Last Friday, the Supreme Court, in a 6-3 opinion in Trump v. CASA, Inc. covering three separate lawsuits that were consolidated for purposes of argument and decision, held that Federal Courts may not grant a universal injunction against the President implementing his Executive Order limiting birthright citizenship. (A “universal injunction” is an injunction which purports to confer benefits on third parties who are not named-plaintiffs in the lawsuit.). The lawsuits were brought by individual pregnant women, two organizations and a number of states. The three Federal District Courts issued universal injunctions after holding that the Executive Order was unconstitutional. The three Courts of Appeals affirmed. The Government then sought partial stays in the Supreme Court of the lower courts’ orders pertaining to the universal injunctive relief but not the orders holding that the Executive Order is unconstitutional. The Government did not seek stays of the orders granting injunctive relief to the plaintiffs, including the members of the organizational plaintiffs. As a result, the Supreme Court did not have in front of it and did not consider at all the constitutionality of the Executive Order or the legality of the organizations to assert claims on behalf of their members.
The Supreme Court noted in a footnote to the majority opinion that it did not consider the possible application of Section 706 of the Administrative Procedure Act, presumably because the lawsuits did not challenge the validity of any federal agency regulation. Section 7(b) states, in relevant part:
§706. Scope of review
To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—
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(2) hold unlawful and set aside agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.
The question arises whether a court might in effect “set aside” or nullify an agency regulation and thereby implicitly benefit all persons harmed by the regulation without granting an injunction which under CASA may only benefit the named plaintiffs. That might be a way for a plaintiff challenging a regulation to avoid the holding of CASA.
The majority opinion held that the injunctive relief must be limited so that it applies only to the individual plaintiffs and the members of the two organizational plaintiffs. The Court did not act on the stay sought by the Government against the application of the universal injunction granted by the District Courts to the States and remanded that issue to the District Courts for further consideration.
This article will not discuss the originalist reasoning employed by the majority of the Court in striking down universal injunctions nor the reasoning of the concurring or dissenting opinions. We will also not consider the impact that this opinion may have on the “checks-and-balances” framework of our Constitution and the fact that this opinion seems to confer extraordinary power on the Executive branch to the detriment of lower Federal Courts which will apply to many other Executive Orders that have been or will be issued. We are sure that such an analysis will be undertaken by many academics. Instead, we will focus exclusively on the practical application of the holding to the consumer financial services industry, which increasingly initiates lawsuits seeking to enjoin statutes and regulations that will harm their businesses. The best examples of that are the numerous lawsuits that were initiated by the industry through their trade groups challenging regulations promulgated by the CFPB under former Director Rohit Chopra.
In initiating those lawsuits, the trade groups, relying upon Supreme Court precedent that enables a trade group to stand in the shoes of its members sought to enjoin the CFPB from enforcing a regulation based on a wide range of legal theories. Associational standing allows an association representing members with standing to bring the case to court. Under Hunt v. Washington State Apple Advertising Commission, 433 U.S. 333 (1977), to satisfy the requirements for associational standing, a trade group must show that “(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.”
Sometimes, the trade groups have sought universal injunctions that would apply to non-members of the trade groups. At other times, in order to simplify the number of issues before the court, the trade groups have sought injunctions that would only benefit their members. As a result of the new Supreme Court opinion in CASA, the trade groups will no longer be able to obtain universal injunctions. The trade groups will only be able to seek injunctive relief that will benefit their members unless they decide to file their lawsuits as Rule 23(b)(2) class actions (class actions which seek only equitable, non-monetary relief).
The majority opinion basically provided a blueprint or roadmap for plaintiffs who are seeking universal injunctions by instructing them to file class actions in the future in which the class will be defined to include all persons harmed by the regulation. Recognizing that this will substantially complicate and prolong these types of lawsuits, the majority opinion advised that a plaintiff could seek a temporary restraining order or preliminary injunction on behalf of the putative class and that the plaintiff might be eligible to obtain that relief before a class actually gets certified. One of the organizational plaintiffs in the birthright citizenship cases file an amended complaint last Friday afternoon seeking a class action accompanied by a motion seeking to certify a class and a separate motion seeking a TRO and preliminary injunction. It will be important to follow further proceedings in that case to see whether the plaintiff actually obtains a preliminary injunction that is upheld on appeal. The Government is expected to oppose both motions.
It should be noted that Rule 23(b)(2) class certification is not just a “walk in the park.” It requires the plaintiff to establish the following elements.
Rule 23(a):
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
- the representative parties will fairly and adequately protect the interests of the class.
Rule 23(b)(2):
- the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.
An order granting or denying certification of a class is appealable at the discretion of the court of appeals.
It is possible that some trade groups will decide not to seek class certification because of the added cost and the view that there is no need to benefit non-members. If that occurs, then non-members will either need to initiate their own lawsuits or possibly seek to intervene in the existing lawsuit in which a court has already granted injunctive relief and then file a separate motion for a preliminary injunction.
Another possible alternative that may work is to become a member of the trade group that has already obtained an injunction benefiting its members (This, of course, could be a nice way for a trade group to recruit new members.) This latter strategy may not work in all instances either because the non-member is not eligible to join the trade group or because a court concludes that the injunction only applies to those entities that are members of the trade group at the time the injunction is granted.
It makes no sense for a federal agency to be able to enforce a regulation only against third-parties that are not beneficiaries of an injunction. The agency should agree not to enforce the regulation against non-members. However, our experience with the CFPB’s reaction to injunctions granted only to members of a plaintiff trade group demonstrates otherwise.
We are also concerned that the Supreme Court may revisit its precedent favoring associational standing as the CFPB has previously urged courts to do. Justice Thomas in a concurring opinion in a recent case has urged the Court to reject associational standing and to instead require that all plaintiffs must have standing on their own in FCA v. Alliance for Hippocratic Medicine, 602 U.S. 367, 397–405 (2024) (Thomas, J., concurring).
It seems that the safest approach would be for the plaintiffs to file class actions if they want to enjoin a federal statute, regulation or Executive Order. While that seems like a rigmarole which shouldn’t be necessary, it may be the only way of ensuring success in obtaining injunctive relief for a wide range of affected entities, rather than just the named plaintiff.