Monday, June 29, 2020

The Supreme Court today struck the statutory independence of the Director of the Consumer Financial Protection Bureau, even as it declined to rule the entire CFPB unconstitutional. This means that the CFPB stays in place, Director and all, but that the President can terminate the Director at will. (As to the particular case before the Court, which challenged a CFPB enforcement demand, the ruling invalidates the demand. But the CFPB could reissue it and re-commence enforcement, but without protections for the Director.)

More broadly, the ruling in Seila Law v. CFPB says that Congress lacks authority to create an Executive Branch "independent" principal office, unless that office is part of a larger board or commission, and probably without significant executive power.

The ruling is a victory for the Trump Administration, which opposed independence for the CFPB Director. But at the same time, it sharply restricts Congress's power to create an independent principal office within the Executive Branch.

Under the Dodd-Frank Act, the CFPB has authority to implement and enforce a variety of consumer financial protection laws to "ensur[e] that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive."

The Director is nominated by the President and confirmed by the Senate. In creating an independent Director, Congress legislated that the Director would be appointed for five years and can be removed only for "inefficiency, neglect of duty, or malfeasance in office." It's that "independence" that was at stake in the case.

The Court ruled that this independence violated the separation of powers. Pointing to the Article II Vesting Clause, the Court wrote that "[t]he entire 'executive Power' belongs to the President alone." It held that statutory independence for a principal executive officer who is not a part of a board of commission impermissibly restricts the President's executive power.

The Court distinguished Humphrey's Executor, holding that Humphrey's upheld the independence of a multi-member board, the FTC, whereas the CFPB has a single head. According to the Court, unlike the FTC (at the time), the CFPB's single Director is not a "body of experts," is not "non-partisan," and does not have staggered terms that "prevent[] complete turnover in leadership." Moreover, the CFPB Director has greater responsibilities than the old FTC did, including the "quintessentially executive power" to seek monetary penalties in federal court.

The Court distinguished Morrison v. Olson, holding that Congress may create an independent inferior officer. The Court said that the CFPB Director was a principal office, and had more wide-ranging authority than the independent counsel in Morrison, and that the independent counsel's prosecutorial authority looked inward, to Executive Branch officials on specified matters, whereas the CFPB Director has authority over "millions of private citizens and businesses, imposing even billion-dollar penalties through administrative adjudications and civil actions."

The Court declined to "extend" those cases to cover the "new situation" of the CFPB Director's independence. The Court said that there was no precedent for this kind of office, and that it "is incompatible with our constitutional structure." "The . . . constitutional strategy is straightforward: divide power everywhere except for the Presidency, and render the President directly accountable to the people through regular elections. In that scheme, individual executive officials will still wield significant authority, but that authority remains subject to the ongoing supervision and control of the elected President."

But even as the Court struck statutory independence for the Director, it declined to take down the entire CFPB. The Court ruled that the independence provision was severable from the rest of the Act, and therefore that the CFPB could remain, Director and all, but without the independence protection.

Justice Kagan, dissenting on independence but concurred on severability, and joined by Justices Ginsburg, Breyer, and Sotomayor, wrote:

If a removal provision violates the separation of powers, it is because the measure so deprives the President of control over an official as to impede his own constitutional functions. But with or without a for-cause removal provision, the President has at least as much control over an individual as over a commission--and possibly more. That means the constitutional concern is, if anything, ameliorated when the agency has a single head. . . . In second-guessing the political branches, the majority second-guesses as well the wisdom of the Framers and the judgment of history. It writes in rules to the Constitution that the drafters knew well enough not to put there. It repudiates the lessons of American experience, from the 18th century to the present day. And it commits the Nation to a new static version of governance, incapable of responding to new conditions and challenges.

June 29, 2020 in Appointment and Removal Powers, Cases and Case Materials, Congressional Authority, Executive Authority, News, Opinion Analysis, Separation of Powers | Permalink | Comments (0)