Justice Department Moves to Roll Back Rogue Texas Judges

“The country generally has outgrown our present judicial system.” – Abraham Lincoln

In 2012, President Barack Obama announced a policy – Deferred Action for Childhood Arrivals (DACA) – that people illegally brought to the U.S. as children would not be deported and could legally find employment. In 2015, a conservative Texas judge enjoined this policy, putting it into legal jeopardy as it works its way through the courts. On the other side of the aisle, in 2017, President Donald Trump issued an executive order barring immigration from seven different nations; a liberal judge in turn blocked this policy. Both Obama and Trump were elected as policymakers, but their aims were thwarted by an unelected group of legal elites – Federal judges. These kinds of conflicts over policy, which used to happen in legislatures, have increasingly moved to courts.

And it’s not on partisan questions. Over the past few years, big business has been asking judges – particularly those in Texas – to block policy they don’t like. In late July, a court that covers Texas, Louisiana, and Mississippi, the Fifth Circuit, struck down a Department of Transportation rule saying that airlines have to disclose all fees upfront, in part alleging that the burden to airlines of having to change their websites was overwhelming. A whole host of laws and rules, on everything from airlines to student debt to pollution to credit cards to hedge fund and private equity disclosures to banking, are now being held up or vacated by judges in Texas and Louisiana.

As much as we might wish otherwise, judges are political. An aggressive judiciary engaging in assertive policymaking over other branches of governance has been central to virtually every major conflict in American history, from Bacon’s Rebellion to the American Revolution to the Civil War to the New Deal.

Today, while it’s arguable whether we’re in a historically elevated moment of conflict, the process of governance is becoming deeply confused, with in some ways similar institutional forces at play. A set of rogue judges have started to seize power over the lawmaking and executive functions of our government, vetoing laws and regulations whose policy aims they dislike. And they are creating a split within the judiciary, between most judges who try to apply the law narrowly and a small set imposing policy preferences to override democracy nationwide.

Right now, the center of the conflict just moved to the Federal Trade Commission’s rule against non-competes, because a Texas judge voided that rule in August, while a Pennsylvania judge upheld it a few weeks earlier. On Wednesday, in a quiet but important filing unnoticed by the entire media, the Biden Department of Justice filed a brief asking the the court in Philadelphia to ignore a nationwide injunction put out by a court in Texas. In doing so, they launched a quiet and potentially significant attempt to roll back out of control judges.

It’s not just a rogue set of judges at issue. Layered onto this dynamic is an institutional problem with the modern judiciary itself, with judges are routinely undermining federalism, blocking state and Federal laws and regulations outright instead of doing what they should do, which is to decide the cases before them and nothing more. Two days ago, for instance, a Federal district court judge enjoined a Utah law mandating that social media sites verify the age of their users and restrict certain features for children, on the grounds there’s not enough evidence social media harms kids and so the state has no compelling interest in violating the First Amendment rights of social media corporations. That’s a wildly aggressive choice, far beyond the dispute at hand.

This situation is distorting our organs of justice. One consequence is that Congress simply doesn’t legislate much anymore, focusing on confirming judges, who are now perceived of as super-legislators. “Day in and day out, the work of the Senate has been reduced to voting to pack the courts with Trump-appointed, lifetime federal judges, as fast as we can,” wrote Senator Tina Smith in 2019. It hasn’t been much better these last few years under a Democratic administration. Another consequence is that large corporations now finance trade associations, such as NetChoice, whose sole focus is forum shopping for the best judge to get rid of laws they dislike. It’s a crazy notion, that courts, instead of hearing actual disputes, are now hearing theoretical complaints about laws, and acting on them.

And that brings us to the conflict over non-competes. Since the mid-2010s, policymakers and citizens have undertaken a broad-based campaign to end the use of non-compete agreements, which are contractual provisions barring employees from working for rivals. Mostly the legal reforms are happening at a state level, but the capstone to this campaign was the Federal Trade Commission issuing a rule in April that barred these contracts as “unfair methods of competition,” using the FTC’s authority in its statute to “make rules and regulations for the purpose of carrying out” its obligations to bar “unfair methods of competition.”

