1935 case involving Wabash College grad back in U.S. Supreme Court spotlight

For 90 years, a U.S. Supreme Court decision centered on the disputed firing of a Federal Trade Commission member has protected independent federal agencies from changes in administrations and tempered the desire of any president tempted to remove agency leaders without cause.

The 1935 case Humphrey’s Executor v. U.S., sprang from a lawsuit filed by the estate of William Humphrey, an Indiana native and Wabash College graduate, who was fired from the FTC by President Franklin D. Roosevelt.

Ultimately, the nation’s high court ruled that Humphrey’s firing was improper. But the case is at issue again after President Donald Trump fired the FTC’s two Democratic commissioners, Alvaro Bedoya and Rebecca Kelly Slaughter earlier this year.

Slaughter filed a lawsuit challenging her dismissal, and the U.S. Supreme Court will hear the case in December, bringing new scrutiny to the Humphrey ruling.

There have been justices in the past two decades who have stated they thought Humphrey was wrongly decided, said Gerard Magliocca, an Indiana University Robert H. McKinney School of law professor.

“Now is the first time we’ve actually had a test of it,” Magliocca said.

Steve Sanders, an IU Maurer law professor, noted that the high court ruled in the 2020 case Seila Law LLC v. Consumer Financial Protection Bureau that restrictions on the removal of Kathy Kraninger, CFPB director, were unconstitutional, although Sanders pointed out that the structure of that agency is different than the FTC.

In an opinion by Chief Justice John Roberts, the high court ruled that the removal restrictions violated the Constitution’s separation of powers.

In that context, Roberts noted that the Supreme Court had recognized two limited exceptions to the president’s otherwise unlimited removal power, with Humphrey being one of those exceptions.

Sanders said he doesn’t feel the Roberts court has completely overturned legal precedent set by Humphrey, but its decisions have tended to chip away at it.

“I think what the court will do is differentiate the way the FTC operated in the 1930s with the way the FTC operates today,” Sanders said, adding that the agency today operates more like a traditional executive department.

Joel Nagle, counsel in Stoll Keenon Ogden’s Indianapolis office, said discussion around the possibility of Humphrey being overturned has been circulating since the Reagan era, with it centered around the unitary executive theory and the idea the president exercises complete control over the executive branch.

Nagle said if the Supreme Court overturns Humphrey, the ramifications could spill over from the FTC to other federal agencies, depending on how the court’s opinion is written.

Humphrey’s Indiana ties

Humphrey was born near the village of Alamo in Montgomery County on March 31, 1862. He would go on to graduate from nearby Wabash College in 1887 and was admitted to the Indiana bar in the same year.

He worked as an attorney in Crawfordsville before moving to Seattle in 1893, where he would launch his political career.

He served as a Republican Congressman from Washington state from 1903 through 1917. He returned to private practice after a failed Senate bid, but remained active in politics.

In a 1924 letter to the White House, he “pled that he could soon be insolvent without the FTC appointment.” So President Calvin Coolidge nominated him and the Senate confirmed him, 45-10. Coolidge successor Herbert Hoover, also a Republican, reappointed Humphrey.

But a few months after taking office in 1933, Democratic President Franklin D. Roosevelt sought Humphrey’s resignation, preferring his own choice at an agency that would have a lot to say about the New Deal.

When Humphrey refused, Roosevelt fired him, despite the provision of law allowing the president to remove a commissioner only for “inefficiency, neglect of duty, or malfeasance in office.”

After Humphrey died the next year, the person charged with administering his estate, Humphrey’s executor, sued for back pay.

The justices ruled unanimously that the law establishing the FTC was constitutional and that FDR’s action was improper.

On a section of the agency’s website detailing FTC history, Humphrey is described as a “boisterous man and a clamorous public official. He dominated the agency for a time by the force of his personality, and he continues to dominate discussions about FTC history between his arrival in 1925 and his dismissal in 1933.”

A principal opponent of Humphrey’s on the FTC at this time was another Coolidge-appointed Republican, Abram Myers.

The agency described Humphrey as generally seeking a relatively limited government role, “preferably as a facilitator for business, unless conduct involved deception or fraud,” while Myers had a more activist agenda.

Supreme Court stays reinstatement, schedules arguments

Humphrey’s legal win looms large as the Supreme Court prepares to hear Slaughter’s case.

In September, the D.C. Circuit Court of Appeals ordered that Slaughter be reinstated to the FTC, citing Humphrey.

The Supreme Court granted a stay of that order and allowed the case to be argued in its December session, with both parties directed to address the following questions:

—Whether the statutory removal protections for members of the Federal Trade Commission violate the separation of powers and, if so, whether Humphrey should be overruled.

—Whether a federal court may prevent a person’s removal from public office, either through relief at equity or at law.

While opinions vary among legal observers on whether Humphrey will be overturned, Magliocca feels certain that it will.

He said some independent federal agencies are now considered more political than others, with the professor citing the FTC, National Labor Relations Board, Federal Communications Commission and U.S. Securities and Exchange Commission as some examples.

For that reason, he said the Supreme Court “is clearly” going to overturn Humphrey, likely on a 6-3 vote.

“That’s about as safe a bet as there is,” Magliocca said.

Nagle said he also believes the Supreme Court will overturn Humphrey, either by a 6-3 or 5-4 margin.

“I don’t see much hope for Mr. Humphrey’s case to survive this,” Nagle said.

Magliocca said the high court has already upheld Trump firings at other federal agencies, something Justice Elena Kagan noted in her dissent of the court’s stay and agreeing to hear Trump v. Slaughter.

Kagan wrote the court had already permitted Trump earlier this year to fire without cause members of the National Labor Relations Board, the Merits Systems Protection Board and the Consumer Product Safety Commission.

Faegre Drinker Biddle & Reath attorneys Alexander Preller and Ryan Funk have extensive experience dealing with the NLRB, with Funk previously serving as a field examiner and field attorney with the agency.

Funk said that the NLRB has more than 1,000 employees and 99% of the agency’s work would go on even if there were removals of board members.

He and Preller said much of the debate surrounding Humphrey centers on whether an agency is acting in an executive capacity under the president’s authority or as a legislative/judicial independent panel of experts..

“It (the NLRB) does feel to me like an agency that enforces the law, which is traditionally an executive function,” Funk said.•