Fractionally Legal v14: The Supreme Court is not Crazy, It Just Had a Bad Episode

To say it's been an active Supreme Court session, with an “activist” Supreme Court, is probably an understatement. We’ve all become amateur constitutional lawyers in the last 30 days or so, with half the country thinking we’ve outsourced our governance to some unelected high priests who see it as their role to create some type of patriarchal Christian theocracy like the Republic of Gilead, while the other half of the country thinks we’re restoring the constitutional order. All I can say is that it can’t be both.

The old-line conservative movement was much less populist, more libertarian, and primarily concerned with reducing government intervention in the economy. That group is pretty much extinct as a potent political force, but they worked hard over about 35 years and got the Supreme Court to be overly sympathetic to their causes by building political power through an alliance with social conservatives who were primarily concerned with overturning abortion rights and expanding the role of religion in the country. Feels like they got eaten by their pet tiger.

Although we sort of merge them into one political force, the legal and constitutional goals for the old-line conservative movement and the current “social conservatives” are very different on a whole range of issues. So congratulating one of these modern social conservatives for decisions that limit the power of executive agencies is like congratulating a modern Italian for winning the Punic Wars (take that Carthage!). Yes, they, in theory, modern Italians occupy the same space as the heart of the Roman Empire, but the language is different and so is the culture.

Which is to say, the winners and losers in the current Supreme Court term are not as clear as it might seem in this hyperpartisan time. Nevertheless, there are winners and losers and for lawyers like me who advise clients on how to think about legal risk, it's important to be able to suss them out. So let's take a look at three decisions this term and understand who the winners and losers are. Things might not be as they seem.

Courts and Executive Immunity?

Let's start with Trump v. United States. Since the case has “Trump” in the title, it seems to drive everyone crazy. For the record, the fact that two justices whose very partisan wives love Trump did not recuse themselves from decisions regarding executive power that focus on Trump is reprehensible. That is especially because their recusals would likely not have mattered—in a conservative six-three majority, Justice Alito (of spousal flag-waver fame) and Justice Thomas (of spousal conservative lobbyist fame) could have recused themselves and the result would have been the same. The fact that they did not see the need to demonstrates just how out-of-whack partisanship has gotten. Their refusal to recuse was a bad episode. I guess my only solace is that we’re all assuming their wives were calling the shots. So maybe we’re further from Gilead than we all think. But just because the decision is tainted by Justice Alito’s and Justice Thomas's bad judgment, that does not make the decision totally wrong.

Trump certainly got the result he wanted since it's going to delay, but not end, the cases against him while courts sort out which of his acts were “official” and therefore getting a presumption of immunity and which were not, which means he would not be immune. That is annoying because we all know that Trump is an awful human being and, worse, is wrong on policy. Wrong on immigration (deporting 11 million American workers), wrong on climate change (denying it), and wrong on tax policy (tax breaks for those who need it least). Trump is the first President for whom prosecution really matters (most Presidents don’t commit crimes in either their official or personal capacity or have the dignity to resign when they do). So it's not a surprise that this is the first time the Supreme Court is dealing with the issue.

But this is not really about Trump. The Supreme Court takes the long view and needs to think beyond the political calendar. Again, this would be a lot easier to see if Alito and Thomas recused themselves (and if the opposition to Trump was not in disarray).

While most government employees enjoy “qualified immunity,” meaning that they can’t be held responsible for violating the law unless they violate a clearly established constitutional right, there are a few government employees that enjoy “absolute immunity.” One group of government employees who have absolute immunity? You guessed it: judges are absolutely immune from any prosecution for any official function even if it's totally unconstitutional. Basically, one judge is never going to need to sit in judgment of another judge. It's not a huge leap to think that the Supreme Court was not letting Trump off the hook but was simply saying that policing the executive is “not my job” (at least when the executive is acting in their official capacity). A win for the judiciary, indeed. Or more likely, a refinement of the role of the judiciary in our democratic republic.

Creating a system where ex-presidents are being prosecuted for what they did in office is just as destabilizing as one in which they are not. Do I think there is a small chance that a man like Trump will order Seal Team 6 to kill his political opponents, and throw non-believers like me into prison? Yes, 100%. Do I think that the Supreme Court ruling that he could be prosecuted for that would make it less likely? No. The answer is for voters not to let people like Trump into office. Whether our democratic systems are up to that challenge is a bigger question, but it's hard to lay that at the feet of the Supreme Court.

