Pillard, Circuit Judge.
We granted en banc review to consider whether the federal statute providing the Director of the Consumer Financial Protection Bureau (CFPB) with a five-year term in office, subject to removal by the President only for "inefficiency, neglect of duty, or malfeasance in office," 12 U.S.C. § 5491(c)(3), is consistent with Article II of the Constitution, which vests executive power "in a President of the United States of America" charged to "take Care that the Laws be faithfully executed," U.S. Const. art. II, § 1, cl. 1; id. § 3. Congress established the independent CFPB to curb fraud and promote transparency in consumer loans, home mortgages, personal credit cards, and retail banking. See 12 U.S.C. § 5481(12). The Supreme Court eighty years ago sustained the constitutionality of the independent Federal Trade Commission, a consumer-protection financial regulator with powers analogous to those of the CFPB. Humphrey's Executor v. United States, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611 (1935). In doing so, the Court approved the very means of independence Congress used here: protection of agency leadership from at-will removal by the President. The Court has since reaffirmed and built on that precedent, and Congress has embraced and relied on it in designing independent agencies. We follow that precedent here to hold that the parallel provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act shielding the Director of the CFPB from removal without cause is consistent with Article II.
The 2008 financial crisis destabilized the economy and left millions of Americans economically devastated. Congress studied the causes of the recession to craft solutions; it determined that the financial services industry had pushed consumers into unsustainable forms of debt and that federal regulators had failed to prevent mounting risks to the economy, in part because those regulators were overly responsive to the industry they purported to police. Congress saw a need for an agency to help restore public confidence in markets: a regulator attentive to individuals and families. So it established the Consumer Financial Protection Bureau.
Congress's solution was not so much to write new consumer protection laws, but to collect under one roof existing statutes and
To analyze the constitutionality of the CFPB's independence, we ask two questions:
First, is the means of independence permissible? The Supreme Court has long recognized that, as deployed to shield certain agencies, a degree of independence is fully consonant with the Constitution. The means of independence that Congress chose here is wholly ordinary: The Director may be fired only for "inefficiency, neglect of duty, or malfeasance in office," 12 U.S.C. § 5491(c)(3)—the very same language the Supreme Court approved for the Federal Trade Commission (FTC) back in 1935. Humphrey's Executor, 295 U.S. at 619, 629-32, 55 S.Ct. 869; see 15 U.S.C. § 41. The CFPB's for-cause removal requirement thus leaves the President no less removal authority than the provision sustained in Humphrey's Executor; neither PHH nor dissenters disagree. The mild constraint on removal of the CFPB Director contrasts with the cumbersome or encroaching removal restrictions that the Supreme Court has invalidated as depriving the President of his Article II authority or otherwise upsetting the separation of powers. In Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010), the Court left in place ordinary for-cause protection at the Securities and Exchange Commission (SEC)—the same protection that shields the FTC, the CFPB, and other independent agencies—even as it invalidated an unusually restrictive second layer of for-cause protection of the SEC's Public Company Accounting Oversight Board (PCAOB) as an interference with Article II. In its only other decisions invalidating removal restrictions, the Supreme Court disapproved of means of independence not at issue here, specifically, Congress's assigning removal power to itself by requiring the advice and consent of the Senate in Myers v. United States, 272 U.S. 52, 47 S.Ct. 21, 71 S.Ct. 160 (1926), and a joint resolution of Congress in Bowsher v. Synar, 478 U.S. 714, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986). The Supreme Court has never struck down a statute conferring the standard for-cause protection at issue here.
Second, does "the nature of the function that Congress vested in" the agency call for that means of independence? Wiener v. United States, 357 U.S. 349, 353, 78 S.Ct. 1275, 2 L.Ed.2d 1377 (1958); see also Morrison v. Olson, 487 U.S. 654, 687, 691 n.30, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988). The CFPB is a financial regulator that applies a set of preexisting statutes to financial services marketed "primarily for personal, family, or household purposes." 12 U.S.C. § 5481(5)(A); see also id. §§ 5481(4), (6), (15). Congress has historically given a modicum of independence to financial regulators like the Federal Reserve, the FTC, and the Office of the Comptroller of the Currency. That independence shields the nation's economy from manipulation or self-dealing by political incumbents and enables such agencies to pursue the general public interest in the nation's longer-term economic stability and success, even where doing so might require action that is politically unpopular in the short term. In Humphrey's Executor, the Supreme Court unanimously sustained the requirement of cause to remove members of the FTC, a consumer protection agency with a broad mandate to prevent
The ultimate purpose of our constitutional inquiry is to determine whether the means of independence, as deployed at the agency in question, impedes the President's ability under Article II of the Constitution to "take Care that the Laws be faithfully executed." U.S. Const. art. II, § 3. It is beyond question that "there are some `purely executive' officials who must be removable by the President at will if he is to be able to accomplish his constitutional role." Morrison, 487 U.S. at 690, 108 S.Ct. 2597. Nobody would suggest that Congress could make the Secretary of Defense or Secretary of State, for example, removable only for cause. At the same time, the Court has consistently affirmed the constitutionality of statutes "conferring good-cause tenure on the principal officers of certain independent agencies." Free Enterprise Fund, 561 U.S. at 493, 130 S.Ct. 3138.
The Supreme Court has distinguished those removal restrictions that are compatible with the President's constitutionally assigned role from those that run afoul of Article II in the line of removal-power cases running from Myers, 272 U.S. 52, 47 S.Ct. 21, 71 S.Ct. 160, through Humphrey's Executor, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611, Wiener, 357 U.S. 349, 78 S.Ct. 1275, 2 L.Ed.2d 1377, Bowsher, 478 U.S. 714, 106 S.Ct. 3181, 92 L.Ed.2d 583, Morrison, 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569, and Free Enterprise Fund, 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706. The Court has repeatedly held that "a `good cause' removal standard" does not impermissibly burden the President's Article II powers, where "a degree of independence from the Executive. . . is necessary to the proper functioning of the agency or official." Morrison, 487 U.S. at 691 n.30, 686-96, 108 S.Ct. 2597; see Wiener, 357 U.S. at 356, 78 S.Ct. 1275; Humphrey's Executor, 295 U.S. at 631, 55 S.Ct. 869. Armed with the power to terminate such an "independent" official for cause, the President retains "ample authority to assure" that the official "is competently performing his or her statutory responsibilities." Morrison, 487 U.S. at 692, 108 S.Ct. 2597.
Petitioners in this case, PHH Corporation, PHH Mortgage Corporation, PHH Home Loans, LLC, Atrium Insurance Corporation, and Atrium Reinsurance Corporation (collectively, PHH), would have us cabin the Court's acceptance of removal restrictions by casting Humphrey's Executor as a narrow exception to a general prohibition on any removal restriction—an exception it views as permitting the multimember FTC but not the sole-headed CFPB. The distinction is constitutionally required, PHH contends, because "multimember commissions contain their own internal checks to avoid arbitrary decisionmaking." Pet'rs' Br. 23.
PHH's challenge is not narrow. It claims that independent agencies with a single leader are constitutionally defective while purporting to spare multi-member ones. But the constitutional distinction PHH proposes between the CFPB's leadership structure and that of multi-member independent agencies is untenable. That distinction finds no footing in precedent, historical
Wide margins separate the validity of an independent CFPB from any unconstitutional effort to attenuate presidential control over core executive functions. The threat PHH's challenge poses to the established validity of other independent agencies, meanwhile, is very real. PHH seeks no mere course correction; its theory, uncabined by any principled distinction between this case and Supreme Court precedent sustaining independent agencies, leads much further afield. Ultimately, PHH makes no secret of its wholesale attack on independent agencies—whether collectively or individually led—that, if accepted, would broadly transform modern government.
Because we see no constitutional defect in Congress's choice to bestow on the CFPB Director protection against removal except for "inefficiency, neglect of duty, or malfeasance in office," we sustain it.
The 2008 financial crisis cost millions of Americans their jobs, savings, and homes. The federal commission that Congress and the President chartered to investigate the recession found that, by 2011, "[a]bout four million families have lost their homes to foreclosure and another four and a half million have slipped into the foreclosure process or are seriously behind on their mortgage payments." Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report, at xv (2011). All told, "[n]early $11 trillion in household wealth has vanished, with retirement accounts and life savings swept away." Id. In Congress's view, the 2008 crash represented a failure of consumer protection. The housing bubble "was precipitated by the proliferation of poorly underwritten mortgages with abusive terms," issued "with little or no regard for a borrower's understanding of the terms of, or their ability to repay, the loans." S. Rep. No. 111-176, at 11-12 (2010). Federal bank regulators had given short shrift to consumer protection as they focused (unsuccessfully) on the "safety and soundness" of the financial system and, post-crisis, on the survival of the biggest financial firms. Id. at 10. Congress concluded that this "failure by the prudential regulators to give sufficient consideration to consumer protection . . . helped bring the financial system down." Id. at 166.
Congress responded to the crisis by including in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (July 21, 2010), a new regulator: the Consumer Financial Protection Bureau. Congress gave the new agency a focused mandate to improve transparency and competitiveness in the market for consumer financial products, consolidating authorities to protect household finance that had been previously scattered among separate agencies in order to end the "fragmentation of the current system" and "thereby ensur[e] accountability." S. Rep. No. 111-176, at 11.
The CFPB administers eighteen preexisting, familiar consumer-protection laws previously overseen by the Federal Reserve
To lead this new agency, Congress provided for a single Director to be appointed by the President and confirmed by the Senate. Id. §§ 5491(b)(1)-(2). Congress designed an agency with a single Director, rather than a multi-member body, to imbue the agency with the requisite initiative and decisiveness to do the job of monitoring and restraining abusive or excessively risky practices in the fast-changing world of consumer finance. See, e.g., S. Rep. No. 111-176, at 11. A single Director would also help the new agency become operational promptly, as it might have taken many years to confirm a full quorum of a multimember body. See 155 Cong. Rec. 30,826-27 (Dec. 9, 2009) (statement of Rep. Waxman) (noting that a single director "can take early leadership in establishing the agency and getting it off the ground").
The Director serves a five-year term, with the potential of a holdover period pending confirmation of a successor.
Congress also determined "that the assurance of adequate funding, independent of the Congressional appropriations process, is absolutely essential to the independent operations of any financial regulator." S. Rep. No. 111-176, at 163. Congress has provided similar independence to other financial regulators, like the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Housing Finance Agency, which all have complete, uncapped budgetary autonomy. See infra Part I.C.2. Congress authorized the CFPB to draw from a statutorily capped pool of funds in the Federal Reserve System rather than to charge industry fees or seek annual appropriations from Congress as do some other regulators. The Federal Reserve is required to transfer "the amount determined by the Director [of the CFPB] to be reasonably necessary to carry out the authorities of the Bureau," up to twelve percent of the Federal Reserve's total operating expenses. 12 U.S.C. §§ 5497(a)(1)-(2). If the Bureau requires funds beyond that capped allotment, it must seek them through congressional appropriation. Id. § 5497(e).
In this case, the CFPB Director interpreted those provisions of RESPA as applied to PHH's mortgage insurance and reinsurance transactions. Mortgage insurance protects lenders in the event a borrower defaults on a mortgage loan. Mortgage lenders often require riskier borrowers to purchase such insurance as a condition of approving a loan. See Director's Decision at 3. In turn, insurers may obtain reinsurance, transferring to the reinsurer some of their risk of loss in exchange for a portion of the borrower's monthly insurance premiums. Borrowers do not ordinarily shop for mortgage insurance, let alone reinsurance; rather, they are referred to insurers of the lender's choosing, to whom they then pay monthly premiums. See id. During the period at issue, the only mortgage reinsurers in the market were "captive"—that is, they existed to reinsure loans originated by the mortgage lenders that owned them. See id. at 13. In a captive reinsurance arrangement, a mortgage lender refers borrowers to a mortgage insurer, which then pays a kickback to the lender by using the lender's captive reinsurer.
On January 29, 2014, the CFPB filed a Notice of Charges against PHH, a large mortgage lender, and its captive reinsurer, Atrium. The CFPB alleged that "[t]he premiums ceded by [mortgage insurers] to PHH through Atrium: (a) were not for services actually furnished or performed, or (b) grossly exceeded the value of any such services," and that the premiums were instead "made in consideration of PHH's continued referral of mortgage insurance business." Notice of Charges at 17-18.
The CFPB borrowed an administrative law judge (ALJ) from the Securities and Exchange Commission (SEC) to adjudicate the charges. The ALJ issued a Recommended Decision concluding that PHH and Atrium violated RESPA because they had not demonstrated that the reinsurance premiums Atrium collected from insurers were reasonably related to the value of its reinsurance services. The ALJ recommended that the Director order disgorgement of about $6.4 million. Director's Decision at 9.
On review of the ALJ's recommendation, the CFPB Director read RESPA to support a broader finding of misconduct and a substantially larger remedy. The Director held that a payment is "bona fide" and thus permitted under Section 8(c)(2) only if it is "solely for the service actually being provided on its own merits," and not "tied in any way to a referral of business." Director's Decision at 17. Thus, even if the reinsurance premiums had been reasonably related to the value of the reinsurance
This court stayed the Director's order pending review. In October 2016, a three-judge panel vacated the Director's decision and remanded for further proceedings. 839 F.3d 1, 10 (D.C. Cir. 2016). A divided panel's majority held that providing forc-ause protection to the sole director of an independent agency violates the Constitution's separation of powers. Severing the for-cause provision from the rest of the Dodd-Frank Act, the majority effectively turned the CFPB into an instrumentality of the President with a Director removable at will. See id. at 12-39.
The panel was unanimous, however, in overturning the Director's interpretation of RESPA. It held that Section 8 permits captive reinsurance arrangements so long as mortgage insurers pay no more than reasonable market value for reinsurance. See 839 F.3d at 41-44. And, even if the Director's contrary interpretation (that RESPA prohibits tying arrangements) were permissible, the panel held, it was an unlawfully retroactive reversal of the federal government's prior position. See id. at 44-49. Finally, according to the panel, a three-year statute of limitations applies to both administrative proceedings and civil actions enforcing RESPA. See id. at 50-55.
Judge Henderson joined the panel's opinion on the statutory questions but dissented from its constitutional holding on the ground that it was unnecessary in her view, and so inappropriate under the doctrine of avoidance, to reach the constitutional removal-power question. Id. at 56-60.
The en banc court vacated the panel decision in its entirety. Following oral argument, the full court, including Judge Henderson, unanimously concluded that we cannot avoid the constitutional question. That is because the disposition of PHH's claims, reinstating the panel's statutory holding, results in a remand to the CFPB. Further action by the CFPB necessitates a decision on the constitutionality of the Director's for-cause removal protection. We accordingly decide only that constitutional question. The panel opinion, insofar as it related to the interpretation of RESPA and its application to PHH and Atrium in this case, is accordingly reinstated as the decision of the three-judge panel on those questions.
We also decline to reach the separate question whether the ALJ who initially considered this case was appointed consistently with the Appointments Clause. Our order granting review invited the parties to address the Appointments Clause implications for this case only "[i]f the en banc court" in Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concluded that an SEC ALJ is an inferior officer rather than an employee. We did not so conclude. Instead, after argument in that case, the en banc court denied the petition for review. Lucia v. SEC, 868 F.3d 1021 (D.C. Cir. 2017), cert. granted, 2018 WL 386565, ___ U.S. ___, 138 S.Ct. 736, ___ L.Ed.2d ___ (Jan. 12, 2018).
PHH challenges the removal protection of the Consumer Financial Protection Bureau's Director, arguing that it unconstitutionally upsets the separation of powers. But the CFPB's structure respects the powers and limits of each branch of government. Congress's decision to establish an agency led by a Director removable only for cause is a valid exercise of its Article I legislative power. The for-cause removal restriction fully comports with the President's Article II executive authority and duty to take care that the consumer financial protection laws within the CFPB's purview be faithfully executed. The panel's grant of PHH's due process claim illustrates how the exercise of legislative and executive powers to establish and empower the CFPB are backstopped by the Article III courts' obligation to protect individual liberty when government overreaches.
Our analysis focuses on whether Congress's choice to include a for-cause removal provision impedes the President's ability to fulfill his constitutional role. Two principal considerations inform our conclusion that it does not. First, the familiar for-cause protection at issue broadly allows the President to remove the Director for "inefficiency, neglect of duty, or malfeasance in office," leaving the President ample tools to ensure the faithful execution of the laws. Second, the functions of the CFPB and its Director are not core executive functions, such as those entrusted to a Secretary of State or other Cabinet officer who we assume must directly answer to the President's will. Rather, the CFPB is one of a number of federal financial regulators—including the Federal Trade Commission, the Federal Reserve, the Federal Deposit Insurance Corporation, and others—that have long been permissibly afforded a degree of independence. The CFPB matches what the Supreme Court's removal-power cases have consistently approved. Accepting PHH's claim to the contrary would put the historically established independence of financial regulators and numerous other independent agencies at risk.
None of the theories advanced by PHH supports its claim that the CFPB is different in kind from the other independent agencies and, in particular, traditional independent financial regulators. The CFPB's authority is not of such character that removal protection of its Director necessarily interferes with the President's Article II duty or prerogative. The CFPB is neither distinctive nor novel in any respect that calls its constitutionality into question. Because none of PHH's challenges is grounded in constitutional precedent or principle, we uphold the agency's structure.
The Constitution makes no explicit provision for presidential removal of duly appointed officers, but the Supreme Court has long recognized that "the executive power include[s] a power to oversee executive officers through removal." Free Enterprise Fund, 561 U.S. at 492, 130 S.Ct. 3138. The Court has found the removal power implied in aid of the executive power, which the Constitution vests "in a President of the United States of America" charged to "take Care that the Laws be
The Court has consistently upheld ordinary for-cause removal restrictions like the one at issue here, while invalidating only provisions that either give Congress some role in the removal decision or otherwise make it abnormally difficult for the President to oversee an executive officer.
In the first modern removal-power decision, Myers v. United States, the Court held that Congress could not condition presidential removal of certain postmasters on the Senate's advice and consent, explaining that the President has "the exclusive power of removing executive officers of the United States whom he has appointed by and with the advice and consent of the Senate." 272 U.S. at 106, 47 S.Ct. 21. Without interpreting the Take Care Clause as such, see Jack Goldsmith & John F. Manning, The Protean Take Care Clause, 164 U. Penn. L. Rev. 1835, 1840-41 (2016), the Court in Myers appeared to assume the Clause dictated illimitable removal power in the President. PHH deploys that conception of illimitable removal power against the CFPB.
But the Supreme Court since Myers has cabined that decision's apparent reach, recognizing the constitutionality of some measure of independence for agencies with certain kinds of functions. The Court in Morrison, Wiener, and Humphrey's Executor explicitly and repeatedly upheld forc-ause removal restrictions in a range of contexts where the Constitution tolerates a degree of independence from presidential control. The Court's latest removal-power decision, Free Enterprise Fund, applied the same analysis developed in those cases to strike an especially onerous set of removal restraints. The Court held that those double-layered restrictions, taken together, interfered with the President's oversight of faithful execution of the securities laws, but it left in place the SEC Commissioners' ordinary for-cause protection—the same protection at issue here.
The Court's removal-power doctrine supports Congress's application of a modest removal restriction to the CFPB, a financial regulator akin to the independent FTC in Humphrey's Executor and the independent SEC in Free Enterprise Fund, with a sole head like the office of independent counsel in Morrison.
It was only nine years after Myers, in Humphrey's Executor, that the Court unanimously upheld a provision of the Federal Trade Commission Act protecting FTC Commissioners from removal except for "inefficiency, neglect of duty, or malfeasance in office." 295 U.S. at 619, 632, 55 S.Ct. 869. Humphrey's Executor explained that Myers was limited; it required only that the President be able to remove purely executive officers without congressional involvement. Id. at 628, 55 S.Ct. 869. By contrast, where administrators of "quasi legislative or quasi judicial agencies" are concerned, the Constitution does not require that the President have "illimitable power" of removal. Id. at 629, 55 S.Ct. 869. The Humphrey's Executor Court drew guidance from the founding era, when James Madison (otherwise a strong proponent of the removal power) argued that an
A generation later, an again-unanimous Court in Wiener v. United States, 357 U.S. at 352-55, 78 S.Ct. 1275, per Justice Frankfurter, explicitly reaffirmed Humphrey's Executor and held that neither the rationale supporting the President's removal power nor the history of that power dating back to the First Congress required that the President always enjoy unconstrained authority to remove leadership of every kind of agency at his will. Wiener concerned the War Claims Commission, which had been set up to compensate certain personal injuries and property losses at the hands of the enemy in World War II. Both President Eisenhower (in Wiener) and President Roosevelt (in Humphrey's Executor) wanted the leaders of the respective agencies "to be their men," removable at will, but in each case Congress had opted for and the Court sustained a modicum of independence. Id. at 354, 78 S.Ct. 1275.
In Wiener, Justice Frankfurter expressly took into account the "thick chapter" of "political and judicial history" of controversy over the President's removal power that the Court had canvassed at length in Myers. 357 U.S. at 351, 78 S.Ct. 1275. The Wiener Court rejected President Eisenhower's broad, categorical understanding of Myers as largely drawn from its dictum and—in light of Humphrey's Executor—appropriately "short-lived." Id. at 352, 78 S.Ct. 1275. Commenting that "the versatility of circumstances often mocks a natural desire for definitiveness," id., Wiener squarely denied that the President had a power of removal that Congress could not limit under any circumstance, "no matter the relation of the executive to the discharge of [the official's] duties and no matter what restrictions Congress may have imposed regarding the nature of their tenure." Id. Rather, with attention to the sort of agency involved, Humphrey's Executor had "narrowly confined the scope of the Myers decision" to purely executive officers, not members of quasi-judicial bodies. Id.
The Wiener Court identified "the most reliable factor" in deciding whether a removal restriction comported with the President's constitutional authority to be "the nature of the function that Congress vested" in the agency. Id. at 353, 78 S.Ct. 1275; see Humphrey's Executor, 295 U.S. at 631, 55 S.Ct. 869 ("Whether the power of the President to remove an officer shall prevail[,]. . . precluding a removal except for cause will depend upon the character of the office . . . ."). The Court distinguished core executive agents who must be fully responsive to the President's preferences from those whose tasks call for a degree of independence "from Executive interference." Wiener, 357 U.S. at 353, 78 S.Ct. 1275. What mattered in Wiener was the "intrinsic judicial character of the task with which the [War Crimes] Commission was charged": Congress had directed the Commission to "`adjudicate according to law' the classes of claims defined in the statute" entirely on their merits, free of personal or partisan pressures. Id. at 355, 78 S.Ct. 1275. That directive prevented the President from interfering at will with the leadership of the Commission. The legislation establishing the Commission made plain, even in the absence of an express
Though the Court in Humphrey's Executor and Wiener thus emphasized the "quasi-legislative" and "quasi-judicial" character of the relevant offices, more recently the Court in Morrison v. Olson downplayed those particular characterizations of independent agencies while continuing to narrowly read Myers as disapproving "an attempt by Congress itself to gain a role in the removal of executive officials other than its established powers of impeachment and conviction." 487 U.S. at 686, 108 S.Ct. 2597. Morrison posed more directly the question whether a removal restriction "interfere[d] with the President's exercise of the `executive power' and his constitutionally appointed duty to `take care that the laws be faithfully executed' under Article II." Id. at 690, 108 S.Ct. 2597. According to Morrison, the references in the earlier removal-power cases to the "character" of the relevant offices could best be understood as describing "the circumstances in which Congress might be more inclined to find that a degree of independence from the Executive, such as that afforded by a `good cause' removal standard, is necessary to the proper functioning of the agency or official" in fulfilling its duties. Id. at 691 n.30, 108 S.Ct. 2597. The Court explained that its decision in Humphrey's Executor to sustain the independence that Congress thought appropriate for the FTC, with its "`quasi-legislative' or `quasi-judicial'" character, reflected the Court's "judgment that it was not essential to the President's proper execution of his Article II powers that [the FTC] be headed up by individuals who were removable at will." Morrison, 487 U.S. at 690-91, 108 S.Ct. 2597.
Morrison viewed as constitutionally relevant Congress's determination that the role and character of a special independent prosecutor called for some autonomy from the President. Echoing Wiener, the Court in Morrison again rejected as "dicta" the "implication" drawn from Myers that the President's removal power should in every circumstance be understood as "all-inclusive." Id. at 687, 108 S.Ct. 2597. Instead, Morrison read Humphrey's Executor and its progeny to allow Congress to provide limited removal protection for some administrative bodies, whose leadership Congress "intended to perform their duties `without executive leave and . . . free from executive control.'" Id. n.25 (alteration in original) (quoting Humphrey's Executor, 295 U.S. at 628, 55 S.Ct. 869). The Morrison Court evaluated the independent counsel's for-cause protection accordingly.
