Welcome back to Ninth Circuit Review-Reviewed, your monthly recap of administrative law before arguably “the second most important court in the land.”

This month, we tackle Nebraska v. Su, in which a split three-judge panel sided with the challengers against President Biden’s $15 minimum wage mandate for federal contractors. Besides engendering a direct circuit split, this important case further establishes the Ninth Circuit as an outlier when it comes to reviewing the statutory president.

A Brief History of Policymaking-by-Procurement

Since the New Deal era, the government has leveraged its tremendous buying power to make policy by placing conditions on public contracts. To win the contract, contractors must “voluntarily” submit to these conditions. 

Constitutional authority over procurement lies, in the first instance, with Congress, which wields “unrestricted power” to “fix terms” on government spending. Although Congress is paramount in this space, presidents also operate as a delegee. Here, the key authorization is the Federal Property and Administrative Services Act. Congress passed FPASA in 1949, after World War II had exposed widespread disorder in the federal procurement process. The idea behind the law was to improve the efficiency of federal contracting by centralizing its administration.

Under FPASA § 121, “The President may prescribe policies and directives that the President considers necessary to carry out this subtitle.” For the most part, presidents historically have read this delegation on its own terms, as a grant of administrative authority to initiate and coordinate agency action. See, e.g., EO 12979, § 1 (Oct. 25, 1995) (directing agency heads to prescribe procedures for the resolution of bid protests).

Sometimes, however, presidents have read FPASA as delegating a free-wheeling grant of regulatory authority. This is done by combining § 121 with the FPASA’s statement of purpose, codified at § 101, to make procurement “economical and efficient.” Under this reading, FPASA authorizes the president to “prescribe policies … [he] considers necessary to carry out” the Act’s goal of making procurement “economical and efficient.” Thus, various presidential administrations (of both political stripes) have asserted far-reaching policies, of which Biden’s minimum wage mandate is only the latest. See Bradford v. Dept. of Labor, 101 F. 4th 707, 727 (CA10 2024) (collecting examples of orders based on purposive readings of FPASA).

Circuits Split on Presidential Power under FPASA

The Supreme Court has held that Congress has plenary power over federal procurement. But the Court never has addressed the extent of the president’s delegated authority to make policy through federal contracting. On this matter, lower courts were divided before Nebraska v. Su.

For decades, the D.C. Circuit has adopted a highly deferential framework to review the president’s purposive interpretations of FPASA. That court will uphold presidential action with a “sufficient nexus” to the statutory purpose of “economical and efficient” procurement. This is an impossibly forgiving standard, akin to rationality review of legislation. According to the D.C. Circuit, this “nexus” standard is so “lenient” that an executive order can stand even if there is “a rather obvious case that the order might in fact increase procurement costs” rather than contributing to economy and efficiency.  

Earlier this year, in Bradford v. Department of Labor, the Tenth Circuit adopted the “nexus” standard in sustaining President Biden’s $15 minimum wage order—the same order at issue in Nebraska v. Su. (Mr. Bradford is represented by the Pacific Legal Foundation, where I work).

On the other side of the ledger, the Sixth Circuit and Eleventh Circuit recently rejected the purposive “nexus” test in denying President Biden’s authority under FPASA to issue a vaccination requirement for employees of government contractors. These circuits eschewed deference altogether; instead, they applied the tools of statutory construction in what amounted to de novo review.

The Fifth Circuit elided the “nexus” test in a challenge to the same vaccine mandate. That court instead employed the major questions doctrine to deny the president’s purposive interpretation.

And before its new decision in Nebraska v. Su, the Ninth Circuit had become the only appellate court to uphold President Biden’s vaccine mandate for contractor employees. See Mayes v. Biden.  Embracing the permissive “nexus” test, Mayes adopted a broad reading of presidential power. Crucially, however, the court later vacated Mayes as moot. In the Ninth Circuit, vacated opinions “remain persuasive, although not binding, authority,” so Mayes lost its precedential effect.

Nebraska v. Su: The Procedural Background

Shortly after taking office, President Biden issued Executive Order 14026, requiring federal contractors to pay employees a $15 minimum wage. Per the EO’s directions, the Labor Department soon issued regulations to implement the order.

Five states challenged the minimum wage mandate in the district court of Arizona. The challengers brought nonstatutory (ultra vires), APA § 706(2)(A) & (C), and constitutional claims.

The states sought a preliminary injunction; the government moved for dismissal. The district court sided with the latter party and dismissed the complaint.

The states timely appealed, seeking review of the district court’s ruling on their nonstatutory and APA claims.

Nebraska v. Su: The Rundown

In Nebraska v. Su, a split panel reversed the district court’s order dismissing the complaint, vacated the district court’s order denying a preliminary injunction, and remanded the case for further proceedings consistent with its opinion.

Judges Ryan Nelson and Danielle Forrest formed the majority; Judge Gabriel Sanchez dissented. Each of the majority’s holdings is discussed in turn below.

Holding #1: Ultra Vires

The majority found the Ninth Circuit’s prior reasoning in Mayes v. Biden to be unpersuasive. Rejecting the deferential “nexus” test adopted by the D.C. and Tenth Circuits, the Su majority instead joined the Sixth and Eleventh Circuits in “conclud[ing] that § 101 is not a source of the President’s authority.” Because the president could point to no other source of authority, the majority concluded that “the minimum wage mandate exceeds the authority granted to the President … in the FPASA.”

Besides entrenching the circuit split over the “nexus” test, Nebraska v. Su sets up a direct split with the Tenth Circuit, which had come to the opposite conclusion on the minimum wage mandate in Bradford v. Department of Labor.

