Justice Jackson questions basis for congressional spending powers case

Justice Ketanji Brown Jackson sparred with Noel Francisco in a case over the funding structure for the Consumer Financial Protection Bureau. Also: Law Dork on TV.

Justice Ketanji Brown Jackson, in essence, kept asking why we were all in court on Tuesday.

It was an essential question with an important lesson in the midst of the day’s arguments over the funding structure of the Consumer Financial Protection Bureau.

The newest appointee to the high court did not buy the premise that this was a case over what test courts should use to rule on Appropriations Clause challenges, and she did not allow that premise to control her questioning. She would not let Noel Francisco, representing payday lenders who argue that the funding structure is unconstitutional, revert to that premise — much to his frustration.

“We can't just suddenly decide that things are troubling without some kind of legal reference point,” she told Francisco — and, indirectly, her colleagues.

We are not, Jackson implicitly declared in a stream of questions redirecting the arguments, beholden to the U.S. Court of Appeals for the Fifth Circuit and whatever fringe arguments a panel of that court — or any other lower court — wills into existence.

This matters.

Jackson used oral arguments masterfully to change the tone of the arguments, perhaps to move some of her colleagues in the framing of their questions, to force Francisco to justify his arguments outside of the Fifth Circuit’s invented world, and to remind all of us how untethered to actual law and legal principles that invented world can be.

Although the outcome of the case at the end of more than 90 minutes of arguments was not certain, it appeared likely that the funding structure of the CFPB will stand.¹

What I will be watching for, though, is a step further: Whether Jackson’s arguments change the reasoning of the decision — namely, whether we avoid the issuance of some new Appropriations Clause test at all.

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What happened?

The CFPB case came to the court after a panel of three Trump appointees on the Fifth Circuit declared that “Congress’s cession of its power of the purse to the [CFPB]” with its funding structure for the bureau “violates the Appropriations Clause and the Constitution’s underlying structural separation of powers.” Notably, the three-judge panel reversed now-retired U.S. District Judge Lee Yeakel — a George W. Bush appointee — in doing so.

The payday lenders’ argument advanced by Francisco — the former solicitor general in the Trump administration who is now back at Jones Day — boils down to a claim that Congress violated the Appropriations Clause of the U.S. Constitution in setting up the funding structure for the CFPB. Because the funding structure has an upper limit on funding but no set amount, is continual and does not require an annual appropriation from Congress, and is derived from another agency (the Federal Reserve), the out-of-thin-air argument goes, it is unconstitutional.

In its brief before the court, Francisco and the lawyers for the payday lenders expanded the rhetorical framing for the case even further.

“The Act permits the CFPB to fund its sweeping enforcement authority by choosing its own amount of funding from the Federal Reserve System forever, subject only to an illusory nine-figure cap each year,” the brief argued. “That abdication of Congress’s fiscal oversight subverts the Clause’s text and structure, has no basis in history or tradition, and is not susceptible to any limiting principle.”

The Biden administration’s brief pushed back on that forcefully — but hewed to a narrow argument that was built within the framework of conservatives’ legal landscape. Its primary argument heading in its brief asserted: “Text, history, and precedent establish the constitutionality of the CFPB’s statutory funding mechanism.”

This, too, was Solicitor General Elizabeth Prelogar’s focus when she took to the podium a little after 10:00 a.m. Tuesday morning. (Because the government was appealing the Fifth Circuit’s ruling, Prelogar went first Tuesday.)

“The Fifth Circuit’s decision in this case is the first time any court in our nation’s history has held that Congress violated the Appropriations Clause by enacting a statute providing funding,” Prelogar said. “This Court should uphold the CFPB’s funding statute because it is firmly grounded in constitutional text and in historical practice dating back to the founding.”

The court engaged with Prelogar on those terms for nearly 45 minutes, and good points were made by the always well-prepared lawyer. There were questions about “the limits of your argument,” as Justice Brett Kavanaugh put it, and whether the “upper limit” on funding in the law is necessary to its constitutionality, as Justice Neil Gorsuch asked.

Justice Sam Alito pinned down the arguments, in effect, to being a chance for everyone to talk out the appropriate Appropriations Clause test: “I understand your answer to these hypotheticals is that we must look to Congress's historical practices. This is a matter of seeing whether the setup that we have before us is consistent with Congress's historical practices. Is that right?”

Which then led to this exchange:

It was, it appeared, a day for test-setting and line-drawing.

Then, at the conclusion of Prelogar’s initial argument, the final questions came from Jackson.

