Seila Law v. Consumer Financial Protection Bureau
 | |
| Seila Law v. Consumer Financial Protection Bureau | |
| Term: 2019 | |
| Important Dates | |
| Argument: March 3, 2020 Decision: June 29, 2020 | |
| Outcome | |
| vacated and remanded the 9th Circuit's ruling | |
| Vote | |
| 5-4 | |
| Majority | |
| Chief Justice John G. Roberts • Clarence Thomas • Samuel Alito • Neil Gorsuch • Brett Kavanaugh | |
| Concurring | |
| Clarence Thomas • Neil Gorsuch • Elena Kagan • Ruth Bader Ginsburg • Stephen Breyer • Sonia Sotomayor | |
| Dissenting | |
| Clarence Thomas • Neil Gorsuch • Elena Kagan • Ruth Bader Ginsburg • Stephen Breyer • Sonia Sotomayor | |
Seila Law v. Consumer Financial Protection Bureau is a 2020 U.S. Supreme Court case that examined the extent of the president’s appointment and removal powers. In a 5-4 decision, the court ruled that the structure of the Consumer Financial Protection Bureau (CFPB), an independent agency that exercised executive powers and had a director protected from at-will termination by the president, was unconstitutional. The majority held that restrictions on the president's ability to remove such agency leaders violated separation of powers principles by limiting presidential control of executive power. The decision only affected part of the agency's structure without eliminating the agency altogether by striking down the Dodd-Frank Act, the 2010 law that created the agency.[1]
The court nullified the judgment of the 9th Circuit and sent the case back for further proceedings to see whether Seila Law would have to obey a CFPB document request.[1]
Chief Justice John Roberts delivered the majority opinion, writing, "While we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power." Part IV of his opinion, joined only by Justices Alito and Kavanaugh, argued in favor of eliminating the removal power restriction and leaving the rest of the Dodd-Frank Act intact.[1]
In an opinion concurring in part and dissenting in part, Justice Clarence Thomas supported the court’s decision in favor of the presidential removal power. Thomas also wrote that in a future case he would overrule Humphrey's Executor, a 1935 case in which the court upheld restrictions on the president’s ability to remove certain agency officials. He disagreed with Roberts' decision to sever the contested removal restrictions from the rest of the Dodd-Frank Act.
Justice Elena Kagan wrote a separate opinion concurring in part and dissenting in part. She argued that the majority's decision "commits the Nation to a static version of governance, incapable of responding to new conditions and challenges." She agreed with the judgment that the removal power provision was severable from the rest of the law, but disagreed that the removal power restrictions were unconstitutional.[1]
The case was argued on March 3, 2020, during the court's October 2019-2020 term.
You can review the lower court's opinion here.
Why it matters: The U.S. Supreme Court's decision expanded the president's ability to remove the director of the CFPB.
Timeline
The following timeline details key events in this case:
- June 29, 2020: The U.S. Supreme Court vacated and remanded the decision from the 9th Circuit.
- March 3, 2020: Oral argument
- October 18, 2019: The U.S. Supreme Court agreed to hear the case.
- June 28, 2019: Seila Law, the petitioner, asked the U.S. Supreme Court to take the case.
- May 6, 2019: The 9th Circuit Court of Appeals affirmed the Central District of California's ruling.
Background
| Administrative State |
|---|
| Five Pillars of the Administrative State |
| • Judicial deference • Nondelegation • Executive control • Procedural rights • Agency dynamics |
| Click here for more coverage of the administrative state on Ballotpedia |
- See also: Separation of powers
Dodd-Frank established the CFPB
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau (CFPB), an independent federal agency located within the Federal Reserve System. The act, specifically 12 U.S.C. §5491(c)(3), established a single agency director, appointed by the president and confirmed by the U.S. Senate for a five-year term. The statute also specified that the president could only remove the director for cause, meaning "inefficiency, neglect of duty, or malfeasance in office."[2][4][5]
CFPB investigated Seila Law
Seila Law, a California-based law firm, provided legal services, including debt relief, to its clients. In February 2017, the CFPB issued a civil investigative demand, requesting information and documents from Seila Law as part of an investigation into whether the firm violated federal consumer-financial law.[2]
CFPB took Seila Law to court for refusing to comply
Seila Law asked the CFPB to set aside the demand and refused to turn over the documents. The CFPB denied the request and filed a petition in the United States District Court for the Central District of California, asking the court to enforce compliance. Seila Law challenged the petition, arguing the CFPB violated the U.S. Constitution's separation of powers doctrine.[2]
The district court rejected Seila Law's argument, narrowed the scope of the CFPB's civil investigative demand, and ordered Seila Law to comply.
