Judge Kavanaugh’s Deregulatory Agenda

AP Photo/Evan Vucci

President Donald Trump shakes hands with Supreme Court nominee Brett Kavanaugh in the East Room of the White House

Most of us take for granted the federal regulations that make our air cleaner, our drinking water purer, our food, highways, and workplaces safer, and our economic transactions less vulnerable to fraud and abuse. And few of us realize the extent to which those protections are subject to reversal by federal courts applying legal principles prescribed by the Supreme Court. If confirmed to the Supreme Court, Judge Brett Kavanaugh would be a fervent vote against even well-established forms of regulation.

A telling example of Kavanaugh’s ideological aversion to even minimal government regulation is his dissent in a case in which the Occupational Safety and Health Administration (OSHA) fined SeaWorld of Florida following a tragic incident at its Orlando facility in which a killer whale named Tilikum pulled a trainer off a platform and held her underwater until she drowned. A panel of the D.C. Circuit Court of Appeals, in an opinion written by Judge Merrick Garland, upheld OSHA’s conclusions that training killer whales was a recognized occupational hazard and that there were feasible ways to reduce that hazard. Tilikum had previously killed another trainer. The hazard could be substantially reduced by requiring trainers to keep a greater distance from the whales or providing a clear plastic barrier that would allow them to guide the movements of whales without risking attacks. The Court therefore upheld OSHA’s modest $7,000 penalty.

Kavanaugh’s dissent did not focus on the facts. Instead, he attacked the proposition that Congress meant to empower OSHA to regulate the professional sports and entertainment industries. In his mind, the real questions before the court were when “should we as a society paternalistically decide that the participants in ... sports and entertainment activities must be protected from themselves” and, more important, “who decides that the risk to participants is too high?” Kavanaugh argued that the participants in those activities were well aware of the risks and elected to participate anyway, and he suggested that government efforts to make those activities safer would cause employers to abandon them altogether.  

This is the same argument that employers raised in the early 20th century when progressive state governments wanted to protect workers from the frightful hazards of industrial workplaces. A Supreme Court committed to a limited government ideology overturned many protective Progressive Era laws, and the carnage in the workplace continued until the Court rejected that ideology during the New Deal and Congress created OSHA in 1970. Kavanaugh’s beef was with the very fact of a powerful OSHA, and he hoped to limit its power by creating an exception for the sports and entertainment industries.

Congress has assigned to the judiciary the task of reviewing agency regulations to ensure that agencies have properly interpreted the statutes that empower them and to ensure that their decisions are supported by substantial evidence and are not arbitrary and capricious. In the seminal case of Chevron, U.S.A. v. Natural Resources Defense Council, the Supreme Court set out a two-step test for judicial review of an agency’s interpretation of a statute. First, if the meaning of the statute is clear on its face, the court must confirm its clear meaning without deferring to the agency. If, however, the statute is ambiguous, the court should defer to the agency’s interpretation the statute if it is reasonable.

Ever since the Court handed down that decision in 1984, some (mostly conservative) judges have chafed under its prescription for deference to agencies whose judgment they do not trust. Kavanaugh has been one of the most forceful judicial advocates of limiting the application of the Chevron prescription.

The easiest way to avoid Chevron deference is to find the relevant statutory language unambiguousand hold that the agency’s interpretation is inconsistent with the statute’s unambiguous meaning. Ambiguity is, of course, a malleable concept. The deeper one probes into a statute’s purpose, context and legislative history, the more likely one is to find ambiguity. In that regard, Kavanaugh has emulated Justice Antonin Scalia’s formula of applying dictionary definitions to statutory terms with little regard for the agency’s experience in working with the statute over the years.

Kavanaugh has also played a leading role in crafting a “major rules” exception to Chevron that could swallow the rule if he joins the Supreme Court. In a controversial case involving the Food and Drug Administration’s attempt to regulate tobacco products during the Clinton administration, the Supreme Court suggested that in “extraordinary cases” involving issues of great “economic and political magnitude,” a court need not defer to the agency’s interpretation of an ambiguous statute.

For a time, it appeared that the tobacco case was a one-off exception, but Kavanaugh revived it in a case involving EPA’s attempt to regulate greenhouse gas emissions through its “new source review” permit program. Following a recent Supreme Court holding that the words “air pollutant” in the definition section of the Clean Air Act included greenhouse gases, EPA interpreted the phrase “any air pollutant” in the new source review section of the statute to include those gases. Claiming that the case was “one of exceptional importance,” Kavanaugh, in a lengthy dissenting opinion, rejected EPA’s interpretation as unreasonable. Without a hint of deference or a mention of Chevron, he concluded that “air pollutant” had a different meaning in the new source review section than in the definition section and that the former meaning excluded greenhouse gases. The Supreme Court rejected EPA’s interpretation, but without relying on the “major rules” exception.