The independent counsel concededly performed functions that were traditionally "executive," but Morrison pinpointed "the real question" as "whether the removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty." Id. at 691, 108 S.Ct. 2597. Analyzing "the functions of the officials in question . . . in that light," id., the Court found the removal protection to be constitutional, recognizing it as "essential, in the view of Congress, to establish the necessary independence of the office." Id. at 693, 108 S.Ct. 2597. To be sure, the office of independent counsel was potent: It was empowered to prosecute highranking federal officials for violations of federal criminal law. Nevertheless, its removal protection did not unconstitutionally impinge on executive power. The Court "simply [did] not see how the President's need to control the exercise of [the independent counsel's] discretion is so central
The Supreme Court has thus recognized that Congress may value and deploy a degree of independence on the part of certain executive officials. At least so long as Congress does not disturb the constitutional balance by arrogating to itself a role in removing the relevant executive officials, see Bowsher, 478 U.S. at 726, 106 S.Ct. 3181; Myers, 272 U.S. at 161, 47 S.Ct. 21, the Constitution admits of modest removal constraints where "the character of the office" supports making it somewhat "free of executive or political control," Morrison, 487 U.S. at 687, 691 n.30, 108 S.Ct. 2597. The Court has sustained Congress's determinations that removal restrictions were appropriate to protect the independence of heads of agencies devoted specifically to special prosecution in Morrison, claims adjudication in Wiener, and market competition and consumer protection in Humphrey's Executor. Without questioning that there are certain agencies that Congress cannot make even modestly independent of the President, the Court accepted the removal restriction in each of those three cases as appropriate protection against the "`coercive influence' of the [atwill] removal power" that otherwise "would `threaten the independence of the [agency].'" Morrison, 487 U.S. at 690, 688, 108 S.Ct. 2597; see Wiener, 357 U.S. at 356, 78 S.Ct. 1275; Humphrey's Executor, 295 U.S. at 629-30, 55 S.Ct. 869.
Invalidating a provision shifting removal power over the Comptroller General from the President to Congress, the Supreme Court in Bowsher v. Synar again insisted on a narrow reading of Myers—at odds with the reading PHH advances here. The Supreme Court treated Myers as holding only "that congressional participation in the removal of executive officers is unconstitutional." 478 U.S. at 725, 106 S.Ct. 3181. To have an executive officer "answerable only to Congress would, in practical terms, reserve in Congress control over the execution of the laws" in violation of the constitutional separation of powers. Id. at 726, 106 S.Ct. 3181. Setting aside the removal scheme before it, the Court in Bowsher made clear that Humphrey's Executor and its progeny "involved an issue not presented either in the Myers case or in this case"—i.e., the constitutional validity of a statute leaving the removal power under the President's control, but authorizing its exercise "only `for inefficiency, neglect of duty, or malfeasance in office.'" Id. at 724-25, 106 S.Ct. 3181 (quoting Humphrey's Executor, 295 U.S. at 628-29, 55 S.Ct. 869). Bowsher thus acknowledged the constitutionality of for-cause limitation on the removal power when the President retains the power to find cause. The culprit violating the separation of powers in Bowsher was Congress's aggrandizement of its own control over executive officers.
The Supreme Court's most recent removal-power decision, Free Enterprise Fund, invalidated a "highly unusual" removal restriction because it interfered with the President's ability to "remove an officer. . . even if the President determines that the officer is neglecting his duties or discharging them improperly." 561 U.S. at 484, 505, 130 S.Ct. 3138. The problem was not congressional encroachment, but damage to the President's ability to supervise executive officers: "`Even when a branch does not arrogate power to itself,' . . . it
At issue in Free Enterprise Fund was an extreme variation on the traditional good-cause removal standard: a provision of the Sarbanes-Oxley Act that afforded members of the Public Company Accounting Oversight Board, an agency within the Securities and Exchange Commission, unusually strong protection from removal. See 561 U.S. at 486, 130 S.Ct. 3138. As in Morrison, the Court focused its inquiry on whether the President retains "power to oversee executive officers through removal." Id. at 492, 130 S.Ct. 3138. The challenged provisions shielded the PCAOB with "two layers of for-cause [protection from] removal—including at one level a sharply circumscribed definition of what constitutes `good cause,' and rigorous procedures that must be followed prior to removal." Id. at 505, 130 S.Ct. 3138. It provided that PCAOB members could be removed only by a formal order of the SEC, and only "for good cause shown." Id. at 486-87, 505, 130 S.Ct. 3138. But this was no garden-variety cause standard: It required a pre-removal finding, "on the record" and "after notice and opportunity for a hearing," of a Board member's willful violation of the Sarbanes-Oxley Act itself, the PCAOB's own rules, or the securities laws, or willful abuse of Board member authority, or a lack of "reasonable justification or excuse" for failure to enforce compliance. Id. at 486, 130 S.Ct. 3138; 15 U.S.C. § 7217(d)(3). On top of that, the SEC's Commissioners—tasked with removing such delinquent Board members—were themselves protected from presidential removal except for inefficiency, neglect of duty, or malfeasance in office. Free Enterprise Fund, 561 U.S. at 487, 130 S.Ct. 3138.
The scheme challenged in Free Enterprise Fund was defective because the Court found that it "withdraws from the President any decision on whether good cause exists" and thus "impair[s]" the President's "ability to execute the laws—by holding his subordinates accountable for their conduct." Id. at 495-96, 130 S.Ct. 3138. The Court distinguished Humphrey's Executor and Morrison as involving "only one level of protected tenure separat[ing] the President from an officer exercising executive power." Id. at 495, 130 S.Ct. 3138. When Congress provides agency heads with for-cause protection against removal by the President, the Court held, it must define "cause" in such a way as to leave the President leeway to sufficiently "oversee" these heads to prevent misconduct. Id. at 492-93, 130 S.Ct. 3138. The problem with the PCAOB's protection, then, was that the President did not retain that oversight. Specifically, "multilevel" for-cause protection rendered the President unable to "remove an officer . . . even if the President determines that the officer is neglecting his duties or discharging them improperly." Id. at 484, 130 S.Ct. 3138. The Court's solution to that problem was to retain one level of for-cause protection and remove the other. Id. at 514, 130 S.Ct. 3138. Thus, the Board members who serve under the SEC Commissioners may be removed by the Commissioners without cause, but the SEC Commissioners' for-cause protection remains in place.
Free Enterprise Fund did not, contrary to PHH's suggestion, narrow Humphrey's Executor or give Myers newly expansive force. See Pet'rs' Br. 21-22 & n.4. The Court's "modest" point was "not to take issue with for-cause limitations in general," but rather that the unprecedented restriction on the President's ability to remove a member of the PCAOB hobbled his power to oversee executive officers. 561 U.S. at 501, 130 S.Ct. 3138. As the Supreme Court had already made clear, "the only issue actually decided in Myers was that the President had power to remove a postmaster of the first class, without the advice and consent of the Senate as required by act of Congress.'" Morrison, 487 U.S. at 687 n.24, 108 S.Ct. 2597 (quoting Humphrey's Executor, 295 U.S. at 626, 55 S.Ct. 869); see Wiener, 357 U.S. at 351-52, 78 S.Ct. 1275. Free Enterprise Fund, for its part, cites Myers only for general restatements of law, all of which are consistent with Morrison, Wiener, and Humphrey's Executor. The opinion emphasizes, for example, that "[s]ince 1789, the Constitution has been understood to empower the President to keep [executive] officers accountable—by removing them from office, if necessary," and quotes Myers for the accepted principle that "the President . . . must have some `power of removing those for whom he can not continue to be responsible.'" Free Enterprise Fund, 561 U.S. at 483, 493, 130 S.Ct. 3138 (quoting Myers, 272 U.S. at 117, 47 S.Ct. 21). At the same time, Free Enterprise Fund recognizes the functional values of those for-cause protections the Court has sustained as consistent with the President's Take Care duty: An FTC "`independent in character,' [and] `free from political domination or control,'" in Humphrey's Executor; "the necessary independence of the office" of the independent counsel in Morrison; and "the rectitude" of officers administering a fund to compensate for war losses in Wiener. Free Enterprise Fund, 561 U.S. at 502, 130 S.Ct. 3138 (quoting Humphrey's Executor, 295 U.S. at 619, 55 S.Ct. 869; Morrison, 487 U.S. at 693, 108 S.Ct. 2597; Wiener, 357 U.S. at 356, 78 S.Ct. 1275).
Thus, the Court has upheld statutes that, like the challenged provision of the Dodd-Frank Act, "confer[] good-cause tenure on the principal officers of certain independent agencies." Free Enterprise Fund, 561 U.S. at 493, 130 S.Ct. 3138. Decisions from Humphrey's Executor to Free Enterprise Fund have approved standard for-cause removal restrictions where Congress deems them necessary for the effectiveness of certain types of agencies, provided that the President remains able to remove the agency heads for acting inefficiently, without good faith, or for neglecting their duties. The "real question" to ask, in considering such a statute, "is whether the removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty," taking account of the "functions of the officials in question." Morrison, 487 U.S. at 691, 108 S.Ct. 2597. The question
"The subject [of the President's removal authority] was not discussed in the Constitutional Convention." Myers, 272 U.S. at 109-10, 47 S.Ct. 21 (1926). But there was a diversity of opinion on the subject at the founding, and early examples of heterogeneity in agency design bear that out. Financial regulation, in particular, has long been thought to be well served by a degree of independence.
Congressional alertness to the distinctive danger of political interference with financial affairs, dating to the founding era, began the longstanding tradition of affording some independence to the government's financial functions. See Amicus Br. of Separation of Powers Scholars 4-10. Whereas the secretaries of the two other original departments (War and Foreign Affairs) were broadly chartered to "perform and execute such duties as shall from time to time be enjoined on or intrusted to [them] by the President of the United States," Act of July 27, 1789, ch. 4, § 1, 1 Stat. 28, 29; Act of Aug. 7, 1789, ch. 7, § 1, 1 Stat. 49, 50, Congress specified the responsibilities of the Treasury Secretary and other officers in the Treasury Department in some detail, see Act of Sept. 2, 1789, ch. 12, §§ 2-6, 1 Stat. 65, 65-67. See Gerhard Casper, An Essay in Separation of Powers: Some Early Versions and Practices, 30 Wm. & Mary L. Rev. 211, 241 (1989) (noting that, under the statutes of 1789 establishing the three "great departments" of government, "[o]nly the departments of State and War were completely `executive' in nature").
The Comptroller of the Treasury, notably, was charged with "direct[ing] prosecutions for all delinquencies of officers of the revenue; and for debts that are, or shall be due to the United States," id. at § 3, 1 Stat. at 66, and his decisions were deemed "final and conclusive," Act of Mar. 3, 1795, § 4, 1 Stat. 443, 443. He could be removed if found to "offend against any of the prohibitions of this act." 1 Stat. at 67. It is unclear whether the Comptroller was also thought to be removable by the President for other reasons, but James Madison, who was generally opposed to removal protections, said he believed "there may be strong reasons why an officer of this kind should not hold his office at the pleasure of the Executive branch of the Government." 1 Annals of Cong. 612 (1789). The nature of the Comptroller's office and independence eventually changed, but it is evident that the Comptroller was, from inception, meant to exercise an unusual degree of independent judgment. See Lawrence Lessig, Readings by Our Unitary Executive, 15 Cardozo L. Rev. 175, 184 (1993) (explaining that the President had "no directory control over the Comptroller General" and that "the Framers and the early congresses treated this independence as flowing from the nature of the Comptroller's duties"); Charles Tiefer, The Constitutionality of Independent Officers as Checks on Abuses of Executive Power, 63 B.U. L. Rev. 59, 73-75 (1983) (explaining that the Comptroller was "clearly . . . expected to exercise independent judgment").
At the dawn of the modern-day federal banking system, Congress continued to afford some independence to financial regulators as it set up the Office of the Comptroller of the Currency. See Nat'l Bank Act of 1863, 12 Stat. 665, 665-66 (1863); Nat'l Bank Act of 1864, 13 Stat. 99 (1864). Since the office's inception, the Comptroller of the Currency has been removable only if the President sends the Senate
The independence of financial regulators remains a prominent pattern today. The Federal Reserve Board is led by governors who can be removed only for cause during their fourteen-year terms. 12 U.S.C. § 242. The reason is simple: The Federal Reserve must "provide for the sound, effective, and uninterrupted operation of the banking system," and Congress found that a degree of independence was needed to "increase the ability of the banking system to promote stability." H.R. Rep. No. 74-742, at 1 (1935). By insulating the Board from presidential control and political pressures, Congress sought to ensure that the Federal Reserve would "reflect, not the opinion of a majority of special interests, but rather the well considered judgment of a body that takes into consideration all phases of national economic life." Id. at 6.
The Federal Trade Commission stands as another example of an independent financial regulator in the modern era—one expressly approved by the Supreme Court. When the FTC was created, the Senate Committee Report described the need for independence as ensuring "a continuous policy . . . free from the effect of . . . changing incumbency" in the White House. 51 Cong. Rec. 10,376 (1914). Congress reasoned that, as the country passed "through a depression," a new consumer protection agency with a degree of independence would "give reassurance rather than create doubt." Id.; see also id. ("The powers [of the FTC] must be large, but the exercise of the powers will not be against honest business, but will be persuasive and correctional. . . ."). In Humphrey's Executor, the Supreme Court expressly approved of Congress's choice to insulate this new consumer protection agency via a for-cause removal provision. 295 U.S. at 619, 632, 55 S.Ct. 869.
These examples typify other federal financial regulators, such as the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Housing Finance Authority, the National Credit Union Administration, and the Securities and Exchange Commission, which are considered independent whether or not for-cause removal protection is specified by statute. See Henry B. Hogue et al., Cong. Research Serv., R43391, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues 1, 15 (2017). This makes sense because Congress has consistently deemed "[i]nsulation from political concerns" to be "advantageous in cases where it is desirable for agencies to make decisions that are unpopular in the short run but beneficial in the long run," such as, for example, "the Fed's monetary policy decisions." Id. at 5 n.16. History and tradition, as well as precedent, show that Congress may appropriately give some limited independence to certain financial regulators.
The for-cause protection shielding the CFPB's sole Director is fully compatible with the President's constitutional authority.
Congress validly decided that the CFPB needed a measure of independence and
There is nothing constitutionally suspect about the CFPB's leadership structure. Morrison and Humphrey's Executor stand in the way of any holding to the contrary. And there is no reason to assume an agency headed by an individual will be less responsive to presidential supervision than one headed by a group. It is surely more difficult to fire and replace several people than one. And, if anything, the Bureau's consolidation of regulatory authority that had been shared among many separate independent agencies allows the President more efficiently to oversee the faithful execution of consumer protection laws. Decisional responsibility is clear now that there is one, publicly identifiable face of the CFPB who stands to account—to the President, the Congress, and the people—for all its consumer protection actions. The fact that the Director stands alone atop the agency means he cannot avoid scrutiny through finger-pointing, buck-passing, or sheer anonymity. What is more, in choosing a replacement, the President is unhampered by partisan balance or ex-officio requirements; the successor replaces the agency's leadership wholesale. Nothing about the CFPB stands out to give us pause that it—distinct from other financial regulators or independent agencies more generally—is constitutionally defective.
Applying the Court's precedents to this case, we begin by observing that the CFPB Director is protected by the very same standard, in the very same words—"inefficiency, neglect of duty, or malfeasance in office"—as the Supreme Court sustained in Humphrey's Executor. Compare 15 U.S.C. § 41, with 12 U.S.C. § 5491(c)(3). Again, the challenged statute imposes no additional layer of particularly onerous protection, per Free Enterprise Fund, nor indeed any other restriction on removal. And Congress has not given itself authority to participate in the President's removal decision, which was fatal to the removal mechanisms in Myers and Bowsher. The CFPB's for-cause protection is therefore unlike any removal restriction that the Court has ever invalidated as impermissibly restricting executive authority. In every case reviewing a congressional decision to afford an agency ordinary for-cause protection, the Court has sustained Congress's decision, reflecting the settled role that independent agencies have historically played in our government's structure. See Morrison, 487 U.S. at 688, 108 S.Ct. 2597; Wiener, 357 U.S. at 356, 78 S.Ct. 1275; Humphrey's Executor, 295 U.S. at 629-30, 55 S.Ct. 869; see also Free Enterprise Fund, 561 U.S. at 509, 130 S.Ct. 3138 (leaving in place "a single level of good-cause tenure" for SEC Commissioners); id. at 510 (suggesting that Congress might choose to make PCAOB members removable directly by the President "for good cause").
Indeed, the independence of financial regulators—chronicled above, see supra Part I.B—is so well established by tradition and precedent that courts have assumed these agencies' heads have removal protection even in the absence of clear statutory text so directing. See Free Enterprise Fund, 561 U.S. at 487, 130 S.Ct. 3138 (treating SEC Commissioners as removable only for cause). It has long been "generally accepted that the President may remove a[n SEC] commissioner [only] for inefficiency, neglect of duty, or malfeasance in office." SEC v. Bilzerian, 750 F.Supp. 14, 16 (D.D.C. 1990) (citing SEC v. Blinder, Robinson & Co., Inc., 855 F.2d 677, 681 (10th Cir. 1988), and H. Rep. No. 2070, 86th Cong., 2d Sess. 14 (1960)). And in Swan v. Clinton, for example, this court assumed that board members of the National Credit Union Association have removal protection because "people will likely have greater confidence in financial institutions if they believe that the regulation of these institutions is immune from political influence." 100 F.3d 973, 983 (D.C. Cir. 1996).
PHH's attempt to single out the CFPB from other financial regulators, including the FTC, is unpersuasive. PHH asserts that, when the Court decided Humphrey's Executor, the FTC "had no substantive rulemaking powers" and "could not order `retrospective' remedies." Pet'rs' Reply Br. 6. But the FTC at that time did have broad powers to interpret and enforce the law. See generally, e.g., Federal Trade Comm'n v. Western Meat Co., 272 U.S. 554, 47 S.Ct. 175, 71 S.Ct. 405 (1926). Moreover, many independent agencies (including the FTC) now exercise rulemaking and remedial powers like those of the CFPB. See Nat'l Petroleum Refiners Ass'n v. FTC, 482 F.2d 672, 698 (D.C. Cir. 1973) (holding that the Federal Trade Commission Act conferred substantive rulemaking powers); Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, Pub. L. No. 93-637, § 205(a), 88 Stat. 2183, 2200-01 (1975) (codified as amended at 15 U.S.C. § 45(m)(1)(A)) (authorizing FTC to "commence a civil action to recover a civil penalty in a district court of the United States").
Apart from the panel of this court whose decision we vacated, courts have uniformly understood Humphrey's Executor to support the constitutionality of for-cause removal protection for the current FTC and certain other agencies with rulemaking and enforcement powers. See Morrison, 487 U.S. at 692 & n.31, 108 S.Ct. 2597 (noting that the FTC and other independent agencies "exercise civil enforcement powers"). Well before the Supreme Court in Free Enterprise Fund assumed the unchallenged constitutionality of SEC Commissioners' for-cause protection, for instance, the Tenth Circuit sustained it,
PHH asks us to cast aside the CFPB's pedigree in Supreme Court precedent upholding this very type of independence and its lineage in historical practice regarding financial regulators. PHH focuses instead on dicta in Myers that speak of executive removal power as seemingly "illimitable." Humphrey's Executor, 295 U.S. at 627-28, 55 S.Ct. 869. Within less than a decade, however, the Supreme Court unanimously rejected that dicta in Humphrey's Executor, 295 U.S. at 628-29, 55 S.Ct. 869, and unanimously did so again in Wiener, 357 U.S. at 351-52, 78 S.Ct. 1275. In the ensuing decades, while it has cited Myers's unexceptional holding prohibiting congressional involvement in removal of executive officials, the Court has continued to disavow the broad dicta on which PHH principally relies. See, e.g., Morrison, 487 U.S. at 686-87, 108 S.Ct. 2597; see also Bowsher, 478 U.S. at 724-25, 106 S.Ct. 3181; Free Enterprise Fund, 561 U.S. at 483, 493, 502, 130 S.Ct. 3138. Law and history put the CFPB, led by a Director shielded from removal without cause, on safe ground.
Congress's commitment to independence for financial regulators is also reflected in the CFPB's budgetary set-up. PHH and some of its amici protest Congress's choice to allow the CFPB to claim funds from the Federal Reserve rather than through the congressional appropriations process. See Pet'rs' Br. 26-28; Amicus Br. of Chamber of Commerce 8-9. But Congress can, consistent with the Appropriations Clause, create governmental institutions reliant on fees, assessments, or investments rather than the ordinary appropriations process. See Am. Fed'n of Gov't Emps., AFL-CIO, Local 1647 v. Fed. Labor Relations Auth., 388 F.3d 405, 409 (3d Cir. 2004). Using that authority, Congress has consistently exempted financial regulators from appropriations: The Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Housing Finance Agency all have complete, uncapped budgetary autonomy. See, e.g., 12 U.S.C. § 243 (Federal Reserve); see also Hogue, Independence of Federal Financial Regulators, at 26-27.
The way the CFPB is funded fits within the tradition of independent financial regulators. The Bureau draws a statutorily capped amount from the Federal Reserve, which formerly administered many of the consumer-protection laws now largely under the CFPB's purview. See Identification of Enforceable Rules and Orders, 76 Fed. Reg. 43,569-01, 43,570-71 (July 21, 2011). That feature aims to help the CFPB to avoid agency capture that Congress believed had beset the agencies that previously administered the CFPB's statutes, in part because those agencies depended on industry fees. See Rachel E. Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 Tex. L. Rev. 15, 44-45 (2010); Oren Bar-Gill & Elizabeth Warren, Making Credit Safer, 157 U. Pa. L. Rev. 1, 93 (2008).
PHH suggests that, even if budgetary independence and for-cause removal protection are not separately unconstitutional, their combination might be. See Pet'rs' Br. 28 (citing Ass'n of Am. R.Rs. v. U.S. Dep't of Transp., 721 F.3d 666, 673 (D.C. Cir. 2013), vacated on other grounds, ___ U.S. ___, 135 S.Ct. 1225, 191 L.Ed.2d 153 (2015)). But that combination is not novel. See, e.g., 12 U.S.C. § 243 (Federal Reserve's budgetary independence); id. § 242 (Federal Reserve's for-cause removal protection); id. § 16 (Office of the Comptroller of the Currency's budgetary independence); id. § 2 (Office of the Comptroller of the Currency's removal protection). And, in any event, for two unproblematic structural features to become problematic in combination, they would have to affect the same constitutional concern and amplify each other in a constitutionally relevant way. Thus, as we have noted, "Free Enterprise Fund deemed invalid a regime blending two limitations on the President's removal power." Ass'n of Am. R.Rs., 721 F.3d at 673. No similar amplification is present here. The CFPB's budgetary independence primarily affects Congress, which has the power of the purse; it does not intensify any effect on the President of the removal constraint.
The CFPB thus fits comfortably within precedent and tradition supporting the independence of the financial regulators that safeguard the economy. Whether it is considered alone or in combination with the independent funding provision, the requirement that the CFPB Director be removed only for cause does not unconstitutionally constrain the President.
We are nevertheless urged that the constitutionality of for-cause removal turns on a single feature of the agency's design: whether it is led by an individual or a group. But this line of attack finds no home in constitutional law.
To begin with, that contention flies in the face of Morrison, which, contrary to PHH's suggestions, remains valid and binding precedent. Morrison upheld the constitutionality of for-cause removal protection for an individual agency head who exercised substantial executive authority. The fact that the independent counsel was a solo actor played no role in either the Court's decision for an eight-member majority or Justice Scalia's dissent; neither saw that fact as a ground of distinction from the multi-member agencies sustained in Humphrey's Executor and Wiener.
Fundamentally, Congress's choice—whether an agency should be led by an individual or a group—is not constitutionally scripted and has not played any role in the Court's removal-power doctrine. As discussed above, the cases focus on "whether the removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty," Morrison, 487 U.S. at 691, 108 S.Ct. 2597, or, put otherwise, whether the President's "ability to execute the laws—by holding his subordinates accountable for their conduct—is impaired," Free Enterprise Fund, 561 U.S. at 496, 130 S.Ct. 3138. Preserving lines of accountability within the executive branch ensures that the public can "determine on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall." The Federalist No. 70, at 476 (Alexander Hamilton) (J. Cooke ed. 1961). On this measure, the constitutionality of the CFPB's structure is unaffected by the fact that it is led by a single Director.
