The White House says the president will appeal to the Supreme Court.
A divided three-judge panel of the D.C. Circuit appeals court ruled on Monday night that President Trump may not remove Lisa Cook from her position on the Federal Reserve Board.
The White House has announced that it will appeal the Circuit’s decision to the Supreme Court. There is urgency because the Federal Open Market Committee (FOMC) begins its two-day meeting today, on the agenda of which is the question of whether or not interest rates should be cut. It is unclear whether the Court would intervene at this late hour.
In the majority of the divided panel were two Biden appointees, Judge Bradley N. Garcia, whose eight-page opinion was joined by Judge J. Michelle Childs. Going the other way was Judge Gregory G. Katsas, who was appointed by President Trump (in his first term). For what it’s worth, I believe Judge Katsas has the better of the argument in his 13-page dissent.
I detailed the relevant facts of the Cook controversy on Sunday, here.
At this preliminary stage, the courts are not rendering a final decision on the merits of Cook’s lawsuit against the president. At issue is whether the president may remove her while the lawsuit proceeds; Cook has sought a preliminary injunction that allows her to continue on the Fed’s board. As I related Sunday, her application was granted by Judge Jia M. Cobb, a Biden appointee to the federal district court in Washington, D.C. It was Judge Cobb’s ruling that the administration appealed to the D.C. Circuit.
Because the administration is not challenging the constitutionality of the Federal Reserve statute’s restriction on the president’s removal authority, the question in the case is what is meant by the statute’s prescription that a board member may be removed only for “cause.”
The Circuit majority reasoned that because she holds a position for which some cause must be shown before she can legitimately be terminated, Cook has a personal “property interest” of which she can be deprived only with some measure of due process — i.e., notice and an opportunity to be heard.
The Trump administration makes no claim that Cook was afforded such a process. Ergo, the majority reasons, she is likely to win her lawsuit on that narrow basis; Judges Garcia and Childs thus concluded that it was unnecessary at this point to delve into the question of what constitutes sufficient cause for removal. They did not assess Judge Cobb’s dubious holding that, under the Fed statute, cause is limited to misfeasance or malfeasance while in office. This is a critical issue because the president concluded that Cook should be removed based on allegations of fraud and misrepresentations in connection with private mortgages Cook entered into in 2021, two years before President Biden appointed her (and the Senate confirmed her) to serve on the Fed’s board.
Judge Katsas, to the contrary, takes issue with the notion that a high-ranking position of public trust in the United States government is a personal property interest of the appointee. Instead, principal officers of the United States hold offices that belong to the public. That makes them different from lower level “civil servants,” who arguably (under relevant statutes) have a property interest in their continuing employment absent some “for cause” removal requirement and due process (generally, before the Merit Systems Protection Board).
Katsas pointed out that neither the Federal Reserve Act nor the Administrative Procedure Act created a civil cause of action via which an appointed officer may sue to challenge actions taken by the president. Accordingly, Cook should be required to satisfy the nigh impossible standards for raising “an ultra vires claim” that she was denied due process. This requires establishing an “extreme” legal error — one that disregards a specific and unambiguous statutory directive. The force of this point is underscored by Cook’s contention, not that she has met this high bar, but that the Trump Justice Department waived this argument by failing to raise it in the lower court — a claim Katsas rejects.
In Katsas’s view, it is not clear that there was any error, much less extreme error. This is because he takes issue with Judge Cobb’s conclusion that cause could be established only by misconduct while in office. He counters that (a) there is nothing in the text of the statute limiting cause to performance while in office; (b) the common understanding of “cause” when the requirement was added to the Federal Reserve statute in 1935 included matters that went to a person’s fitness to serve, which is obviously not limited to performance in office; and (c) any other interpretation of the term would mean an appointee could engage in outrageous misconduct that would have been disqualifying prior to confirmation but that was not uncovered until after she was in office.
No one doubts that, in the absence of a statutory cause standard for removal, the president would have the constitutional power to fire at will any high-ranking official who wields some executive power. Katsas’s interpretation of the Fed statute’s cause standard, then, calls for little beyond an at-will standard: basically, something that passes the low threshold of being rationally based on some indication of misconduct relevant to fitness.
Let’s assume there is at least some evidence of financial fraud against Cook in connection with documents involving hundreds of thousands of dollars in loans — not necessarily proof beyond a reasonable doubt, but some articulable evidence. On the standard Katsas describes, that would be an objectively rational basis for a president to remove the office holder. (After all, had it been known at the time, it would have been a perfectly reasonable basis for a president not to appoint her in the first place, or for the Senate to deny confirmation, even if she is not guilty of a crime.) And when a president has such a basis for acting, courts do not inquire into the president’s motives or sincerity. (This is analogous to the Supreme Court’s rationale in last year’s immunity ruling, Trump v. United States: If the president has the legitimate power to take an action, it is not the role of judges to second-guess why the president is taking the action.)
To be clear, the discrete issue for present purposes is not whether Cook is guilty of bank fraud. It is whether she has a viable objection to Trump’s removal of her on suspicion of financial improprieties under circumstances in which (a) Congress has given the president authority to remove a board member for what, in his judgment, is cause; (b) Congress has not created a civil legal action allowing Fed board members to sue the president in court over their removal; (c) the board member is dubiously claiming a personal property interest in a high-ranking office of public trust; and (d) to the extent the board member may arguably have some inchoate property interest, a wrongful denial of that interest could be satisfied by, for example, a suit for money damages (e.g., back pay) — i.e., the relief is not necessarily that she should get to keep the board position.
In the piece on Sunday, I expressed doubt that the Supreme Court would intervene because the administration is not claiming that the president can remove Cook at will, and Cook has produced some evidence that calls into question whether she intended to deceive her lender(s) in connection with transactions that had nothing to do with her official duties. I still believe the justices will be reluctant to wade into this messy controversy right as the FOMC meeting is set to begin, with Cook participating. But Judge Katsas — a superb originalist jurist who is respected by the Court — makes a strong case that President Trump’s removal of Cook should stand while her case is litigated on the merits.