Column: New SpaceX opinion in NLRB case has ominous hints for federal agencies
The opinions expressed here are those of the author, a columnist for Reuters.
By Alison Frankel
July 24 (Reuters) -It's way too early to predict all of the possible fallout if the U.S. Supreme Court takes up a case next term challenging its longstanding precedent that the heads of federal agencies cannot be fired at the whim of the president.
But we know there will be consequences. I've been writing for several weeks about that case, which asserts that the U.S. Consumer Product Safety Commission is unconstitutionally structured. One of the appellate judges who reluctantly held that the old Supreme Court precedent remains binding described the potential aftershocks as “seismic” as he urged the justices to grant review.
Now a new opinion from a Texas trial judge — in a constitutional challenge by Elon Musk’s SpaceX to the National Labor Relations Board — hints at the chaos that could ensue if the Supreme Court eviscerates or overturns the precedent that underlies dozens of laws creating federal agencies and boards.
The opinion is from U.S. District Judge Alan Albright of Waco, Texas, who earlier this month granted SpaceX a preliminary injunction that shut down an NLRB case accusing the space exploration company of forcing workers to sign illegal employment agreements. The new opinion explains Albright’s reasoning.
Neither an NLRB spokesperson nor SpaceX responded to my queries about the written decision.
Albright concluded that SpaceX was likely to prevail on claims that both NLRB administrative law judges and NLRB board members are unconstitutionally shielded from firing by the president. I’m going to focus on the judge's analysis regarding the NLRB board members, since they are analogous to the federal agency commissioners who would be affected by a Supreme Court ruling in the Consumer Products case.
Albright held that the Supreme Court’s 1935 precedent from Humphrey’s Executor v. United States does not apply to NLRB commissioners. In Humphrey’s Executor, you’ll recall, the Supreme Court ruled that the law creating the U.S. Federal Trade Commission did not violate separation of powers doctrine. The court said that even though the statute restricted the president’s right to fire FTC commissioners without good cause, the FTC’s multimember, politically balanced leadership did not wield significant executive-branch power.
That precedent has been under attack in recent years by critics of the so-called administrative state, who broadly contend that modern-day federal agencies exercise far more enforcement and rulemaking authority than the New Deal-era FTC.
In the Consumer Product Safety Commission case,a narrowly divided 5th U.S. Circuit Court of Appeals held in April that Humphrey’s Executor remains good law until the Supreme Court explicitly says otherwise. The Supreme Court petition challenging that ruling was filed in June.
Albright said the 5th Circuit’s decision does not control in the SpaceX case because the statutory text shielding NLRB commissioners from being fired is slightly different from the language of the FTC statute at issue in Humphrey’s Executor.
That’s certainly a debatable conclusion. But what’s more potentially important is Albright’s analysis of the consequences of the constitutional flaw in the National Labor Relations Act.
In its brief opposing SpaceX’s request for a preliminary injunction, the labor board argued that the cure for an unconstitutional provision in an otherwise constitutional statute is to sever the problematic piece of the law. That’s what the Supreme Court has done, the NLRB said, in recent cases contesting the constitutionality of federal agency heads.
The NLRB argued that because the purportedly unconstitutional provision insulating its board members can be severed from the rest of the statute without affecting the agency’s work, SpaceX was not entitled to a preliminary injunction halting its case even if it is likely to prevail on the merits of the constitutional challenge.
Otherwise, the NLRB said, courts will be swamped with preliminary injunction motions from defendants targeted in actions by federal agencies, in a kind of constitutional “judicial preclearance process,” to use the labor board's words.
Federal agency enforcement, the NLRB predicted, will be crippled if agencies’ cases are halted whenever defendants bring constitutional challenges.
“Granting an injunction would encourage any employer or labor union unhappy with scrutiny of their labor practices to seek preliminary injunctions against NLRB proceedings,” the NLRB argued.
SpaceX’s lawyers at Morgan, Lewis & Bockius pointed in their reply brief to the Supreme Court’s 2023 decision allowing the defendant in an FTC administrative proceeding to mount a constitutional challenge in federal court without waiting for the administrative process to conclude. Defendants, they argued, cannot be subjected to actions by unconstitutionally insulated decisionmakers.
“The fact that many litigants may be able to establish that the government is subjecting them to unconstitutional agency proceedings is no reason to let the government continue,” SpaceX said.
Albright sided with SpaceX. Severance of a statutory provision, he said, is a form of relief that can only be ordered when there is a final determination that the provision is unconstitutional. So, according to Albright, it’s premature to consider severance on a motion for a preliminary injunction.
Albright, to be sure, is just one trial judge. Another Texas federal judge, as the NLRB noted in its brief, ruled just last year, in a SpaceX constitutional challenge to a proceeding by the U.S. Justice Department’s Immigration and Employee Rights Section, that provisions shielding agency administrative law judges are severable so cannot be the basis of a preliminary injunction.
Nevertheless, if the Supreme Court takes the Consumer Product Safety Commission case and ends up limiting or overturning Humphrey’s Executor without addressing severability, you can expect exactly the tsunami of preliminary injunction motions that the NLRB predicted in its brief. Defendants in all manner of federal agency enforcement actions will cite Albright’s reasoning on severability when they ask to pause proceedings, arguing that federal agency targets cannot be forced to litigate against unconstitutionally insulated decisionmakers.
The Justice Department will file its brief opposing Supreme Court review in the Consumer Products case next month. I’m eager to see if the government addresses the potential fallout from rulings like Albright’s opinion in the SpaceX case.
Read more:
US Chamber urges Supreme Court to end special protection for federal agency heads
SpaceX wins block on US labor board case over severance agreements
Next attack on federal agency power is already before the US Supreme Court
(Reporting By Alison Frankel)
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