As a practical matter, considering the impact on presidential power, the line of accountability at the CFPB is at least as clear to the observing public as at multiheaded independent agencies, and the President's control over the CFPB Director is at least as direct. PHH has not identified any reason to think that a single-director independent agency is any less
By contrast, the CFPB Director's line of accountability to the President is clear and direct. Before Congress established the Bureau, multiple agencies—most of them independent—had jurisdiction over consumer financial protection, and that dispersion hampered executive ability to diagnose and respond to problems. The creation of the CFPB, with the centralization of previously scattered powers under common leadership, enhanced public accountability and simplified the President's ability to communicate policy preferences and detect failings. Now, if the President finds consumer protection enforcement to be lacking or unlawful, he knows exactly where to turn. If the offending conduct is rooted in the Director's failure to carry out the prescribed work of the agency, the President can remove the Director for "inefficiency, neglect of duty, or malfeasance in office." 12 U.S.C. § 5491(c). The President need only remove and replace a single officer in order to transform the entire CFPB and the execution of the consumer protection laws it enforces. Thus, just as the Framers "consciously decid[ed] to vest Executive authority in one person rather than several" so as to "focus, rather than to spread" responsibility and thereby "facilitat[e] accountability" to the people, Clinton v. Jones, 520 U.S. 681, 712, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997) (Breyer, J., concurring), Congress's creation of an independent agency led by a single Director would appear to facilitate the agency's accountability to the President.
Eschewing the relevant doctrinal inquiry—whether an agency's independence impermissibly interferes with presidential power—PHH nonetheless seeks some other home in the precedent for its argument that a single-headed independent agency is unlawful. PHH places great stock in the Court's observation in Humphrey's Executor that the FTC is "called upon to exercise the trained judgment of a body of experts." Pet'rs' Br. 22-23 (quoting Humphrey's Executor, 295 U.S. at 624, 55 S.Ct. 869). It claims an absence of any such body here. In reality, Congress created a multi-member body of experts to check the CFPB Director: the Financial Stability Oversight Council (FSOC). See 12 U.S.C. § 5321. The Council brings together the nation's leading financial regulators, including the Secretary of the Treasury and the Chairman of the Federal Reserve, to constrain risk in the financial system. Id. § 5321(b). The FSOC may stay or veto any CFPB regulation that threatens the "safety and soundness" of the national economy. Id. § 5513.
As a legal matter, the passing reference to a "body" of experts in Humphrey's Executor arose in the course of the Court's statutory holding, not its constitutional analysis. Before reaching the constitutional question—whether FTC Commissioners may be given for-cause protection consistently
As an alternative theory why an agency's leadership structure might be constitutionally relevant to presidential power, PHH points out that the CFPB Director's five-year term means that some future President might not get to appoint a CFPB Director, whereas Presidents typically have an opportunity to appoint at least some members of multi-member commissions, or to select a member to act as chair. Pet'rs' Br. 25. But the constitutionality of for-cause protection does not turn on whether the term is five years or four. None of the leaders of independent financial-regulatory agencies serves a term that perfectly coincides with that of the President, and many have longer terms than the CFPB Director. See Hogue, Independence of Federal Financial Regulators, at 14 ("Five-year terms are the most common. . . but some positions have longer terms."); Marshall J. Breger & Gary J. Edles, Established by Practice: The Theory and Operation of Independent Federal Agencies, 52 Admin. L. Rev. 1111, 1137 (2000) (describing terms as "typically extend[ing] beyond the four-year presidential term"). As noted, the seven governors of the Federal Reserve Board are appointed to serve staggered fourteen-year terms unless removed for cause. See 12 U.S.C. § 242. Further examples abound. The members of the Consumer Product Safety Commission, the FTC, and the Merit Systems Protection Board have seven-year terms, 15 U.S.C. § 2053; 15 U.S.C. § 41; 5 U.S.C. § 1202, the Federal Deposit Insurance Corporation's five directors each has a six-year term, 12 U.S.C. § 1812, so, too, do the National Credit Union Administration's three members, 12 U.S.C. §§ 1752a(b), (c); and the National Transportation Safety Board's members serve five-year terms, 49 U.S.C. § 1111. The Social Security Commissioner appointed by President George W. Bush to a six-year term served into the second term of President Barack Obama.
Across independent agencies, there is also wide variation as to the means of appointment and term of various chairpersons. The members of the Federal Election Commission, for instance, serve six-year terms, and the Chair, rather than
We are not aware of any court that has viewed the existence, strength, or particular term of agency chairs or members to be relevant to the constitutionality of an independent agency. The Constitution has never been read to guarantee that every President will be able to appoint all, or even a majority of, the leaders of every independent agency, or to name its chair. And what practical effect the terms of any particular agency's members or chair might have on a President's agenda remains context-dependent and unclear. See Hogue, Independence of Federal Financial Regulators, at 8-9 & n.36 (explaining that the statutory or practical authority of such chairs varies widely); Senate Committee on Governmental Affairs, Study on Federal Regulation, S. Doc. No. 95-91, vol.5, at 35 (1977) ("[T]he President would have only a limited opportunity to affect the leadership of any given commission; most of the time, hold-overs from a prior administration could be expected to be part of the membership."). PHH assumes that this factor always cuts one way. In reality, the diversity of circumstance helps illustrate why PHH errs in treating commission structure as constitutionally decisive.
Notably, when the President does get to replace the CFPB Director, he is not restricted by ex-officio requirements to appoint incumbent officeholders, or by a partisan-balance mandate to select individuals who do not even belong to his political party. See, e.g., 15 U.S.C. § 78d(a) (not more than three of five SEC Commissioners shall be members of the same political party); 12 U.S.C. § 1812(a)(2) (not more than three of the five members of the FDIC's Board of Directors may be members of the same political party, and one must have State bank supervisory experience); 12 U.S.C. § 242 (the Chairman and two Vice Chairmen of the Federal Reserve are designated from among its Board of Governors). At bottom, the ability to remove a Director when cause to do so arises and to appoint a replacement provides "ample authority to assure that the [Director] is competently performing his or her statutory responsibilities." Morrison, 487 U.S. at 692, 108 S.Ct. 2597. After all, the terms "inefficiency, neglect of duty, or malfeasance in office" are "very broad." Bowsher, 478 U.S. at 729, 106 S.Ct. 3181. Given these realities, a single level of for-cause protection for heads of certain appropriate agencies is constitutionally permissible despite the possibility that some future President will lack a regularly occurring vacancy to fill.
We find no reason in constitutional precedent, history, or principle to invalidate the CFPB's independence. The Supreme Court has sustained for-cause protection for the heads of certain administrative agencies—even if they perform a mix of regulatory, investigative, prosecutorial, and adjudicatory functions—as compatible with the President's essential duty to assure faithful execution of the law. The CFPB led by a single Director is as consistent with the President's constitutional authority as it would be if it were led by a group. Like other independent federal financial
PHH goes further than trying to problematize the CFPB's leadership structure with reference to the logic or language of the Supreme Court's removal-power cases; it offers several broader theories of unconstitutionality. None of PHH's novel objections to the Director's for-cause protection squares with the Constitution or precedent. And PHH's disputed factual premises about the effects of agency design choices underscore that, while such considerations may be useful fodder for policy-making by Congress, they are not grounds for courts to reshape the constitutional removal power.
First, breaking with traditional separation-of-powers analysis and precedent, PHH and its amici assail the CFPB as somehow too powerful. See Pet'rs' Br. 24; Amicus Br. of Chamber of Commerce 8-11. But nothing about the focus or scope of the agency's mandate renders it constitutionally questionable; indeed, the Bureau's powers have long been housed in and enforced by agency officials protected from removal without cause. That fact underscores our fundamental point: The exercise of those powers by an independent official does not interfere with the President's constitutional role.
Second, the CFPB's sole directorship is not historically anomalous. And, in any event, congressional innovation in the CFPB's internal structure would not alone render the agency constitutionally invalid.
Third, PHH's notion that a multi-member structure would safeguard liberty, writ large, because it would check or slow or stop the CFPB from carrying out its duties is a non-sequitur from the perspective of precedent, which focuses on President's authority and the separation of powers.
Finally, our decision to sustain the challenged for-cause provision cannot reasonably be taken to invite Congress to make all federal agencies (or various combinations thereof) independent of the President. The President's plenary authority over his cabinet and most executive agencies is obvious and remains untouched by our decision. It is PHH's unmoored theory of liberty that threatens to lead down a dangerously slippery slope.
PHH argues that, because the CFPB Director wields "vast authority" over the American economy, he cannot be protected from the President. Pet'rs' Br. 28. Both the factual and the legal premises of that argument are unsupported.
To begin with the factual assertion, the CFPB's power and influence are not out of the ordinary for a financial regulator or, indeed, any type of independent administrative agency. The Bureau enforces antifraud rules in the consumer finance context; it does not unilaterally exercise broad regulatory power over the financial system. Its authority reaches only entities providing "consumer financial product[s] or service[s]," limited to those offered to individual consumers "primarily for personal, family, or household purposes." See 12 U.S.C. § 5491(a); id. §§ 5481(4), (5), (6), (15). It does not address, for example, business-to-business or institutional debt or investments. In that respect, it contrasts with the 1935-era FTC—upheld by the Court in Humphrey's Executor, 295 U.S. at 620, 55 S.Ct. 869—that had authority,
That the CFPB is headed by a single Director does not render the scope of its responsibilities anomalous or problematic. Independence has long been associated with financial regulators with wide latitude to oversee and steady financial markets and the national economy. See supra Part I.B. Independent financial regulators have been headed either by one person, as with the Comptroller of the Treasury and the Comptroller of the Currency, or by a group, as with the Federal Reserve. The CFPB's authority to ensure the fairness of family— and household-facing financial products does not somehow pose unprecedented dangers rendering every historical analogue inapt.
As for PHH's legal premise that the scope of the CFPB's regulatory authority is constitutionally relevant, Humphrey's Executor turned not on the breadth of the FTC's jurisdiction or on its social and economic impact, but on its character as a financial and commercial regulator. The Supreme Court described the FTC as "an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid." Humphrey's Executor, 295 U.S. at 628, 55 S.Ct. 869. PHH relies on Morrison's description of the independent counsel as having only "limited jurisdiction and tenure and lacking policymaking or significant administrative authority." 487 U.S. at 691, 108 S.Ct. 2597. Those limitations were significant in Morrison because the independent counsel's criminal-law-enforcement functions were quintessentially "executive" in nature; the Court placed emphasis on features of the independent counsel that would clearly distinguish her from, for example, an independent Attorney General. See id. The Court spelled out the independent counsel's functions to make plain that they were not "so central to the functioning of the Executive Branch as to require as a matter of constitutional law that the counsel be terminable at will by the President." Id. at 691-92, 108 S.Ct. 2597. But that is not to suggest that it is appropriate to tally up the number of laws an agency is charged with administering in order to determine whether it may be independent. Cf. Pet'rs' Reply Br. 2. Indeed, the independent counsel had all of federal criminal law at her disposal. Rather, the Court has analyzed the function of the office in question and where it stood in relation to particular types of governmental power, including those like criminal prosecution that are indisputably and solely executive.
In sum, under the requisite functional analysis, the CFPB's authority is more cabined than either the FTC's or the independent counsel's, and the agency is part of a longstanding tradition, dating back to the founding of the Republic, of financial regulators with a modicum of independence from presidential will.
PHH further argues that the CFPB's structure is constitutionally suspect because it is novel. We reject both premises—that whatever novelty the CFPB may represent calls into question its constitutionality, and that the CFPB is in any relevant respect unprecedented.
Even if the CFPB were anomalous, PHH points to nothing that makes novelty itself a source of unconstitutionality. Novelty "is not necessarily fatal; there is a first time for everything." Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519, 549, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012) (opinion of Roberts, C.J.); see also Mistretta v. United States, 488 U.S. 361, 385,
For instance, in NLRB v. Noel Canning, the Supreme Court interpreted the President's express constitutional authorization to "fill up all Vacancies that may happen during the Recess of the Senate." ___ U.S. ___, 134 S.Ct. 2550, 2556, 189 L.Ed.2d 538 (2014); see U.S. Const. art. II, § 2, cl. 3. An historical practice of recess appointments "since the beginning of the Republic" aided in "expounding terms [and] phrases"—"Recess of the Senate" and "Vacancies that may happen"—and the Court treated "practice as an important interpretive factor." 134 S.Ct. at 2560 (quoting Letter from James Madison to Spencer Roane (Sept. 2, 1819), in 8 The Writings of James Madison 450 (Hunt ed., 1908)). But novelty did not create the constitutional question or define the constitutional violation.
In Free Enterprise Fund, the Supreme Court quoted a dissenter in this court stating that "lack of historical precedent" for dual-layered protection may be "the most telling indication of [a] severe constitutional problem." 561 U.S. at 505, 130 S.Ct. 3138 (quoting Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 537 F.3d 667, 699 (D.C. Cir. 2008) (Kavanaugh, J., dissenting)). But it did so only after explaining how, under its own precedent, the unusual set-up of the Public Company Accounting Oversight Board directly impaired the President's "ability to execute the laws." 561 U.S. at 500-01, 130 S.Ct. 3138. Other constitutional principles beyond novelty must establish why a specific regime is problematic.
A constrained role for novelty in constitutional doctrine is well justified. Our political representatives sometimes confront new problems calling for tailored solutions. The 2008 financial crisis, which Congress partially attributed to a colossal failure of consumer protection, was surely such a situation. The Constitution was "intended to endure for ages to come, and, consequently, to be adapted to the various crises of human affairs." McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 415, 4 S.Ct. 579 (1819). The judiciary patrols constitutional boundaries, but it does not use the Constitution merely to enforce old ways. Even if we agreed that the CFPB's structure were novel, we would not find it unconstitutional on that basis alone.
As for the descriptive premise of the novelty argument—that the CFPB's soledirector structure makes it historically exceptional, Pet'rs' Br. 23—we again must disagree. For starters, there is no appreciable difference between the historical pedigree of single-member and multi-member independent agencies. The most notable early examples in either category (and the only pre-Twentieth Century ones) are soleheaded financial regulators: the Comptroller of the Treasury, dating back to the late-Eighteenth Century; and the Office of the Comptroller of the Currency, established in the mid-Nineteenth. See Act of Sept. 2, 1789, ch. 12, § 3, 1 Stat. at 66; Nat'l Bank Act of 1863, 12 Stat. at 665-66.
Other examples of single-headed independent agencies include the Social Security Administration, which was placed under a single director in 1994, see 42 U.S.C. § 902(a), and the Office of Special Counsel established under a sole director in 1978, the same year as the Office of Independent Counsel upheld in Morrison, see 5 U.S.C.
PHH and its amici try to undermine these analogues by asserting that Presidents have consistently objected to single-headed independent agencies. See Amicus Br. of United States 17-19. As an initial matter, no contemporaneous objection was voiced by the President or any dissenting faction within Congress to placing the CFPB itself under a Director rather than a board. PHH's contention is further belied by history. President Lincoln, for instance, signed without objection an act rendering the Comptroller of the Currency removable only with advice and consent of the Senate. Steven G. Calabresi & Christopher S. Yoo, The Unitary Executive During the Second Half-Century, 26 Harv. J.L. & Pub. Pol'y 667, 734 (2003); George Wharton Pepper, Family Quarrels: The President, The Senate, The House 111 (1931); see Nat'l Bank Act of 1863, 12 Stat. 665, 665-66 (1863). And President George H.W. Bush approved that Congress had decided to "retain[] current law which provides that the Special Counsel may only be removed for inefficiency, neglect of duty, or malfeasance." George H.W. Bush, Remarks on Signing the Whistleblower Protection Act of 1989 (Apr. 10, 1989), http://www.presidency.ucsb.edu/ws/?pid=16899.
Evidence proffered to show presidential contestation is recent, sparse, and nonspecific. See Amicus Br. of United States 17-19. Executive objections to removal restrictions have not made clear whether they opposed protecting a sole agency head in particular, or for-cause protections more generally. See Statement by President William J. Clinton Upon Signing H.R. 4277, 1994 U.S.C.C.A.N. 1624 (Aug. 15, 1994) (Clinton administration objection to Social Security Administration under a sole, independent administrator on the ground that "the provision that the President can remove the single Commissioner only for neglect of duty or malfeasance in office raises a significant constitutional question"); Mem. Op. for the Gen. Counsel, Civil Serv. Comm'n, 2 Op. O.L.C. 120, 120 (1978) (Carter administration objection to creation of Office of Special Counsel because it exercised "functions [that] are executive in character," such as investigation and prosecution); President Ronald Reagan, Mem. of Disapproval on a Bill Concerning Whistleblower Protection, 2 Pub. Papers 1391, 1392 (Oct. 26, 1988) (Reagan administration objection to law creating Office of Special Counsel because it "purports to insulate the Office from presidential supervision and to limit the power of the President to remove his subordinates from office"). The scant and ambivalent record of executive-branch contestation thus does not detract from the tradition of sole-headed agencies as precedents for the CFPB.
We are also unpersuaded by efforts to distinguish away agencies like the Social Security Administration and the Office of Special Counsel on the ground that they lack authority to bring law enforcement actions against private citizens. See Amicus Br. of United States 17-18. Those agencies perform important and far-reaching functions that are ordinarily characterized as executive. The Social Security Administration runs one of the largest programs in the federal government, overseeing retirement, disability, and survivors' benefits, handling millions of claims and trillions of
Moving beyond precedent and practice, PHH and its amici ask us to compare single-headed and group-led agencies' relative contributions to "liberty." The CFPB, headed by an individual Director, is constitutionally invalid, they say, because it diminishes the President's firing authority without substituting a different, ostensibly liberty-protecting mechanism—collective leadership. See, e.g., Pet'rs' Br. 2. If a majority of an agency's leadership group must agree before the agency can take any action, the agency might be slower and more prone to compromise or inaction. A sole-headed agency, by contrast, might be nimble and resolute. Because multiple heads might make the CFPB less likely to act against the financial services industry it regulates, group leadership is, according to PHH, constitutionally compelled.
There is no question that "structural protections against abuse of power [a]re critical to preserving liberty." Bowsher, 478 U.S. at 730, 106 S.Ct. 3181; see also Free Enterprise Fund, 561 U.S. at 501, 130 S.Ct. 3138 (quoting Bowsher, 478 U.S. at 730, 106 S.Ct. 3181). Agencies' accountability to the President and the people, bolstered by the removal power, can ultimately protect liberty. But by arguing that sole-headed and group-headed agencies differ in terms of "liberty" without identifying any differential effect on accountability, PHH proposes a ground for our decision that lacks doctrinal footing and conflicts with Morrison's approval of a sole-headed independent agency. Morrison, Wiener, and Humphrey's Executor hold that unbridled removal power in the President's hands is not a universal requirement for constitutional accountability; those cases thus underscore that such unbridled power is not in all contexts necessary to serve liberty or the myriad other constitutional values that undergird the separation of powers. Broad observations about liberty-enhancing effects are not themselves freestanding constitutional limitations.
PHH's brand of argument depends on a series of unsupported leaps. First, it treats a broad purpose of the separation of powers—safeguarding liberty—as if it were a judicially manageable constitutional standard. But, as criteria for judicial decision,
John F. Manning, Foreword: The Means of Constitutional Power, 128 Harv. L. Rev. 1, 56-57 (2014). As sustained by the Supreme Court, for-cause removal restrictions presumptively respect all of the "general and diverse" goals of separation of powers, see id. at 56, including liberty. Once the Supreme Court is satisfied that a removal restriction leaves the President adequate control of the executive branch's functions, the Court does not separately
Another of PHH's leaps is its assumption that the CFPB's challenged characteristics diminish "liberty," writ large. It remains unexplained why we would assess the challenged removal restriction with reference to the liberty of financial services providers, and not more broadly to the liberty of the individuals and families who are their customers. Congress determined that, without the Dodd-Frank Act and the CFPB, the activities the CFPB is now empowered to regulate contributed to the 2008 economic crisis and Americans' devastating losses of property and livelihood. Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report, at xv-xvii. Congress understood that markets' contribution to human liberty derives from freedom of contract, and that such freedom depends on market participants' access to accurate information, and on clear and reliably enforced rules against fraud and coercion. Congress designed the CFPB with those realities in mind.
More fundamentally, PHH's unmoored liberty analysis is no part of the inquiry the Supreme Court's cases require: As Part I explains, the key question in the Court's removal-power cases is whether a challenged restriction either aggrandizes the power of another branch or impermissibly interferes with the duty and authority of the President to execute the laws. The CFPB Director's for-cause restriction does neither. That result is liberty-protecting; it respects Congress's chosen means to cleanse consumer financial markets of deception and fraud, and respects the President's authority under the challenged law to ensure that the CFPB Director performs his or her job competently and in accordance with the law. The traditional for-cause protection leaves the President "ample authority" to supervise the agency. Morrison, 487 U.S. at 692, 108 S.Ct. 2597.
If the CFPB Director runs afoul of statutory or constitutional limits, it is the President's prerogative to consider whether any excesses amount to cause for removal, the Financial Stability Oversight Council's expert judgment whether to step in to protect markets, and the courts' role to them in violations of individual rights. The now-reinstated panel holding that invalidated the disgorgement penalties levied against PHH (a holding expressly approved by three additional members of the en banc court, see Concurring Op. (Tatel, J.)), illustrates how courts appropriately guard the liberty of regulated parties when agencies overstep. The fact that the CFPB is led by one Director, rather than several commissioners, does not encroach on the President's constitutional power and duty to supervise the enforcement of the law.
Finally, PHH mounts a slippery-slope argument against the CFPB. Sustaining the CFPB's structure as constitutionally permissible, PHH argues, could threaten the President's control over the Cabinet. Pet'rs' Reply Br. 7.
We disagree. "[T]here are undoubtedly executive functions that, regardless of the enactments of Congress, must be performed by officers subject to removal at will by the President." Bowsher, 478 U.S. at 762, 106 S.Ct. 3181 (White, J., dissenting); see Morrison, 487 U.S. at 690, 108 S.Ct. 2597 (same). Should Congress ever seek to provide the Cabinet with for-cause protection against removal, at least two principled distinctions would differentiate this case from a challenge to such a law.
First, the Supreme Court's removal-power precedent, which we follow here, makes the nature of the agency's function
Second, Cabinet-level officers traditionally are close presidential advisers and allies. Under the 25th Amendment, Cabinet officials have the power (by majority vote and with the Vice President's assent) to remove the President temporarily from office. See U.S. Const. amend. XXV, § 4; Freytag v. Comm'r of Internal Revenue, 501 U.S. 868, 887, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991) (suggesting that the 25th Amendment, which refers to "the principal officers of the executive departments," refers to "Cabinet-level entities"). We do not believe that the heads of independent agencies are executive-agency principals eligible under the 25th Amendment to vote on a President's incapacity. Cabinet officials are also, by statute, in the presidential line of succession, see 3 U.S.C. § 19(d)(1), and their agencies are specifically denoted as "Executive departments," 5 U.S.C. § 101. There is thus little prospect that Congress could require the President to tolerate a Cabinet that is not fully and directly accountable to him.
Indeed, the slipperiest slope lies on the other side of the mountain. PHH argues that, regardless of whether Humphrey's Executor itself turned on the FTC's multi-member character, we should reject any independent agency that does not precisely mimic the agency structure that the Court approved in that case. See Pet'rs' Br. 22. PHH gleans from Free Enterprise Fund the proposition that "when a court is asked `to consider a new situation not yet encountered by the [Supreme] Court,' there must be special mitigating `circumstances' to justify `restrict[ing the President] in his ability to remove' an officer." Pet'rs' Br. 22 (quoting 561 U.S. at 483-84, 130 S.Ct. 3138). The Court held no such thing. And if we were to embrace an analysis invalidating
PHH suggests that so-called "[h]istorical[]" multi-member independent agencies are different in kind—and thus would be safe even if the CFPB were invalidated—because "their own internal checks" somehow substitute for a check by the President. Pet'rs' Br. 23. The argument is that multi-member agency leadership could check or slow or stop agency action even when the President could not, and that such a check, in turn, protects liberty. PHH's newly devised theory posits that freestanding liberty is the goal, and that various agency design features might be a means—alternative to illimitable presidential control but nonetheless somehow mandated by Article II—to ensure that liberty. That theory lacks grounding in precedent or principle. See supra Part I.C.3. In Free Enterprise Fund, for example, the fact that the PCAOB and the SEC were both multi-member bodies did not salvage the Board's dual-layered removal limitation.
If PHH's version of liberty were the test—elevating regulated entities' liberty over those of the rest of the public, and requiring that such liberty be served by agencies designed for maximum deliberation, gradualism, or inaction—it is unclear how such a test could apply to invalidate only the CFPB. That test would seem equally to disapprove other features of many independent agencies. Consider, for example, efficiency-promoting features like a strong chairperson, low quorum requirement, small membership, shared professional or partisan background, and electronic or negative-option voting. Even a multi-member independent agency might have features that offset that body's theoretical gradualism and, in practice, achieve the efficiency that PHH's liberty analysis condemns. Would such an agency be susceptible to challenge under PHH's theory as threatening to liberty?
