The Most Dangerous Branch: Is the Supreme Court Dismantling the Administrative State?

At first glance, the question posed above may sound slightly paranoid. Still, sometimes a measure of paranoia may be justified. In any event, this column is less a prediction of the future than a review of what is actually happening, particularly over the last month. Consider the following three cases:

Case 1: The press is now focusing on West Virginia v. EPA,[1] which was argued before the Supreme Court last week. West Virginia and the coal industry have appealed a lower court decision that upheld the EPA’s authority under the Clean Air Act to regulate greenhouse gasses (“GHG”). Appellants assert that, under the “major questions doctrine,” a federal agency does not have the authority to adopt regulations that significantly extend the reach of its regulatory scheme without express congressional approval. This doctrine is the new darling of the Court’s intellectual nursery, and it may nullify the Biden administration’s efforts to adopt new rules for reducing GHG emissions from power plants.[2]  For the future, it could mean that administrative agencies can only address smaller issues, unless they have express authority to tackle larger issues. What is “small” and what is “large”? That is today in the eye of the beholder.

Case 2: On January 13, 2022, in Nat’l Fed’n of Indep. Bus. v. DOL, OSHA,[3] the Court issued a preliminary ruling finding that the Secretary of Labor probably lacked statutory authority to impose a COVID-19 vaccine mandate. Why? Because OSHA’s authority is limited, the Court said, to regulatory hazards that employees face at work, while the risk of contracting COVID-19 was not a work-related danger, but the “kind of universal risk…that all face….”[4] In a concurring opinion, Justice Gorsuch, writing for himself and justices Thomas and Alito, warned that giving a federal agency broader power would turn it into “little more than a roving commission to inquire into evils and upon discovery correct them.”[5]

Case 3: On January 24, 2022, in Axon Enter., Inc. v. FTC,[6] the Court granted certiorari in a case challenging the constitutionality of the FTC’s administrative review system. Specifically, the issue here involves the long-standing doctrine of “implied preclusion” under which a defendant in an administrative proceeding may not sue in federal district court to challenge the agency’s structure or its existence, but instead can only raise these issues on appeal of the agency’s ultimate decision. This doctrine applies not just to the FTC, but to the SEC as well (which largely copied its administrative review system from its older sibling, the FTC). In Axon Enter., Inc., a divided Ninth Circuit panel upheld the implied preclusion doctrine, largely because of a triad of Supreme Court decisions that had earlier announced and affirmed the doctrine.[7] Even the notably liberal Ninth Circuit did not find the doctrine appealing on its own merits, but considered stare decisis to be an insurmountable obstacle to any reconsideration of the doctrine.

What will the Court do on appeal? It seems highly unlikely that the Court would grant certiorari just to affirm settled precedent one more time. Denying certiorari would also have had that effect. Thus, some limitation of the doctrine seems likely. What would this mean? If the implied preclusion doctrine were discarded, the impact on the SEC would be extremely adverse. Defendants sued in an administrative proceeding could rush into federal district court to raise a constitutional challenge and likely seek to stay the administrative proceeding until that challenge was finally resolved. Often, this might take years. Equally important, in a decision in December 2021 (only three months ago), an en banc Fifth Circuit in Cochran v. United States[8] reversed a lower court’s dismissal of a constitutional challenge to the SEC’s administrative law judges on the grounds that they were not sufficiently removable to withstand constitutional scrutiny. Specifically, the defendant, an accountant whom the SEC had fined and barred from practice for five years, contended that because the SEC’s ALJs enjoyed multiple layers of “for cause” removal protection, they were unconstitutionally insulated from the president’s Article II removal power. The Fifth Circuit did not resolve this removal power issue, but did reverse the district court’s dismissal of that claim. Nonetheless, the tenor of the decision shows great sympathy with the argument.

Other circuits have disagreed with the Fifth Circuit’s Cochran decision, but if Axon Enter., Inc. reverses the implied preclusion doctrine, a defendant sued in an administrative proceeding may be able to go to federal district court to raise the same or a similar claim. Predictably, these defendants will also allege that the SEC (or the FTC or a host of other federal agencies that have a similar administrative procedure) has unconstitutionally permitted the agency to play both prosecutor, judge, jury, and appeal board. While it is still premature to predict whether this much-broader theory will attract the new conservative wing on the Court, it has to terrify the SEC and other federal agencies.

