Last fall, in PHH Corporation v. CFPB, the U.S. Court of Appeals for the D.C. Circuit held that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional, at least insofar as the President may only remove the agency head for cause. Although the Supreme Court has upheld such limits on removal for the heads of other independent agencies, as with the Federal Trade Commission in Humphrey’s Exexcutor, all such cases involved agencies headed by bi-partisan, multi-member commissions or boards. The CFPB’s unique structure, the court concluded, made it uniquely unaccountable. On that basis, the court struck down the provision limiting removal of the head of the CFPB for cause. As Judge Kavanaugh explained: “the CFPB now will operate as an executive agency. The President of the United States now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.”
The CFPB was understandably upset with this provision, and quickly announced its intention to seek review. Within a week of the decision, the CFPB critiqued the D.C. Circuit’s decision in a filing in another court, declaring in a brief that “The panel decision was wrongly decided and is not likely to withstand further review.”
In November, just after the election, the CFPB filed a brief asking the D.C. Circuit for en banc rehearing in the case. This brief was supported by the Justice Department, which filed an amicus brief supporting the agency’s position. In February, the D.C. Circuit unsurprisingly granted the petition, vacating the decision below.
Now, however, the Department of Justice is no longer on the CFPB’s side. Yesterday, the Department of Justice filed an amicus brief in PHH Corporation v. CFPB defending the original panel decision. According to the brief, the CFPB’s structure, as drafted by Congress, is unconstitutional and the President must have the authority to remove the head of the agency, even if solely due to a policy disagreement. As the Justice Department’s brief explains:
The principal constitutional question in this case is whether the exception to the President’s removal authority recognized in Humphrey’s Executor should be extended by this Court beyond multi-member regulatory commissions to an agency headed by a single Director. While we do not agree with all of the reasoning in the panel’s opinion, the United States agrees with the panel’s conclusion that singleheaded agencies are meaningfully different from the type of multi-member regulatory commission addressed in Humphrey’s Executor.
The Supreme Court’s analysis in Humphrey’s Executor was premised on the nature of the FTC as a continuing deliberative body, composed of several members with staggered terms to maintain institutional expertise and promote a measure of stability that would not be immediately undermined by political vicissitudes. A singleheaded agency, of course, lacks those critical structural attributes that have been thought to justify “independent” status for multi-member regulatory commissions. Moreover, because a single agency head is unchecked by the constraints of group decision-making among members appointed by different Presidents, there is a greater risk that an “independent” agency headed by a single person will engage in extreme departures from the President’s executive policy. And as the panel recognized, while multi-member regulatory commissions sharing the characteristics of the FTC discussed in Humphrey’s Executor have existed for over a century, limitations on the President’s authority to remove a single agency head are a recent development to which the Executive Branch has consistently objected.
We therefore urge the Court to decline to extend the exception recognized in Humphrey’s Executor in this case. In addition, in our view, the panel correctly applied severability principles and therefore properly struck down only the for-cause removal restrictions.
Given the make-up of the D.C. Circuit, I would be surprised if the CFPB lost in the en banc proceeding. I doubt there are six votes to hold the for cause limitation on removal unconstitutional. But the D.C. Circuit will not be the last stop in this litigation. Should PHH Corporation lose en banc, there is little question they will seek certiorari, and every reason to expect the Supreme Court to hear the case.
Should PHH Corporation v. CFPB reach the Supreme Court, we could be faced with the unusual situation of the Justice Department opposing a federal agency before the court. While the CFPB has independent litigating authority, independent agencies are typically represented by the Office of the Solicitor General before the Supreme Court. What does this mean? One possibility is that the SG could defend the constitutionality of the relevant statutory position despite the Administration’s opposition. I think this is unlikely, however. Another possibility is that the SG’s office will adopt the so-called “dueling briefs” approach, in which it files two briefs — one defending the CFPB, and one explaining the Administration’s position. This approach is unusual, but it has been used before, most notably in Buckley v. Valeo, where the Justice Department believed some of the relevant statutory provisions enforced by the Federal Election Commission were unconstitutional. Alternatively, the Court, or DOJ, might seek to allow another lawyer argue on the CFPB’s behalf.
Whatever course DOJ eventually takes, the prospect of the federal government opposing a federal agency in the Supreme Court is yet one more reason this is a case to watch.