By the same token, it is also unclear why a doctrine embracing PHH's brand of freestanding liberty analysis would not constitutionally obligate Congress to affirmatively impose additional internal checking mechanisms on all independent agencies. Many familiar processes and structures—such as partisan or sectoral balance, requirements of large and broadly representative membership; high quorum, supermajority or unanimity rules; or even mandatory in-person meetings and votes—might foster deliberation and check action as much if not more than mere multi-member leadership. Reading the Constitution, as PHH does, to require courts to impose group leadership at independent agencies would appear to throw open many other institutional design features to judicial second-guessing. For good reason, PHH's freestanding liberty analysis is not, and has never been, the law.
The reality that independent agencies have many and varied design features underscores that there is no one, constitutionally compelled template. Academic analyses to which PHH and dissenters point for the proposition that a multi-headed structure is the sine qua non of these agencies' constitutional validity, see Dissenting Op. at 177-78 (Kavanaugh, J.), do not support their theory. Those materials are more descriptive than prescriptive. And, contrary to the dissenters' suggestions, they do not treat multiple membership as indispensable. Rather, scholars identify various indicia of agency independence that demonstrate the rich diversity of institutional design. See Kirti Datla &
The particular design choice that PHH here highlights—whether to create a single-director or multi-member agency—implicates policy determinations that we must leave to Congress. There are countless structural options that might be theorized as promoting more or less thorough deliberation within agencies. Our own judgments of contested empirical questions about institutional design are not grounds for deeming such choices constitutionally compelled. After all, "[t]he court should. . . not stray beyond the judicial province to explore the procedural format or to impose upon the agency its own notion of which procedures are `best' or most likely to further some vague, undefined public good"—including "liberty," however defined. Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 549, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978).
Even accepting deliberative virtues of multi-member bodies under certain conditions, other structural choices serve other virtues of equal importance. We should not require Congress always to privilege the putative liberty-enhancing virtues of the multi-member form over other capabilities Congress may choose, such as efficiency, steadiness, or nuanced attention to market developments that also, in different ways,
Judicial review of agency design choices must focus on ensuring that Congress has not "interfere[d] with the President's exercise of the `executive power' and his constitutionally appointed duty to `take care that the laws be faithfully executed' under Article II." Morrison, 487 U.S. at 690, 691 n.30, 108 S.Ct. 2597. Internal agency dynamics to which PHH points have little to do with the President's ultimate duty to ensure that the laws are faithfully executed.
A constitutional analysis that condemns the CFPB's for-cause removal provision provides little assurance against—indeed invites—the judicial abolition of all independent agencies. PHH and dissenters do not dispel that concern. In PHH's view, the Supreme Court's entire line of precedent beginning with Humphrey's Executor was wrongly decided. See Pet'rs' Br. 22 n.4 (preserving argument for overrule of Morrison and Humphery's Executor); see also Dissenting Op. at 194-95 n.18 (Kavanaugh, J.) (noting PHH's preservation of that argument). PHH's course calls into question the legitimacy of every independent agency. We instead follow Supreme Court precedent to sustain the challenged Act of Congress.
Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the President from firing the CFPB Director without cause. We thus uphold Congress's choice.
The Supreme Court's removal-power decisions have, for more than eighty years, upheld ordinary for-cause protections of the heads of independent agencies, including financial regulators. That precedent leaves to the legislative process, not the courts, the choice whether to subject the Bureau's leadership to at-will presidential removal. Congress's decision to provide the CFPB Director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will. We have no warrant here to invalidate such a time-tested course. No relevant consideration gives us reason to doubt the constitutionality of the independent CFPB's single-member structure. Congress made constitutionally permissible institutional design choices for the CFPB with which courts should hesitate to interfere. "While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635, 72 S.Ct. 863, 96 S.Ct. 1153 (1952) (Jackson, J., concurring).
The petition for review is granted in part and denied in part, and the case is remanded to the agency for further proceedings.
Concurring opinion filed by Circuit Judge Tatel, with whom Circuit Judges Millett and Pillard join.
Concurring opinion filed by Circuit Judge Wilkins, with whom Circuit Judge Rogers joins.
Opinion concurring in the judgment filed by Circuit Judge Griffith.
Dissenting opinion filed by Circuit Judge Henderson.
Dissenting opinion filed by Senior Circuit Judge Randolph.
Tatel, Circuit Judge, with whom Circuit Judges Millett and Pillard join, concurring:
Finding no way to avoid the constitutional question, the en banc court reinstates the panel opinion's statutory holdings. Were this court to address the statutory questions, which are fully briefed, I would have resolved them differently. Specifically, I would have concluded that (1) the Bureau reasonably interpreted RESPA to impose liability on PHH, (2) the applicable statute of limitations reaches back five years to cover PHH's conduct, and (3) the Bureau's prospective injunction against PHH is permissible, even if its retrospective disgorgement penalties are not.
First, the Bureau's interpretation of RESPA. Section 8(c) states that "[n]othing in this section shall be construed as prohibiting. . . the payment to any person of a bona fide salary or compensation or other payment for goods or . . . services actually performed." 12 U.S.C. § 2607(c) (emphasis added). The CFPB interpreted this provision to insulate from liability just payments for referral services made "solely for the service actually being provided on its own merits," Director's Decision at 17—that is, that "bona fide" payments excludes payments whose purpose is to serve as a quid pro quo for referrals.
PHH argues that Section 8(c) unambiguously permits regulated entities to give or receive kickbacks in the form of reinsurance arrangements as long as the kickbacks do not exceed the reasonable market value for reinsurance services. In other words, PHH insists that "bona fide" admits of only one meaning—that a "payment is `bona fide' if it bears a reasonable relationship to the value of the services actually provided in return." Pet'rs' Br. 43.
But Section 8(c)'s use of the phrase "bona fide" is not unambiguous. Neither it nor any other provision of RESPA defines the term, and looking to its "ordinary or natural meaning"—as we must when the statute supplies no definition of its own, FDIC v. Meyer, 510 U.S. 471, 476, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994)—likewise fails to resolve the ambiguity. To the contrary, dictionary definitions reflect a range of meanings encompassed by the term, including the very definition adopted by the Bureau. See Webster's New Collegiate Dictionary 125 (1973) ("Made in good faith without fraud or deceit . . . , made with earnest intent . . . , neither specious nor counterfeit."); Black's Law Dictionary 223 (4th Ed. Rev'd 1968) ("In or with good faith; honestly, openly, and sincerely; without deceit or fraud . . . real, actual, genuine, and not feigned."). The existence of these varied definitions, "each making some sense under the statute, itself indicates" the statute's ambiguity. National Railroad Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407, 418, 112 S.Ct. 1394, 118 L.Ed.2d 52 (1992).
Moreover, the Bureau's interpretation of "bona fide" is perfectly reasonable, as the previous citations to both Webster's and Black's demonstrate. Indeed, PHH does not argue to the contrary, other than to claim that because RESPA has some criminal applications—none relevant here—the rule of lenity requires that any statutory ambiguity be resolved in PHH's favor. The Supreme Court, however, has done just the opposite, deferring to an agency's interpretation of a statute even though the Court recognized that violations of the statute could carry criminal penalties. Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687, 704
There remains the question of how far back the Bureau can reach in seeking to impose liability on regulated entities. Specifically, the question is whether administrative actions to enforce RESPA's ban on referral fees are subject to the specific three year statute of limitations contained in RESPA, 12 U.S.C. § 2614, as PHH argues, or whether, as the Bureau contends, they are subject only to the general five year statute of limitations on any action or administrative proceeding for "enforcement of any civil fine, penalty, or forfeiture" contained in 28 U.S.C. § 2462. Given that RESPA provides that "[a]ny action" to enforce the ban on referral fees initiated by the Bureau must be brought within three years, 12 U.S.C. § 2614, the question turns on whether the word "action" encompasses both court and administrative actions.
RESPA's plain text favors the Bureau's view that the provision limits the timing of only court actions, not administrative actions like the one at issue here. The clause expressly refers to actions that "may be brought in the United States district court" and specifies that such actions are generally subject to a one year statute of limitations, except that "actions brought by the Bureau, the Secretary, the Attorney General of any State, or the insurance commissioner of any State may be brought within 3 years." Id. Given that state attorneys general and insurance commissioners have no authority to bring administrative enforcement actions, even if they may bring actions in court, it would be odd to conclude that this provision circumscribes when the same actors can bring administrative actions that they could never have brought in the first place. Reinforcing this point, the RESPA provision is entitled "Jurisdiction of courts; limitations."
If the statute, read alone, was not clear enough, the Bureau would still be entitled to a presumption that statutes of limitations "are construed narrowly against the government"—a principle "rooted in the traditional rule . . . [that] time does not
The Bureau thus reasonably interpreted PHH's actions as running afoul of RESPA and correctly concluded that it could impose liability on conduct falling within the five-year limitations period. Based on this liability, the Bureau sought two forms of relief: disgorgement for PHH's past harms and an injunction to prevent future ones. For substantially the reasons given by the panel, I agree that the Bureau ran afoul of the due process clause by failing to give PHH adequate notice in advance of imposing penalties for past conduct. Importantly for our purposes, however, the imposition of prospective relief is unaffected by that fair notice issue. See, e.g., Landgraf v. USI Film Products, 511 U.S. 244, 273 (1994) ("When the intervening statute authorizes or affects the propriety of prospective relief, application of the new provision is not retroactive."); Bowen v. Georgetown University Hospital, 488 U.S. 204, 221, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988) (Scalia, J., concurring) ("Retroactivity [in agency adjudications] is not only permissible but standard.").
Though I disagree with the panel's now-reinstated statutory holdings, I completely agree with the en banc court that the Bureau's structure does not violate the constitutional separation of powers. PHH is free to ask the Supreme Court to revisit Humphrey's Executor and Morrison, but that argument has no truck in a circuit court of appeals. Attempts to distinguish those cases—by rereading Humphrey's as hinging on the multi-member structure of the FTC, or by characterizing the Independent Counsel in Morrison as an insignificant inferior officer—are, at best, strained. Indeed, to uphold the constitutionality of the Bureau's structure we need scarcely go further than Morrison itself, which approved a powerful independent entity headed by a single official and along the way expressly compared that office's "prosecutorial powers" to the "civil enforcement powers" long wielded by the FTC and other independent agencies. Morrison v. Olson, 487 U.S. 654, 692 n.31, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988).
Although it may (or may not) be wise, as a policy matter, to structure an independent agency as a multimember body, nothing in the Constitution's separation of powers compels that result. The Constitution no more "enacts" social science about the benefits of group decision-making than it does "Mr. Herbert Spencer's Social Statics." Lochner v. New York, 198 U.S. 45, 75, 25 S.Ct. 539, 49 S.Ct. 937 (1905) (Holmes, J. dissenting).
Wilkins, Circuit Judge, with whom Rogers, Circuit Judge, joins, concurring:
I concur with the Court's decision in full. This petition involves a challenge to a final decision in an adjudication by the Consumer Financial Protection Bureau ("CFPB"). Petitioners are quite clear that they seek review of the "Decision of the Director" and the "Final Order" issued by the
Congress authorized the CFPB "to conduct hearings and adjudication proceedings" to "ensure or enforce compliance with" the provisions of the Dodd-Frank Act establishing the authority of the CFPB and any rules issued thereunder, and "any other Federal law that the Bureau is authorized to enforce. . . ." 12 U.S.C. § 5563(a)(1)-(2). The Bureau must do so in the "manner prescribed" under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551 et seq. 12 U.S.C. § 5563(a). The CFPB can bring enforcement actions in either a court or an administrative proceeding. "The court (or the Bureau, as the case may be) in an action or adjudication proceeding brought under Federal consumer financial law, shall have jurisdiction to grant any appropriate legal or equitable relief. . . ." Id. § 5565.
In 2012, the CFPB issued a final rule pursuant to 12 U.S.C. § 5563(e) to establish rules of practice for adjudication proceedings. 12 C.F.R. § 1081.
The Director does not initiate investigations. Rather, "[t]he Assistant Director of the Office of Enforcement and the Deputy Assistant Directors of the Office of Enforcement have the nondelegable authority to initiate investigations," id. § 1080.4, just as they have the authority to close CFPB investigations, id. § 1080.11(c). If the investigation merits enforcement within the agency, Bureau lawyers commence the proceeding with the filing of a Notice of Charges, id. § 1081.200, as was done here, J.A. 41, and the matter proceeds to a hearing.
The "hearing officer," defined as "an administrative law judge or any other person duly authorized to preside at a hearing," id. § 1081.103, is vested with wide adjudicatory authority, including the power to issue subpoenas, order depositions, hold settlement conferences, and "rule upon, as justice may require, all procedural and other motions appropriate in adjudication proceedings." Id. § 1081.104(b)(2), (3), (7), (10). Most importantly, at the close of the administrative proceedings, "[t]he recommended decision shall be made and filed by the hearing officer who presided over the hearings. . . ." Id. § 1081.400(d).
The Director of the Bureau acts as the chief adjudicatory official. Whether or not the parties choose to appeal the recommended decision, it goes to the CFPB Director, who "shall . . . either issue a final decision and order adopting the recommended decision, or order further briefing regarding any portion of the recommended decision." Id. § 1081.402(b). If the Director determines that it would "significantly aid[]" the decisional process, the Director may order oral argument. Id. § 1081.404(a). As the Director considers the recommended decision, the Director "will, to the extent necessary or desirable, exercise all powers which he or she could have exercised if he or she had made the
The Director rendered a final decision and order as the chief adjudicatory official of the Bureau in this case. J.A. 1-40. That adjudication is the basis of the petition for review, Petition 1-3, and that adjudication provides the basis for our subject matter jurisdiction. Pet'r's Br. 4.
The adjudicatory nature of the order under review is material to the questions raised by the instant petition. We have an extensive line of authority, from the time of the Framers to the present, establishing that removal restrictions of officers performing adjudicatory functions intrude far less on the separation of powers than removal restrictions of officers who perform purely executive functions.
From the time of the Constitution's enactment, the Framers recognized that adjudication poses a special circumstance. Even James Madison, one of strongest and most articulate proponents "for construing [Article II] to give the President the sole power of removal in his responsibility for the conduct of the executive branch," Myers v. United States, 272 U.S. 52, 117, 47 S.Ct. 21, 71 S.Ct. 160 (1926) (citation omitted), acknowledged the "strong reasons why" an executive officer who adjudicates disputes "between the United States and particular citizens . . . should not hold his office at the pleasure of the Executive branch of the Government." 1 ANNALS OF CONG. 611-12 (1789) (Joseph Gales ed., 1834) (statement of James Madison). Consistent with Madison's view, the Supreme Court has held that the evaluation of removal restrictions for an officer "will depend upon the character of the office." Humphrey's Executor v. United States, 295 U.S. 602, 631, 55 S.Ct. 869, 79 S.Ct. 1611 (1935). As a result, the scrutiny of a removal restriction for an officer "with no duty at all related to either the legislative or judicial power," differs from that of an officer who "perform[s] other specified duties as a legislative or as a judicial aid," as the latter "must be free from executive control," id. at 627-28, 55 S.Ct. 869. The Court continued:
Id. at 629.
Relying upon the "philosophy of Humphrey's Executor," the Court later held that the power to remove "a member of an adjudicatory body" at will and without cause is not "given to the President directly by the Constitution." Wiener v. United States, 357 U.S. 349, 356, 78 S.Ct. 1275, 2 L.Ed.2d 1377 (1958).
To be sure, the adjudicatory nature of an officer's duties is not dispositive. The analysis is much more nuanced. The modern view is "that the determination of whether the Constitution allows Congress to impose a `good cause'-type restriction on the President's power to remove an official
Despite its rejection in Morrison of the simple categorization of officers, the Supreme Court was clear that it "d[id] not mean to suggest that an analysis of the functions served by the officials at issue is irrelevant." Id. at 691, 108 S.Ct. 2597. As Madison recognized, the faithful execution of the laws may require that an officer has some independence from the President. To provide for due process and to avoid the appearance of impropriety, agency adjudications are structured to be "insulated from political influence" and to "contain many of the same safeguards as are available in the judicial process." Butz v. Economou, 438 U.S. 478, 513, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978) (holding, among other things, that safeguards from political influence entitled the Secretary of Agriculture's designee, who rendered final decisions in agency adjudications, to absolute immunity). The Article II inquiry is informed by the consistent recognition of the imperative to safeguard the adjudicatory officer from undue political pressure. Thus, even if not dispositive, the quasi-judicial functions of the CFPB Director are still relevant to our inquiry, and those functions seriously undermine petitioners' separation-of-powers objection. See Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 507 n.10, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010) (noting that its holding, which struck down two layers of good-cause removal restrictions for members of the Public Company Accounting Oversight Board, did not necessarily apply to administrative law judges who, "unlike members of the Board, . . . perform adjudicative rather than enforcement or policymaking functions").
Disagreeing with the weight of authority, the dissenters take two major tacks, neither of which is sufficient to overcome the Court's precedent.
First, the dissenters attempt to recast this case as more about the Director's pure executive power of enforcement rather than about the quasi-judicial power of adjudication. Henderson Dissenting Op. 33; Kavanaugh Dissenting Op. 15-17, 20-23 & n.2. But what we have before us is the Director's order of adjudication. Pet'r's Br. 4 (Jurisdictional Statement). This essential detail, along with the fact that the Director has substantial adjudicative responsibilities, is minimized.
This recasting is significant, because Judge Henderson contends that the Court's precedents should be read to deem removal protections for a principal officer in violation of the separation of powers unless the officer's "primary function is adjudication," Henderson Dissenting Op. 33 (emphasis in original), and Judge Kavanaugh emphasizes over and again that this case is "about executive power," Kavanaugh Dissenting Op. 1, because the CFPB Director has "substantial executive authority." Id. at 3, 125 S.Ct. 377; see also id. at 5, 7, 8, 18, 68, 73, 125 S.Ct. 377 (characterizing the Director's "substantial executive power" or "authority").
This line of attack collapses under its own weight. The vast majority of independent agencies have significant enforcement and adjudicative responsibilities, and these shared duties are expressly addressed by the APA. 5 U.S.C. § 554(d). If the dissenters were correct, then it would violate the separation of powers for any such independent agency to be headed by a principal officer with tenure protection. This has never been the law. At the time of Humphrey's Executor, the Court was well aware that the Federal Trade Commission ("FTC") exercised both enforcement, 15 U.S.C. §§ 45(b), 46, and adjudicative functions, Fed. Trade Comm'n v. Winsted Hosiery Co., 258 U.S. 483, 490, 42 S.Ct. 384, 66 S.Ct. 729 (1922), but it nonetheless upheld the removal protections of FTC Commissioners. 295 U.S. at 629, 55 S.Ct. 869. Similarly, in Free Enterprise Fund,
Morrison, 487 U.S. at 690, n.29, 108 S.Ct. 2597 (emphasis added).
In sum, the dissenters have warped the current meaning of Myers. There is no rule requiring direct presidential supervision of all officers, with the only potential exception for "purely" judicial officers or officers having no "substantial" executive power; rather, Humphrey's Executor "narrowly confined the scope of the Myers decision to include only `all purely executive officers.'" Wiener, 357 U.S. at 352, 78 S.Ct. 1275 (quoting Humphrey's Executor, 295 U.S. at 628, 55 S.Ct. 869).
In their other major line of attack, the dissenters seek to overcome the precedent upholding tenure protection for officers with significant quasi-judicial and quasi-legislative responsibilities by distinguishing the CFPB, headed by a single director, from independent agencies headed by multimember commissions. In this regard, a few other points bear mention.
As noted in the Majority Opinion, Congress mostly reshuffled existing responsibilities from other entities to the CFPB. Maj. Op. 11-12. I do not read the dissenting opinions as suggesting that the Constitution prohibits Congress from reassigning responsibilities from existing independent agencies to a new independent agency. Instead, the dissenters contend that the Constitution requires the new independent agency to be headed by multiple members in order to receive tenure protection; Congress cannot depart from that model. However, just as "[o]ur constitutional principles of separated powers are not violated. . . by mere anomaly or innovation," Mistretta v. United States, 488 U.S. 361, 385, 109 S.Ct. 647, 102 L.Ed.2d 714 (1989), I do not believe that the concept of "two heads are better than one" has been elevated to a constitutional requirement of agency leadership. Single individuals have been entrusted with important decision-making authority throughout our government from
For our separation-of-powers analysis, there are two critical questions: How much, if at all, does the single-director structure decrease the agency's accountability to the President in comparison to a multi-member agency? And is the President's control so diminished as to "interfere impermissibly with his constitutional obligation to ensure faithful execution of the laws"? Morrison, 487 U.S. at 693, 108 S.Ct. 2597. As the Majority Opinion points out, the assumption that the single-director structure gives the President less control over the agency is dubious at best. Maj. Op. 43-45. Furthermore, we have a "duty . . . to construe [the CFPB] statute in order to save it from constitutional infirmities" and to avoid "overstat[ing] the matter" when describing the power and independence of the Director. Morrison, 487 U.S. at 682, 108 S.Ct. 2597. I fear the dissenters have overstated the power of the Director and understated the checks on that power.
I grant that having a single person in charge of the CFPB is different than having a multi-member body, but we cannot downplay the fact that Congress also required extensive coordination, expert consultation, and oversight of the Director. If much was given to the Director, then much was also required:
In sum, Congress guided (and limited) the discretion of the Director of the CFPB in a very robust manner. Of course, the CFPB is not the only independent agency with consultation requirements, and the Dodd-Frank Act imposed new consultation requirements upon a number of agencies. See Jody Freeman & Jim Rossi, Agency Coordination in Shared Regulatory Space, 125 HARV. L. REV. 1131, 1168 (2012); Susan Block-Lieb, Accountability and the Bureau of Consumer Financial Protection, 7 Brook. J. Corp. Fin. & Corn. L. 25, 55-56 (2012). But "[t]he Dodd-Frank Act does not subject any of the other federal financial regulators to similar overarching coordination requirements. . . ." U.S. GOVT ACCOUNTABILITY OFFICE, GAO-12-151, DODD FRANK ACT REGULATIONS: IMPLEMENTATION COULD BENEFIT FROM ADDITIONAL ANALYSES AND COORDINATION 22 (2011). With the amount of "coordination" and "consultation" required of the CFPB by statute, there can be no doubt that the Director operates with as much expert advice as any other independent agency. Congress went even further, repeatedly requiring the Director to seek "consistency" with other agencies, and in some circumstances, requiring the Director to explain why he or she failed to heed an objection of another agency. Congress even required the Director to give a yearly after-action report assessing the merits of every significant rule or order.
But here's the kicker: Congress created a new entity, the above-described Financial Stability Oversight Council, with veto power over any rule promulgated by the Director that the Council believes will "put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk." 12 U.S.C. § 5513. Any member of the Council can file a petition to stay or revoke a rule, which can be granted with a two-thirds majority vote. See id. Thus, if the Director's decisionmaking goes awry on a critical rulemaking, a multi-member body of experts can step in. Significantly, a supermajority of persons on the Council are designated by the President.
The veto is powerful enough, but the filing of a petition alone will trigger congressional oversight, since it "shall be published
These myriad coordination and consultation requirements have further significance for the separation-of-powers analysis: They give the President more potential ammunition to remove the CFPB Director than for the average officer. For-cause removal protections are meaningful as a bulwark against undue political influence in agencies relied on for their expertise and independent judgment. But the standard of removal for "inefficiency, neglect of duty, or malfeasance in office" does not afford officers who head independent agencies with unlimited discretion or untrammeled power. Here, the Director's failure to abide by the stringent statutory requirements of consultation or coordination would almost certainly constitute "neglect of duty." And the promulgation of a rule contrary to consensus expert advice without sufficient grounds or explanation would subject the Director to risk of removal for inefficiency.
Although the Supreme Court has largely avoided the task of spelling out precisely what conduct constitutes "cause" to remove officers under Humphrey's Executor, "inefficiency, neglect of duty, or malfeasance in office" provides a workable standard, and lower courts have long adjudicated the meaning of those terms in similar contexts. Congress first used "inefficiency, neglect of duty, or malfeasance in office" as a removal standard for officers of the Interstate Commerce Commission and the General Board of Appraisers in 1887 and 1890, respectively. See An Act to Regulate Commerce, ch. 104, § 11, 24 Stat. 379, 383 (1887); An Act to Simplify the Laws in Relation to the Collection of the Revenues, ch. 407, § 12, 26 Stat. 131, 136 (1890).
