Supreme Court to let stand steel tax

Group’s appeal of tariffs rejected

The U.S. Supreme Court left intact President Donald Trump’s 25% tariffs on imported steel products, rejecting an industry trade group challenge that sought to strip the president of a powerful legal tool for imposing duties.

The rebuff marks the second time the justices have turned away the American Institute for International Steel on Trump’s tariffs. The court made no comment in refusing to hear the group’s appeal.

The appeal contended that the provision Trump invoked, known as Section 232, gives the president such broad discretion to impose tariffs on national security grounds that it violates the Constitution.

“Section 232 is astonishing in the breadth of discretion, both in the finding that triggers its application and in the completely unbounded choice of remedies afforded the president, including the amount of any tariffs or quotas,” the trade group argued.

The industry group said a ruling in its favor would have let companies recoup some of the $6 billion-plus in tariffs that have been paid so far.

Trump imposed the 25% steel tariff, along with a 10%

duty on aluminum imports, in March 2018. Some countries, including Brazil and South Korea, have negotiated deals to avoid the tariff, and Trump dropped the duty for imports from Canada and Mexico. But the tariffs still apply for much of the world, including the European Union and China and Japan.

Trump has also threatened to invoke Section 232 to place tariffs on imported automobiles and parts.

CONGRESSIONAL GUIDANCE

The trade group pointed to the “nondelegation doctrine,” a rarely used constitutional rule that says Congress must give clear guidance to an agency before handing off its legislative responsibilities. The Supreme Court’s conservatives indicated in a ruling last year that they are interested in revitalizing the nondelegation doctrine.

The Trump administration urged the court to reject the appeal, saying Congress gave the president adequate guidelines for exercising Section 232 authority.

Section 232 “sets forth both the policy the president must pursue and the boundaries of his authority,” U.S. Solicitor General Noel Francisco argued. In addition, it “empowers the president to exercise discretion in fields (foreign affairs and foreign trade) that are already within the scope of executive power.”

The Supreme Court upheld Section 232 in 1976, saying it gives sufficient guidance to the president to pass constitutional muster.

COURT LIMITS SEC POWER

Also Monday, the court limited the power of the Securities and Exchange Commission to recoup illegal profits from wrongdoers, putting new curbs on one of the agency’s most potent legal weapons.

The 8-1 ruling is a partial victory for a California couple ordered to pay $27 million after being found to have defrauded investors.

The justices said Congress gave the SEC power to win “disgorgement” in federal court if the money is used to reimburse defrauded investors and is capped at the wrongdoer’s net profits. But the court also suggested that awards can’t go further, blunting a legal tool that critics say the agency has abused.

The SEC typically wins more than $1 billion a year in disgorgement orders in federal court.

Disgorgement is a traditional tool used by judges to return wrongful gains to the victims. It’s distinct from SEC fines, which the SEC can also seek and which can be used as punishment.

President Donald Trump’s administration and the SEC defended the disgorgement power, saying Congress authorized it three times, including in the 2002 Sarbanes-Oxley Act.

‘EQUITABLE RELIEF’

Writing for the court, Justice Sonia Sotomayor said courts must subtract “legitimate expenses” before ordering disgorgement. “Congress prohibited the SEC from seeking an equitable remedy in excess of a defendant’s net profits from wrongdoing,” she wrote.

The Sarbanes-Oxley law doesn’t explicitly mention disgorgement but says judges hearing SEC enforcement actions can award “any equitable relief” they deem appropriate to protect investors.

Courts have traditionally viewed disgorgement as an “equitable” measure, which means judges make awards based on fairness rather than strict legal rules.

Sotomayor also said disgorgement awards must be geared toward compensating investors, rather than simply stripping wrongdoers of their profits.

She said it was an “open question” whether the SEC can deposit recouped money in the Treasury when it’s not feasible to distribute it to investors.

Disgorgement “must do more than simply benefit the public at large by virtue of depriving a wrongdoer of ill-gotten gains,” she wrote.

The ruling didn’t directly affect the SEC’s separate authority to seek disgorgement through administrative proceedings.

The couple, Charles Liu and Xin Wang, had asked the justices to go further and bar the SEC from seeking courtordered disgorgement at all. Liu and Wang said that tool isn’t one of the remedies Congress has authorized the SEC to seek against people who violate the nation’s securities fraud laws.

Liu and Wang were found to have defrauded people seeking to take advantage of a visa program for foreigners who make large U.S. investments. The SEC said Liu and Wang falsely told investors their money would be used for a cancer treatment center.

Liu and Wang said the order in their case went well beyond the $8 million that the trial judge found they had gained from their scheme.