Holding #2: Major Questions Doctrine

Independent of its ultra vires finding, the Su majority also considered whether President Biden’s minimum wage mandate violated the major questions doctrine. Specifically, the states alleged the mandate is a major policy that requires, but lacks, a clear statutory basis.

Performing a standard major questions analysis, the majority determined that Biden’s mandate did not trigger the doctrine because it was not a “transformative” expansion of authority.

Despite denying the major questions claim, the court still made important doctrine. Simply by undertaking a major questions analysis, the majority shifted the law of the circuit. In Mayes v. Biden (discussed above), a unanimous three-judge panel categorically exempted the president from the major questions doctrine. But, again, Mayes had been mooted, meaning the decision carried only persuasive effect. In Su, the majority determined Mayes is unpersuasive.

In a thoughtful concurrence (to the controlling opinion he wrote), Judge Nelson elaborated on why, in his view, the major questions doctrine applies to presidential action. In a nutshell, he believes it is “implausible” that “our normal interpretive process should turn on the identity of the Executive Branch officer to whom Congress delegated power.”

The upshot is that the law of the circuit shifted subtly on the major questions doctrine. Before Su, there was persuasive authority in the Ninth Circuit that the doctrine does not reach the president; after Su, there is binding authority that the president is at least subject to the doctrine (even if the Su majority did not ultimately find that the doctrine applied in this case).

Holding #3: APA 706(2)(A)

For adlaw nerds, perhaps the most intriguing development in Nebraska v. Su is its holding on the APA. This part of the decision has tremendous potential implications for executive power under the incoming Trump administration.

The APA provides regulated parties with a cause of action and a waiver of sovereign immunity to challenge agency action that is “arbitrary and capricious.” However, in Franklin v. Massachusetts, the Supreme Court concluded that the APA does not reach the president. As a result, lower courts generally refuse to take a “hard look” into presidential action. The Federal Circuit, for example, won’t review the president’s regulations. And in the D.C. Circuit, the court has erected pleadings barriers that make meaningful review of the president’s fact-finding and decision-making virtually impossible.

Turning back to Nebraska v. Su, the states argued that the Labor Department’s implementing regulations were “arbitrary and capricious” because the agency failed to explain itself and consider alternatives. In response, the government argued that the agency had no discretion to deviate from the president’s directive and, therefore, the president’s immunity from APA challenges extended to the implementing regulations. The district court agreed with the government. At the time of briefing in Su, no other circuit court seems to have reached this question, although two other district courts previously had sided with the government on the matter. The Su majority reversed. According to the court, the district court’s holding “conflicts with the plain language” of the APA:

As a textual matter, final agency actions, even if implementing an executive order, are subject to judicial review under the APA. … [T]he APA’s language is plain. The APA applies to any “final agency action.” 5 U.S.C. § 704. No language in the APA prevents or excepts review of an agency action that implements a presidential action. See, e.g., id. Thus, as a textual matter, final agency actions, even if implementing an executive order, are subject to judicial review under the APA.

The majority’s reading of the APA clearly was influenced by Prof. Kathryn Kovacs’s excellent work in this area, which the court cited twice. (This is a sterling example of how scholarship can influence judges!)

Ultimately, the court determined that the Labor Department’s implementing rule is “arbitrary and capricious” for its failure to consider alternatives.

This is not the first time the Ninth Circuit has advanced a bold interpretation of the APA to facilitate judicial review of the statutory president. In East Bay Sanctuary Covenant v. Trump, the Ninth Circuit reviewed the combination of a presidential proclamation and an agency rule—independently, the measures had no effect, but together they became operative. To overcome the government’s Franklin v. Massachusetts argument, the court turned to APA § 551(13), which defines “agency action” to include “the whole or part of an agency rule, order, license, sanction, relief, or the equivalent … thereof.” The Ninth Circuit reasoned that the proclamation was “part of an agency rule” and, therefore, met the definition of “agency action.”

The Nebraska v. Su panel cited East Bay Sanctuary Covenant as precedential support for its holding. With these two decisions, the Ninth Circuit has become an outlier on the justiciability of executive action. No other circuit is (even remotely) as accommodating when it comes to judicial review of the president’s regulatory activity.

What’s Next?

At least four judges on the Ninth Circuit disagree with Nebraska v. Su: dissenting judge Sanchez and the three judges who came to the opposite conclusion in Mayes v. Biden (Richard Clifton, Mark Bennett, and Roopali Desai). As such, the en banc odds seem better than normal. With the coming change in administration, there is the likelihood that President-elect Trump would reverse his predecessor and possibly moot the case. However, the Nebraska v Su decision lessens presidential power, so perhaps the Trump administration would fight. Stay tuned.

Then there’s the direct circuit split. Again, in Bradford v. Department of Labor, the Tenth Circuit came to opposite conclusions on the question of whether FPASA authorizes President Biden’s minimum wage order. In that controversy, the challengers have petitioned the Supreme Court for certiorari and are awaiting a response from the Solicitor General.

Finally, there is a third challenge to Biden’s $15 minimum wage mandate for contractors. In Texas v. Biden, a federal district court rejected the “nexus” test and determined that the minimum wage mandate is not authorized under FPASA. That case is currently on appeal before the Fifth Circuit, where it has been briefed and argued. Until these challenges run their course, or until President-elect reverses course, the Ninth Circuit’s ruling in Nebraska v. Su does not halt the application of the federal contractor minimum wage nationwide because the injunction will apply only in favor of the plaintiffs in that case.