William Rehnquist, his clerk John Roberts and the Supreme Court precedent at the center of Trump’s tariffs case

By Joan Biskupic, CNN Chief Supreme Court Analyst

(CNN) — Most judges who have considered President Donald Trump’s disputed tariffs have ruled against him. But when the Supreme Court hears his appeal next week, it may be influenced by a forceful dissenting opinion that highlighted a 1981 case from the Iranian hostage crisis.

Chief Justice John Roberts knows that case well. He helped produce it, as a 26-year-old law clerk to then-Justice William Rehnquist.

Rehnquist wrote the opinion in Dames & Moore v. Regan during a hectic week that June – a “mad scramble,” Rehnquist told his fellow justices in a memo. He caught viral pneumonia in the middle of writing the opinion. Roberts himself was in the last frantic days of his clerkship and trying to study for an upcoming bar exam.

The case tested financial aspects of a deal struck by President Jimmy Carter to use frozen Iranian assets as a “bargaining chip” to win the release of 52 American hostages. Among the laws Carter invoked was the International Emergency Economic Powers Act (IEEPA), which Trump is now citing to justify certain tariffs, including on imported goods from Canada, Mexico and China.

The Constitution gives Congress the power to set tariffs, and while IEEPA, which was passed in 1977, has previously been used to impose economic penalties, it was never used for tariffs. The law authorizes the president to “regulate … importation” of goods to deal with a national emergency arising from an “unusual and extraordinary threat” to the national security, foreign policy or economy of the US.

A seven-justice majority of the US Court of Appeals for the Federal Circuit rejected the Trump administration’s arguments in August, finding that while IEEPA gives the president authority for many kinds of actions in response to a national emergency, the disputed tariffs exceed that authority.

But dissenting Judge Richard Taranto, joined by three other judges, countered that the Supreme Court has recognized “broad authority” for the president within IEEPA’s power to “regulate.”

Taranto highlighted the Dames & Moore case. “There, the Court held that IEEPA authorized the President to take action involving Iranian assets as leverage to solve a problem based on Iran’s holding of American hostages,” Taranto wrote. “The Supreme Court blessed the measure as a ‘bargaining chip to be used by the President when dealing with a hostile country.’ Similarly, here, the tariffs are to be a ‘bargaining chip’ to get Canada, Mexico, and China to take more action regarding the criminal trafficking identified in the executive orders.”

The Trump administration has embraced Taranto’s arguments as part of its appeal to the Supreme Court defending the tariffs that have brought the US treasury billions of dollars but raised consumer prices and caused widespread economic upheaval.

An urgent, end-of-term, case

Roberts, who declined CNN’s request for comment on this story, was just finishing his year-long clerkship in Rehnquist’s chambers when Dames & Moore v. Regan landed. (The justices typically hand down all their opinions for the session by the end of June.)

Rehnquist, appointed in 1972 by President Richard Nixon, was serving as an associate justice at the time. In 1986, President Ronald Reagan appointed him to the chief justice spot; Roberts succeeded Rehnquist in 2005.

The hostage deal negotiated by Carter and endorsed by his successor Reagan required court orders involving frozen Iranian assets to be nullified and transferred to an international tribunal. Dames & Moore, an engineering firm that had won an earlier judgment against Iran, brought a lawsuit against the US Department of Treasury when its judgment was voided as part of the deal. (Donald Regan was Treasury Secretary at the time.)

A US district court dismissed the claim, and Dames & Moore petitioned the Supreme Court in early June 1981 to quickly resolve the matter, because the assets were set to be transferred in mid-July.

When the Dames & Moore petition came in, the justices considered it in a private vote on June 11. Rehnquist, at this initial stage, wanted to reject it and let the US district court order favoring the government stand.

But he and another justice who apparently felt the court was being “stampeded” were outvoted, according to materials reviewed by CNN from the archives of Rehnquist and other justices. The majority believed the court had an institutional obligation to swiftly resolve the case, and oral arguments were held on June 24 as the justices were already moving at a frenzied pace to finish writing their final opinions of the term.

After two hours of courtroom arguments, the justices took their customary private vote and had immediate unanimity to affirm the lower court and uphold the deal. The nine, however, varied in their reasoning.

Then-Chief Justice Warren Burger tapped Rehnquist, known for his speed and ability to juggle multiple demands, to craft the opinion for the court. Burger wrote to the others: “To ‘get the show on the road’ Bill Rehnquist has agreed to get an opinion in our hands by noon Sunday, next – if not before.”

