Liberal Justices Say an FTC Ruling for Trump Could Hit Tax Court

The US Supreme Court’s liberal justices warned of far-reaching consequences affecting entities like the Tax Court should their conservative colleagues grant the president control over dozens of traditionally independent agencies.

The possibility of specialized Article I courts created by Congress losing their independence was driven by Justice Elena Kagan at Monday’s arguments over Donald Trump’s attempt to fire at-will members of the Federal Trade Commission and other regulatory bodies.

“Once you’re down this road, it’s a little bit hard to see how you stop,” Kagan, a former administrative law professor at Harvard Law School, said in pushing back on the notion that the Supreme Court could note its decision in the case wouldn’t affect other agencies.

The comments came as the conservative majority signaled that it’s poised to abandon a 90-year precedent stopping the president from firing members of multi-member agencies without legal cause.

Conservatives seemed to side with the administration’s arguments that the president must have at-will removal power to retain meaningful authority over officials who perform executive actions.

But some conservative justices discussed how a ruling could be limited for legislative courts that engage in judicial functions. Justice Brett Kavanaugh raised the possibility of an exception for such bodies similar to one for the Federal Reserve Board of Governors.

“Many justices expressed concern about how it might affect other agencies, and thus a desire to wall off those issues and reserve them for a future case,” said Kevin King, a Covington & Burling partner and former clerk to Justice Antonin Scalia.

But King and other court-watchers said a ruling would nonetheless make it more likely that challenges involving other agency leaders and civil-service protections for federal employees would come up in the future.

‘Executive by Nature’

Monday’s arguments centered around a lawsuit by Rebecca Slaughter, a Democratic FTC commissioner who is one of at least 17 members of independent federal agencies that Trump has attempted to fire since his inauguration.

A key question in the case is how far the implications of a ruling could go.

Under the administration’s logic, Justice Sonia Sotomayor said the president would have removal power over entities like the Tax Court, which resolves disputes between taxpayers and the IRS, and was set up as an independent agency by Congress.

Many of the Supreme Court’s own cases have said that “even though they’re engaging in adjudicative functions, they have to be executive by their nature,” Kagan added.

US Solicitor General John Sauer noted that the administration hasn’t “challenged the removal restriction as to the non-Article III courts in this case,” to which Sotomayor responded, “not yet.”

Drawing Lines

In Humphrey’s Executor v. US, the US Supreme Court in 1935 affirmed the FTC’s removal protections under the basis that it operated with “quasi-legislative or quasi-judicial powers.”

The justices will now confront potentially tricky questions about how a new holding on presidential power would affect agencies in the executive branch that have adjudicatory functions, said Nicholas Bednar, a law professor at the University of Minnesota.

“Drawing a clean line between adjudicatory and non-adjudicatory agencies is far more difficult than the Court suggests,” Bednar said. “In most agencies, adjudication is deeply intertwined with other responsibilities.”

Allowing Slaughter’s firing to stand is likely to hand Trump more power over agencies such as the FTC, National Labor Relations Board, and Consumer Product Safety Commission, all of which have oversight over aspects of the US economy.

Sauer argued that it wouldn’t necessarily apply to non-Article III courts “because, there, the question would be, what are they doing? Is it judicial power or executive power?”

Chief Justice John Roberts also floated the possibility of stripping an agency’s executive functions while allowing it to retain its judicial ones, which Bednar noted would require courts to “rewrite the statutory scheme,” a job normally left to Congress.

Justice Ketanji Brown Jackson who argued that “one way to avoid these difficult line-drawing problems” is to allow Congress to decide.

“I mean,” she said. “I sort of thought that we have Article I, which I think you agree gives Congress some authority to set up these agencies, to determine their structure, to create the offices that we’re talking about.”