Seila Law LLC v. Consumer Financial Protection Bureau

VALIDITY OF THE CIVIL INVESTIGATIVE DEMAND

Petitioner Seila Law (“Seila”) maintains that the CFPB’s structure is unconstitutional because it lacks appropriate Presidential oversight. Brief for Petitioner, Seila Law LLC at 35. In such instances, Seila argues that any action undertaken by a CFPB officer, including the CID issued to Seila, lacks executive authority and is invalid. Id. at 36. To support its argument, Seila cites numerous cases where the Supreme Court has overturned actions by officers employed under a structural infirmity. Id. at 35–36.

Paul Clement as Court-appointed Amicus Curiae (“Clement”) counters that Seila’s claimed injury is not traceable to the CFPB’s structure because the CID would be enforced irrespective of the President’s removal power over the CFPB director. Brief for Court-Appointed Amicus Curiae In Support of Judgment Below, Paul D. Clement at 21. Accordingly, Clement argues that the removal issue is not properly before the Court. Id. at 22. He claims that past cases have demonstrated that removal questions should be decided in the context of an actual contested removal, which is not the case here. Id. at 24–25. While Clement concedes that some prior cases addressed removal issues in the absence of an actual removal, those cases separately raised other constitutional issues. Id. at 26.

REMOVAL POWER

Seila argues that the CFPB’s structure impermissibly restricts the President’s ability to remove an executive officer. Brief for Petitioner at 15. Seila argues that the framers gave the President the executive power so that one person could be accountable for how the laws are executed. Id. at 16. To be sure, Seila recognizes that the President needs subordinate officers to help ensure that the laws are faithfully executed. Id. But, Seila contends that for the President to be held accountable, he must have the exclusive ability to remove any of those officers at will. Id. Seila argues that the Supreme Court has even affirmed this as the default “removal power” rule. Id. at 17. Additionally, Seila asserts that any other system would make it impossible for the President to ensure that the laws are faithfully executed. Id. at 18. Seila therefore insists that here, because the CFPB’s structure prevents the President from removing a principal officer at will, this structure violates separation of powers principles and is unconstitutional. Id. at 19.

Next, Seila argues that the Ninth Circuit was incorrect to conclude that it was bound to hold for the CFPB by the Supreme Court’s decisions in Humphrey’s Executor v. United States and Morrison v. Olson, decisions where the Court found constitutional limitations on the President’s removal power. Id. at 19. First, Seila maintains that Humphrey’s Executor, a case where the Supreme Court determined that a statute constitutionally limited the president’s ability to remove commissioners of the Federal Trade Commission (“FTC”), is inapposite. Id. Seila argues that in Humphrey’s Executor, the FTC exercised “quasi-legislative or quasi-judicial” power; had a multimember, non-partisan commission; and received congressional funding. Id. However, Seila contends that the CFPB exercises significantly more executive power than the FTC, its power is vested in one director, and it does not receive funding through Congressional appropriations. Id. at 20. Next, Seila asserts that in Morrison, a case where the Court sanctioned a restriction on the removal of an independent counsel, is distinguishable from this case because there the independent counsel was an inferior officer with limited jurisdiction and lacking “policymaking or significant administrative authority.” Id. at 21. Thus, Seila contends that Congress was not limited from giving the independent counsel for-cause protection from presidential removal. Id. However, Seila argues that, unlike the independent counsel in Morrison, the CFPB director is a principal officer with broad statutory authority, and therefore any limitation on the president’s removal authority would be unconstitutional. Id.

Clement counters that the Constitution is quiet on the removal power while clearly stating that Congress has substantial discretion to create executive agencies. Brief for Clement at 29. He does concede, though, that the Supreme Court gave the President the exclusive removal authority. Id. at 30. But Clement argues that since the First Congress, Congress has had the power to structure executive-branch agencies as it has seen fit. Id. Clement then asserts that since 1887, Congress has repeatedly discharged responsibilities to officers who were only removable under the for-cause standard. Id. at 32. While he concedes that the President certainly needs the power to remove his closest officials at will, such as White House officials and Cabinet members, Clement insists that Congress has often determined that certain officers require some degree of removal protection. Id.

Clement also argues that precedent dictates that the CFPB’s structure is constitutional. Id. at 33. First, Clement contends that Seila’s reliance on Free Enterprise Fund v. Public Company Accounting Oversight Board is faulty. Id. In Free Enterprise Fund, Congress created the Public Company Accounting Oversight Board (“PCAOB”), which consisted of five members who were removable “for good cause shown” by the Securities and Exchange Commission (“SEC”). Id. He argues that this case is distinguishable from Free Enterprise Fund because, in that case, Congress completely gave away the President’s removal power to a separate agency, whereas that did not happen here. Id. at 34. Next, he contends that in Humphrey’s Executor the Court upheld the FTC Act’s for-cause removal restriction while expressly denying the President’s claim that he had unfettered control over the removal of executive officers. Id. at 35. While Clement concedes that the FTC exercised quasi-legislative or quasi-adjudicative power, he asserts that the agency also exercised executive power. Id. To conclude, Clement cites additional cases where the Supreme Court determined that the “inefficiency, neglect of duty, or malfeasance of office,” standard in the CFPA is only a modest restriction on the President’s removal authority and does not excessively constrain the President. Id. at 35–36.

