The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
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.
Judge Griffith's concurring opinion is worth highlighting, as it puts forward a rather distinct way of addressing concerns about the existence of a powerful regulatory agency not subject to Presidential control. As he summarizes his opinion:
I agree that the challenged features of the CFPB do not violate the Constitution, but for different reasons than the majority. My colleagues debate whether the agency's single-Director structure impermissibly interferes with the President's ability to supervise the Executive Branch. But to make sense of that inquiry, we must first answer a more fundamental question: How difficult is it for the President to remove the Director? The President may remove the CFPB Director for "inefficiency, neglect of duty, or malfeasance in office." After reviewing these removal grounds, I conclude they provide only a minimal restriction on the President's removal power, even permitting him to remove the Director for ineffective policy choices. Therefore, I agree that the CFPB's structure does not impermissibly interfere with the President's ability to perform his constitutional duties
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.
[Note: As originally posted, I inadvertently referred to Judge Robert Wilkins as Gerald Wilkins. I've corrected the post and regret the error.]