Giving Deference

The Supreme Court gives with one hand and takes away with the other. If Trump v. United States might expand executive authority by limiting judicial authority, three other cases worth looking at in this newsletter—Loper Bright Enterprises v. Raimondo, SEC v. Jarkesy, and Corner Post, Inc. v. Board of Governors of the Federal Reserve System—actually reduce executive authority and expand judicial authority. These are all administrative law decisions and don’t have “Trump” in the title, but they are important to understand in context.

In Loper Bright (and a companion case known as Relentless v. Department of Commerce), a business challenged a regulation of an executive agency (the Commerce Department) as being an unreasonable interpretation of a law passed by Congress. In the past, courts were required to defer to the administrative agency’s “reasonable” interpretation of the statute, a so-called Chevron Deference. Not so anymore after those cases. Now courts need to conduct a full review of the law and the interpretation and can, if they want, substitute their own judgment. Nice work if you can get it. Corner Post just basically makes it possible to challenge these government regulations at any time, meaning that these regulations may never actually be final and are always susceptible to judicial review, without a Chevron Deference.

In Jarkesy, the Supreme Court essentially said that administrative tribunals convened by agencies can’t require the payment of a fine because only courts can do that. If an administrative agency wants to assess a fine, they need to bring the civil suit in federal court presided over by a federal judge and a jury. See a pattern?

The current conservative majority on the Supreme Court, and the old-line conservative movement that birthed them, is definitely into limiting government’s role in the economy, and one means of doing that is to hobble administrative agencies. But it's a little reductive to say that there is any political purpose to that. Regulations passed by both Democratic and Republican administrations are going to be challenged under Loper Bright and Corner Post. Administrative agencies led by Republican or Democratic administrations are going to be unable to assess monetary penalties under Jarkesy. So these are not political decisions, but ideological decisions about who should be wielding power in our system of government. According to the Supreme Court, it's not the executive branch. It’s, wait for it . . . the courts.

I’ve been dealing with courts for 20+ years and even worked as a Federal Court law clerk for a year after law school. I’m generally impressed with the Federal judiciary – the judges are smart and able. And there is some attraction to the fact that judges are appointed for life and don’t change over every few years, like regulators do. But, for better or worse, judges do have political beliefs and our system is actually designed to accommodate those beliefs because judges are appointed and approved by politicians and those politicians know that voters put them in that position hoping for particular results. Of course, the regulators who put the regulations into effect are also political since they are also appointed by politicians. Why the Supreme Court feels that political judges are better at interpreting ambiguous law than political regulators is anyone’s guess, but it seems like the wrong call.

And it's not good for business. The result of removing the deference and expanding the time that regulations can be challenged means that businesses will rarely have the clarity they need. For example, take non-compete clauses, which I’ve written about in the past. The FTC thinks they are bad and passed some regulations banning them. Those regulations were challenged in court and a court has already temporarily banned its enforcement, at least as to the parties in the case (it's not a nationwide injunction, which happens from time to time). But it still means that by granting the injunction, this judge thinks that the challenge to the non-compete ban is likely to be successful on the merits.

The case was likely filed to take advantage of Texas’s conservative-leaning federal judiciary, the result of one-party rule in that state. But under the old law, the FTC would have been granted deference either by the district court (the lower level) or by the appellate court, which is slightly less conservative inasmuch as it covers multiple states. And because of the deference, businesses could have been reasonably certain that the ban would stick, at least until a new administration reversed the rule, and that would be something we would all see coming. But now, without deference, businesses just don’t know whether the non-compete ban is going to be invalidated, and when. Is that the stability this “business-friendly” Supreme Court is looking for? Doubtful. Another bad episode.

Keep thinking, keep building, Jesse

Hi, and welcome to my newsletter! I’m Jesse Strauss, Your Fractional General Counsel. I’m a lawyer with a private practice based in New York City, helping clients in the United States and globally with their US legal needs. My expertise spans various areas, including raising funding rounds, employment issues, negotiating master service agreements, intellectual property, compliance, legal process management, and dispute resolution. My focus is on founding and nurturing great companies from seed to exit. Discover more at www.yourfractionalgc.com and book a complimentary 30-minute consultation at https://www.yourfractionalgc.com/contact-yourfractionalgc