As interpreted by courts and agencies for nearly a century, "inefficiency" provides a broad standard allowing for the removal of employees whose performance is found lacking. What constitutes "inefficiency" has varied depending on the context of the officer or employee's responsibilities and functions, but it is best described as incompetence or deficient performance. See, e.g., Burnap v. United States, 53 Ct. Cl. 605, 609 (Ct. Cl. 1918) (upholding the removal of a landscape architect for inefficiency due to his failure to heed his super, visor's instructions to cease working for private clients), aff'd, 252 U.S. 512, 519-20 (1920) (rejecting procedural and constitutional challenges, and upholding the removal); Thomas v. Ward, 225 F.2d 953, 954 (D.C. Cir. 1955) (upholding a Navy personnel officer's removal for inefficiency when the officer was charged with "lack of professional knowledge and supervisory ability; poor personnel management and public relations and acts of misconduct involving failure to carry out orders; disloyalty to his superiors and untruthfulness in official relations with other employees"); Seebach v. Cullen, 338 F.2d 663, 665 (9th Cir. 1964) (upholding the dismissal of an IRS Auditor for "[i]nefficiency in handling tax cases as evidenced by technical and procedural errors, substandard report writing, and lack of proper audit techniques"); King v. Hampton, 412 F.Supp. 827 (E.D. Va. 1976) (upholding the removal of a Navy electronics engineer for inefficiency); Alpert v. United States, 161 Ct. Cl. 810 (Ct. Cl. 1963) (inefficiency removal sustained when an employee of a VA Hospital was charged with "Insubordination, Tardiness, Improper Conduct, and Unsatisfactory Interpersonal Relationships"); DeBusk v. United States, 132 Ct. Cl. 790 (Ct. Cl. 1955) (upholding removal of VA loan examiner for failure to "promote the efficiency of the service" based on charges of his disrespect of supervisors and failure to follow instructions); Fleming v. U.S. Postal Serv., 30 M.S.P.R. 302, 308 (M.S.P.B. 1986) (upholding removal for "inefficiency" based on numerous unscheduled absences from work); see also Arnett v. Kennedy, 416 U.S. 134, 158-64 (1974) (upholding "efficiency" standard against vagueness challenge); see generally, 1 PETER BROIDA, A GUIDE TO MERIT SYSTEMS PROTECTION BOARD LAW & PRACTICE 1669, 1713 (Dewey Publ'ns Inc. 2012) (discussing cases upholding removal of federal employees for inefficiency); 1 ISIDORE SILVER, PUBLIC EMPLOYEE DISCHARGE & DISCIPLINE § 3.23 (John Wiley & Sons Inc. 2d ed. 1995) (discussing the role of MSPB in adjudicating disputes over removals for inefficiency); OFFICE OF PERSONNEL MANAGEMENT, FEDERAL PERSONNEL MANUAL 752-15 (1989) (on file in the D.C. Circuit Library) (collecting cases upholding removal of federal employees for inefficiency); ROBERT VAUGHN, PRINCIPLES OF CIVIL SERVICE LAW §§ 1, 5 (Matthew Bender & Co. 1976) (discussing the origins of civil service law and the "efficiency" standard).
In sum, this body of authority from the past century demonstrates that the CFPB Director would be subject to supervision and discipline for "inefficiency" if he or she failed to comply with the various statutory mandates of coordination and consultation. It also shows that "inefficiency" is relatively broad and provides a judicially manageable standard. I agree with the overall sentiment of Judge Griffith that the broad removal authority gives the President adequate ability to supervise the CFPB Director,
Thus, even if the meaning of "inefficiency" could be construed, in isolation, as broadly as Judge Griffith contends, "[i]n expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy." U.S. Nat. Bank of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455, 113 S.Ct. 2173, 124 L.Ed.2d 402 (1993) (quoting United States v. Heirs of Boisdore, 49 U.S. (8 How.) 113, 122, 12 S.Ct. 1009 (1849)). The removal standard must be interpreted in light of the fact that Congress designated the CFPB as "an independent bureau," 12 U.S.C. § 5491(a), and even if agency independence exists on a spectrum, Griffith Concurring Op. 23-24, the spectrum has a limit. The essence of an independent agency is that it "be independent of executive authority, except in its selection, and free to exercise its judgment without the leave or hindrance of [the President]," Humphrey's Executor, 295 U.S. at 625, 55 S.Ct. 869. Judge Griffith's broad reading of the removal power is inconsistent with the common understanding of "independent" and "would render part of the statute entirely superfluous, something we are loath to do." Cooper Indus., Inc. v. Aviall Servs., Inc., 543 U.S. 157, 166, 125 S.Ct. 577, 160 L.Ed.2d 548 (2004). See also Maj. Op. 30-34 (discussing the historical independence of financial regulators). This is why the interpretation of "inefficiency" for lower-level federal workers is instructive, but not dispositive, because no one imagines that federal employees are entitled to be "independent" of their bosses in the way Congress clearly
Although the dissenters take great pains to distinguish the single-director structure of the CFPB from the multi-member structure of other agencies, they fail to show that this structural difference so impairs presidential control that it poses a constitutional problem. Or even that it provides the President less control over the CFPB than over other independent agencies. The upshot of the dissenters' cramped reading of the Supreme Court's separation-of-powers jurisprudence is that the President cannot exercise meaningful control over the Executive branch without the ability to remove all principal officers for any reason (or no reason at all). That is not the import of the Supreme Court's separation-of-powers cases from Myers to Free Enterprise Fund. Those cases establish constitutional boundaries which the CFPB falls well within.
While the Constitution requires that the President be permitted to hold principal and inferior officers to account, it also accommodates—and may, at times, even require—a degree of independence for those officers who perform quasi-judicial and quasi-legislative functions. So here. And just as the commissioners on a multimember board must consult with each other before acting, the CFPB Director is required to consult with a plethora of colleagues and experts. Furthermore, the unique combination of oversight provisions in the Dodd-Frank Act gives the President greatly enhanced control over the CFPB compared to other independent agencies.
A proper balancing of these considerations against the factors that arguably diminish the President's control requires that we uphold the present "good cause" tenure protections applicable to the CFPB Director. In sum, "[I] do not think that this limitation as it presently stands sufficiently deprives the President of control over the [CFPB Director] to interfere impermissibly with his constitutional obligation to ensure the faithful execution of the laws," Morrison, 487 U.S. at 693, 108 S.Ct. 2597. I therefore concur in the denial of the constitutional claim in the petition.
Griffith, Circuit Judge, concurring in the judgment:
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.
Although most principal officers of Executive Branch agencies serve at the pleasure of the President as at-will employees, in Humphrey's Executor v. United States, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611
Some fifty years later in Morrison v. Olson, 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), the Supreme Court recast the inquiry established in Humphrey's Executor. The Court's evaluation of the "functions" performed by an officer did not "define rigid categories" but only sought to "ensure that Congress does not interfere with the President's exercise of the `executive power' and his constitutionally appointed duty to `take care that the laws be faithfully executed' under Article II." Id. at 689-90, 108 S.Ct. 2597 (quoting U.S. Const. art. II, §§ 1, 3). According to the Morrison Court, "the real question is whether the removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty, and the functions of the officials in question must be analyzed in that light." Id. at 691, 108 S.Ct. 2597; see also id. at 692, 108 S.Ct. 2597 (asking whether a restriction "impermissibly burdens" or "interfere[s] impermissibly" with the President's constitutional obligations). More recently, in Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010), the Supreme Court applied Morrison's test to strike down a particularly restrictive removal scheme, holding that "multilevel protection from removal. . . . contravenes the President's `constitutional obligation to ensure the faithful execution of the laws.'" Id. at 484, 130 S.Ct. 3138 (quoting Morrison, 487 U.S. at 693, 108 S.Ct. 2597).
In this case, my colleagues conduct the Morrison inquiry by debating how the CFPB's novel institutional design affects the President's supervision of the agency. They focus on the agency's single-Director structure and consider whether a single agency head is more or less responsive to the President than a multimember commission. And they debate whether, because of the single Director's five-year term, a one-term President has sufficient supervisory power over the CFPB. Although these difficult questions may matter in a future case, we cannot understand their constitutional significance in this case until we know the strength of the Director's removal protection.
For-cause removal protections are generally considered the defining feature of independent agencies. See Free Enterprise Fund, 561 U.S. at 483, 130 S.Ct. 3138.
Moreover, when addressing the constitutionality of independent agencies, the Supreme Court has directed us to focus on the President's removal power instead of squinting at "bureaucratic minutiae" such as the structural intricacies debated by the
A faithful application of Morrison requires us to determine the extent to which the CFPB's removal standard actually prevents the President from removing the Director. In addition, this approach allows us to forgo, at least for now, the more vexing constitutional questions about institutional design. Cf. Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 787, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) (explaining that "statutes should be construed so as to avoid difficult constitutional questions" (emphasis added)); John F. Manning, The Independent Counsel Statute: Reading "Good Cause" in Light of Article II, 83 Minn. L. Rev. 1285, 1288 (1999) (arguing that, to avoid a "serious constitutional question," the "good cause" removal provision in the Ethics in Government Act should be interpreted to allow removal for insubordination).
The Dodd-Frank Wall Street Reform and Consumer Protection Act provides that the President may remove the CFPB Director for "inefficiency, neglect of duty, or malfeasance in office." Pub. L. No. 111-203, § 1011, 124 Stat. 1376, 1964 (2010) (codified at 12 U.S.C. § 5491(c)(3)). For purposes of simplicity, I refer to this as the "INM standard." Congress first used the INM standard in the late nineteenth century, see An Act To Regulate Commerce, ch. 104, § 11, 24 Stat. 379, 383 (1887), and it has since become a common for-cause removal provision for independent agencies, see e.g., An Act To Complete the Codification of Title 46, Pub. L. No. 109-304, § 301(b)(3), 120 Stat. 1485, 1488 (2006); ICC Termination Act of 1995, Pub. L. No. 104-88, § 701(a)(3), 109 Stat. 803, 933; Federal Mine Safety and Health Act of 1977, Pub. L. No. 95-164, § 113, 91 Stat. 1290, 1313; Federal Aviation Act of 1958, Pub. L. No. 85-726, § 201(a)(2), 72 Stat. 731, 741; Bituminous Coal Act of 1937, ch. 127, § 2(a), 50 Stat. 72, 73; An Act To Create the Federal Trade Commission, ch. 311, § 1, 38 Stat. 717, 718 (1914); see also Marshall J. Breger & Gary J. Edles, Established by Practice: The Theory and Operation of Independent Federal Agencies, 52 Admin. L. Rev. 1111, 1144-45 (2000) (describing the INM standard as the prototypical removal provision).
In spite of the repeated use of the INM standard throughout the U.S. Code and its prominent role in Humphrey's Executor, the meaning of the standard's three grounds for removal remains largely unexamined. Congress has nowhere defined these grounds and the Supreme Court has provided little guidance about the conditions
Some suggest that the Court in Humphrey's Executor established that the INM standard prohibits the President from removing an agency officer for disagreements over policy. See, e.g., Concurring Op. at 123 (Wilkins, J.) (arguing that "mere policy disagreements" cannot satisfy the INM standard).
Humphrey's Executor came to the Supreme Court as a certified question from the Court of Claims. The certificate stipulated as an undisputed fact that the President never removed Humphrey pursuant to the INM standard.
The Supreme Court's most substantive discussion of the INM terms came in Bowsher v. Synar. There, the Court declared unconstitutional Congress's delegation of executive power to the Comptroller General, who was an official in the Legislative Branch. 478 U.S. at 728-34, 106 S.Ct. 3181. By joint resolution, Congress could remove the Comptroller General for several statutorily specified causes including the three INM grounds. Id. at 728, 106 S.Ct. 3181. In assessing Congress's control over the Comptroller General, the Court emphasized that the INM terms are "very broad and, as interpreted by Congress, could sustain removal of a Comptroller General for any number of actual or perceived transgressions of the legislative will." Id. at 729, 106 S.Ct. 3181 (emphasis added). In other words, the Court determined that the INM removal grounds were so broad that Congress retained significant power to supervise and direct the Comptroller General. However, the Court did not proceed to explore the meaning of the individual grounds for removal because
In sum, although Congress has provided little guidance on the meaning of the INM standard, the Supreme Court in Bowsher nevertheless recognized the general breadth of the INM terms. Picking up where Bowsher left off, we must now determine the meaning of the INM standard as we would any other statutory text and interpret it according to the traditional tools of construction.
I begin with the text of the INM standard: "The President may remove the Director for inefficiency, neglect of duty, or malfeasance in office." 12 U.S.C. § 5491(c)(3). Because Congress has not defined these terms, we give them their ordinary meaning. See Taniguchi v. Kan Pac. Saipan, Ltd., 566 (U.S. 560, 566, 132 S.Ct. 1997, 182 L.Ed.2d 903 2012). To discern a term's ordinary meaning, the Court generally begins with dictionaries. See, e.g., Sandifer v. U.S. Steel Corp., ___ U.S. ___, 134 S.Ct. 870, 876-77, 187 L.Ed.2d 729 (2014); Schindler Elevator Corp. v. U.S. ex rel. Kirk, 563 U.S. 401, 407-08, 131 S.Ct. 1885, 179 L.Ed.2d 825 (2011); MCI Telecomm'ns Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218, 225-28, 114 S.Ct. 2223, 129 L.Ed.2d 182 (1994). Based on the following analysis, I conclude that the ordinary meaning of the INM terms—particularly given the breadth of the "inefficiency" ground—allow the President enough supervisory authority to satisfy Morrison.
Generally, the ordinary meaning of a statutory term is fixed at the time the statute was adopted. See, e.g., Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979) ("[W]ords will be interpreted as taking their ordinary, contemporary, common meaning."); Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 78 (2012). Were we to strictly follow that approach here, we would seek to determine the ordinary meaning of each INM term in 2010 when the Dodd-Frank Act established the CFPB.
But there is good reason to think that 2010 is not the correct time period to fix the ordinary meaning of the INM terms. The INM standard was first used by Congress in the Interstate Commerce Act in 1887 and has since been readopted in dozens of statutes spanning over a century. See supra Part II. "[W]hen Congress uses the same language in two statutes having similar purposes . . . it is appropriate to presume that Congress intended that text to have the same meaning in both statutes." Smith v. City of Jackson, 544 U.S. 228, 233, 125 S.Ct. 1536, 161 L.Ed.2d 410 (2005).
The INM standard provides three separate grounds for removal. Although the standard may seem to be a unitary, general "for cause" provision, the Supreme Court has clarified that these three grounds carry discrete meanings. In Humphrey's Executor the Court explained that the INM standard prevented the President from removing any officer except for "one or more of the causes named in the applicable statute." 295 U.S. at 632. Moreover, Congress has enacted other statutes that include only two of the three INM removal grounds, indicating that each term bears a distinct meaning. For instance, weeks after the Court decided Humphrey's Executor, Congress added a removal provision to the National Labor Relations Act, but it narrowed the INM standard by eliminating "inefficiency." See ch. 372, § 3, 49 Stat. 449, 451 (1935) (codified at 29 U.S.C. § 153).
Turning then to each basis for removal, "malfeasance" was defined as "the doing of that which ought not to be done; wrongful conduct, especially official misconduct; violation of a public trust or obligation; specifically, the doing of an act which is positively unlawful or wrongful, in contradistinction to misfeasance." 6 The Century Dictionary and Cyclopedia 3593 (Benjamin E. Smith ed., 1911).
However, I concentrate on "inefficiency" because it is the broadest of the three
Dictionaries consistently defined the word "inefficiency" to mean ineffective or failing to produce some desired result. For example, one prominent turn-of-the-century dictionary defined "efficient" as "[a]cting or able to act with due effect; adequate in performance; bringing to bear the requisite knowledge, skill, and industry; capable; competent." 3 The Century Dictionary and Cyclopedia, supra, at 1849. The same dictionary also defined "inefficient" to mean "[n]ot efficient; not producing or not capable of producing the desired effect; incapable; incompetent; inadequate." 5 id. at 3072. Other dictionaries from the time period reiterated these definitions. See, e.g., 3 A New English Dictionary on Historical Principles 52 (Henry Bradley ed., 1897) (defining "efficient" as "productive of effects; effective; adequately operative. Of persons: Adequately skilled"); 5 id. at 240 (James A.H. Murray ed., 1901) (defining "inefficient" as "[n]ot efficient; failing to produce, or incapable of producing, the desired effect; ineffective. Of a person: Not effecting or accomplishing something; deficient in the ability or industry required for what one has to do; not fully capable").
This broad understanding of "inefficiency" is supported by other contemporaneous sources, such as the debates in Congress both before and after Humphrey's Executor. Legislative history is a permissible tool of statutory interpretation when used "for the purpose of establishing linguistic usage" or "showing that a particular word or phrase is capable of bearing a particular meaning." Scalia & Garner, supra, at 388. The debates in Congress during the early twentieth century display how the "inefficiency" ground for removal was understood by "intelligent and informed people of the time." Antonin Scalia, Common-Law Courts in a Civil-Law System: The Role of United States Federal Courts in Interpreting the Constitution
When discussing congressional control of the Comptroller General, who was protected by the INM terms, Members of Congress assumed the Comptroller could be removed for "inefficiency" if he failed to produce Congress's desired effects. One Congressman maintained that if the Comptroller "was inefficient and was not carrying on the duties of his office as he should and as the Congress expected, [then Congress] could remove him" under the INM standard. 61 Cong. Rec. 1081 (1921) (statement of Rep. Joseph Byrns) (emphases added); see also Bowsher, 478 U.S. at 728, 106 S.Ct. 3181 (inferring from this quotation that "inefficiency" constitutes a broad ground for removal). And another Member reiterated that when the Comptroller General "fails to do that work [of Congress] in a strong and efficient way, in a way the Congress would have the law executed, Congress has its remedy, and it can reach out and say that if the man is not doing his duty, if he is inefficient . . . he can be removed." 61 Cong. Rec. at 1080 (statement of Rep. James Good) (emphases added). Thus, even though the Comptroller General was protected by the INM terms, the breadth of the "inefficiency" ground permitted Congress to remove him for failing to perform his duties in the manner Congress wanted.
Three years after Humphrey's Executor, Congress again considered the meaning of "inefficiency" when debating whether to include INM protections for officials of the Civil Aeronautics Authority. One Senator participating in the debate, fearing that the "inefficiency" cause did not provide sufficient independence for agency officials, even lamented: "If we provide that the President may remove a man for inefficiency, to my mind we give him unlimited power of removal. Under such authority he could have removed Mr. Humphrey, had he assigned that as a reason.. . . I do not see anything to be gained by discussing the legal question if we are to leave the word `inefficiency' in the provision." 83 Cong. Rec. 6865 (1938) (statement of Sen. William Borah). While this sentiment somewhat overstates the breadth of the "inefficiency" ground, it reflects a broader truth exemplified in the Congressional Record: well-informed people in the early twentieth century understood the word "inefficiency" in a manner consistent with its dictionary definition.
And for those who find it relevant, turning to the contemporary meaning of "inefficiency" would not change much in this analysis. The word has maintained a fairly stable meaning throughout the life of the INM standard. If anything, the contemporary definition of "inefficiency" has gradually become more expansive than it was at the time of Humphrey's Executor. While older definitions of inefficiency largely discuss ineffectiveness, modern definitions have increasingly adopted an additional definition of "wasteful." See, e.g., Efficiency, Oxford English Dictionary (2d ed. 1989) (outlining the etymological evolution of "efficiency"). And this broad understanding of "inefficiency" is further supported by contemporary usage. See, e.g., Budget Hearing—Consumer Financial Protection Bureau Before the Subcomm. on Oversight & Investigations of the H. Comm. on Fin. Servs., 112th Cong. 8 (2012) (statement of Rep. Barney Frank, Ranking Member, H. Comm. on Fin. Servs.) (discussing the INM standard and stating that "this notion that the Director cannot be removed is fanciful. . . . No one doubts that if a change in Administration comes, and the new President disagrees with the existing Director, he or she can be removed. And proving that you were not inefficient, the burden of proof being
While ordinary usage reveals that an officer is "inefficient" when he fails to produce or accomplish some end, one might wonder who or what sets the end that the officer must efficiently pursue. In context, it is clear that the end cannot be set by the officer himself. After all, it is a removal ground that we are interpreting. Congress establishes the broad purposes of an independent agency, see, e.g., 12 U.S.C. § 5511 (outlining the purpose, objectives, and functions of the CFPB), and the President assesses whether the officer has produced the "desired effect." Put differently, 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.
All told, the President retains significant authority under the INM standard to remove the CFPB Director. The breadth of the standard—particularly the inefficiency ground—preserves in the President sufficient supervisory power to perform his constitutional duties.
The INM standard provides a broad basis for removing the CFPB Director, but what steps must the President take to effect such a removal? It appears well-settled that an officer with removal protection is entitled to notice and some form of a hearing before removal. See Shurtleff v. United States, 189 U.S. 311, 313-14, 23 S.Ct. 535, 47 S.Ct. 828 (1903) (concluding that where removal is sought pursuant to statute for "inefficiency, neglect of duty, or malfeasance in office . . . the officer is entitled to notice and a hearing"); Reagan v. United States, 182 U.S. 419, 425, 21 S.Ct. 842, 45 S.Ct. 1162 (1901) (stating that where causes of removal are specified by the Constitution or statute, "notice and hearing are essential").
In practical effect, my approach yields a result somewhat similar to Judge Kavanaugh's proposed remedy. He would sever the for-cause provision from the CFPB's authorizing statute, making the Director removable at will. See Dissenting Op. at 167, 198-200 (Kavanaugh, J.). My interpretation of the INM standard would not disturb Congress's design of the CFPB, but it would allow the President to remove the Director based on policy decisions that amounted to inefficiency. In addition, my analysis of the INM standard would likely have broader implications. For example, the definition of "inefficiency" presented here would presumably apply to other independent
Judge Wilkins argues this interpretation of the INM standard defeats the purpose of the provision. See Concurring Op. at 122-24 (Wilkins, J.). After all, the Court in Humphrey's Executor examined the legislative history of the Federal Trade Commission Act and concluded that the "congressional intent" underlying the Act was to create an "independent" body of experts. 295 U.S. at 625, 55 S.Ct. 869. How can agency directors be independent if the President can remove them so easily for "inefficiency"?
As a preliminary matter, the Court's discussion of FTC "independence" in Humphrey's Executor was part of its statutory holding, not its constitutional analysis. See Maj. Op. at 98-99. In its statutory analysis, the Court merely attempted to discern if the INM standard was intended to limit the President's removal power. The Court determined that it did, staking its conclusion on the text of the statute: "The words of the act are definite and unambiguous." 295 U.S. at 623, 55 S.Ct. 869. The Court then proceeded to address the legislative history, but it expressly disavowed any reliance on that discussion, see id. at 623-25, 55 S.Ct. 869, and concluded that the INM standard was designed to reduce the President's otherwise "illimitable" removal power. But as described above, the Court never addressed just how much the INM standard limits that power. See supra Part II.
More fundamentally, a straightforward textual analysis of "inefficiency" does not remove the "concept of `independence' from `independent agencies,'" Concurring Op. at 123 (Wilkins, J.), because agency independence is not a binary but rather a matter of degree. This principle is at the heart of Morrison, which does not forbid all interference with the President's executive power but only forbids too much interference. See 487 U.S. at 692. Insisting that each INM term be interpreted to maximize director independence thwarts Congress's specific choice of means to protect the Director. "[N]o legislation pursues its purposes at all costs. . . . [I]t frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary objective must be the law." Rodriguez v. United States, 480 U.S. 522, 525-26 (1987) (per curiam). With the INM standard, Congress chose to provide three discrete grounds for removal, at least one of which is very broad. In other words, Congress specified the amount of removal protection the CFPB Director would receive, and that amount is minimal. Elsewhere Congress has elected to provide greater protection. For example, only weeks after Humphrey's Executor Congress chose not to include "inefficiency" as a ground for removal in the National Labor Relations Act. See ch. 372, § 3, 49 Stat. 449, 451 (1935) (codified at 29 U.S.C. § 153) (permitting removal "upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause").
Since Humphrey's Executor, Congress has created a wide range of removal protections, some stronger than others. See Free Enterprise Fund, 561 U.S. at 549-56, 130 S.Ct. 3138 (Breyer, J., dissenting) (listing numerous agency removal protections, many of which provide different statutory grounds for removal). "[L]aw is like a vector.
The challenged features of the CFPB do not violate Article II because they do not prevent the President from performing his constitutional duty to supervise the Executive Branch. That is so because the INM standard creates only a minimal barrier to the President removing the CFPB Director. Of course, if Congress desires, it may pass a more restrictive removal provision, as it has with other agencies. At that point, my colleagues' thorough evaluation of the CFPB's bureaucratic structure may be necessary. But as it stands today, such an evaluation is neither required nor consistent with the mandate from Morrison.
Karen Lecraft Henderson, Circuit Judge, dissenting:
Effective 1789, we Americans "set up government by consent of the governed." W. Va. State Bd. of Educ. v. Barnette, 319 U.S. 624, 641, 63 S.Ct. 1178, 87 S.Ct. 1628 (1943). Under the United States Constitution, all of the federal government's power derives from the people. U.S. CONST. pmbl.; see McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 405, 4 S.Ct. 579 (1819) ("In form, and in substance, it emanates from them."). Much of that power has been further delegated to a warren of administrative agencies, making accountability more elusive and more important than ever. Nowadays we the people tolerate bureaucrats "poking into every nook and cranny of daily life," City of Arlington v. FCC, 569 U.S. 290, 133 S.Ct. 1863, 1879, 185 L.Ed.2d 941 (2013) (Roberts, C.J., dissenting), on the theory that if they exercise their delegated power unjustly, inexpertly or otherwise at odds with the popular will, we can elect legislators and a President who will take corrective action, Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 865, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (underscoring that "[w]hile agencies are not directly accountable to the people," they report to political actors who are).
