Source: https://reason.com/2018/01/31/en-banc-dc-circuit-upholds-constitutiona
Timestamp: 2019-04-21 08:52:19+00:00

Document:
A divided D.C. Circuit holds Congress may insulate the Consumer Financial Protection Bureau from Presidential Control. Will the Supreme Court agree?
This afternoon, the U.S. Court of Appeals for the D.C. Circuit rejected a constitutional challenge to the structure of the Consumer Financial Protection Bureau (CFPB). Sitting en banc, the court concluded that limiting the President's ability to remove the CFPB's Director, even when combined with the agency's rather unique structure, did not create any constitutional problems. Several judges dissented and, as one might expect, the case would seem to be a good candidate for Supreme Court review.
In October 2016, a three-judge panel of the D.C. Circuit had concluded that the agency's unique structure was unconstitutional. The CFPB understandably disagreed, and sought en banc review of this decision. The D.C. Circuit granted the CFPB's petition in February, but then something interesting happened: The new adminstration decided it disagreed with the old. Whereas the Obama Administration had supported the CFPB's unique structure, the Trump Administration did not, and it let the D.C. Circuit know. Like the petitioners, the Trump Administration argued that it was unconstitutional to place such substantial power in an agency headed by a single individual (as opposed to a multimember commission) who is only subject to removal "for cause."
The D.C. Circuit was apparently not persuaded by the Trump Administration's opinion, as the court voted to overturn the original panel decision, 7-3. Judge Nina Pillard wrote the opinion for the court, which five other judges joined. Judges David Tatel and Robert Wilkins each wrote concurrences. Judge Thomas Griffith concurred in the judgment, albeit on grounds that would make it relatively easy for a President to remove a CFPB director who did not toe the line. Judges Karen Henderson and Brett Kavanaugh and Senior Judge A. Raymond Randolph, each wrote a dissent.
Altogether, the opinions in PHH Corporation v. CFPB span a full 250 pages. That's quite a bit to wade through, and I'm not going to try and summarize all of the points made in the various opinions. Fortunately, over at the Notice & Comment blog, Aaron Neilson has posted excerpts from each of the opinions, highlighting the various arguments made.
The primary arguments in the Pillard majority, and the dissents, are largely what you would expect if you've followed the longstanding constitutional debate over the extent to which Congress may constrain the President's removal power. The opinions spar over the meaning of prior precedents, including Morrison v. Olson and Humphrey's Executor. They also cross swords on the extent to which the CFPB's unique structure is legally relevant. It may be true that, up until now, the only agency heads protected by a "for cause" removal limitation are those who are part of multi-member commissions. The quesiton is whether that matters for constitutional purposes.
Judges Kavanaugh and Henderson both argue that constraining the ability of the President to remove the head of an agency like the CFPB unduly constrains executive power. Judge Kavanaugh makes this argument within the constraints of existing precedent, whereas Judge Henderson does not, arguing instead that first principles must control. These dissenters also disagreed on remedy. Following the Supreme Court's lead in Free Enterprise Fund v. PCAOB, Judge Kavanaugh argues the constitutional infirmity is cured by simply eliminating the "for cause" constraint on removal of the CFPB's head. This is not enough for Judge Henderson, however, who argues the CFPB should be invalidated in its entirety.
This argument is particularly interesting because it would give the Supreme Court a way to reinforce Presidential control over federal agencies without having to strike down portions of the Dodd-Frank law that created the Bureau. According to Griffith, there is nothing in the text of the statute, or relevant precedents such as Humphrey's Executor, that would prevent a President from removing a CFPB head who sought to implement a policy agenda at odds with the President. Among other things, Griffith writes, "an officer is inefficient when he fails to produce or accomplish the agency's ends, as understood or dictated by the President operating within the parameters set by Congress." So understood, the "for cause" removal provision would not impose a significant constraint on the ability of a President to remove and replace the CFPB Director. Although his reasoning is different, Judge Griffith notes that, as a practical matter, his decision would produce a similar ultimate outcome as that urged by Judge Kavanaugh.
Given the magnitude of the question at issue, one would think PHH Corporation v. CFPB is a good candidate for Supreme Court review, particularly since the Solicitor General could be expected to support any petition for certiorari. There is a catch, however. While the D.C. Circuit rejected PHH's constitutional challenges to the CFPB, it upheld PHH's statutory challenge to the CFPB enforcement actions that prompted the suit. As a consequence, PHH might be seen as a prevailing party, and (as a general rule) the Supreme Court does not grant petitions for certiorari from parties that prevailed below.
