The Supreme Court’s New York decision is indicative of the high tide of litigation flowing against executive decisionmakers.
In Collins v. Mnuchin, the Fifth Circuit, sitting en banc, advanced the concept of the unitary executive by holding that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional, because its director did not serve at the pleasure of the President. The opinion is very important for showing how lower court judges should address precedent in tension with their view of the original meaning of the Constitution—in this case, that Article II vests the entire executive power in the President and thus gives him control over agencies exercising executive functions. Led by judges recently appointed by President Trump, the Fifth Circuit is asserting that the original meaning should cabin Supreme Court precedent averse to original meaning. That is, such precedent should control the outcome of a case when it is directly on point, but should be narrowly read. Chief Justice John Roberts is not generally praised by originalists, but here lower court judges are aggressively following his lead in sharply revising precedent contrary to the original meaning of provisions that establish our separation of powers.
The Issues in the Case
The FHFA is hardly a household name, but it is one of scores of federal administrative agencies that wield immense power. Unlike most of those agencies, it is insulated from direct presidential control because its head cannot be fired whenever the President chooses. And unlike the other agencies insulated from such executive oversight, it is not run by a commission composed of Democrats and Republicans, but by a single director. And unlike almost all agencies in Washington, the FHFA has its own stream of funding and does not have to rely on the appropriation process to carry out its operations.
The main issue in Collins was the FHFA administrator’s decision to sweep all the profits from Freddie Mac and Fannie Mae into the Treasury rather than return the profits to those companies and presumably ultimately to the shareholders. Whatever the wisdom of the decision (whose legality was separately at issue in this case), the discretionary power to redirect property is an awesome one that sits uneasily in the hands of a bureaucrat who is not only unelected, but also not substantially accountable to the elected head of the executive branch.
Priority to Originalism
In an opinion for the court, Judge Don Willett demonstrates that the constitutional baseline for the case lies in the separation of powers provisions of the Constitution. Thus, agencies exercising executive powers are presumed to be under the control of the executive. And since the FHFA exercised executive powers in transferring assets to the federal government for its benefit, it materially legitimated that presumption.
To be sure, some Supreme Court cases have upheld insulation from presidential control for some independent agencies. But Judge Willett was able to distinguish such cases because the structure of FHFA made it more “isolated” from the President than the agencies at issue in those cases. For instance, Humphrey’s Executor upheld restrictive removal provisions for commissioners of the Federal Trade Commission. But, unlike the FHFA, the FTC operates in a bipartisan manner, which limits the likelihood of political arbitrariness. The FTC’s dependence on the appropriation process gave the President a lever of influence, given his ability to veto appropriation laws. Moreover, the Court justified the FTC’s independence on the grounds that this agency was engaged in quasi-legislative and quasi-judicial action, not executive action of the kind that FHFA undertakes.
Willett also distinguished Morrison v. Olson. This decision upheld insulating the statutory independent counsel from presidential removal despite the fact that the counsel exercised the quintessentially executive power of prosecution. But the independent counsel in that case was an inferior officer responsible to the Attorney General, himself under the control of the President, and the inferior officer’s power applied only to a sharply limited jurisdiction of a particular set of criminal cases. In contrast, the head of the FHFA was a principal officer not reporting to anyone but the President, and yet not controlled by him. The Administrator also exercised continuing and plenary jurisdiction over important financial institutions and was not confined to a single legal matter, as was the case in Morrison.
The strength of these distinctions depends on a strong presumption in favor of the original structure of the Constitution. Thus, if a judge believes that Supreme Court precedent is more constitutive of constitutional law than the original meaning, he or she would likely expand the reach of precedent somewhat rather than limit it by reference to original meaning and thus uphold the insulation of the FHFA from presidential control. At least in the separation of powers area, the Fifth Circuit regards the original meaning of the Constitution as the ocean in which it must sail, and precedents as relatively small isolated islands at which it must stop only if it runs directly into them.
Roberts Leads the Way
Both the majority opinion as well as a concurrence by Judge Andrew Oldham (which was even more emphatic in pressing the original meaning of the Constitution) defended their approach by noting that they are following Chief Justice John Roberts’ example in one of the most important separation of powers cases of his tenure. In Free Enterprise Fund v. Public Company Accounting Oversight Board, Roberts held that the structure of the PCAOB was unconstitutional. The members of PCAOB were appointed by the Securities Exchange Commission, but could not be fired by that Commission except “for good cause.” The members of the SEC themselves could be removed only for “inefficiency, neglect of duty, or malfeasance in office.”
Roberts ruled that despite the above-discussed precedents permitting insulation of independent agencies, the PCAOB was unconstitutional because it is doubly insulated from Presidential control. He wrote:
This novel structure does not merely add to the Board’s independence, but transforms it. Neither the President, nor anyone directly responsible to him, nor even an officer whose conduct he may review only for good cause, has full control over the Board. The President is stripped of the power our precedents have preserved, and his ability to execute the laws—by holding his subordinates accountable for their conduct—is impaired.
Roberts’ opinion thus serves as a roadmap to lower courts as they judicially review other administrative structures that strip more oversight power from the President than previously upheld by the Supreme Court. The Fifth Circuit consciously follows the path Roberts blazed, citing Free Enterprise multiple times.
Thus, at least in the area of the separation of powers, Roberts’ strategy of distinguishing non-originalist opinions rather than overruling them may bear more fruit than some critics expect, because it shows that the Supreme Court believes that these opinions should not be given generative force and be extended to reach harder cases. His approach underscores the originalist baseline of the separation of powers and empowers lower court judges sympathetic to originalism to distinguish non-originalist opinions if there are features in their case that are materially different from the previous one. Collins provides more evidence that the rise of originalism is reducing the weight of non-originalist opinions.
Conventional legal analysis in high stakes constitutional cases looks nothing like it did a generation ago. At that time it could be fairly said that Supreme Court precedents were all important. Thus, briefs that emphasized original meaning were a waste of time. But today no lawyer can afford to ignore original meaning, even in areas where the Supreme Court has rendered many non-originalist decisions and even in the lower courts. The essential nature of law is changing as originalism meaning takes precedence over precedent.