US Supreme Court Could Dismantle Federal Government’s Powers in 2024

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With the U.S. Supreme Court slated to return to session on Jan. 8, the second part of the high court’s term could hand down rulings that either curb or expand the federal government’s powers—sometimes known as the administrative state.

Analysts have said that three cases that the high court is hearing related to the federal bureaucracy this term, including the Consumer Financial Protection Bureau (CFPB) v. Community Financial Services of America, the Securities Exchange Commission (SEC) v. Jarkesy, and Loper Bright Enterprises v. Raimondo.

SEC v. Jarkesy

Hedge fund manager George Jarkesy was penalized by the SEC for violating securities fraud law, which he appealed. The U.S. 5th Circuit Court of Appeals sided with the plaintiff, arguing in a ruling that the SEC violated the Constitution’s Seventh Amendment, which provides the right to have a jury trial, and it also found that Congress engaged in overreach by delegating its own power when allowing an agency—in this case, the SEC—to hold administrative proceedings rather than file a lawsuit in a civil court against Mr. Jarkesy.

The SEC had held an in-house proceeding and used its own administrative law judges, who work as independent officials within the executive branch who oversee internal hearings and adjudicate disputes between the agency and other parties.
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CFPB v. Community Financial Services of America

In the CFPB case, the agency had asked the Supreme Court to rescind a ruling by a lower court that determined the agency’s funding structure runs afoul of the Constitution. That ruling was also handed down by the U.S. 5th Circuit Court of Appeals earlier this year.

Lawyers for the DOJ argued in their petition that the ruling calls into question virtually every CFPB action since the agency’s inception in 2011 under the Obama administration.

The case stems from a challenge by two payday lending groups that sued to overturn a CFPB rule aimed at combating what the agency calls “unfair and abusive” practices in the industry. The 5th Circuit overturned the rule on Oct. 19, holding in the process that the CFPB’s funding through the Federal Reserve, rather than budgets passed by Congress, violated the separation of powers principle in the U.S. Constitution.

The CFPB said in its petition that the 5th Circuit “relied on an unprecedented and erroneous understanding” of the Appropriations Clause of the U.S. Constitution, which requires government spending to be authorized by Congress.

The CFPB said in its petition that the 5th Circuit “relied on an unprecedented and erroneous understanding” of the Appropriations Clause. “Congress enacted a statute explicitly authorizing the CFPB to use a specified amount of funds from a specified source for specified purposes. The appropriations clause requires nothing more,” it added.
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Loper Bright Enterprises v. Raimondo

In May 2023, the high court opted to take the case, Loper Bright Enterprises v. Raimondo, which will decide on the question whether the court should overrule the Chevron doctrine, which has long been criticized by conservatives who call it unconstitutional.

Critics object to its application without a clear framework to resolve statutory ambiguity, leaving too much discretion with the courts to engage in results-oriented decisioning. The Chevron v. Natural Resources Defense Council case, issued in 1984, is considered a key facet of administrative law and requires courts to defer the federal agencies’ reasonable interpretations of statutes that are unclear.

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