Whether or not PHH, the SG's office, or another party is able to convince the Supreme Court to review this case, the underlying question will land at One First Street relatively soon. PHH was not the only entity subject to CFPB regulation to challenge the Bureau's structure, and there are other cases working their way throught the court system that could become alternative vehicles for certiorari.
In my view, Supreme Court review of the underlying question will come relativey soon, and the D.C. Circuit's decision is unlikely to prevail. Recent Supreme Court decisions, such as that in Free Enterprise Fund, suggest a majoirty of justices on the Court would like to contain precedents such as Humphrey's Exectuor and are unlikely to bless the CFPB's unique structure. If I am right, this means a mjaority of the Court is likely to embrace the position adopted by Judge Kavanaugh or Judge Griffith, not that laid out by Judge Pillard. Time will tell—and we will need time to thoroughly review the D.C. Circuit's latest handiwork.
Given the magnitude of the question at issue, one would think PHH Corporation v. CFPB is a good candidate for Supreme Court review, particularly since the Solicitor General could be expected to support any petition for certiorari. There is a catch, however. While the D.C. Circuit rejected PHH’s constitutional challenges to the CFPB, it upheld PHH’s statutory challenge to the CFPB enforcement actions that prompted the suit. As a consequence, PHH might be seen as a prevailing party, and (as a general rule) the Supreme Court does not grant petitions for certiorari from parties that prevailed below.
Setting aside whether the Court would hear a petition from PHH, why would there be a petition from PHH? What incentive does it have, given that it won on the merits, to appeal the administrative law issue?
Indeed. Their statement doesn’t mention the issue at all. They simply say they’re happy that they won.
It’s a fair question. Note that the case is remanded to the agency and they may feel that, so long as they remain under the CFPB’s thumb, they face some degree of legal threat. (Of course, having Mulvaney as CFPB head may lessen that concern.) So I think it may come down to whether they think the CFPB remains a threat to their business operations — and whether a resolution that merely makes it easier for the President to remove the Director would address some of their concerns.
The same reason cases can continue on constitutional grounds for criminal appeals of violations of the 4th even if dismissed on other grounds. You don’ want to let the violation of civil rights continue on and on when there is a case that bears out the argument.
So from inference…. PHH has no interest in upholding civil rights, just their bottom line. Is that what you are claiming? Seems about your level of intellectual discourse.
Um, Corporations are supposed to be responsible to their shareholders, to be prudent stewards of corporate assets. Spending corporate funds on legal fees to continue litigating a case which you have already won hardly strikes me as a prudent use of corporate funds.
Depends on your time horizon, I suppose. And whether you can convince anyone else to pony up, too.
Brett and Jesse’s inability to both understand, and want to understand, this issue is both the saddest and most predictable thing imaginable.
No, I think you’re failing to get my point.
Sure, you won the case, there’s a strong argument to just take your win, and let the future deal with itself. And, normally, that argument would properly prevail.
But, if a public interest group came to you, and offered to foot the bill, so that it won’t cost you anything to potentially remove the threat the agency might pose in the future, it *could* change the calculation.
So, it’s a matter of time horizon and whether somebody else is willing to pony up some money.
Sure, if you are a person, it might.
But not if you’re a corporation. This isn’t Hobby Lobby (private corporation). This is a publicly traded corporation. Why are you letting a public interest group use your name to advance their cause?
I get your point, it’s just wrong. Public corporations advance all sorts of arguments, including constitutional ones. But they have a rational reason for doing so- to win the case. Now, don’t get me wrong, maybe something odd will happen here. Stranger things and all that. But it would be very odd, indeed, for a corporation to continue on in litigation that it has won. Irrational from its perspective.
a. That it will have another encounter with the Board.
b. That the encounter will go badly.
c. That it will no longer have this exact argument that it can use.
And, moreover, this is all assuming that (a-c) happens before this becomes … someone else’s problem.
Are you catching up yet? Have you ever represented corporate interests? How would you as legal counsel advise the corporation, well, other than PAY MEH FEEZ!
b. There’s something regarding remand to the Bureau that could get hinky/result in less than a complete win.