Kavanaugh elaborated on the major rule exception in considerably more detail in his dissent in a case involving FCC’s net neutrality rule. In cases involving “major social or economic activity,” he wrote, an ambiguous grant of statutory authority to an agency “is not enough” to warrant deference. Conceding that the “major cases” exception was malleable, he noted that “determining whether a rule constitutes a major rule sometimes has a bit of a ‘know it when you see it’ quality.” If Kavanaugh is confirmed, we can expect that he will continue his project of creating exceptions until the Chevron rule is reduced to a historical footnote.

We can also expect Kavanaugh to interpret statutory language to require agencies to emphasize industry costs, rather than focusing primarily on the statute’s protective goals and public benefits. For example, in dissenting from a holding that EPA had lawfully vetoed a Corps of Engineers permit for a proposed mountaintop removal project, Kavanaugh concluded that in deciding whether the project would have “unacceptable adverse impacts” on wildlife in the inundated streams below the project, EPA had to consider the cost to the industry of preventing its disastrous impact on the environment. Wiping out the streams could be “acceptable,” in Kavanaugh’s view, if preventing the catastrophic loss would cost the coal company too much in lost profits.

It might at first glance seem ironic that President Trump would appoint a skeptic of Chevron deference to the Court at just the moment when the deregulatory activities of agencies headed by his appointees are beginning to wind their way through the courts. Most statutes that authorize agencies to regulate do not explicitly authorize them to deregulate. If Kavanaugh is disinclined to defer to agency interpretations, won’t he be receptive to claims by public interest groups that a Trump administration agency has misinterpreted its statute in rolling back Obama administration regulations? Probably not.

Given his overall discomfort with government regulation, it is unlikely that Kavanaugh would demand that a Trump appointee point to an explicit grant of authority to rescind or reduce the stringency of a regulation. More likely, he will find in the relevant statute an “implicit” authority to rescind or reduce the stringency of regulations, and he will uphold the Trump administration’s deregulatory initiatives.

The federal courts also review the substance of agency decisions to ensure that there is sufficient evidence in the record to support the agency’s factual conclusions and that it has offered plausible reasons for its decisions.

Kavanaugh has boiled substantive judicial review down to two propositions. First, the reviewing court asks whether the agency’s decision was “substantively unreasonable” in that the agency exercised its discretion unreasonably. Second, the court asks whether the agency failed to provide a reasoned explanation for its decision that addressed all of the relevant factors and adequately explained its exercise of discretion in light of the information before it.

While the second proposition is a fairly accurate summary of Supreme Court holdings on substantive review, the Supreme Court has not adopted the first proposition. Deciding whether an agency decision is unreasonable presumes that a court made up of judges with training primarily in law is capable of discerning whether an agency with expertise in the resolving technical questions reached a reasonable outcome on a contested issue given the facts and relevant policy considerations. That test is quite malleable because “reasonableness” is often in the eye of the beholder. Indeed, Kavanaugh has recognized that the test is “sometimes more art than science, more Rorschach than rule of law.”

Although Kavanaugh’s opinions sometimes show a healthy respect for agency conclusions based on scientific data and complex modeling exercises, he has also demanded a degree of perfection that is impossible for agencies to achieve. For example, he authored the majority opinion holding that EPA had unreasonably allocated the emissions reduction load among the states that were significantly contributing to excess levels of pollution in downwind states along the Eastern Seaboard. 

This was a highly complex task involving sophisticated modeling exercises, complicated by the fact that air quality in most downwind states was affected by emissions from multiple upwind states. Kavanaugh overturned EPA’s allocation because it had not ensured that each upwind state eliminated only its significant contribution to each downwind state’s nonattainment, no more and no less. On appeal, the Supreme Court rejected Kavanaugh’s conclusion, because that sort of precision could never be achieved in practice. 

When it comes to reviewing the less technical factual findings of agencies like the National Labor Relations Board (NLRB), Kavanaugh is not especially deferential. When a D.C. Circuit panel held that substantial evidence supported NLRB’s conclusion that a non-union woodworking company owned by the daughters of the owner of a unionized woodworking company was in reality an alter ego of the unionized company, Kavanaugh dissented. The record demonstrated that the unionized company provided a building, manufacturing equipment, and expertise to the non-union company and assisted with management, operations, sales training, and engineering. That was not enough for Kavanaugh, who would have shielded the spin-off company from its responsibilities to the union.

