The DC Circuit’s Split Decision Prepares for a Supreme Court Showdown Favoring Trump

The DC Circuit Court of Appeals recently delivered a temporary win for Federal Reserve Governor Lisa Cook, blocking President Trump from removing her while litigation continues. However, the 2-1 ruling, particularly dissenting views from Justice Gregory Katsas, suggests that the Supreme Court might overturn this decision.

In the majority opinion authored by Judge Bradley Garcia, there’s an attempt to extend protections for civil service employees to high-ranking officials like Cook, essentially creating a constitutional right to a hearing before any removal occurs under the Federal Reserve Act. In contrast, Judge Katsas, taking a more textualist approach, argues against this extension, pointing out significant differences in the roles of civil servants and high-ranking officials.

A Glimpse at Congressional Intent in 1935

Let’s examine what Congress did back in 1935. They decided on a broad standard for removal, choosing a “for cause” standard over stricter alternatives. This decision followed a mistake from 1933 when Congress accidentally removed the protections for the Federal Reserve. When they recognized it in 1935, lawmakers were faced with a critical choice.

At that time, the Supreme Court had just ruled in Humphrey’s Executor vs. United States, which upheld limitations on the removal of FTC commissioners—indicating they could only be removed for inefficiency or misconduct. Congress chose not to copy this model for the Federal Reserve Act, with Senator Carter Glass emphasizing that the Fed was meant to be accountable to political oversight. If the Fed’s policies harmed public interest, the President could dismiss members “for cause” based on a written justification.

Katsas Recognizes the Constitutional Discrepancy

Judge Katsas aptly pointed out that the majority opinion missed a crucial distinction: Lisa Cook isn’t merely a civil servant; she is a U.S. chief officer, appointed by the President and confirmed by the Senate. The constitutional framework for such officials diverges significantly from that for regular civil employees, who are afforded protections under cases like Cleveland Board of Education v. Loudermill.

The Loudermill ruling, established in 1985, affirms that officials with a “for cause” protection enjoy constitutionally safeguarded property rights in their jobs. This precedent is critical, but Justice Garcia’s opinion attempts to extend this protection to Cook inappropriately, based on her statutory rights.

Independence and Accountability Concerns

Noah Feldman from Bloomberg recently discussed the potential consequences of the judicial review on the Federal Reserve’s independence, suggesting that without it, “for cause” protections would lack meaning. This viewpoint seems to misinterpret the original intent of Congress, which aimed for political checks and transparency.

Feldman argues that the lack of judicial review could undermine accountability, but this overlooks the structural measures intended to safeguard the Fed’s independence—like the lengthy terms and Senate confirmations. These features provide checks against arbitrary removals.

The Supreme Court May Lean Towards Trump

It seems that Judge Katsas’s reasoning aligns with traditional conservative legal thought. He refers to historical definitions of “for cause” from early legal dictionaries, indicating a broader intent by Congress in 1935. As he noted, this language gives the President considerable leeway in removal decisions.

The allegations against Cook appear significantly aligned with this historical context—they concern her conduct and capability as a financial regulator. Katsas emphasizes that the choice of a more expansive language reflected Congress’s intention to empower presidential discretion.

In contrast, Judge Garcia’s opinion leans towards accommodating a mix of interests without solid grounding in statutory text, which could run afoul of how the current Supreme Court generally prefers textualist interpretations.

Outlook for the Supreme Court’s Decision

As this case approaches the Supreme Court, there’s a good chance a conservative majority will favor Judge Katsas’s analysis over Judge Garcia’s. They are likely to grasp the legislative intent from 1935 and argue that Congress consciously opted against stricter limitations highlighted in Humphrey’s Executor.

The Supreme Court’s tendency toward textualism, alongside a distrust of judicial oversight over enforcement decisions, points toward a probable reversal of the DC Circuit’s ruling.

While Cook may see a temporary stay from Garcia’s ruling, the broader constitutional principles indicate that the Supreme Court will likely not affirm this approach. If they assess the 1935 legislative intent, along with the constitutional framework for high-ranking officials, Trump may find himself vindicated.

In essence, the independence of the Fed was never designed to rest on judicial review of presidential decisions. Instead, it relies on structural safeguards, such as Senate confirmation and long terms of office, which are inherently resilient regardless of the outcome of this case.

What Congress articulated in 1935 seems well understood by Judge Katsas today, and it’s probable that the Supreme Court is ready to concur.