Seila Law appealed to the 9th Circuit
Seila Law appealed to the United States Court of Appeals for the 9th Circuit, asking for a stay, which the 9th Circuit granted. While the case was pending, the United States Court of Appeals for the District of Columbia Circuit was considering a similar question about the CFPB's constitutionality in PHH Corp. v. CFPB (2018). The D.C. Circuit issued an en banc decision in PHH, holding the CFPB did not violate the separation of powers.[2]
Appeal to the U.S. Supreme Court
After the D.C. Circuit's decision, the 9th Circuit affirmed the Central District of California's order. Seila Law asked for a stay pending its petition to the U.S. Supreme Court and the 9th Circuit granted the stay.[2]
Questions presented
The petitioner presented the following questions to the court:
| Questions presented: (1) Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers.
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Outcome
The U.S. Supreme Court nullified the 9th Circuit's ruling with a 5-4 vote against the Consumer Financial Protection Bureau and sent the case back to the 9th Circuit for further proceedings.
Chief Justice John Roberts delivered the opinion of the court that consisted of three parts, joined by Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh.
Roberts also wrote an opinion, labeled part IV, joined by Alito and Kavanaugh.
Thomas wrote an opinion concurring in part and dissenting in part, joined by Gorsuch.
Justice Elena Kagan wrote an opinion concurring in the judgment to sever the removal protections from the rest of the CFPB statute and dissenting in part, joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor.
Opinions
Opinion of the court
A majority of the justices ruled that making the director of the CFPB removable by the president only for inefficiency, neglect, or malfeasance violates the separation of powers. The court recognized historical exceptions to the president's removal power in Humphrey's Executor and Morrison v. Olson, but refused to apply those precedents to the CFPB because it held that the agency exercised significant executive power unlike the actors involved in those cases. [1]
In the three-part opinion of the court, Chief Justice John Roberts wrote:[1]
| “ | A decade ago, we declined to extend Congress’s authority to limit the President’s removal power to a new situation, never before confronted by the Court. We do the same today. In our constitutional system, the executive power belongs to the President, and that power generally includes the ability to supervise and remove the agents who wield executive power in his stead. While we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power. The Constitution requires that such officials remain dependent on the President, who in turn is accountable to the people.[6] | ” |
Other opinions
Chief Justice John Roberts' opinion
Chief Justice Roberts, joined only by Justices Alito and Kavanaugh, wrote a part IV plurality opinion arguing that the part of the Dodd-Frank law establishing the removal protections for the CFPB director could be severed from the rest of the sections that created the CFPB and that the court did not have to find all the sections unconstitutional. He wrote, "The provisions of the Dodd-Frank Act bearing on the CFPB’s structure and duties remain fully operative without the offending tenure restriction. Those provisions are capable of functioning independently, and there is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the President."[1]
Justice Clarence Thomas' opinion
Justice Thomas, joined by Justice Gorsuch, wrote an opinion concurring in part and dissenting in part. Thomas supported the majority's decision to limit Humphrey's Executor's allowance for limitations on the presidential removal power to "multimember expert agencies that do not wield substantial executive power." Thomas disagreed with the court's analysis of whether the court could eliminate the part of the Dodd-Frank it found unconstitutional while leaving the rest of the law intact. He wrote:[1]
| “ | Humphrey’s Executor poses a direct threat to our constitutional structure and, as a result, the liberty of the American people. ... with today’s decision, the Court has repudiated almost every aspect of Humphrey’s Executor. In a future case, I would repudiate what is left of this erroneous precedent.[6] | ” |
Thomas also argued that the court should have rejected the CFPB's request to enforce a civil investigative demand against Seila instead of severing the removal power restrictions from the rest of the Dodd-Frank Act. He wrote, "The Federal Judiciary does not have the power to excise, erase, alter, or otherwise strike down a statute," and "the Court’s reference to severability as a 'remedy' is inaccurate."[1]
Justice Elena Kagan's opinion
Justice Elena Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor wrote an opinion concurring in part and dissenting in part. Kagan agreed with the court's decision to sever the removal power provisions from the rest of Dodd-Frank but she disagreed with the court's analysis of Humphrey's Executor and other precedents concerning presidential removal powers. She wrote:[1]
| “ | Not every innovation in governance—not every experiment in administrative independence—has proved successful. And debates about the prudence of limiting the President’s control over regulatory agencies, including through his removal power, have never abated. But the Constitution—both as originally drafted and as practiced—mostly leaves disagreements about administrative structure to Congress and the President, who have the knowledge and experience needed to address them. Within broad bounds, it keeps the courts—who do not—out of the picture.
|
” |
Kagan added that by "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 static version of governance, incapable of responding to new conditions and challenges."[1]
Text of the opinion
Read the full opinion here.
Oral argument
Oral arguments were held on March 3, 2020.