HUMPHREY’S EXECUTOR’S INFLUENCE ON THE CASE

Seila argues that the exception for removal restrictions for a multimember agency in Humphrey’s Executor should not be extended to a single-director agency, like the CFPB. Brief for Petitioner at 21. First, Seila contends that the CFPB’s structure is an historical anomaly, as independent agencies with considerable executive power are traditionally structured as multimember commissions to avoid discharging too much power in an agency without an appropriate level of accountability. Id. at 22. Seila believes that, because of the lack of historical support, the exception should not be extended. Id. at 24. Additionally, Seila insists that the President has less control over agencies headed by a single director. Id. at 28–29. Specifically, Seila asserts that the President can influence multimember commissions who can be fired for cause by staggering the appointments of officers and by appointing the chair of the agency. Id. at 28. Seila maintains, however, that the President can exert far less influence over a single director who is not terminable at will. Id.

Alternatively, Seila argues that Humphrey’s Executor should be overruled. Id. at 31. Seila insists that the decision was “poorly reasoned and wrongly decided,” and failed to yield an effective rule. Id. at 31, 33. Additionally, Seila maintains that the decision conflicts with the principle that the President needs a “clear and effective chain of command” to govern, including the exclusive power to remove the officers who help him carry out his responsibilities. Id. at 32. Thus, Seila asserts that there is no reason to perpetuate the case’s holding. Id. at 34.

Clement counters by arguing that Seila’s attempts to distinguish Humphrey’s Executor fail for two reasons. Brief of Clement at 32. First, he contends Seila’s claim that the CFPB’s structure, director’s power and tenure, and funding sources, do not meaningfully distinguish it from the FTC in Humphrey’s Executor. Id. at 37–38. Second, he insists that the President has less control over a multimember commission with partisanship requirements than over a single-director agency, and therefore Seila’s argument is counterproductive. Id. at 41. Additionally, Clement argues that in Morrison, the Supreme Court approved the removal restriction in Humphrey’s Executor on single officers with executive power. Id. at 42. He insists that it is irrelevant that Morrison involved the removal of an inferior officer while here the removal in question involves a principal officer. Id. at 43.

Clement also argues that the Supreme Court should reject Seila’s request to overrule Humphrey’s Executor. Id. at 47. He argues that overruling a case typically demands “exceptional action” requiring “special justification,” and that Seila has only presented “ambiguous historical evidence.” Id. at 48–49. Specifically, he contends that it remains unclear from whom (Congress or the Constitution) the President actually received the removal power and what the scope of that power is. Id. at 49. Most important to Clement is that Humphrey’s Executor delineated a clear and workable rule: Congress can impose modest removal restrictions on the President, so long as the President retains the actual removal power. Id. With such a clear, doctrinal rule synthesizing the Court’s removal cases, Clement contends that it would be unwise to overrule the clarity that Humphrey’s Executor provides. Id.

SEVERABILITY

Seila contends that the Supreme Court should reverse the Ninth Circuit’s decision to avoid reaching the issue of severability entirely. Brief for Petitioner at 37. First, Seila asserts that the Court cannot—and has not—severed statutory provisions when doing so is unnecessary to provide relief, and in this case, the Court can provide relief by simply ending the CID enforcement proceeding. Id. at 38–39. Next, Seila argues that this case fails the typical severability test: whether Congress would have enacted the provision without the severed ones. Id. at 39. Seila contends that Congress would have preferred a different structure (a multimember commission) than to sever the provision and make the CFPB director removable at will. Id. at 39–40. Therefore, Seila believes that the Court should simply avoid the issue of severability. Id. at 39. But, if the Court does reach the issue of severability, Seila maintains that the President’s removal authority under Section 5491(c)(3) cannot be severed from the remainder of Title X. Id. at 41. Therefore, Seila claims that it is entitled to relief from the CID irrespective of whether the Court reaches the issue of severability. Id.

The CFPB argues that the Supreme Court should simply sever Section 5491(c)(3), the restriction on the President’s removal authority, from the rest of the Dodd-Frank Act. Brief for Respondent Supporting Vacatur, Consumer Financial Protection Bureau at 46. The CFPB asserts that historically, the Supreme Court has severed removal restrictions from the constitutional portions of statutes. Id. Additionally, the CFPB argues that the Dodd-Frank Act has an express severability clause in 12 U.S.C. § 5302 that states that if any provision of the Dodd-Frank Act is found unconstitutional, the remainder of the Act is unaffected. Id. at 47. Finally, the CFPB contends that there is no evidence that Congress preferred to have no CFPB than a CFPB with a director removable at will. Id. at 47–48. The CFPB therefore insists that if the removal restriction is found unconstitutional, it should be severed from the rest of the act. Id.

Clement contends that if the Supreme Court reaches the issue of severability, the CFPA should be read to avoid any constitutional issues. Brief of Clement at 50. Specifically, he stresses that the “inefficiency, neglect, malfeasance” standard can be interpreted as a permitted restriction on the President’s removal authority. Id. at 50–51. Clement argues that while the restriction has been interpreted to require removal for cause, the Supreme Court has defined the terms broadly, permitting removal for numerous “actual or perceived” transgressions. Id. at 51. Clement maintains that this interpretation leaves the officer “subservient” to the President, giving the President wide discretion to remove an executive officer, and therefore avoid any constitutional problems. Id.