“Some of the questions that have been asked this morning are — seem to be requiring you to establish whether or not Congress can do certain things,” she told Prelogar. “But I sort of thought that the burden was on them to show that Congress can't set up the agency in this way, and the reason I think that is because of the language of the Appropriations Clause and the way in which it seems to give the legislature the prerogative of the purse. And, here, we have a statute in which the legislature has exercised that.

“So am I right that that's really all you need to say to win?”

With that, the trajectory changed.

Prelogar responded, “I think that's right, Justice Jackson, and I think it actually highlights an important aspect of this case.” The payday lenders, she continued, “are coming in and asking the Article III courts to oversee and superintend Congress's own exercise of its prerogatives over the purse.”

The landscape shifted.

When Francisco took to the podium, he faced skeptical questioning, some of which likely would have come anyway, but Jackson opened the possibilities and framing by questioning the very foundation of the case Francisco was making.

Justice Clarence Thomas started off: “You seem to suggest that there is a spillover into separation of powers issues, non-delegation issues, without telling us precisely how we run into that problem and what the constitutional problem is. I get your point that this is different, that it's unique, that it's odd, that they've never gone this far. But not having gone this far is not a constitutional problem.”

Jackson then continued her line of thinking, asking Francisco where in the Appropriations Clause he finds a definition that requires the limits he’s arguing are present.

Francisco replied that “inherent” in the definition of “appropriation” is the idea that it has “got to be the authorization to spend an amount of money,” that “any spending has to be in consequence of an appropriation” from Congress, and that those decisions are informed — under “history and purpose” — by the understanding that “separating the sword from the purse” between the executive and legislative branches “is to protect individual liberty.”

Jackson continued pushing, though, asking why that definition — with its implications and qualifications — and not one “that a particular government department can spend up to a certain amount of money, that they have the ability to use a certain amount of the public fisc.”

From there, others jumped in.

Justice Elena Kagan questioned the idea that this is some huge number: “[T]his is $600 million, and this is a rounding error in the federal budget, honestly.” Or, in any event, that it’s an “illusory” limit, as Francisco claimed: “Congress thought $600 million was a pretty good number. Maybe that will prove to be too high and Congress will cut it back. Maybe, over time, the CFPB actually will hit $600 million because they'll create new programs ….”

On the idea that the CFPF’s funding is “perpetual,” Kavanaugh weighed in, telling Francisco: “I’m having trouble with [that] because it implies that it's entrenched and that a future Congress couldn't change it. But Congress could change it tomorrow and there's nothing perpetual or permanent or — about this.”

And while Justice Amy Coney Barrett started off asking Francisco about limits — “[J]ust assuming that you're right that there has to be something more than the $600 million, how do you decide how much is too much or how specific is specific enough?” — she was later following on and echoing Jackson, specifically stating that the limits present in other areas of constitutional law are “not there“ in the Appropriations Clause. “I guess that's what I'm struggling with, and I take it some of the other questions are, too.”

By the end of the arguments, Prelogar, in rebuttal, concluded by saying that Francisco was “proposing that the Court go down the road of for the first time ever interpreting the Appropriations Clause to contain some kind of inherent, implicit limit on Congress that has never previously before been recognized and that is completely detached from history. We'd ask the Court to reject that approach.”

In short, this case could be used to create limits where none previously existed.

Jackson’s refusal to accept the test-setting premise of the day and decision to reframe the arguments serves as an important lesson about a less-discussed effect of Fifth Circuit-style rulings and arguments. When such arguments are brought into the center of debate from the fringe through the presumed legitimacy of the appeals courts (or even by virtue of a cert grant by four justices of the Supreme Court), the arguments can be used to shift our underlying government structure regardless of whether the specific cases succeed.

Here, for example, the CFPB structure could be upheld even as the court engages in setting new limits on congressional appropriations — expanding judicial authority and restricting both congressional and executive authority.

It was important — and perhaps pivotal — that Jackson pushed back on that premise today.

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Talking SCOTUS

Before Tuesday’s arguments, though, I joined Stephanie Ruhle on MSNBC’s The 11th Hour on Monday night to kick off the new term.

We talked Supreme Court ethics — including Justice Clarence Thomas’s recusal from John Eastman’s Jan. 6-related petition before the court — and the new term’s big cases.

Some of the conversation was posted on Twitter/X, which you can watch here.

1. For her part, Justice Sonia Sotomayor focused attention on the Fifth Circuit’s similarly extreme remedy of vacating a payday lending rule issued by the agency under the funding scheme.