In addition to the issues already raised by DJDiverDan and loki, there is also a risk of losing. If PHH files cert, there is no guarantee that SCOTUS won’t rule that the DC Circuit was correct about the challenges to the CFPB but wrong as to the statutory challenges. Then PHH loses across the board. There’s a real risk of snatching defeat from the jaw of victory.
One point that Judge Pillard made that seems to be an extremely weak justification is the comparison of the FCC and CFPB. she completely glosses over the fact that the FCC has a board,whereas the CFPB has a director with unilateral power. Considering that’s one of the central issues with the structure of this agency, I would have thought that would be more important here.
I’m just not seeing the focus on presidential removal (except, Trump) when there’s a pivotal question on if congress can instill so much power in one person with presidential or even substantial congressional oversight.
Help a constitutional illiterate out, because I’m not seeing it.
I would think that an agency with a board is more difficult to oversee than an agency run by a single chair. In the latter case, the president only has to remove one person to get his way. In the former case, he might have to remove four.
If PHH won on the statutory challenge, why did the court even need to address the constitutional question?
Because the consequence of prevailing on the statutory question is a remand to the agency.
Pity about the procedural posture.
“The executive power shall be vested in a President of the United States of America”.
“Independent” agencies are a Court sanctioned de facto Article VIII of the Constitution.
Just like the first amendment protects “the freedom of speech” without saying what is in and out of scope of that freedom, art. II vests the executive power in the President without defining its limitations. The US has as much of a common law constitution as the UK does, you’d better get used to it.
I can accept that the error is “law” but I don’t have to “get used to it”.
You cannot justify so-called independent agencies outside of Presidential control with the Constitution.
It’s not outside presidential control. It says right there in the article.
Not quite. Some in the Circuit Court concluded that the current structure is ‘not outside presidential control’. Others disagreed. Prof Alder doesn’t seem to offer a clear opinion on the question though his closing paragraph hints that he may side more with the dissent.
I would go further and argue that merely having the ability to fire the head of an independent agency (at whatever threshold) is insufficient to cure the inconsistency between the constitutional requirement for vesting of executive power and the statutory assignment of “independence”. But given the past decades of precedence, I think it’s unlikely that SCOTUS would take up that argument no matter how good it is.
Can the President tell them “do not issue that regulation” or “withdraw that regulation”? Can the President tell them what their enforcement priorities are?
That is what control means.
This bureau is particularly obnoxious because it is independent of Congress’s power of the purse and is inside a private corporation exercising government powers. Its a trifecta of un-constitutional.
That’s the part that bothers me the most – CFPB’s independence from Congress.
The courts really need to come back to the no moneys shall be expended part, and soon. This should apply to the federal reserve as well. If you have any kind of enforcement or regulatory powers, Congress should be approving your annual budget. Period.
The lack of presidential control is hardly the only, or even the most glaring, constitutional problem with administrative agencies. There is the whole issue that most agencies combine legislative, executive AND judicial functions. The whole purpose of the founders in establishing three separate branches of the government, none of which is dependent upon the others, was to create separation of powers. The purpose of creating a judiciary which is independent of the executive and legislative branches was to create a structural protection against tyrannical government. The entire concept of administrative agencies, combining legislative, executive and judicial functions in one location, throws the entire concept of separation of powers out the window, and opens the door to all sorts of oppressive shenanigans. The Supreme Court, in Humphrey’s Executor, justified not permitting the President to remove an FTC Commissioner except for cause, focused on the fact that the FTC, in addition to being an executive agency with enforcement powers, also exercised what the Court called “quasi-legislative” and “quasi-judicial” functions – in other words, the FTC wrote the rules, enforced the rules, and passed judgment on the alleged violators. Yet the Court doesn’t waste a single paragraph, even a sentence, on how this is fundamentally inconsistent with the separation of powers which is supposed to be a bulwark against tyrannical government. Shameful.
Now THIS is windmill tilting.
Technically, it’s dragon tilting, which is more dangerous than windmill tilting, because they bite if you get near them.
He’s right. The Court is much too casual about violations of separation of powers in agencies.
Hoping for a Country that actually complies with its written Constitution – “The Impossible Dream.” Guilty as charged.
Live the dream of demanding your idiosyncratic Constitutional understanding be followed. But in our Republican system all this really accomplishes is letting you be angry on the Internet.
E Pluribus Unum != E Pluribus DjDiverDanum.
Diver, given that Congress is empowered to establish courts (which it is), why isn’t the establishment of narrowly-defined judicial power in a congress-created agency an example of separation of powers working as planned, instead of an example of its overthrow?