Audio
Audio of oral argument:[7]
Transcript
Commentary about the case
Pre-decision commentary
Amy Howe, a reporter for SCOTUSblog, wrote that the dispute in Seila Law “is not merely an academic one: If the justices agree that the restrictions violate the doctrine known as the separation of powers – the idea that the Constitution divides the different functions of government among the executive, judicial and legislative branches – their ruling could potentially unravel all the CFPB’s decisions in the nine years since its creation.”[8] Washington Post columnist Harry Litman argued that he believed such a ruling “would leave the legal status of independent agencies unstable, inviting a future court, if not this one, to administer the final blow.”[9]
Opponents of the structure of the CFPB argued that the case gave the court an opportunity to support separation of powers principles. The “removal power [...] helps to keep administrative agencies accountable to the people governed by the agencies” and “accountability was an important principle to the Framers, who believed that a single executive — a president — could more easily be held accountable,” according to Oliver Dunford, an attorney at the Pacific Legal Foundation.[10] Dunford wrote that he expected “the court to rule that even though the CFPB is an independent agency, it carries out core executive functions, it must be held accountable, and, therefore, the removal restriction is unconstitutional.”[10] He also argued that the court should “go further and rule that the concentration of all three government powers in a single agency, especially an agency that is independent of the government’s three branches, is wholly unconstitutional.”[10]
Howe argued that at least one Justice had indicated what he thinks about the issue. She cited then-judge Kavanaugh’s dissent in the 2018 D.C. Circuit decision in PHH Corp. v. CFPB where he argued that the agency’s structure violates the U.S. Constitution because the director’s power is “massive in scope, concentrated in a single person, and unaccountable to the President.”[8]
Post-decision commentary
Ian Millhiser, a senior correspondent at Vox, wrote in an article that there are two ways to read the court's decision in Seila:
- First, "as a minor decision holding that the unusual structure Congress envisioned for the Consumer Financial Protection Bureau is unconstitutional. The CFPB is one of just a few federal agencies that is headed by a single director who cannot be removed at will by the president of the United States. Seila Law holds that this abnormal way of structuring a federal agency’s leadership is unconstitutional."
- Second, "The other way to read the decision, however, is that it could be the first salvo in an attack on other agencies that enjoy some degree of insulation from the president. These “independent” agencies include bodies like the Federal Reserve and the Federal Communications Commission (FCC), and there are vital reasons why these agencies’ leadership should remain independent of the president."[11]
William Yeatman, a research fellow at the Cato Institute, wrote in an article that he agreed with the Supreme Court's ruling that the structure of the CFPB was unconstitutional. However, for Yeatman, the court's decision "to remove the agency's 'independent' status ... fails to diminish the constitutional harm as set forth by the holding." He argued that "the agency still reflects a constitutionally dubious consolidation of power, albeit now amassed in the president instead of the CFPB director" because the agency does not get its funding from regular congressional appropriations.[12]
Rebecca Jones, policy counsel at the Project on Government Oversight, wrote in an article that "the Supreme Court issued a decision that could help clear the way for Congress to pass crucial protections for inspectors general. While the case at hand, Seila Law LLC v. Consumer Financial Protection Bureau, does not directly address these federal watchdogs, the court’s reasoning in reaching its ruling could have major implications for ongoing efforts to protect inspectors general from being removed from their posts at a president’s political whim."[13]
Jones argued, "The key to understanding what this [decision] means for inspectors general is that the structure and work of inspectors general align much more closely with cases where the court upheld for-cause removal protections than with cases where the court has struck down those protections. That means inspectors general could meet one of the two exceptions that the court discusses in this case, and the court’s explanation here helps advance that position."[13]
See also
External links
- U.S. Supreme Court docket file - Seila Law v. Consumer Financial Protection Bureau (petitions, motions, briefs, opinions, and attorneys)
- SCOTUSblog case file for Seila Law v. Consumer Financial Protection Bureau
Footnotes
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 U.S. Supreme Court, "Seila Law LLC v. Consumer Financial Protection Bureau," June 29, 2020
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 Supreme Court of the United States, "Petition for a writ of certiorari, Seila Law v. Consumer Financial Protection Bureau," accessed October 22, 2019
- ↑ 3.0 3.1 Supreme Court of the United States, "Questions presented: Seila Law v. Consumer Financial Protection Bureau," accessed October 22, 2019
- ↑ United States Court of Appeals for the 9th Circuit, Consumer Financial Protection Bureau v. Seila Law, decided May 6, 2019
- ↑ Legal Information Institute, "12 U.S. Code § 5491. Establishment of the Bureau of Consumer Financial Protection," accessed November 19, 2019
- ↑ 6.0 6.1 6.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Supreme Court of the United States, "Oral Argument - Audio," accessed March 9, 2020
- ↑ 8.0 8.1 SCOTUSblog, “Justices to review constitutionality of CFPB structure,” October 18, 2019
- ↑ The Washington Post, “ The Supreme Court is on its way to helping conservatives dismantle the administrative state,” October 28, 2019
- ↑ 10.0 10.1 10.2 Daily Journal, “How the high court may rule in Seila Law — and why,” November 1, 2019
- ↑ Vox, "The Supreme Court’s big decision on the CFPB and the 'unitary executive,' explained," June 29, 2020
- ↑ Cato Institute, "Seila Law Doesn’t Add Up," June 29, 2020
- ↑ 13.0 13.1 Project on Government Oversight, "Seila Law v. CFPB: What’s Unconstitutional for One May Not Be Unconstitutional for All," July 1, 2020
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