But consent of the governed is a sham if an administrative agency, by design, does not meaningfully answer for its policies to either of the elected branches. Such is the case with the Consumer Financial Protection Bureau (CFPB). The CFPB, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), Pub. L. No. 111-203, Title X, 124 Stat. 1376, 1955-2113 (July 21, 2010), perma.cc/6K2U-CD9W,
In my view, Dodd-Frank Title X, otherwise known as the Consumer Financial Protection Act, violates Article II: its "language providing for good-cause removal is. . . one of a number of statutory provisions that, working together, produce a constitutional violation." Free Enter. Fund v. PCAOB, 561 U.S. 477, 509, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010). Under Article II, "[t]he executive Power shall be vested in a President" who "shall take Care that the Laws be faithfully executed." U.S. CONST. art. II, §§ 1, 3. In Myers v. United States, 272 U.S. 52, 47 S.Ct. 21, 71 S.Ct. 160 (1926), the United States Supreme Court explained that the President must ordinarily have "unrestricted power" to remove executive officers if he is to faithfully execute the laws. Id. at 176, 47 S.Ct. 21. More recently, the Court in Free Enterprise Fund emphasized "the importance of removal"—based on "simple disagreement with [an agency's] policies or priorities"—as a means of ensuring that the modern administrative state does not "slip from the Executive's control, and thus from that of the people." 561 U.S. at 499, 502, 130 S.Ct. 3138. Here, when taken together with the rest of Title X, the for-cause removal provision in effect puts the CFPB beyond the people's reach.
I recognize that Humphrey's Executor v. United States, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611 (1935), made an exception to the President's "exclusive power of removal," Myers, 272 U.S. at 122, 47 S.Ct. 21, in holding that the Congress "can, under certain circumstances, create independent agencies run by principal officers appointed by the President, whom the President may not remove at will but only for good cause," Free Enter. Fund, 561 U.S. at 483, 130 S.Ct. 3138 (emphasis added) (citing Humphrey's Ex'r, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611). But Humphrey's Executor remains the exception, not the rule, and it does not apply here.
Humphrey's Executor upheld a for-cause limit on the President's authority to remove commissioners of the Federal Trade Commission (FTC), a "legislative agency" headed by a "non-partisan" "body of experts" whose staggered terms ensure that the commission does not "complete[ly] change at any one time" but instead gains collective expertise even as individual members come and go. 295 U.S. at 624, 628, 55 S.Ct. 869. By contrast, the CFPB is not a legislative agency, if that means an agency that reports to the Congress.
First principles, not Humphrey's Executor, control here. This unaccountable agency violates them. I disagree with the majority's conclusion to the contrary. Further, although I agree with portions of Judge Kavanaugh's dissent, I cannot join it, primarily because it would strike and sever Title X's for-cause removal provision. Even assuming that remedy would bring the CFPB fully in line with the Constitution, I do not think we can dictate it to the Congress.
Severability turns on whether the statute, minus any invalid provision, "will function in a manner consistent with the intent of Congress" and "is legislation that Congress would . . . have enacted." Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 685, 107 S.Ct. 1476, 94 L.Ed.2d 661 (1987) (emphasis in original). Statutory text, structure and history manifest the 111th Congress's belief that the CFPB's independence from both of the elected branches is indispensable. Excising only the for-cause removal provision would leave behind a one-legged agency that, by all indications, the Congress would not have created. True, the introduction to the 849-page Dodd-Frank legislation includes a standard-form severability clause. But such a clause raises only a "presumption" that "the objectionable provision can be excised." Alaska Airlines, 480 U.S. at 686, 107 S.Ct. 1476. The presumption is rebutted here. As I see it, Dodd-Frank's severability clause speaks to severing Title X from other titles of the legislation but does not support severing the for-cause removal provision from the rest of Title X.
Accordingly, I would invalidate Title X in its entirety and let the Congress decide whether to resuscitate—and, if so, how to restructure—the CFPB. I would set aside the Director's decision as ultra vires and forbid the agency from resuming proceedings. Because the en banc Court's decision permits this case to continue before the agency, I respectfully dissent.
The administrative agencies sprawled across Washington, D.C.—especially the "independent" ones—do not fit comfortably within the text and structure of the Constitution.
Three Article II cases—Myers, Humphrey's Executor and Free Enterprise Fund—set forth the legal framework for deciding the CFPB's constitutionality. I discuss each in turn.
One would not know it from the CFPB's one-sentence treatment, CFPB Br. 32, but Myers is a "landmark," Free Enter. Fund, 561 U.S. at 492. In 1917, President Wilson, by and with the advice and consent of the Senate, appointed Frank Myers to a four-year term as first-class postmaster. Myers, 272 U.S. at 56, 106. He did so pursuant to an 1876 statute providing in relevant part that "[p]ostmasters of the first, second and third classes shall be appointed and may be removed by the President by and with the advice and consent of the Senate." Id. at 107 (quoting Act of July 12, 1876, ch. 179, § 6, 19 Stat. 80, 81). In 1920, for reasons undisclosed in the Myers opinion,
Because the Constitution contains "no express provision respecting removals" and "[t]he subject was not discussed in the Constitutional Convention," 272 U.S. at 109-10, 47 S.Ct. 21, the Court focused on the First Congress, id. at 111-36, 47 S.Ct. 21. In 1789, the First Congress enacted a law that effectively recognized "the power of the President under the Constitution to remove the Secretary of Foreign Affairs"—now the Secretary of State—"without the advice and consent of the Senate." Id. at 114, 47 S.Ct. 21; see id. at 111-15, 47 S.Ct. 21. The Court gave "great[] weight" to the debates on the bill because the First
First, Article II gives the President not only the power to execute the laws but the obligation "to take care that they be faithfully executed." 272 U.S. at 117, 47 S.Ct. 21. He cannot do so "unaided"; he needs "the assistance of subordinates." Id. Because "his selection of administrative officers is essential to" his faithful execution of the laws, "so must be his power of removing those for whom he can not continue to be responsible." Id. (citing 1 ANNALS OF CONG. 474 (1789) (Joseph Gales ed., 1834) (available in photo. reprint, William S. Hein & Co. 2003) (statement of Fisher Ames)). And because the crown—the British executive—had the power to appoint and remove executive officers, "it was natural" for the Framers "to regard the words `executive power' as including both." Id. at 118, 47 S.Ct. 21.
Second, the Constitution divides legislative and executive powers, giving them to two separate but coequal political branches as a check against oppression by either. 272 U.S. at 120-21, 47 S.Ct. 21. Some Framers had thought it an "unchaste" "mingling" of the legislative and executive powers even to give the Senate the job of advising on and consenting to the President's appointments. Id. at 120, 47 S.Ct. 21 (quoting 1 ANNALS OF CONG. 557 (statement of Abraham Baldwin)). In the First Congress, Madison and others cautioned against "`extend[ing] this connexion'" to "the removal of an officer who has served under the President." Id. at 121, 47 S.Ct. 21 (quoting 1 ANNALS OF CONG. 380 (statement of James Madison)). Whereas a veto on the appointment power merely "enables the Senate to prevent the filling of offices with bad or incompetent men," a veto on the President's "exclusive power of removal" entangles the Congress in an executive function: deciding whether an incumbent officer has the requisite "loyalty" to the President's agenda. Id. at 121-22, 131, 134, 47 S.Ct. 21.
Third, the President's removal power is especially strong with respect to principal executive officers. 272 U.S. at 126-29, 47 S.Ct. 21. The first half of the Appointments Clause requires the President personally to appoint, with the Senate's advice and consent, "Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law." U.S. CONST. art. II, § 2, cl. 2. By way of an "exception," 272 U.S. at 127, 47 S.Ct. 21, the second half of the Appointments Clause provides: "[B]ut the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments." U.S. CONST. art. II, § 2, cl. 2. The Congress accordingly has "legislative power in the matter of appointments and removals in the case of inferior executive officers." 272 U.S. at 127, 47 S.Ct. 21 (citing United States v. Perkins, 116 U.S. 483, 485, 6 S.Ct. 449, 29 S.Ct. 700 (1886)). "By the plainest implication," however, the Appointments Clause "excludes Congressional dealing with appointments
Fourth, the Framers did not "intend[ ], without express provision, to give to Congress . . . the means of thwarting the Executive . . . by fastening upon him, as subordinate executive officers, men who by their inefficient service," "lack of loyalty" or "different views of policy" would make it "difficult or impossible" for him to "faithfully execute[ ]" the laws. 272 U.S. at 131, 47 S.Ct. 21. The removal power was vested in the President to help him "secure th[e] unitary and uniform execution of the laws," id. at 135, 47 S.Ct. 21, and to preserve a discernible "chain" of "responsibility" from appointed officers to the President and from the President to the people, id. at 131-32, 47 S.Ct. 21 (quoting 1 ANNALS OF CONG. 499, 523 (statements of James Madison and Theodore Sedgwick)).
For those four reasons, the Court concluded that the President must ordinarily have "unrestricted power" to "remov[e] executive officers who ha[ve] been appointed by him by and with the advice and consent of the Senate." 272 U.S. at 176, 47 S.Ct. 21. Because the 1876 statute restricting removal of postmasters violated that general rule, the Court invalidated the statute. Id.
Less than a decade after Myers, the Supreme Court in Humphrey's Executor again addressed the scope of the President's removal power, this time in the context of the FTC. Under section 1 of the Federal Trade Commission Act (FTC Act), an FTC commissioner "may be removed by the President for inefficiency, neglect of duty, or malfeasance in office." 15 U.S.C. § 41. In 1933, President Roosevelt requested the resignation of William Humphrey, a business-friendly FTC commissioner appointed by President Coolidge and reappointed by President Hoover. 295 U.S. at 618, 55 S.Ct. 869; see RICHARD A. HARRIS & SIDNEY M. MILKIS, THE POLITICS OF REGULATORY CHANGE: A TALE OF TWO AGENCIES 153 (2d ed. 1996) (noting that Humphrey's appointment was perceived as "transform[ing] the FTC into an agency that served not as an overseer but a part-ner of business" (internal quotation omitted)). In his correspondence with Humphrey, President Roosevelt cited "polic[y]" differences and "disclaim[ed] any reflection upon the commissioner personally or upon his services." 295 U.S. at 618-19, 55 S.Ct. 869 (internal quotation omitted). Humphrey refused to resign and the President removed him. Id. at 619, 55 S.Ct. 869. Humphrey died shortly thereafter but his executor sued to recover Humphrey's salary from the date of removal. Id. at 618-19, 55 S.Ct. 869.
The Court in Humphrey's Executor confronted two questions. First, does section 1 of the FTC Act prohibit the President from removing an FTC commissioner for any reason other than inefficiency, neglect or malfeasance? 295 U.S. at 619, 55 S.Ct. 869. Second, if so, "is such a restriction or limitation valid under the Constitution"? Id. The Court answered yes to both questions. Id. at 632, 55 S.Ct. 869. In considering the first question, the Court described at length "the character of the commission," id. at 624, 55 S.Ct. 869, as manifested in the FTC Act's text and legislative history, id. at 619-26, 55 S.Ct. 869. And in considering the second question, the Court indicated that "the character of the office" would determine the Congress's ability to restrict the President's removal power. Id. at 631, 55 S.Ct. 869.
In other words, the constitutionality of the FTC Act, like any other" law, depended on its content. The CFPB resists this
As summarized in Humphrey's Executor, the FTC's structure is as follows:
Having made these observations, the Court concluded that an FTC commissioner "is so essentially unlike" a first-class postmaster that Myers "cannot be accepted as controlling our decision here." 295 U.S. at 627, 55 S.Ct. 869. Unlike a postmaster, the Court reasoned, an FTC commissioner "exercises no part of the executive power . . . in the constitutional sense." Id. at 628, 55 S.Ct. 869. Rather, "[t]o the extent that [the FTC] exercises any executive function, ... it does so in the discharge and effectuation of its quasi-legislative and quasi-judicial powers" as an expert agency "charged with the enforcement of no policy except the policy of the law." Id. at 624, 628, 55 S.Ct. 869. In the Court's view, just as the Congress has limited power to interfere with the President's removal of executive officers, the President has "[]limitable power" to remove FTC commissioners because they are legislative or judicial officers. Id. at 629, 55 S.Ct. 869; see id. at 630, 55 S.Ct. 869 ("The sound application of a principle
In Free Enterprise Fund, the Supreme Court's most recent decision on the scope of the removal power, the Court was asked to extend Humphrey's Executor to "a new situation" it had "not yet encountered." 561 U.S. at 483, 130 S.Ct. 3138. It declined the invitation. At issue were provisions that precluded the Securities and Exchange Commission (SEC) from removing members of the Public Company Accounting Oversight Board (Board) except for cause. Id. at 486, 130 S.Ct. 3138 (citing 15 U.S.C. §§ 7211(e)(6), 7217(d)(3)). Based on the "understanding" that SEC commissioners "cannot themselves be removed by the President except" for cause, id. at 487, 130 S.Ct. 3138, the Court held that two layers of "good-cause protection" violate Article II because together they prevent the President from "oversee[ing] the faithfulness" of officers who "determine[ ] the policy and enforce[ ] the laws of the United States," id. at 484, 130 S.Ct. 3138.
The Court acknowledged that the Congress has "power to create a vast and varied federal bureaucracy" to ensure "apolitical expertise." 561 U.S. at 498-99, 130 S.Ct. 3138 (internal quotation omitted). But faced with a "novel structure" not squarely authorized by Humphrey's Executor or any other precedent, id. at 496, 130 S.Ct. 3138; see id. at 483, 492-96, 514, 130 S.Ct. 3138, the Court returned to the most fundamental of first principles: "Our Constitution was adopted to enable the people to govern themselves, through their elected leaders." Id. at 499, 130 S.Ct. 3138. In view of that principle, the Court held that the Congress could not "encase[ ]" the Board "within a Matryoshka doll of tenure protections" and thereby "immun[ize] from Presidential oversight" the "regulator of first resort . . . for a vital sector of our economy." Id. at 497, 508, 130 S.Ct. 3138; see id. at 485, 130 S.Ct. 3138 (detailing Board's "expansive powers to govern an entire industry" through rulemaking, audits, inspections, investigations, monetary penalties and other forms of discipline). Concluding otherwise, the Court reasoned, would sever the chain of responsibility linking the Board to the people via the President. Id. at 495, 130 S.Ct. 3138 ("The result is a Board that is not accountable to the President, and a President who is not responsible for the Board.").
Under the foregoing framework and considering Title X as a whole, I believe the CFPB's structure violates Article II.
For me the initial question is whether the Supreme Court has "encountered" an agency like the CFPB or if, instead, its structure is "novel." Free Enter. Fund, 561 U.S. at 483, 496, 130 S.Ct. 3138. Although structural "innovation" is not itself unconstitutional, Mistretta v. United States, 488 U.S. 361, 385, 109 S.Ct. 647, 102 L.Ed.2d 714 (1989); see Maj. Op. 53-54, a novel agency fights uphill: "the lack of historical precedent for [an] entity" is "[p]erhaps the most telling indication of [a] severe constitutional problem." Free Enter. Fund, 561 U.S. at 505, 130 S.Ct. 3138 (internal quotation omitted). The CFPB argues that it is sufficiently like the FTC to fall within the ambit of Humphrey's Executor. CFPB Br. 13-14, 18-21, 23, 30-31. It also relies on Morrison v. Olson, 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), which involved the independent counsel. CFPB Br. 18-21, 24-25, 31-32. Finally, along with Humphrey's Executor and Morrison, my
Equating financial products with household appliances, Professor Elizabeth Warren in 2007 advocated for the creation of a federal agency to protect consumers from "[u]nsafe" mortgages, student loans and credit cards in the same way the Consumer Product Safety Commission protects consumers from exploding toasters. Elizabeth Warren, Unsafe at Any Rate, DEMOCRACY (Summer 2007), perma.cc/52X3-892V. She proposed that the Congress consolidate in the new agency the power to administer most federal consumer-protection laws, the result being "the review of financial products in a single location." Id. The proposed agency was to be "independent" of "national politic[s]," the "financial . . . industry lobby" and "legislative micromanaging." Id. Freed of such burdens, the agency could take "quick action" to solve the problems regularly generated by a financial services industry bent on "increas[ing] profits." Id. The agency, in short, was to "side" with consumers against the industry. Id.
Consistent with Professor Warren's proposal, Title X established the CFPB as "an independent bureau" to "regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws." 12 U.S.C. § 5491(a). It transferred to the CFPB the authority to enforce eighteen existing laws previously administered by seven different federal agencies. Id. §§ 5481(12), 5581(a)(2), (b). Those eighteen laws cover most consumer credit products, including mortgages, student loans and credit cards. The CFPB now has all but exclusive power "to prescribe rules or issue orders or guidelines pursuant to" all eighteen laws. Id. § 5581(a)(1)(A); see id. §§ 5481(12), 5512(b)(4). The agency also has expansive new powers under Title X to investigate, charge, adjudicate and penalize—through (inter alia) subpoena, rescission, restitution, disgorgement and monetary penalties—a consumer-connected "act or practice" the agency defines as "unfair, deceptive, or abusive." Id. § 5531(a), (b); see id. §§ 5562-5565.
The CFPB's expansive powers are vested in and derive from its sole Director. 12 U.S.C. § 5491(b)(1) (Director is "head" of CFPB); id. § 5491(b)(5)(A) (Director appoints Deputy Director); id. § 5492(b) (Director "may delegate to any duly authorized employee, representative, or agent any power vested in the Bureau by law"); id. § 5493(a)(1)(A) (Director "fix[es] the number of" CFPB employees and "appoint[s]" and "direct[s]" all of them); id. § 5512(b)(1) (Director "may prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof").
The President appoints the Director "by and with the advice and consent of the Senate." 12 U.S.C. § 5491(b)(2). The Director is thereafter insulated from both political branches. He has a five-year term, id. § 5491(c)(1), and the President may remove him only "for cause," i.e., "inefficiency, neglect of duty, or malfeasance in office," id. § 5491(c)(3).
The agency just described is not even a distant cousin of the FTC blessed by Humphrey's Executor. I see at least three critical distinctions.
First, like nearly all other administrative agencies, the FTC is and always has been subject to the appropriations process. 15 U.S.C. § 42; see HARRIS & MILKIS, supra, at 146, 204-05 (discussing FTC appropriations); see also Note, Independence, Congressional Weakness, and the Importance of Appointment: The Impact of Combining Budgetary Autonomy with Removal Protection, 125 HARV. L. REV. 1822, 1823 (2012) (Budgetary Autonomy) ("A complete exemption from appropriations is rare. . . ."). Accordingly, the FTC must go to the Congress every year with a detailed budget request explaining its expenditure of public money. See, e.g., FTC, Fiscal Year 2018 Congressional Budget Justification (May 22, 2017) (185-page request), perma.cc/4V7G-83JL. The procedure provides a measure of public accountability and helps explain the Supreme Court's description of the FTC as a "quasi-legislative" agency that "report[s] to Congress." Humphrey's Ex'r, 295 U.S. at 621, 624, 628-29, 55 S.Ct. 869.
The CFPB is different. As the agency itself declares, it is "fund[ed] outside of the congressional appropriations process to ensure full independence." CFPB, Strategic Plan: FY2013-FY2017, at 36 (Apr. 2013), perma.cc/XQW5-5S5S. The agency has made the most of its autonomy: when legislators have sought explanation for its spending or policies, it has stonewalled. See, e.g., Letter from Rep. Randy Neugebauer et al. to Richard Cordray (May 2, 2012) (noting CFPB's "wholly unresponsive" posture to "requests for additional budget information"), perma.cc/NTH6-KR98; Letter from Sen. Rob Portman et al. to Richard Cordray (Oct. 30, 2013) (seeking "greater transparency for the Bureau's activity"), perma.cc/5N3Z-GGCQ. Perhaps the best illustration is a 2015 hearing in which a legislator asked the
The appropriations process has long been considered "the most potent form of Congressional oversight." 2 SENATE COMMITTEE ON GOVERNMENT OPERATIONS, STUDY ON FEDERAL REGULATION: CONGRESSIONAL OVERSIGHT OF REGULATORY AGENCIES 42 (1977); see MICHAEL J. KLARMAN, THE FRAMERS' COUP: THE MAKING OF THE UNITED STATES CONSTITUTION 16 (2016) (founding generation "generally embraced the maxim that the power which holds the purse-strings absolutely will rule" (internal quotation and brackets omitted)). Because of its freedom from appropriations, the CFPB cannot be called "an agency of the legislative . . . department[ ]" and the Congress cannot be called its "master." Humphrey's Ex'r, 295 U.S. at 630, 55 S.Ct. 869. The agency argues that, whatever its accountability to the Congress, its budgetary independence "does not interfere with the President's power to take care that the laws be faithfully executed." CFPB Br. 28 & n.8 (emphasis added); see Maj. Op. 41 ("The CFPB's budgetary independence. . . does not intensify any effect on the President of the removal constraint."). The contention overlooks the President's constitutional role in the budget process.
Lest it be forgotten, the Presentment Clause gives the President the power to veto legislation, including spending bills. U.S. CONST. art. I, § 7, cl. 2. Armed with that authority and the prerogative to "recommend to [the Congress's] Consideration such Measures as he shall judge necessary and expedient," U.S. CONST. art. II, § 3, the President has for the past century submitted an annual budget to the Congress, see LOUIS FISHER, CONGRESSIONAL ABDICATION ON WAR AND SPENDING 24 (2000) (tracing practice to Budget and Accounting Act of 1921). Indeed, the President has long been required to submit an annual budget. 31 U.S.C. § 1105(a).
Acting through OMB, the President uses his annual budget to influence the policies of independent agencies, including the FTC. Eloise Pasachoff, The President's Budget as a Source of Agency Policy Control, 125 YALE L.J. 2182, 2191, 2203-04 (2016) (independent agencies "must participate in the annual budget cycle under [the] oversight" of OMB's Resource Management Offices, which in turn "serve as a conduit for policy and political direction from the President" and his staff); see, e.g., HARRIS & MILKIS, supra, at 204-05 (noting policy-driven budget cuts at FTC under President Reagan). The President lacks that leverage over the CFPB, which stands outside the budget. 12 U.S.C. § 5497(a)(1).
Similarly, the President requires the FTC and other independent agencies to (inter alia) "prepare an agenda of all regulations under development or review" and submit them to the Office of Information and Regulatory Affairs, an arm of OMB, to ensure "coordination of regulations" that "promote the President's priorities." Exec. Order No. 12866 § 4, 58 Fed. Reg. 51735 (Sept. 30, 1993); see Exec. Order No. 13563 § 1(b), 76 Fed. Reg. 3821 (Jan. 18, 2011) ("reaffirm[ing]" 1993 order). But the requirements apply only "to the extent permitted by law," Exec. Order No. 12866 § 4, and Title X exempts the CFPB by shielding it from OMB's "jurisdiction or oversight," 12 U.S.C. § 5497(a)(4)(E).
Second, unlike the FTC, the CFPB is not a "non-partisan" commission pursuing "entire impartiality" in law and policy. Humphrey's Ex'r, 295 U.S. at 624, 55 S.Ct. 869.
The CFPB contends that its single-Director, single-party structure is no greater threat to the President's faithful execution of the laws than is the FTC's multimember bipartisan structure. CFPB Br. 23-32. In fact, the CFPB says, the President can more easily replace or persuade one Director than three of five commissioners. See, e.g., Oral Arg. Tr. 49; see also Maj. Op. 35, 43-44 (making similar points). But if the President's dissatisfaction is rooted in policy, it is just as impossible for him to remove a single official with for-cause protection as it is to remove several such officials.
Moreover, because of the mismatch between the President's four-year term and the Director's five-year term, the CFPB's entire leadership may for much of the President's tenure—and sometimes all of it—identify with a political party other than the President's. This does not happen at the FTC. The difference matters for accountability: a minority party of a multimember agency is "a built-in monitoring system," dissenting when appropriate and serving as a "fire alarm" for the President and the public. Rachel E. Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 TEX. L. REV. 15, 41 (2010).
Further, whereas the FTC is structured to administer the laws apolitically and with "impartiality," Humphrey's Ex'r, 295 U.S. at 624, 55 S.Ct. 869, the CFPB's design encourages the opposite. Title X gives the Director latitude to define and punish "unfair, deceptive, or abusive acts or practices" broadly or narrowly, depending on his policy preferences. 12 U.S.C. § 5531(a), (b); see id. § 5531(c), (d) (malleable statutory definitions of "unfair" and "abusive").