According to handwritten notes in his archive at the Hoover Institution at Stanford University, Rehnquist broke down the various issues (IEEPA, the Hostage Act, relevant precedent) and detailed the sentiment of his colleagues by their initials. Working with Roberts and two other clerks, Rehnquist produced the first draft within two days and sent it around to the other justices that Friday.

As happens in negotiations over any case, various justices wanted amendments. Rehnquist was accommodating but also mindful of the impending deadline, telling his colleagues in a note, “we are in something of a mad scramble right now, trying to tailor the opinion to the votes taken….”

They finished the decision for public release on July 2. Reviewing the history of IEEPA and an earlier law it replaced, Rehnquist wrote that Carter had acted within the authority granted by Congress as he dealt with the Iranian financial claims.

Still, the distinct nature of the case and the rushed consideration prompted Rehnquist to warn at the outset of the court’s opinion, “We attempt to lay down no general ‘guidelines’ covering other situations not involved here, and attempt to confine the opinion only to the very questions necessary to decision of the case.”

What does Dames & Moore actually mean?

The interpretation of Dames & Moore is one of many questions before the current justices on their own expedited, but not as rushed, schedule. One consideration will be whether Trump’s move violates a relatively new court doctrine that dictates that when the president takes steps of vast “economic and political significance,” clear congressional authorization is required for those steps.

On the core question of the breadth of IEEPA’s coverage, Trump’s legal team has drawn on Taranto’s dissent.

“As Judge Taranto explained, ‘IEEPA embodies an eyes-open congressional grant of broad emergency authority in this foreign-affairs realm,’” US Solicitor General D. John Sauer wrote, defending the tariffs.

Regarding the national threat, Sauer said tariffs were imposed “to rectify America’s country-killing trade deficits and to stop the flood of fentanyl and other lethal drugs across our borders.”

But the tariff challengers contend in their filings that the administration is misreading Dames & Moore.

Michael McConnell, lead counsel for wine importer VOS Selections, tells the justices the case stands for the opposite of what the administration argues. He said it advises judges, in fact, to pay “close attention to the IEEPA’s text and established practice,” which would disallow “an unprecedented, worldwide tariff regime.”

Among the many outside organizations siding with the challengers is a group of economists who say even if the IEEPA allowed for the imposition of tariffs, there is no real emergency to address.

Trade deficits “have existed consistently over the past fifty years in the United States …” the group writes. “They are thus not ‘unusual and extraordinary’ but rather ordinary and commonplace.”

Taranto was appointed by President Barack Obama, a Democrat, but he is widely recognized as non-ideological on the specialized Federal Circuit court that resolves international trade, patent and trademark disputes.

The judge is also known to many of the justices, having taken a similar path to the bench. Three years after Roberts clerked for Rehnquist, Taranto served in the chambers of Justice Sandra Day O’Connor. Taranto also argued often before the high court, as an assistant US solicitor general and then as a lawyer in private practice before his 2013 appointment.

One last test

Back on July 2, 1981, after Rehnquist and his clerks had finished the opinion, Justice William Brennan, the senior liberal, sent Rehnquist a note, with copies all around: “Congratulations again upon a truly splendid job. I’m happy to join.”

Justice Lewis Powell quickly began drafting a similar note of appreciation. Materials in his files show that Powell first addressed only the effort of Rehnquist: “I join in thanking and congratulating you on a super accomplishment.” Powell added a handwritten change to be typed up: “congratulating you – and your Chambers – on a super accomplishment … ”

The finished decision was not without some personal cost. Rehnquist caught viral pneumonia and ended up in the emergency room just as he was finishing the opinion. He quickly recovered but faced other obstacles as he was trying to fly to Vermont for a scheduled family vacation.

“Meanwhile,” Rehnquist wrote on July 2 to his fellow justices, “I find that I lost my wallet at the Bethesda Hospital Emergency Room on Sunday, and have become virtually a ’stateless’ person. Yesterday I got a temporary driver’s license, but that has to be converted into a regular duplicate by Monday or all of my driving will be illegal.”

For his part, Roberts tried to catch up on his studies for the bar exam that month and prepare for a job in the Reagan administration beginning in August.

His study partner for the District of Columbia bar exam happened to be a fellow clerk, from the Brennan chambers that term: McConnell, now the lead counsel suing Trump over the tariffs.

Both men passed.

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