Kavanaugh has supported broad presidential power to control regulatory agencies, even agencies that Congress has structured to be independent of presidential power so as to free agency experts from political pressure. Congress typically accomplishes this by providing for presidential appointment of the members of independent multi-member agencies for a fixed term of years, but also protecting the members from removal by the president except for some legitimate cause unrelated to their decisions on pending matters. In theory, this prevents the president from supervising or directing independent agencies.

Kavanaugh acknowledges that the Supreme Court has consistently upheld this arrangement since 1935, but he is eager to find reasons to declare independent agencies unconstitutional.  In 2008, he wrote a lengthy dissenting opinion concluding that the Public Company Accounting Oversight Board (PCAOB) was unconstitutional. Established by the Sarbanes-Oxley Act in 2002 to provide better regulation of the accounting profession, the PCAOB was composed of five members appointed by the independent Securities and Exchange Commission (SEC) and charged with protecting investors from the from the kinds of accounting shenanigans that characterized the Enron debacle.  

The SEC could remove members from the board, but only “for cause.” Kavanaugh concluded that this arrangement was unconstitutional because it left the president with no power to appoint or remove members of the board directly. It contravened the explicit provision in the Constitution empowering the president to appoint the principal officers of the United States, and it violated the principle of separation of powers that is inherent in the Constitution’s division of responsibilities among the legislative, executive and judicial branches. In a 5-4 opinion written by Justice Roberts that mirrored part of Kavanaugh’s dissent, the Supreme Court reversed the D.C. Circuit and found the PCAOB to be unconstitutional.

More recently, Kavanaugh dissented from a D.C. Circuit decision upholding the constitutionality of the Consumer Financial Protection Bureau (CFPB). Under Director Richard Cordray, an Obama appointee, CFPB was an aggressive protector of consumers from fraud and abuse by banks, payday lenders, and other shady financial institutions. Because CFPB is an independent agency, its protective efforts continued throughout most of the first year of the Trump administration. In Kavanaugh’s view, the fact that the Director of the CFPB cannot be fired by the president except for cause violated the separation of powers principle. The concentration of “enormous power” in a “single unaccountable, unchecked Director,” he reasoned, “poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty than a multi-member agency does.” The difference is that the arbitrariness of any single member of a multi-member board can be countered by the other members.

This makeweight rationale is unconvincing. A multi-member independent agency consisting of like-minded individuals can be just as arbitrary and pose just as great a threat to liberty as a single director. Kavanaugh offered no evidence to support his conclusion that an independent director would be more arbitrary and abusive than a director subject to presidential control. It would, of course, depend on whether the president was inclined to be arbitrary or abusive. And the liberty that concerned Kavanaugh was the liberty of unscrupulous moneylenders to fleece unsuspecting consumers, not the liberty of consumers to go about their business without being continuously on guard in highly technical realms. One senses that, if he were writing on a clean slate, Kavanaugh would also find multi-member independent agencies to be unconstitutional.  

Given his expansive approach to presidential power and his general distrust of federal agencies, Kavanaugh will no doubt look favorably upon attempts by the Office of Management and Budget (OMB) and other White House officials to micromanage agency regulatory initiatives. In the past, OMB review of agency rules has provided a conduit for industry groups to influence executive branch agency decisions without having to put the contents of their input in the rulemaking record. Empirical studies have demonstrated that OMB invariably serves as a brake on attempts by agencies to protect citizens from irresponsible companies. With Kavanaugh on board, White House officials won’t have to worry about legal limits on their efforts to dislodge agencies from their statutory obligations.

Over the 230-year history of the Supreme Court, there have been periods during which a majority of the justices have been ideologically committed to free markets and limited government. During those periods, it became nearly impossible for Congress to put into place programs designed to protect the weak and vulnerable from irresponsible businesses. We experienced judge-made constraints on progressive change during the Lochner era of the early 20th century, when the Court most infamously in the Lochner decision of 1905 overturning a New York statute regulating the permissible work hours for bakers, struck down child labor, minimum wage, and pension protection laws and regulations requiring safer banking and transportation practices. 

With Kavanaugh’s confirmation, we may well experience a return to the Lochner years where the Supreme Court acts as a bulwark against legislative experimentation with new protective statutes and attempts by appointees of a future progressive president to use existing statutes in innovative ways to protect us and our shared environment from the vicissitudes of the free market.  

That possibility alone has inspired the American business community to support the nomination, despite qualms on the part of some business leaders about Kavanaugh’s stands on social issues like abortion and same-sex marriage. It should inspire the rest of us to demand that the Senate ask Kavanaugh hard questions and refuse to confirm his appointment if he does not offer credible assurances that he will not turn back the clock to the days when five policymakers in robes persistently frustrated the will of the American people.

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