It was a bold choice by FTC Chair Lina Khan, but one that was broadly popular, with more than 90% of the tens of thousands of comments being in favor. The commission hasn’t issued rules under this authority since the 1970s, though at that time, it did issue many such rules that were upheld. Since the 1990s, non-competes have become an important tool for private equity and large corporations to hold doctors and other professionals in de facto bondage, and so making these provisions unlawful caused a collective scream from consolidated capital. FTC clearly has authority according to 1970s circuit courts, but that precedent doesn’t matter to a generation of corporate judges. The result, naturally, was litigation over abstract questions and forum shopping, precisely what the judiciary shouldn’t be dealing with.

There are currently three cases in district courts contesting the non-compete ban, with three different judges coming to different conclusions about whether this rule is legal.

• In North Texas, Judge Ada Brown issued a ruling in a case of an accounting company challenging the ban, ruling that the FTC did not have the authority bar non-competes, and that the FTC rule was “arbitrary and capricious.” Brown said the authority used by the FTC was a mere ‘housekeeping statute,’ despite its use to put forward many significant economic rules in the 1960s and 1970s.

• In Pennsylvania, Judge Kelley Brisbon Hodge ruled in a different case on the same subject, that the FTC had authority to put forward the rule, and that the proposed ban on these agreements was legal. It’s a tightly reasoned opinion where Hodge hewed to old precedent and the clear text of the statute.

• In Florida, Judge Timothy Corrigan meekly said that the commission had authority to issue rules, but that this particular rule was too broad based on the recent Supreme Court decision on something called the major questions doctrine.

Finally, a few weeks ago, Brown issued another ruling that ‘set aside’ the FTC rule, meaning that she struck it down for the entire country. A lot of lawyers are telling their clients that the FTC rule is dead and they no longer need to worry. The problem is that Pennsylvania litigation is still ongoing, which means that a Texas judge reached all the way over to Philadelphia and ruled on disputes that were not before its court.

In its brief, the Biden made an aggressive argument to limit judicial reaching, arguing that “fundamental constitutional and equitable principles establish that a court should limit relief to the plaintiffs where that relief is sufficient to remedy the plaintiffs’ injuries.” And this decision is not some small bore choice by a rogue FTC, it was signed by a high-level appointee in the Department of Justice, Principal Deputy Assistant Attorney General Brian Boynton. It’s a legal strategy by DOJ, which is run by the establishment’s establishment, Merrick Garland.

Here’s Boynton:

Notwithstanding that a single district court in the Northern District of Texas has “set aside” the Rule, this Court should not stay this case and thereby deprive other courts and the judicial system of the benefits that would flow from this Court’s considered views on the important questions presented in this case-questions on which courts in three circuits have now reached varying conclusions.

It’s hard to overstate the importance of the liberal elite seeking to reduce the power of the judiciary. Since the 1960s, the culture of liberalism has flowed through the judiciary, with the most important job for a young lawyer being a clerk on the Supreme Court, and the ultimate capstone in a career to become a Federal judge. (To put a number on it, Supreme Court clerks get $500k signing bonuses when going to work in big law.) By contrast, lawyers who write laws in elected legislatures are slumming it, having to deal with grubby voters instead of making policy wearing robes in erudite chambers.

And yet, the judiciary has become so fraught that liberal legal elites are turning on their vaunted friends in robes.

In some ways, such a move was both inevitable and long overdue. The choice of the FTC non-compete is likely driven by the fact that there are multiple live court cases involving the rule in different districts, an overreaching conservative judge in Texas coming to one conclusion that overrules longstanding precedent, and a Philadelphia judge reaching a different one. Brown’s decision is so lawless that it’s a highly disturbing opinion for the administration in general. And there are, as I mentioned above, many rules that are being hamstrung by corporate friendly judges in Texas.