Recently, the SEC has begun to rely more on federal courts to litigate enforcement proceedings and less on in-house administrative proceedings. Because in-house proceedings are far less costly for the SEC and far quicker to resolve, this reversal suggests that the SEC is concerned about these likely constitutional attacks, which seem certain to increase if Axon Enter., Inc. ends or substantially limits the implied preclusion doctrine (as I suspect it will).

On the merits, are administrative law judges systematically biased against defendants? Critics point out that the SEC wins 60 percent of the cases that it brings administratively. But is that proof of bias? Or, does it better reflect cautious prosecutorial discretion under which the SEC tends to limit itself to strong cases? Both positions are arguable. Unfortunately, the facts are more extreme in the case of the FTC, which has not lost an administrative case in the last 25 years.[9] Thus, the FTC context is particularly vulnerable, and it is the case before the Supreme Court.

The basic point of this brief column is that the Court’s newly ascendant conservative wing appears to be moving at a rapid pace to dismantle much of the Administrative State. This process began in earnest in 2018 when the Court decided Lucia v. SEC,[10] which found that ALJs appointed by the SEC staff flunked the constitutional standard that requires an appointment be made by the president or a limited number of persons subject to the president’s removal power. In December, 2021, Cochran seems to have expressed support for the flipside of this coin: Unless ALJs can be removed in a similar fashion, they will again be found in violation of the president’s Article II authority. Between now and the end of June, we will likely see decisions in both West Virginia v. EPA and Axon Enter., Inc. v. FTC, which will tell us whether the Court’s hardcore conservatives can bring a majority of the Court with them. Note, however, that just in the month of January, the Court has taken three significant steps towards the effective dismantling of the  administrative state; that is a fast pace.

Once, Alexander Bickel defended the Supreme Court as the “least dangerous branch” and stressed its tendency to use the “passive virtues” to avoid confrontations with the other branches of government. This January does not show the Court still relying on the passive virtues. Nor does the Court’s skepticism of the Administrative State stand alone. As everyone is well aware, the Court may soon reverse or curtail Roe v. Wade and could sharply constrain affirmative action. Much depends on the potentially swing-vote status of Chief Justice Roberts and justices Kavanaugh and Barrett, but whether they are truly swing votes is still unresolved.

To sum up, the president is politically challenged and vulnerable; Congress is dysfunctional; and administrative agencies may soon have very confined discretion that does not allow them to address “major questions.” As a result, the most significant issues of the day — climate change, the pandemic, and the economy — are likely to remain unresolved, and a virtually paralyzed government may persist. Yes, things may not turn out this way, but even an optimist should be apprehensive.


[1] For a discussion of the oral argument in this case, see Adam Liptak, “Justices Dispute E.P.A. Power to Curb Emissions,” New York Times, March 1, 2022 at page A-1.

[2] See King v. Burwell, 576 U.S. 473, 485-86 (2015); Util. Air Reg. Grp. v. EPA, 573 U.S. 302, 324 (2014) (If an agency’s regulatory action “brings about an enormous and transformative expansion in [the agency’s] regulatory authority,” there must be “clear Congressional authorization.”).

[3] 142 S. Ct. 661 (January 24, 2022), 2022 U.S. LEXIS 633.

[4] Id. at 665. Although it may be true that one can contact COVID-19 anywhere (thus making it a “universal risk”), it remains undeniable that the unvaccinated can infect others at work, thus increasing the danger of the workplace, which is OSHA’s concern.

[5] Id. at 669. Symptomatically, this quotation was borrowed from Schechter Poultry Corp. v. United States, 295 U.S. 495, 551 (1935), the infamous “sick chickens” case in which the conservative justices of 1935 struck down President Franklin Roosevelt’s NRA. We may be back to a similar point.

[6] 2022 U.S. LEXIS 599 (January 24, 2022). For the lower court decision, see Axon Enter., Inc. v. FTC, 986 F.3d 1173 (9th Cir. 2020).

[7] See Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1996); Free Enter. Fund v. Pub. Co. Acct. Oversight Board, 561 U.S. 477 (2010); Elgin v. Dep’t of Treasury, 567 U.S. 1 (2012).

[8] 2021 U.S. App. LEXIS 36687 (5th Cir. 2021).

[9] See Axon Enter., Inc. v. FTC, 986 F.3d 1173, at 1187 (9th Cir. 2020).

[10] 138 S. Ct. 2044 (2018).

This post come to us from John C. Coffee, Jr., the Adolf A. Berle Professor of Law at Columbia University Law School and Director of its Center on Corporate Governance.