Congress is meant to be a check on the executive. Putting within bounds the President’s power to meddle with the CFPB seems to be an example of Congress checking the President.
Why isn’t the Supreme Court’s handling of the issue an example of the Court respecting separation of powers? Why is your own tendency to consolidate power in the hands of the President a defense of separation of powers, instead of an attack on that notion? To me, you seem to be attacking separation of powers, for no better reason than an ideologically-founded dislike of the CFPB.
Because the bureau isn’t a court. (You can tell by the name.) It also wields executive power. If it only wielded judicial power, not only would the president not need to have supervisory authority over it, but it would be inappropriate for the president to do so.
No, Congress is meant to exercise the legislative powers granted by the Constitution. All three branches, exercising only those powers granted by the Constitution, are intended to check and balance each other. The President is intended to check and balance Congress, just like Congress is intended to check and balance the President. Independent agencies don’t serve either function because they are independent.
I think you need to take another look at Article III.
That is a truly bizarre criticism of critics of the administrative state. Mostly because it’s pretty much backwards. The Administrative State is an example of Congress ceding its responsibilities to the executive.
You are quite right, Congress is empowered to create courts. It says so right in Article III. BUT, if those courts are to wield “the judicial power” of the United States, then such courts must be presided over by independent judges with all of the protections provided by Article III. Now the Court HAS approved of situations where Congress has established courts without such protections, Article I courts, if you will, like Territorial Courts and Military Tribunals. But it has NEVER approved of a situation where an ordinary American citizen – NOT a member of the military or a resident of a territory – can be forced to accept, over its objection, the final judicial decision of a non-Article III court, and, as the Court made very clear in Stern v. Marshall, this was an important structural protection of the Constitution.
It shouldn’t be hard to cure a situation that probably wouldn’t come up anyway. Which of the cases before the CFPB involve an “ordinary American citizen” as the regulated party, instead of a per-share voting corporation? If it happens, then throw that case out, and go on as before, regulating (and adjudicating) corporate cases only. And for belt and suspenders, allow the corporations to appeal CFPB decisions to Article III courts. Can’t they do that already, by the way? If they can’t, then I agree with you. That would need to be changed.
Um, if there was no separation of powers, how did Humphrey’s Executor get before the Supreme Court? How do any regulatory cases get there?
And now that I think of it, Diver, given your extreme views on separation of powers and the unitary executive, how does the Supreme Court get into the picture at all? Why isn’t judicial review an example of illegitimate infringement of the President’s power? Or to put it another way, if the President must legitimately grant deference to the Court, why can’t he be required similarly to grant deference to Congress?
As usual, leftist appointees of Clinton and Obama continue to damage America.
“and (as a general rule) the Supreme Court does not grant petitions for certiorari from parties that prevailed below.” Goodness, Prof. A, didn’t all that quaint stuff about not reviewing opinions, but judgments, and not considering appeals from prevailing parties go out the window in Camreta v. Greene, 563 U.S. 692 (2011)?
Hardly seems to dispute the existence of “a general rule”.
The Democrats literally just sued to try to bypass the Trump administrations filling in of director after a director quit. We know they will sue anytime a conservative president attempted to sue over due cause. At a limit this causes a delay in the Presidential powers as the lawsuit goes through the courts. It also sows confusion during his period for any rulings a director may make while the lawsuit winds its way through.
The purpose is to allow someone appointed by another party to continue ramming through the china shoppe with no way for an opposing president to stop it.
So just blow away the restriction.
I regretfully find the dissenting arguments in Myers v. United States more persuasive than the arguments of the majority. The dissents maintained (convincingly I think) that Congress, when it creates an office (other than a judgeship) can decide what the tenure of that office will be, and when the President can remove the official without cause (or perhaps even with cause).
I would have written the Constitution to mean what the Supreme Court said it means – the President can control the executive branch, purge the Deep State and obstructive bureaucrats. But Holmes, Brandeis – and don’t forget McReynolds – made compelling arguments otherwise in their dissents.
Easy mistake to make — whenever I hear the name “Wilkins,” my first thought also goes to NBA legend Gerald Wilkins. What most people don’t know is that he had a brother who also played basketball.
the Problem with the CFPB is that from the outset, it was designed to be an entrenched and permanent un-elected Democrat Party bureaucracy that violated the principles of representative government.

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