I do not question the importance of protecting consumers. But an agency cannot be considered "impartial[ ]" under Humphrey's Executor if in partisan fashion it uniformly crusades for one segment of the populace against others. Consistent with its design, that is what the CFPB has done. See Dep't of Treasury, A Financial System That Creates Economic Opportunities: Banks and Credit Unions 82-87 (June 2017) (Economic Opportunities) (cataloging questionable practices CFPB has undertaken at expense of regulated parties), perma.cc/V3SC-VXBH; Amicus Br. of U.S. Chamber of Commerce 16-29 (same).
By at least some accounts, for instance, the CFPB under its first Director hired all but exclusively from one political party, deliberately weeding out applicants from other parties and the banking industry. Todd Zywicki, The Consumer Financial Protection Bureau: Savior or Menace?, 81 GEO. WASH. L. REV. 856, 877, 895 (2013) (asserting that agency hired staffers and "true believers" from one political party); Ronald L. Rubin, The Tragic Downfall of the Consumer Financial Protection Bureau, NAT'L REV., Dec. 21, 2016 (alleging, from insider's perspective, that agency used "screening techniques"), perma.cc/VR9F-TWHQ; cf. Bill McMorris, 100% of CFPB Donations Went to Democrats, WASH. FREE BEACON, Nov. 23, 2016 (reporting that, during 2016 Presidential election, CFPB employees made more than 300 donations totaling about $50,000, all of which went to candidates of one party), perma.cc/6JVQ-RRRQ.
Additionally, the CFPB provides an online forum for consumers to complain publicly about providers of mortgages, student loans, credit cards and other financial products. CFPB, Consumer Complaint Database, perma.cc/VT2D-E6K5. The agency acknowledges that some complaints may be misleading or flat wrong. Disclosure of Consumer Complaint Narrative Data, 79 Fed. Reg. 42765, 42767 (July 23, 2014) ("[T]he narratives may contain factually incorrect information. . . ."). Without attempting to verify them, the agency publishes the complaints anyway, knowing it is providing a "megaphone" for debtors who needlessly damage business reputations. CFPB, Prepared Remarks of CFPB Director Richard Cordray at the Consumer Response Field Hearing (July 16, 2014), perma.cc/4S3G-9ALK. Compare that blinkered
Consider also PHH's case. In rulings reinstated today, see Maj. Op. 16-17, the panel rejected: the Director's new interpretation of the anti-kickback provision of the Real Estate Settlement Procedures Act (RESPA), PHH Corp. v. CFPB, 839 F.3d 1, 39-44 (D.C. Cir. 2016), vacated upon grant of reh'g en banc (Feb. 16, 2017); his attempt to apply that interpretation retroactively to PHH, id. at 44-49; his construction of RESPA's limitations provision, id. at 52-55; and his theory that the CFPB is bound by no limitations period in any administrative enforcement action under any of the laws the agency administers, id. at 50-52. The issues were "not a close call": the CFPB flunked "Rule of Law 101" and was called out for "gamesmanship" and "absurd[]" reasoning. Id. at 41, 48-49, 55. An agency that gets the law so badly wrong four times over in its first major case in this circuit has a steep climb in claiming "[i]t is charged with the enforcement of no policy except the policy of the law." Humphrey's Ex'r, 295 U.S. at 624, 55 S.Ct. 869.
Third, and relatedly, the Director is not a "body of experts" "informed by experience," Humphrey's Ex'r, 295 U.S. at 624, 55 S.Ct. 869 (internal quotation omitted), because he is not a body at all. When a Director leaves at the end of his term, he takes with him all of the expertise and experience that his board of one has collected in five years. The new Director—faced with a one-sided mission and armed with unilateral power to administer a complex web of laws at the heart of the credit economy—starts with no expertise qua rector and has no coequal colleagues with whom to deliberate. Far from "promot[ing] stability and confidence," Maj. Op. 13; see id. at 7, 33, full turnover from one insulated Director to the next is a recipe for jarring policy changes and costly rookie mistakes, see, e.g., PHH Corp., 839 F.3d at 7 (multitude of errors "resulted in a $109 million order against" PHH).
By contrast, each FTC commissioner is informed by fellow commissioners who have years of collective experience as commissioners. See Kirti Datla & Richard L. Revesz, Deconstructing Independent Agencies (and Executive Agencies), 98 CORNELL L. REV. 769, 794 (2013) ("[M]ultimember agencies allow for the development of institutional memory."). From the FTC's inception, its staggered multimember structure has been central to its functions. The Congress passed the FTC Act in part because of dissatisfaction with the Bureau of Corporations, "a single-headed organization" better suited to "investigation and publicity" than to "judgment and discretion." 51 CONG. REC. 11092 (1914) (statement of Sen. Newlands, sponsor of FTC Act). As the Senate Report explained:
S. REP. No. 63-597, at 10-11 (1914).
The CFPB's proponents view its single-Director structure as a strong selling point. In the 111th Congress, they advocated for a regulator who can "keep pace with the changing financial system" and "respond quickly and effectively to . . . new threats to consumers." S. REP. No. 111-176, at 18, 40 (2010); see id. at 11 (agency must be "streamlined" and "have enough flexibility to address future problems as they arise"); 156 CONG. REC. 6237 (2010) (statement of Sen. Whitehouse) (agency must "monitor the market and act quickly when there is a consumer hazard"); id. at 12436 (statement of Rep. Meeks) (agency must "act swiftly" to protect consumers "from unscrupulous behavior"); id. at 15025 (statement of Sen. Durbin) (agency must "keep up with the[ ] lawyers and accountants" of "the big banks on Wall Street"); cf. Warren, Unsafe at Any Rate, supra (agency must be prepared to take "quick action" against financial services industry). Similarly, in this Court, the agency's proponents tout its single-Director structure as essential to preventing "the delay and gridlock to which multimember commissions are susceptible." Amicus Br. of Current and Former Members of Congress Supporting CFPB 2; see id. at 15-20.
I do not begin to assert that the Constitution "enacts social science about the benefits of group decision-making." Tatel Concurring Op. 6 (internal quotation omitted). Far be it from a judge to question the Congress's conclusion that a single Director beats a multimember commission as a fast-acting solution to real-time problems. See Buckley v. Valeo, 424 U.S. 1, 138-39, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976) (per curiam) (subject to constitutional constraints, Congress has authority to create and structure government offices "as it chooses"). My point is more modest: if the Director is a speedy unitary actor, he cannot also be a "quasi-legislative and quasi-judicial" "body of experts" exercising "trained judgment" by considered consensus. Humphrey's Ex'r, 295 U.S. at 624, 629, 55 S.Ct. 869; compare THE FEDERALIST No. 70, at 472 (Alexander Hamilton) (J. Cooke ed., 1961) ("power in a single hand" is exercised with "dispatch"), with John Locke, The Second Treatise of Civil Government, in 2 THE TRADITION OF FREEDOM 201, 252 § 160 (M. Mayer ed., 1957) (legislative power is "too numerous and so too slow for the dispatch requisite to execution").
In sum, the FTC is a deliberative expert nonpartisan agency that reports to the Congress. The CFPB is a unitary inexpert partisan agency that reports to no one. Because the former is no precedent for the latter, Humphrey's Executor does not control here.
As for Morrison, that case and this one are not on the same jurisprudential planet. At issue in Morrison was (inter alia) whether the Ethics in Government Act "impermissibly interferes with the President's exercise of his constitutionally appointed functions" by "restricting the Attorney General's power to remove the independent counsel to only those instances in which he can show `good cause.'" 487 U.S. at 685, 108 S.Ct. 2597. The Supreme Court found no violation. Id. at 685-93, 695-96, 108 S.Ct. 2597. Crucially, however, the Court recognized that
The CFPB Director has even less in common with the independent counsel than with an FTC commissioner. As no one disputes, the Director is a principal officer: he has no "superior" who "direct[s] and supervise[s]" his work. Edmond v. United States, 520 U.S. 651, 662-63, 117 S.Ct. 1573, 137 L.Ed.2d 917 (1997). The distinction between principal and inferior makes a considerable difference. The Constitution gives the Congress much more power over the appointment and removal of an inferior officer than over the appointment and removal of a principal officer, see U.S. CONST. art. II, § 2, cl. 2; Myers, 272 U.S. at 126-29, 47 S.Ct. 21, at least where, as here, the principal officer is not a legislative agent under Humphrey's Executor.
The distinction makes good sense "in the context of a Clause designed to preserve political accountability relative to important Government assignments." Edmond, 520 U.S. at 663, 117 S.Ct. 1573. The more important the officer's assignments, the more directly his actions implicate the President's responsibility to faithfully execute the laws. Myers, 272 U.S. at 132, 47 S.Ct. 21 (President's oversight "varies with the character of [the officer's] service"); see id. at 132-33, 47 S.Ct. 21 (each principal executive officer charged with "highest and most important duties" of his department "must be the President's alter ego"). And the more powerful the officer, the more likely the people will hold the President personally responsible if the officer formulates bad policy. 1 ANNALS OF CONG. 499 (statement of James Madison) (describing "chain of dependence" from "lowest
The Director is more powerful than the independent counsel and poses a more permanent threat to the President's faithful execution of the laws. The independent counsel had "limited jurisdiction" to investigate and prosecute crimes pursuant to Department of Justice policy. Morrison, 487 U.S. at 691, 108 S.Ct. 2597; see id. at 672, 108 S.Ct. 2597. She lacked "any authority to formulate policy" of her own. Id. at 671, 108 S.Ct. 2597; see id. at 691, 108 S.Ct. 2597. She performed no "administrative duties outside of those necessary to operate her office." Id. at 671-72, 108 S.Ct. 2597. She had "limited . . . tenure" and "no ongoing responsibilities": her "temporary" office "terminated" when she finished investigating or prosecuting the matters for which she was called to duty. Id. at 672, 108 S.Ct. 2597 (internal quotation omitted); see id. at 664, 691, 108 S.Ct. 2597.
The Director's jurisdiction and tenure, by contrast, are anything but "limited" and "temporary." He has all but exclusive power to make and enforce rules under eighteen preexisting consumer laws and a nine-teenth in Title X itself. 12 U.S.C. §§ 5481(12), 5512(b)(4), 5562-5565, 5581(a)(1)(A). Under the latter, his power to define and punish "unfair, deceptive, or abusive acts or practices" is cabined by little more than his imagination. Id. § 5531(a), (b). Absent inefficiency, neglect or malfeasance, he is guaranteed five years in which to impose on the people his version of consumer protection. 12 U.S.C. § 5491(c)(1), (3). And the cycle immediately begins again when he is through.
Wiener has still less bearing on this case than Morrison does. The parties apparently recognize as much, as their briefs do not cite it.
In 1948, the Congress established the War Claims Commission, a temporary body consisting of three Commissioners whose sole task was to "adjudicate according to law" claims seeking compensation for injuries suffered during World War II. Wiener, 357 U.S. at 349-50 (quoting War Claims Act of 1948, Pub. L. No. 80-896, § 3, 62 Stat. 1240, 1241 (July 3, 1948)). In 1950, President Truman, by and with the advice and consent of the Senate, appointed Myron Wiener as a Commissioner. Id. In 1953, President Eisenhower removed Wiener not for lack of "rectitude" but because the President wanted "`personnel of my own selection.'" Id. at 350, 356. The Commission was abolished in 1954. Id. at 350. Wiener sued for salary from the date of his removal. Id. at 350-51.
Viewing Wiener's case as a "variant" of Humphrey's Executor, the Supreme Court held that the War Claims Act implicitly protected him from removal except for cause and that the statute so construed was consistent with Article II. Wiener, 357 U.S. at 351, 78 S.Ct. 1275; see id. at 352-56, 78 S.Ct. 1275. The Court noted that Humphrey's Executor "explicitly `disapproved' the expressions in Myers supporting the President's inherent constitutional power to remove members of quasi-judicial bodies." Id. at 352, 78 S.Ct. 1275 (quoting Humphrey's Ex'r, 295 U.S. at 626-27, 55 S.Ct. 869). Emphasizing "the intrinsic judicial
As I read it, Wiener stands for the narrow proposition that the Congress can constitutionally bestow for-cause protection on an officer whose primary function is adjudication, given his need for independence. 357 U.S. at 355, 78 S.Ct. 1275; see The Constitutional Separation of Powers Between the President and Congress, 20 Op. O.L.C. 124, 170 & n.120 (1996) (suggesting Wiener is limited to officers "whose only functions are adjudicatory" or at most to officers "whose primary duties involve the adjudication of disputes involving private persons"), perma.cc/DF3R-FFER.
The CFPB is not a quasi-judicial body. Nor does its Director have an "intrinsic judicial character." Wiener, 357 U.S. at 355, 78 S.Ct. 1275. Nor does the Director have as his primary function the adjudication of disputes. Adjudicative power is only a fraction of his entire authority. He is no less than the czar of consumer finance. In that realm, he is legislator, enforcer and judge. See supra pp. 16-17, 31-32. James Madison wrote that "[t]he accumulation of all powers legislative, executive, and judiciary in the same hands . . . may justly be pronounced the very definition of tyranny." THE FEDERALIST No. 47, at 324. The Director's adjudicative power is part of the reason he meets Madison's definition of a tyrant. And a tyrant with complete authority over "a vital sector of our economy," Free Enter. Fund, 561 U.S. at 508, 130 S.Ct. 3138, cannot but threaten the President's faithful execution of the laws in that realm. In my estimation, then, the Director's adjudicative power does not exempt him from at-will removal.
My colleagues invoke Madison for the opposite conclusion. Maj. Op. 21, 31; Wilkins Concurring Op. 3-5. They point to his statement in the First Congress that "there may be strong reasons why" the Comptroller of the Treasury "should not hold his office at the pleasure of the Executive branch." 1 ANNALS OF CONG. 612. He underscored that the Comptroller—whose "principal duty seems to be deciding upon the lawfulness and justice of the claims and accounts subsisting between the United States and particular citizens"—"partakes strongly of the judicial character." Id. at 611-12. For reasons just explained, that observation is inapposite here. It does not describe the CFPB Director, whose "principal duty" consists of far more than adjudicating "claims and accounts" through rote application of existing law.
In short, the CFPB and its Director have no ancestor in Humphrey's Executor, Morrison or Wiener. Undeterred, the CFPB takes a divide-and-conquer approach to the structural features that in combination differentiate it from any predecessor. It contends that each feature has no constitutional import standing alone and that, collectively, they add up to no problem at all. Oral Arg. Tr. 66-67 ("[W]hen you add them all together you're adding zero plus zero plus zero plus zero, and at the end of the day . . . you're still there with zero."). The apt analogy is not math but chemistry: even if innocuous in isolation, some elements are toxic in combination. See, e.g., THE CAMBRIDGE ENCYCLOPEDIA 328 (D. Crystal ed., 1990) (cyanide, merely carbon plus nitrogen, is deadly); see also Free Enter. Fund, 561 U.S. at 496, 130 S.Ct. 3138 (second layer of for-cause protection did not only "add to the Board's independence, but transform[ed] it"); id. at 509, 130 S.Ct. 3138 ("a number of statutory provisions," "working together," "produce[d] a constitutional violation"); Ass'n of Am. R.Rs. v. Dep't of Transp., 721 F.3d 666, 673 (D.C. Cir. 2013) ("[J]ust because two structural features raise no constitutional concerns independently does not mean Congress may combine them in a single statute."), vacated on other grounds, ___ U.S. ___, 135 S.Ct. 1225, 191 L.Ed.2d 153 (2015).
The CFPB is not the first agency exempt from appropriations. See Budgetary Autonomy, supra, at 1823 (pointing out, however, that list of other exempt agencies is "short" and "composed of narrowly focused" regulators "operat[ing] in technical sectors"). It is not the first agency headed by a single official or lacking a partisan balance requirement. See Datla & Revesz, supra, at 793-94 & nn.125, 127 (listing agencies headed by single official); id. at 797 (listing agencies with no partisan balance requirement). It is not the first agency with sweeping rulemaking and enforcement powers over an entire sector of the economy—the SEC comes to mind. But the CFPB is the only agency that combines each and every one of these elements with for-cause removal protection and a mission to "side" with one segment of the population against others. Neither the Supreme Court nor our Court has upheld anything like it before.
Because the CFPB falls between the existing removal cases, our job is to decide the agency's validity under first principles.
To date, the Supreme Court has recognized only one exception to the default rule: Humphrey's Executor. The CFPB violates the rule, see 12 U.S.C. § 5491(c)(3), and does not fit within the exception, see supra pp. 15-28, 96 S.Ct. 612. The question, then, is whether we should stretch the exception to reach the CFPB. That is what my colleagues do today, even if they do not say so. But just as we cannot overrule Supreme Court decisions, Shea v. Kerry, 796 F.3d 42, 54 (D.C. Cir. 2015); see Tatel Concurring Op. 5, we have no business fundamentally recalibrating them, Humphries v. Ozmint, 397 F.3d 206, 225 n.9 (4th Cir. 2005) (en banc) ("we, as judges of an inferior court, are without liberty to change" Supreme Court "framework"). Even if the FTC and the CFPB were not as dissimilar as I believe they are, I would be loath to cede any more of Article II than Humphrey's Executor squarely demands. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 525-26, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009) (opinion of Scalia, J.) ("There is no reason to magnify the separation-of-powers dilemma posed by the headless Fourth Branch . . . ."); see also Ziglar v. Abbasi, ___ U.S. ___, 137 S.Ct. 1843, 1864, 198 L.Ed.2d 290 (2017) ("[E]ven a modest extension is still an extension.").
Given the CFPB's novelty, we must "[a]t the very least" "`pause to consider the implications of'" sustaining it. Cf. Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519, 550, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012) (opinion of Roberts, C.J.) (quoting United States v. Lopez, 514 U.S. 549, 564, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995)). The CFPB assures us that "the President has an 80 percent chance . . . to be guaranteed an opportunity to replace the Bureau's Director." Oral Arg. Tr. 49. That is hardly comforting. It means there is a twenty per cent chance the President will have no at-will opportunity to replace the agency's leader—and no real policy influence over the agency—for the entirety of the President's four-year term. Furthermore, the odds grow ever larger that the President will have no such opportunity or influence during his first three years, first two years, first year and first hundred days. The President cannot be reduced to appointer-in-chief, cf. Free Enter. Fund, 561 U.S. at 502, 130 S.Ct. 3138, especially if his appointment power turns on luck of the draw, see id. at 500, 130 S.Ct. 3138 (separation of powers "cannot be permitted to turn on" "bureaucratic minutiae" (internal quotation omitted)).
Even assuming the CFPB violates Article II only some of the time—a year here, a couple years there—that is not a strong
The erosion of Presidential responsibility, no less than the "accretion" of Presidential power, can be "dangerous" even when it "does not come in a day." Youngs-town Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 594, 72 S.Ct. 863, 96 S.Ct. 1153 (1952) (Frankfurter, J., concurring); see Free Enter. Fund, 561 U.S. at 497, 130 S.Ct. 3138 ("[I]f allowed to stand, this dispersion of responsibility could be multiplied."); id. at 499, 130 S.Ct. 3138 ("[W]here, in all this, is the role for oversight by an elected President?"). I would draw the line right here and now.
If forced to expand the Humphrey's Executor exception, I would limit it to an agency that answers in some meaningful way to the policy oversight of at least one political branch. See Myers, 272 U.S. at 131-32, 47 S.Ct. 21 (emphasizing need for "chain" of "responsibility" from appointed officers to populace (quoting 1 ANNALS OF CONG. 499, 523 (statements of James Madison and Theodore Sedgwick))); see also Free Enter. Fund, 561 U.S. at 501, 130 S.Ct. 3138 ("The Framers created a structure in which `[a] dependence on the people' would be the `primary controul on the government.'" (quoting THE FEDERALIST No. 51, at 349 (James Madison))); McCulloch, 17 U.S. (4 Wheat.) at 405 (ours is "a government of the people"). The CFPB fails even this minimal test of accountability. The agency and its proponents cite a grab bag of purported checks on the agency's authority but none is an adequate substitute for removal at the President's will.
In Free Enterprise Fund, the Supreme Court rejected the contention that the SEC's functional control over the Public Company Accounting Oversight Board "blun[ted] the constitutional impact of for-cause removal." 561 U.S. at 504, 130 S.Ct. 3138 (internal quotation omitted). The Court explained that "altering the budget or powers of an agency as a whole is a problematic way to control an inferior officer. The [SEC] cannot wield a free hand to supervise individual members if it must destroy the Board in order to fix it." Id.
The Court's reasoning applies with equal force to the Congress's ability to restructure the CFPB. See Oral Arg. Tr. 34, Free Enter. Fund v. PCAOB, S. Ct. No. 08-861 (Dec. 7, 2009) (Justice Scalia: "I'm not sure that [the Congress's] ability to take away responsibility . . . from an agency is the same as controlling what authority that agency does exercise." (emphasis added)). Refashioning the agency as a whole is a ham-handed way to monitor the Director's handling of a specific policy matter. Similarly, threatening to alter the agency does not give the Congress much leverage either. Any Director with the political instinct for the job knows that, nowadays especially, transformative legislation is akin to a bolt of lightning. See Perry v. MSPB, ___ U.S. ___, 137 S.Ct. 1975, 1990, 198 L.Ed.2d 527 (2017) (Gorsuch, J., dissenting) ("[T]he demands of bicameralism and presentment are real and the process can be protracted. [And] the difficulty of making new laws isn't some bug in the constitutional design; it's the point of the design . . . ."); Budgetary Autonomy, supra, at 1831-32 (describing hurdles such as "crowded agenda," "filibuster" and need for "support of congressional leadership"). At all events, an otherwise invalid agency is no less invalid merely because the Congress can fix it at some undetermined point in the future.
Second, judicial review under the Administrative Procedure Act is not a meaningful substitute check. Contra, e.g., Amicus Br. of Americans for Financial Reform et al. 15. Some of the CFPB's excesses will "occur[ ] in the twilight of judicially unreviewable discretion." PHH Corp., 839 F.3d at 35; see Chevron, 467 U.S. at 844-45, 104 S.Ct. 2778; 12 U.S.C. §§ 5512(b)(4)(B), 5581(b)(5)(E)(ii); 15 U.S.C. § 1693b(e)(1). And even if the courts could review de novo everything the CFPB does, that would not suffice for today's purpose. The chain of responsibility from the agency to the judiciary does not then link to the people. Federal judges "have no constituency," Chevron, 467 U.S. at 866, 104 S.Ct. 2778, and are therefore no proxy for the people's representatives in deciding consumer-finance policy, TVA v. Hill, 437 U.S. 153, 195, 98 S.Ct. 2279, 57 L.Ed.2d 117 (1978) (courts decide legal questions, leaving it to "political branches" to decide "what accords with common sense and the public weal" (internal quotation omitted)).
Third, procedural requirements associated with CFPB rulemaking are not a meaningful substitute check. Contra, e.g., Amicus Br. of Financial Regulation Scholars
Fourth, and finally, the threat of super-majority veto by the Financial Stability Oversight Council is not a meaningful substitute check. Contra, e.g., Amicus Br. of Financial Regulation Scholars 23; Wilkins Concurring Op. 13-15. The Council (another unelected body) can "set aside a final regulation" of the CFPB only if the regulation "would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk." 12 U.S.C. § 5513(a). As far as the Council is concerned, then, the CFPB can break the law or abuse its power as long as it does so (1) in an enforcement action or (2) in a regulation that does not threaten national financial ruin.
A recent episode illustrates how toothless the Council's veto is in controlling CFPB policy. In July 2017, the CFPB finalized one of its most controversial policies to date: a rule prohibiting certain providers from entering arbitration agreements with consumers to stave off class actions. CFPB, Final Rule: Arbitration Agreements (July 10, 2017), perma.cc/N3JH-573A. The acting Comptroller of the Currency, one of the Council's ten voting members, 12 U.S.C. § 5321(b)(1)(C), sought data so that he could determine the rule's "safety and soundness implications." Letter from Keith Noreika to Richard Cordray (July 17, 2017), perma.cc/3X6D-YZS6. In response, the CFPB Director asserted that, because the rule's projected impact is "less than $1 billion per year," it is "plainly frivolous" to suggest the rule "poses a safety and soundness issue." Letter from Richard Cordray to Keith Noreika (July 18, 2017), perma.cc/76MU-39PC. The Director also implied that the Comptroller was "distort[ing] the FSOC process" because of a mere "disagree[ment] with the policy judgments for the rule." Id.
The rule was published in the Federal Register the next day.
Judge Kavanaugh and I agree that Title X's for-cause removal provision, 12 U.S.C. § 5491(c)(3), is unconstitutional. But he would excise section 5491(c)(3) and preserve the rest of Title X. Kavanaugh Dissenting Op. 68-73. I respectfully disagree with that approach. Above all else, the 111th Congress wanted the CFPB to be independent: free, that is, from industry influence and the changing political tides that come with accountability to the President. Severing section 5491(c)(3) would yield an executive agency entirely at odds with the legislative design. In my view, the Congress would not have enacted Title X in its current form absent for-cause removal protection. I believe, therefore, that the appropriate remedy for the CFPB's Article II problem is to invalidate Title X in its entirety.
