On Monday, June 21, 2021, SCOTUS decided Arthrex, and the question arises whether Arthrex is instructive with respect to what to expect from SCOTUS in Collins. Now, we may have Collins decided as soon as Wednesday, June 23, 2021, so any cause for speculation may be short lived. But here are my quick thoughts on what SCOTUS did, and what Arthrex may portend for Collins.
Very briefly, SCOTUS held that Administrative Law Judges (ALJs) hearing patent disputes under the Patent Trial and Appeal Board (PTAB) were unconstitutionally appointed, insofar as they were principal officers (they exercised significant authority not subject to review) that were not appointed by, or subject to control by someone who was appointed by, POTUS with advice and consent of the Senate.
Importantly for our purposes, the Chief Justice ordered not only prospective relief, severing the provision of the governing statute that prevented the PTAB Director (who is accountable to POTUS) from reviewing and approving the ALJs’ decisions, but also “backward” relief for the Plaintiff, remanding the case back to the Director for the opportunity to review the Arthrex ALJ patent determination.
Recall that the 5th C en banc in Collins found FHFA to be unconstitutionally structured with a single Director removable by POTUS only for cause, but provided only prospective relief, leaving the net worth sweep (NWS) intact. Collins plaintiffs petitioned for cert to review this denial of backward relief, which was granted by SCOTUS.
Now the speculation. Arthrex supports the notion, set forth recently in Seila Law and also going back to Bowsher, that SCOTUS will grant some form of backward relief to a private party adversely affected by an action by an unconstitutionally structured agency. Will this backward relief take the form of voiding the NWS in Collins? Will SCOTUS find some halfway point, in the sense that it did in Arthrex, where it provided the PTAB Director the opportunity to review the ALJ determination in the Arthrex case, rather than voiding that determination and ordering Arthrex a new patent hearing?
It is not clear to me what such a halfway point would be in Collins. The constitutional flaw in Arthrex was not subjecting ALJ determinations to review by the Director, who is accountable to POTUS’s at will removal. Thus, it makes sense for SCOTUS to grant as backward relief this opportunity for Director review. There is a symmetry in the Arthrex forward and backward forms of relief.
However, in Collins, the constitutional flaw was that the FHFA Director (and ostensibly the acting director who executed the NWS) himself was not accountable to POTUS at will removal. There was no one on the scene who was accountable to POTUS who could supervise the FHFA Director. While SCOTUS could point out that even if the NWS was voided, it could be subsequently “ratified” by a new POTUS removable, Senate confirmed FHFA Director, that Director currently doesn‘t exist…and the question of ratification brings with it a whole host of issues, such as how does an agency create an administrative record to ratify a decision that occurred nine years ago…does it have to take into account all of Collins plaintiffs’ discovery since then, which is adverse to FHFA and Treasury and serves to impeach the appropriateness of the NWS at the time it was executed?
So I am cautiously optimistic…the good news is that Arthrex granted backward relief. While it did so only by a halfway measure, it is hard to see how SCOTUS could craft a similar halfway measure in Collins, given the nature of the constitutional flaws in each case.