Despite consumer watchdog's US Supreme Court win, agency powers still on chopping block

[May 17, 2024]  By John Kruzel

WASHINGTON (Reuters) - The U.S. Supreme Court's decision safeguarding the Consumer Financial Protection Bureau - the nation's consumer finance watchdog - earned plaudits from supporters of robust federal regulation. But their praise for the court may prove short-lived.

Powered by its 6-3 conservative majority, the court has emerged in recent years as something of an ally in what has been called the "war on the administrative state," a longstanding conservative effort to weaken federal agencies that regulate key aspects of American business and life.

The court on Thursday upheld the CFPB's funding mechanism - drawing money annually from the Federal Reserve rather than from budgets passed by Congress - in a challenge by the payday loan industry, handing a win to President Joe Biden's administration and a setback to the agency's conservative critics.

Despite that ruling, pending decisions in cases that the justices heard during their current term, which began in October, could substantially curb federal agency powers in areas ranging from finance to fish conservation. Those rulings are expected by the end of June.

"It's always perilous to predict the outcome of Supreme Court decisions, but I anticipate the agencies will still face a net-loss record this year at the court," George Mason University law professor Jennifer Mascott said after the CFPB ruling.

The 7-2 decision, authored by conservative Justice Clarence Thomas, reversed a lower court's ruling that the CFPB's funding design violated a provision of the U.S. Constitution called the "appropriations clause," giving Congress the power of the purse.

Afterward, Biden lauded the work being done by the agency, blasted its Republican critics and said the CFPB's "strong record of consumer protection will not be undone."

Brianne Gorod, chief counsel at the Constitutional Accountability Center liberal legal group, welcomed the CFPB ruling but emphasized that the challenge to the agency represented just one front in a "multifaceted conservative attack on the ability of the federal government to function effectively."

"The full story regarding this court and whether it is willing to enable the conservative attack on the administrative state very much remains to be written," Gorod said.

Key rulings are pending in cases involving the Securities and Exchange Commission (SEC), National Marine Fisheries Service (NMFS) and Environmental Protection Agency (EPA).

The justices on Nov. 29 heard arguments over the legality of proceedings conducted by in-house judges at the SEC to enforce investor-protection laws. The challenge was brought by a Texas-based hedge fund manager who the SEC fined and barred from the industry after determining he had committed securities fraud.

The United States Supreme Court building is seen as in Washington, U.S., October 4, 2023. REUTERS/Evelyn Hockstein/File Photo

Biden's administration appealed a lower court's decision striking down the SEC enforcement proceedings at issue for violating the right to a jury trial and infringing on presidential and congressional powers under the Constitution.

'CHEVRON DEFERENCE'

The justices heard arguments on Jan. 17 in lawsuit by fishing companies over a government-run program to monitor for overfishing of herring off New England's coast.

The case is particularly important because the companies have asked the court to rein in or overturn a precedent established in 1984 that calls for judges to defer to federal agency interpretation of U.S. laws deemed to be ambiguous, a doctrine called "Chevron deference."

Some legal scholars have said that a ruling limiting or eliminating Chevron deference would likely harm Democratic presidential administrations more than Republican ones, as Democrats are typically more interested in regulating industry.

Erwin Chemerinsky, dean of the University of California Berkeley Law School, said CFPB's legal victory should not be seen as predictive of how the court will rule in other cases testing agency powers.

"I think this was the most radical of the administrative law decisions (by lower courts) being reviewed by the court this term because it involved changing a way of funding agencies that has been used since the time of George Washington," Chemerinsky said of the CFPB ruling by the conservative-leaning New Orleans-based 5th U.S. Circuit Court of Appeals.

Regarding the cases involving the SEC's authority and Chevron deference, Chemerinsky added: "Those issues are quite different and involve administrative law issues much more generally."

In the EPA-related case, the court on Feb. 21 heard arguments in a bid by Republican-led Ohio, Indiana and West Virginia and several energy companies to block a regulation issued by the agency aimed at reducing ozone emissions that may worsen air pollution in neighboring states.

The plaintiffs are seeking to avoid complying with the EPA's "Good Neighbor" plan restricting ozone pollution from upwind states, while they contest its legality in a lower court.

(Reporting by John Kruzel; Editing by Will Dunham)

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