It’s overdue because these national injunctions is relatively new. Most people think that when a Federal judge blocks a law, that’s how our legal system works and how it has always worked. In fact, there is no rule that allows a judge to strike down a law or regulation nationwide, and they only started doing that in the 1960s. Judges traditionally handled only disputes that came before them, with their rulings limited to the parties at hand. That’s not to say judges didn’t have authority to decide on constitutional or legal questions, because they did. As just one example, judges blocked 1600 different New Deal rules and regulations in a single summer. But they didn’t issue broad-based injunctions so much as declined to allow a law or rule to be enforced against the specific party before them. Congress or state legislatures would act to fix the laws after judges declined to enforce them over constitutional or statutory concerns.

As scholar Samuel Bray noted, the first nationwide injunction was in 1963, when judges just kind of started doing it. After judges began experimenting with nationwide injunctions, it gradually became a normal tool in the toolbox. And since the 1990s, judges regularly issue injunctions voiding regulations or laws for parties not before their court (or doing something similar called vacatur which is a Latin term meaning ‘the same thing as a national injunction but not for legal pedants with tenure’).

The result, Bray argues, is a corruption of the judiciary, where people will search for a judge somewhere in the country to block policies they don’t like. And it’s pretty hard to argue the point. Here’s a paper showing that the judiciary is becoming corrupted and partisan as a result.

Interestingly, it’s conservative Supreme Court Justices Clarence Thomas and Neil Gorsuch who dislike nationwide injunctions, because they impede legal discovery. As Gorsuch put it, such a system “encourages multiple judges and multiple circuits to weigh in only after careful deliberation, a process that permits the airing of competing views that aids this Court’s own decision-making process.” In other words, it’s not a partisan problem. The question here is not whether we agree with the rule or regulation being overturned, but whether judges should have the authority to overturn those rules – not just as applied to the parties before them, but to every single person in the country.

If this judicial tool isn’t rolled back, we’re headed into lawlessness. Take the recent airline junk fee rule put forward by the Department of Justice. It’s very annoying to try and book a plane ticket, and then at the end of the process, be hit with an additional fee of some sort by a booking site or airline. These kinds of undisclosed junk fees are pervasive, and they are also unfair, something that most people believe the government needs to address. Over the course of the last few years, the Department of Transportation put together a rule to do just that, under its authority to bar unfair methods of competition. These kinds of rules are not done lightly, and require enormous amounts of data and analysis. It was slated to go into effect, but again, a Texas judge stepped in to block it.

It won’t end there, of course, because the goal is to institutionalize in law without going through elected legislatures a certain authoritarian view of commerce. Blocking new rules is just the first step. The airline lobby is now gunning to overturn a bunch of old rules on which we rely. For instance, the government prohibits raising the price of a ticket after it’s been purchased. They want that one gone. The rule that says airlines have to show on-time and cancelation data during the fare purchase process? The prohibition on charging multiple baggage fees for one flight? The 24-hour reservation hold rule? The rule saying you can’t overheat the cabin during tarmac delays? The rule mandating prompt wheelchair assistance? Penalties against chronically delayed flights?

They want all of these gone. Now walk through every administrative agency that has put out a regulation on something, and that’s what we’re talking about. If judges keep issuing national injunctions, corporate lobbyists won’t have to go to Congress to get a law passed to eliminate popular policies. They can simply find one judge out of the roughly seven hundred on the bench, and get a ruling.

Now, there are obviously arguments on the other side of this one. If a law is unconstitutional or if the enforcement of a law is outside the statute, does it really make sense to allow the state to continue enforcement even if one judge finds the law unenforceable? Well, the answer is that we did that for about 200 years, and it had its downsides, but it was a functional system. There are reforms that don’t go all the way to eliminating nationwide injunctions. But the point is that the power to block laws and regulations isn’t something to be used lightly, and right now, too many judges are acting as if they get to use their branch of government to veto policies they don’t like.

And finally, a certain slice of the legal elite have decided they’ve gone too far.

Thanks for reading. Send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.

cheers,

Matt Stoller