Has Humphrey’s Executor Been Effectively Overruled on the Supreme Court’s Emergency Docket with Impact on the FTC?

The Supreme Court yesterday granted the stay requested by the Government enjoining the enforcement of the U.S. District Court for the District of Columbia’s orders involving President Trump’s firing of members of the National Labor Relations Board (NLRB) and Merit Systems Protection Board (MSPB) without cause.

While the Supreme Court stated that its grant of the stay was only with respect to the case before it, the decision clearly portends that, in a not-too-distant future case, the Court will overrule or otherwise render dead its nearly century-old decision^[1] that has assured the independence of the Federal Trade Commission (FTC) and immunized it from presidential control. This will undoubtedly have a major impact on how the FTC’s regulatory and enforcement authority are exercised and will in turn almost certainly have a material effect on how the federal antitrust laws are applied to health care providers, including, in among many other ways, how mergers, joint ventures and affiliations are treated.

In each of the cases to which the stay had been granted, the District Court issued the injunction because:

1. The statutes governing the NLRB and MSPB provide that their members may only be removed for cause and no cause had been given
2. The for-cause removal restrictions did not unconstitutionally limit the President’s executive authority on account of the Court’s 1935 decision in Humphrey’s Executor v. United States, 295 U.S. 602 (1935)

Importantly, in granting the stay, the Court begins by stating that under Article II, Section 1, the Constitution vests the executive power in the President, and accordingly “he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents.” One of those precedents is clearly Humphrey’s Executor in which the Court held that the FTC was structured such and operated such that it was an independent multi-member, bipartisan commission exercising quasi-legislative, quasi-judicial regulatory powers whose members could be granted for-cause removal protection without violating the Constitution.

In the case now before it, the Court goes on to state that, for purposes of satisfying one of the requirements for issuance of a stay, the Government is likely to show that the NLRB and MSPB exercise considerable executive power. “But we do not ultimately decide in this posture whether the NLRB or MSPB falls within … a recognized exception; that question is better left for resolution.”^[2]

(Justice Kagan in an opinion joined in by Justices Sotomayor and Jackson vigorously dissent, asserting that the Court in granting the request for the stay has effectively and wrongly overruled Humphrey’s Executor and has done so on the emergency docket notwithstanding the Court’s contrary assertions and has done so on that which should never be used to overrule or revise existing law.)

Given that  the Court has signaled a willingness to render Humphrey’s dead in prior cases, this will almost certainly occur when the Wilcox case arrives for substantive adjudication in the Supreme Court, and this is equally likely and more directly relevant with respect to the FTC on account of the case now pending in the U.S. District Court for the District of Columbia (Slaughter v. Trump) which is also making its way toward the Supreme Court and directly addresses Humphrey’s as applicable to the FTC. This case involves President Trump’s firing of the two Democratic FTC Commissioners. (Most recently, the District Court heard oral argument on the motion of the fired Commissioners for expedited summary judgment.)

In the days ahead, we will provide a more detailed discussion of how these developments affect the administration and operation of the FTC and the impact on health care providers.

^[1] The case which has been widely-reported is Humphrey’s Executor v. United States, 295 U.S. 602 (1935)

^[2] Significantly, in this case which only involves an emergency request for a stay, the Court goes on state that what it is doing here should not be read to apply equally with respect to the Federal Reserve, which it states is a differently structured and operated agency.