seemed fine to him, because he got to appoint the "experts" who could then not be removed by his successors.  The whole idea was to create a permanent "administrative state" that the next President could not change -- in other words, to restrict and ultimately eliminate the ability of the people to alter the direction of their government through an election.

Fast forward to 1933.  After FDR was elected, he promptly fired one of the Commissioners of the FTC, a guy named Humphrey, who had been appointed by FDR's predecessor Hoover for a seven year term.  Despite the provision of the FTC Act restricting the President's ability to fire a Commissioner other than for cause, FDR gave no cause, and asserted an unrestricted right to terminate under Article II of the Constitution.  Humphrey sued for his pay.  By the time the case reached the Supreme Court in 1935, Humphrey had died, and the case was pursued by his executor, which is why this important case goes by the name of Humphrey's Executor.  You won't be surprised to learn that the Supreme Court of that moment was much more concerned about reining in Roosevelt and the New Deal than it was in preserving the fundamental constitutional structure.  A unanimous Court held that Roosevelt's non-cause firing of Humphrey violated the statute, and Humphrey could have his pay.  And the constitutional structure?  The bizarre reasoning of the case is that the powers of an FTC Commissioner are neither executive nor legislative nor judicial, but merely "quasi-legislative" or "quasi-judicial."  Huh??  Where are those sorts of powers in the Constitution?  I previously discussed the unsupportable result and reasoning of Humphrey's Executor in this post from 2016, and you can go there if you want more detail.

It seems incredible to me, but Humphrey's Executor has never come in for substantial criticism or limitation in any subsequent case.  However, there have been a couple of recent cases that have nibbled around the edges -- and Judge Kavanaugh was centrally involved in both of them!

First, we have Free Enterprise Fund v. PCAOB.  This case came to the D.C. Circuit in 2008.  The Public Company Accounting Oversight Board (PCAOB, sometimes pronounced "peek-a-boo") was created by the Sarbanes-Oxley Act of 2002, and is an extreme example of the progressive fantasy that a collection of unaccountable government "experts" can solve the problems of the world.  In the aftermath of the dot-com bust of 2000/01, these guys were supposedly going to prevent all future financial reckonings by telling the big accounting firms how to prepare and audit the financial statements of the Citibanks and Exxons and Googles.  Well, we wouldn't want the voice of the ignorant people through elections having any say in that, now would we?  So Congress decided to go the FTC et al. model one better by putting yet an additional layer of insulation between the PCAOB board members and the President.  Under their statute, the board members of the PCAOB were appointed not by the President, but by the SEC, and could only be removed "for cause" by the SEC; while the SEC is itself also an "independent" agency, with its Commissioners only removable "for cause" by the President.  Good luck then to any President who might try to remove one of the PCAOB guys.  He would be tied up in litigation well beyond the end of his term, even if he got a second one.

Needless to say, this structure was perfectly OK with two of the three judges who heard it on the D.C. Circuit.  But Kavanaugh dissented, specifically on the ground of separation of powers.  From Kananaugh's dissent:

Article II begins: “The executive Power shall be vested in a President of the United States of America.” Under Article II, the President possesses the sole power and responsibility to “take Care that the Laws be faithfully executed.” To assist in his duties, the President has authority, within certain textual limits, to appoint and remove executive officers. Myers v. United States, 272 U.S. 52, 117 (1926). Disputes over the scope of the President’s appointment and removal powers have arisen sporadically throughout American history. This latest chapter involving the Public Company Accounting Oversight Board is the most important separation-of-powers case regarding the President’s appointment and removal powers to reach the courts in the last 20 years. . . .  On the removal issue, the majority opinion views this case as Humphrey’s Executor redux. But this case is Humphrey’s Executor squared. There is a world of difference between the legion of Humphrey’s Executor-style agencies and the PCAOB . . . .     

Free Enterprise Fund v. PCAOB reached the Supreme Court two years later.  The Supremes reversed, and found the PCAOB structure unconstitutional.  The majority opinion by Chief Justice Roberts largely follows Kavanaugh's dissent below, and indeed the opening section of Roberts's opinion even borrows some of Kavanaugh's language.  You will not be surprised to hear that this was a 5-4 decision in the Supreme Court, with the usual dissenters of Ginsburg/Breyer/Sotomayor/Kagan.  Those four think that a completely unaccountable, unremovable administrative state, completely immune from the results of elections, is a good idea, and is authorized by the Constitution.

And then there is PHH Corp. v. CFPB.  This one came before a three-judge D.C. Circuit panel including Kavanaugh in 2016.  I wrote a more detailed post about this case in December 2016, titled "Can The Separation Of Powers In The Federal Government Be Righted?"    The CFPB prosecuted PHH for some technical violations of mortgage lending regulations, and imposed an enormous fine in excess of $100 million.  On appeal, PHH challenged the constitutionality of the CFPB order against it on multiple grounds, one being the manner in which the administrative law judge who imposed the fine was appointed, and another being the structure of the CFPB with a sole director not fireable by the President.  Kavanaugh wrote an opinion in excess of 100 pages, declaring the CFPB to be unconstitutional.  He recognized that he was bound by Humphrey's Executor, but distinguished this case on the ground that the agency at issue in Humphrey's Executor (the FTC) had five Commissioners, whereas the CFPB only has one Director -- concentrating enormous power in the hands of one person that the new President is then stuck with.  Briefly on the subsequent history:  the CFPB took the case to the D.C. Circuit en banc, which in January of this year affirmed the result of the panel's decision (invalidating the fine against PHH), but on the narrower ground of the flaws in the manner in which the judge was appointed.   On the question of whether the single-non-removable-director structure is constitutional, the en banc panel reversed Kavanaugh and said:  "We . . . hold that the . . . provision of the Dodd-Frank . . . Act shielding the Director of the CFPB from removal without cause is consistent with Article II."  After that result, neither party in PHH sought certiorari to the Supreme Court.

But perhaps you might be interested in some of the stirring prose from Kavanaugh in his initial decision:

In its landmark decision in Myers v. United States, 272 U.S. 52 (1926), authored by Chief Justice and former President Taft, the Supreme Court . . . recognized the President’s Article II authority to supervise, direct, and remove at will subordinate officers in the Executive Branch.  In 1935, however, the Supreme Court carved out an exception to Myers and Article II by permitting Congress to create independent agencies that exercise executive power.  See Humphrey’s Executor v. United States, 295 U.S. 602 (1935). . . .  

The independent agencies collectively constitute, in effect, a headless fourth branch of the U.S. Government. They exercise enormous power over the economic and social life of the United States. Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances. . . .   In other words, to help preserve individual liberty under Article II, the heads of executive agencies are accountable to and checked by the President, and the heads of independentagencies, although not accountable to or checked by the President, are at least accountable to and checked by their fellow commissioners or board members. No head of either an executive agency or an independent agency operates unilaterally without any check on his or her authority. Therefore, no independent agency exercising substantial executive authority has ever been headed by a single person.

Until now.

In my December 2016 post, I questioned whether newly-elected President Trump was even aware of these separation of powers issues.  In November 2017, I attended the Federalist Society convention and heard White House counsel Don McGahn speak, and he made clear that these issues were not only known, but were absolutely a focus of the President's judicial selection team.     

Anyway, as recently as December 2016, I had no confidence at all that the constitutional separation of powers of the federal government was going to be restored any time soon.  Now, it's looking better and better.  Although PHH itself is not on its way to the Supreme Court, in another case just decided a few weeks ago a judge of the Southern District of New York (Preska) ruled that the CFPB's structure is unconstitutional on the grounds relied on by Kavanaugh, and rejected the reasoning of the en banc D.C. Circuit.  Let the games begin!