When remedying a constitutional defect, a court should not "nullify more of a legislature's work than is necessary" because the "ruling of unconstitutionality" already "frustrates the intent of the elected representatives of the people." Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320, 329, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006) (internal quotation omitted). Neither, however, should the court use the severability doctrine to "rewrit[e]" an unconstitutional statute because that also "circumvent[s] the intent of the legislature." Id. at 329-30, 126 S.Ct. 961 (internal quotation omitted); see Free Enter. Fund, 561 U.S. at 510, 130 S.Ct. 3138 (doctrine does not give court "editorial freedom"); United States v. Reese, 92 U.S. 214, 221, 23 S.Ct. 563 (1875) (court cannot "introduce words" into statute).
With those competing considerations in mind, the court must ask whether the statute minus any invalid provision "will function in a manner consistent with the intent of Congress" and "is legislation that Congress would . . . have enacted." Alaska Airlines, 480 U.S. at 685, 107 S.Ct. 1476 (emphasis in original). If the answer to either component of the question is no, the invalid provision cannot be severed. Id. In deciding the question, the court looks to the statute's "language," "structure" and "legislative history." Id. at 687, 107 S.Ct. 1476; see, e.g., id. at 687-97, 107 S.Ct. 1476 (weighing all three); Regan v. Time, Inc., 468 U.S. 641, 652-55, 104 S.Ct. 3262, 82 L.Ed.2d 487 (1984) (plurality opinion) (same); INS v. Chadha, 462 U.S. 919, 931-35, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983) (same); see also 2 NORMAN J. SINGER & J.D. SHAMBIE SINGER, SUTHERLAND STATUTES &
A severability clause can be probative of legislative intent but it is by no means dispositive. Dorchy v. Kansas, 264 U.S. 286, 290, 44 S.Ct. 323, 68 S.Ct. 686 (1924) ("[I]t is an aid merely; not an inexorable command."); see United States v. Jackson, 390 U.S. 570, 585 n.27, 88 S.Ct. 1209, 20 L.Ed.2d 138 (1968) ("[T]he ultimate determination of severability will rarely turn on the presence or absence of such a clause."); 2 SINGER & SINGER, supra, § 44:8, at 627 ("Because of the frequency with which it is used, the separability clause is regarded as little more than a mere formality."). In the federal courts, a severability clause creates only a rebuttable "presumption that Congress did not intend the validity of the statute in question to depend on the validity of the constitutionally offensive provision." Alaska Airlines, 480 U.S. at 686, 107 S.Ct. 1476; see Dorchy, 264 U.S. at 290, 44 S.Ct. 323 (treating severability clause as "a rule of construction"). Thus, the Supreme Court sometimes declines to sever an invalid provision despite a severability clause. See, e.g., City of Akron v. Akron Ctr. for Reprod. Health, Inc., 462 U.S. 416, 425 n.8, 445-46 n.37, 103 S.Ct. 2481, 76 L.Ed.2d 687 (1983), overruled on other grounds by Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992); Planned Parenthood of Cent. Mo. v. Danforth, 428 U.S. 52, 83-84, 96 S.Ct. 2831, 49 L.Ed.2d 788 (1976); Sloan v. Lemon, 413 U.S. 825, 833-35, 93 S.Ct. 2982, 37 L.Ed.2d 939 (1973); Hill v. Wallace, 259 U.S. 44, 70-71, 42 S.Ct. 453, 66 S.Ct. 822 (1922).
At the outset of Title X, the Congress "established" the CFPB as "an independent bureau." 12 U.S.C. § 5491(a).
In other words, section 5491(a) ties the CFPB's very existence to its freedom from the President. That is powerful evidence the Congress opposed the idea of a CFPB answerable to him. Other statutory features reinforce the conclusion.
As discussed earlier, the Congress transferred to the CFPB the authority to enforce and issue rules under eighteen existing
Even if that result might be worth cheering for the purpose of accountability, it is not what the Congress had in mind. The floor statements in support of Title X highlighted, more than any other consideration, the CFPB's need for independence. See, e.g., 156 CONG. REC. 2052 (2010) (statement of Rep. Tsongas); id. at 3187 (statement of Sen. Kaufman); id. at 6237, 6365, 7015 (statements of Sen. Whitehouse); id. at 6240 (statement of Sen. Franken); id. at 6990 (statement of Sen. Reid); id. at 7481, 7485-86, 8931 (statements of Sen. Dodd); id. at 9447 (statement of Rep. Kilroy); id. at 9839 (statement of Rep. Holt); id. at 11814 (statement of Rep. Lee); id. at 12434 (statement of Rep. Maloney); id. at 13135 (statement of Sen. Cardin).
Likewise, in this Court, the CFPB's strongest backers have repeatedly emphasized its independence as a sine qua non. See, e.g., Amicus Br. of Current and Former Members of Congress Supporting Rehearing En Banc 2 ("By . . . severing the provision that made [the] Director removable only for cause, the panel decision fundamentally altered the CFPB and hampered its ability to function as Congress intended."); Amicus Br. of Americans for Financial Reform et al. 2-3 ("The Bureau's independence has been critical to its ability to remain a steadfast enforcer of the consumer protection laws despite massive political opposition from the financial industry."); Amicus Br. of Financial Regulation Scholars 17-18 ("Regulated industries are likely to bring concentrated political pressure to bear on the White House to influence an agency whose head is subject to at-will removal to adjust policy in favor of the industry."); cf. Maj. Op. 16, 68 (Congress sought to "insulat[e]" CFPB "from political winds and [P]residential will" but panel majority, by excising section 5491(c)(3), "effectively turned the CFPB into an instrumentality of the President").
Indeed, the Congress so valued the CFPB's independence that it forfeited its own oversight by exempting the agency from appropriations. The intent, as the CFPB's architects made plain, was to give the agency watertight freedom from both of the elected branches, lest the agency's mission be compromised by shifting popular will, the "financial . . . industry lobby" or "legislative micromanaging." Warren, Unsafe at Any Rate, supra; see, e.g., S. REP. No. 111-176, at 163 (finding that "adequate funding, independent of the Congressional appropriations process, is absolutely essential" to CFPB's "independent operations"); 156 CONG. REC. 8931 (statement of Sen. Dodd) ("[T]he [CFPB's] funding will be independent and reliable so that its mission cannot be compromised by political maneuvering.").
A CFPB responsive to the President would have been too "controversial" to pass the 111th Congress. Alaska Airlines, 480 U.S. at 685, 107 S.Ct. 1476. At the very least it would not have passed absent "strong oversight" via the appropriations process. Id. But we judges cannot subject the agency to appropriations; to do so would be to "blue-pencil" still more of Title X, Free Enter. Fund, 561 U.S. at 509, 130 S.Ct. 3138, and potentially introduce new provisions of our own. Nor can we convert the agency into a multimember commission. True, in contrast to a CFPB responsive to the President, a multimember CFPB "would deviate less radically from Congress' intended system." United States v. Booker, 543 U.S. 220, 247, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005); see Amicus Br. of Current and Former Members of Congress Supporting CFPB 17-20 (Congress seriously considered multimember structure). Yet that alternative, too, would be a rewrite for the Congress and not the courts. See Free Enter. Fund, 561 U.S. at 509-10, 130 S.Ct. 3138; Ayotte, 546 U.S. at 329-30, 126 S.Ct. 961; Reese, 92 U.S. at 221.
The best argument for excising section 5491(c)(3) is Dodd-Frank's severability clause, 12 U.S.C. § 5302, but it does not change my view. Appearing in the mega Dodd-Frank legislation 574 pages before section 5491(c)(3), see 124 Stat. at 1390, 1964, section 5302 provides in relevant part that "[i]f any provision of this Act . . . is held to be unconstitutional, the remainder of this Act . . . shall not be affected thereby." The clause says nothing specific about Title X, let alone the CFPB's independence, let alone for-cause removal, let alone the massive transfer of power inherent in deleting section 5491(c)(3), let alone whether the Congress would have endorsed that transfer of power even while subjecting the CFPB to the politics of Presidential control. Instead, as one of Dodd-Frank's architects said decades earlier of a materially identical clause: "This is just boilerplate severability." 134 CONG. REC. 12280 (1988) (statement of Rep. Frank). Thus, beyond the standard presumption that section 5302 creates, see Alaska Airlines, 480 U.S. at 686, 107 S.Ct. 1476, it tells us little about how the Congress would deal with invalidation of section 5491(c)(3) in particular, see Max Radin, A Short Way With Statutes, 56 HARV. L. REV. 388, 419 (1942) ("Are we really to imagine that the legislature . . . weighed each paragraph literally and c[a]me to the conclusion that it would have enacted that paragraph if all the rest of the statute were invalid?").
For reasons already stated, the presumption of severability is rebutted here. A severability clause "does not give the
As a guarantor of self-government, Article II has always been "one of the Constitution's best provisions." Saikrishna Prakash, The Essential Meaning of Executive Power, 2003 U. ILL. L. REV. 701, 725 (quoting 1788 North Carolina ratification debate) (brackets omitted). But it suffers a major defeat today and will suffer more if today's decision stands. In my view, the CFPB violates Article II and should be invalidated top to bottom.
Accordingly, I dissent.
Kavanaugh, Circuit Judge, with whom Senior Circuit Judge Randolph joins, dissenting:
This is a case about executive power and individual liberty.
To prevent tyranny and protect individual liberty, the Framers of the Constitution separated the legislative, executive, and judicial powers of the new national government. To further safeguard liberty, the Framers insisted upon accountability for the exercise of executive power. The Framers lodged full responsibility for the executive power in a President of the United States, who is elected by and accountable to the people. The first 15 words of Article II speak with unmistakable clarity about who controls the executive power: "The executive Power shall be vested in a President of the United States of America." U.S. CONST. art. II, § 1. And Article II assigns the President alone the authority and responsibility to "take Care that the Laws be faithfully executed." Id. § 3. The purpose "of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom." Morrison v. Olson, 487 U.S. 654, 727, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988) (Scalia, J., dissenting).
Of course, the President executes the laws with the assistance of subordinate executive officers who are appointed by the President, often with the advice and consent of the Senate. To carry out the executive power and be accountable for the exercise of that power, the President must be able to supervise and direct those subordinate officers. In its landmark decision in Myers v. United States, 272 U.S. 52, 47 S.Ct. 21, 71 S.Ct. 160 (1926), authored by Chief Justice and former President Taft, the Supreme Court recognized the President's Article II authority to supervise, direct, and remove at will subordinate officers in the Executive Branch.
In 1935, however, the Supreme Court carved out an exception to Myers and Article II by permitting Congress to create independent agencies that exercise executive power. See Humphrey's Executor v. United States, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611 (1935). An agency is "independent" when the agency's commissioners or board members are removable by the President only for cause, not at will, and therefore are not supervised or directed by the President. Examples of independent agencies include well-known bodies such as the Federal Trade Commission, the Federal Communications Commission, the Securities and Exchange Commission, the National Labor Relations Board, and the Federal Energy Regulatory Commission.
Those and other independent agencies exercise executive power by bringing enforcement
The independent agencies collectively constitute, in effect, a headless fourth branch of the U.S. Government. They hold enormous power over the economic and social life of the United States. Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.
To mitigate the risk to individual liberty, the independent agencies historically have been headed by multiple commissioners or board members. In the Supreme Court's words, each independent agency has traditionally been established as a "body of experts appointed by law and informed by experience." Humphrey's Executor, 295 U.S. at 624, 55 S.Ct. 869. Multi-member independent agencies do not concentrate all power in one unaccountable individual, but instead divide and disperse power across multiple commissioners or board members. The multi-member structure thereby reduces the risk of arbitrary decisionmaking and abuse of power, and helps protect individual liberty.
In other words, the heads of executive agencies are accountable to and checked by the President; and the heads of independent agencies, although not accountable to or checked by the President, are at least accountable to and checked by their fellow commissioners or board members. No independent agency exercising substantial executive authority has ever been headed by a single person.
Until now.
In the Dodd-Frank Act of 2010, Congress created a new independent agency, the Consumer Financial Protection Bureau. As originally proposed by then-Professor and now-Senator Elizabeth Warren, the CFPB was to be another traditional, multi-member independent agency. The initial Executive Branch proposal from President Obama's Administration likewise envisioned a multi-member independent agency. The House-passed bill sponsored by Congressman Barney Frank and championed by Speaker Nancy Pelosi also contemplated a multi-member independent agency.
But Congress ultimately departed from the Warren and Executive Branch proposals, and from the House bill sponsored by Congressman Frank. Congress established the CFPB as an independent agency headed not by a multi-member commission but rather by a single Director.
The Director of the CFPB wields enormous power over American businesses, American consumers, and the overall U.S. economy. The Director unilaterally implements and enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices.
The Director alone may decide what rules to issue. The Director alone may decide how to enforce, when to enforce, and against whom to enforce the law. The Director alone may decide whether an individual or entity has violated the law. The Director alone may decide what sanctions and penalties to impose on violators of the law.
Because the CFPB is an independent agency headed by a single Director and not by a multi-member commission, the Director of the CFPB possesses more unilateral authority—that is, authority to take action on one's own, subject to no check—
That combination—power that is massive in scope, concentrated in a single person, and unaccountable to the President—triggers the important constitutional question at issue in this case.
The petitioner here, PHH, is a mortgage lender and was the subject of a CFPB enforcement action that resulted in a $109 million sanction. In seeking to vacate the CFPB's order, PHH argues that the CFPB's novel structure—an independent agency headed by a single Director—violates Article II of the Constitution. I agree with PHH.
Three considerations inform my Article II analysis: history, liberty, and Presidential authority.
First, history. In separation of powers cases, the Supreme Court has repeatedly emphasized the significance of historical practice. See, e.g., NLRB v. Noel Canning, ___ U.S. ___, 134 S.Ct. 2550, 189 L.Ed.2d 538 (2014); Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010). The single-Director structure of the CFPB represents a gross departure from settled historical practice. Never before has an independent agency exercising substantial executive authority been headed by just one person. That history matters. In Free Enterprise Fund, in invalidating the novel structure of another newly created independent agency, the Public Company Accounting Oversight Board, the Supreme Court stated: "Perhaps the most telling indication of the severe constitutional problem with the PCAOB is the lack of historical precedent for this entity." Id. at 505, 130 S.Ct. 3138. Here too: Perhaps the most telling indication of the severe constitutional problem with the CFPB is the lack of historical precedent for this entity.
Second, liberty. The CFPB's concentration of enormous power in a single unaccountable, unchecked Director poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty, than a multi-member independent agency does. The overarching constitutional concern with independent agencies is that the agencies exercise executive power but are unchecked by the President, the official who is accountable to the people and who is responsible under Article II for the exercise of executive power. In lieu of Presidential control, the multi-member structure of independent agencies operates as a critical substitute check on the excesses of any individual independent agency head. This new agency, the CFPB, lacks that critical check, yet still wields vast power over American businesses and consumers. This "wolf comes as a wolf." Morrison, 487 U.S. at 699, 108 S.Ct. 2597 (Scalia, J., dissenting).
Third, Presidential authority. The single-Director CFPB diminishes the President's Article II authority to control the Executive Branch more than traditional multi-member independent agencies do. In comparable multi-member independent agencies such as the Federal Trade Commission (to which the CFPB repeatedly compares itself), the President ordinarily retains power to designate the chairs of the agencies and to remove chairs at will from the chair position. As a result, Presidents can maintain at least some influence over the general direction of the agencies. Soon after a new President enters office, the new President typically designates new
A President possesses far less influence over the single-Director CFPB. The single CFPB Director serves a fixed five-year term and, absent good cause, may not be replaced by the President, even by a newly elected President. The upshot is that a President may be stuck for years with a CFPB Director who was appointed by the prior President and who vehemently opposes the current President's agenda. To illustrate, upon taking office in January 2017, the President could not appoint a new Director of the CFPB, at least absent good cause for terminating the existing Director. It will get worse in the future. Any new President who is elected in 2020, 2024, or 2028 may spend a majority of his or her term with a CFPB Director who was appointed by a prior President. That does not happen with the chairs of the traditional multi-member independent agencies. That dramatic and meaningful difference vividly illustrates that the CFPB's novel single-Director structure diminishes Presidential power more than traditional multi-member independent agencies do.
In sum, because of the consistent historical practice in which independent agencies have been headed by multiple commissioners or board members; because of the serious threat to individual liberty posed by a single-Director independent agency; and because of the diminution of Presidential authority caused by this single-Director independent agency, I conclude that the CFPB violates Article II of the Constitution. Under Article II, an independent agency that exercises substantial executive power may not be headed by a single Director. As to remedy, I agree with the United States as amicus curiae: The Supreme Court's Free Enterprise Fund decision and the Court's other severability precedents require that we sever the CFPB's for-cause provision, so that the Director of the CFPB is supervised, directed, and removable at will by the President.
I begin by describing the history of independent agencies in general and of the CFPB in particular. That history demonstrates that, in order to comply with Article II, independent agencies exercising substantial executive power must be structured as multi-member agencies.
As the Supreme Court has explained, our Constitution "was adopted to enable the people to govern themselves, through their elected leaders," and the Constitution "requires that a President chosen by the entire Nation oversee the execution of the laws." Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 499, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010). Article II of the Constitution provides quite simply: "The executive Power shall be vested in a President of the United States of America." U.S. CONST. art. II, § 1. And Article II assigns the President alone the authority and responsibility to "take Care that the Laws be faithfully executed." Id. § 3. Article II makes "emphatically clear from start to finish" that the President is "personally responsible for his branch." AKHIL REED
To exercise the executive power, the President must be assisted by subordinates. The Framers anticipated and provided for executive departments, and for officers (principal and inferior) in those departments who would assist the President. See U.S. CONST. art. II, § 2. In 1789, soon after being sworn in, the First Congress established new executive Departments of Foreign Affairs, War, and Treasury, and created various offices in those new Departments.
In order to control the exercise of executive power and take care that the laws are faithfully executed, the President must be able to supervise and direct those subordinate executive officers. As James Madison stated during the First Congress, "if any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws." 1 ANNALS OF CONGRESS 463 (Madison) (1789) (Joseph Gales ed., 1834); see also Neomi Rao, Removal: Necessary and Sufficient for Presidential Control, 65 Ala. L. Rev. 1205, 1215 (2014) ("The text and structure of Article II provide the President with the power to control subordinates within the executive branch.").
To supervise and direct executive officers, the President must be able to remove those officers at will. Otherwise, a subordinate could ignore the President's supervision and direction without fear, and the President could do nothing about it. See Bowsher v. Synar, 478 U.S. 714, 726, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986) ("Once an officer is appointed, it is only the authority that can remove him, and not the authority that appointed him, that he must fear and, in the performance of his functions, obey.").
The Article II chain of command therefore depends on the President's removal power. As James Madison explained during the First Congress: "If the President should possess alone the power of removal from office, those who are employed in the execution of the law will be in their proper situation, and the chain of dependence be preserved; the lowest officers, the middle grade, and the highest, will depend, as they ought, on the President, and the President on the community." 1 ANNALS OF CONGRESS 499 (Madison).
In 1789, the First Congress confirmed that Presidents may remove executive officers at will. As the Supreme Court has explained: "The removal of executive officers was discussed extensively in Congress when the first executive departments were created. The view that `prevailed, as most consonant to the text of the Constitution' and `to the requisite responsibility and harmony in the Executive Department,' was that the executive power included a power to oversee executive officers through removal." Free Enterprise Fund, 561 U.S. at 492, 130 S.Ct. 3138 (quoting Letter from James Madison to Thomas Jefferson (June 30, 1789), 16 DOCUMENTARY HISTORY OF THE FIRST FEDERAL CONGRESS 893 (2004)). That Decision of 1789 "soon became the settled and well understood construction of the Constitution." Free Enterprise Fund, 561 U.S. at 492, 130 S.Ct. 3138.
To summarize: "The Constitution that makes the President accountable to the people for executing the laws also gives him the power to do so. That power includes, as a general matter, the authority to remove those who assist him in carrying out his duties. Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else." Id. at 513-14, 130 S.Ct. 3138.
The constitutionality of those independent agencies was called into doubt by the Supreme Court in the 1926 Myers decision written by Chief Justice and former President Taft. In that case, the Supreme Court ruled that, under Article II, the President must be able to supervise, direct, and remove at will executive officers. The Court stated: When "the grant of the executive power is enforced by the express mandate to take care that the laws be faithfully executed, it emphasizes the necessity for including within the executive power as conferred the exclusive power of removal." Myers v. United States, 272 U.S. 52, 122, 47 S.Ct. 21, 71 S.Ct. 160 (1926).
The Myers Court's articulation of the President's broad removal power appeared to mean that Congress could no longer create independent agencies. Indeed, Congress itself read Myers that way. For several years after Myers, Congress therefore did not create any new agencies whose heads were protected by for-cause removal provisions.
In the 1930s, based on his reading of Article II and buoyed by Myers, President Franklin Roosevelt vigorously challenged the notion of independent agencies. President Roosevelt did not necessarily object to the existence of the agencies; rather, he objected to the President's lack of control over the agencies.
The issue came to a head in President Roosevelt's dispute with William E. Humphrey, a commissioner of the Federal Trade Commission. Commissioner Humphrey was a Republican holdover from the Hoover Administration who, in President Roosevelt's view, was too sympathetic to big business and too hostile to the Roosevelt Administration's regulatory agenda. Asserting his authority under Article II, President Roosevelt fired Commissioner Humphrey. Humphrey contested the removal (and after Humphrey's death, his representative continued the litigation in order to obtain back pay). Humphrey's representative argued that Humphrey was protected against firing by the statute's for-cause removal provision, and further argued that Congress could create independent agencies without violating Article II. The case reached the Supreme Court in 1935.
At its core, the Humphrey's Executor case raised the question whether Article II permitted independent agencies. Representing President Roosevelt, the Solicitor General contended that Congress could not create independent agencies. The Solicitor General relied on the text and history of Article II, as well as the Supreme Court's 1926 decision in Myers. But notwithstanding Article II and Myers, the Supreme Court upheld the constitutionality of independent
In allowing independent agencies, the Humphrey's Executor Court emphasized that the Federal Trade Commission was intended "to be non-partisan" and "to exercise the trained judgment of a body of experts appointed by law and informed by experience." Id. at 624, 55 S.Ct. 869. Those characteristics, among others, led the Court to conclude that Congress could create an independent agency "wholly disconnected from the executive department," except in its selection. Id. at 630, 625, 55 S.Ct. 869. According to the Court, Congress could limit the President's power to remove the commissioners of the Federal Trade Commission and, by extension, Congress could limit the President's power to remove the commissioners and board members of similar independent agencies. Id. at 628-30, 55 S.Ct. 869.
Ever since the 1935 Humphrey's Executor decision, independent agencies have played a significant role in the U.S. Government. The independent agencies possess extraordinary authority over vast swaths of American economic and social life—from securities to antitrust to tele-communications to labor to energy. The list goes on.
Importantly, however, each of the independent agencies has traditionally operated—and each continues to operate—as a multi-member "body of experts appointed by law and informed by experience." Id. at 624, 55 S.Ct. 869. Independent agencies are not headed by single Directors. As Professor Amar has explained, "the Decision of 1789" has remained controlling, at least to the extent that the Decision "established that in all one-headed departments, the department head must be removable at will by the president." AKHIL REED AMAR, AMERICA'S UNWRITTEN CONSTITUTION 323 (2012).
The independent agency at issue here, the CFPB, arose out of an idea originally advanced by then-Professor and now-Senator Elizabeth Warren. In 2007, concerned about balkanized and inconsistent federal law enforcement of consumer protection statutes, Professor Warren encouraged Congress to create a new independent agency, a Financial Product Safety Commission. This new agency would centralize and unify federal law enforcement efforts to protect consumers. See Elizabeth Warren, Unsafe at Any Rate: If It's Good Enough for Microwaves, It's Good Enough for Mortgages. Why We Need a Financial Product Safety Commission, Democracy, Summer 2007, at 8, 16-18.
The agency proposed by Professor Warren was to operate as a traditional multi-member independent agency. The subsequent Executive Branch proposal by President Obama's Administration likewise contemplated a multi-member independent agency. See DEPARTMENT OF THE TREASURY, FINANCIAL REGULATORY REFORM: A NEW FOUNDATION: REBUILDING FINANCIAL SUPERVISION AND REGULATION 58 (2009). The originally passed House bill sponsored by Congressman Barney Frank and supported by Speaker Nancy Pelosi similarly would have created a multi-member independent agency. See H.R. 4173, 111th Cong. § 4103 (as passed by House, Dec. 11, 2009).
But Congress ultimately departed from the Warren and Executive Branch proposals, from the House bill, and from historical practice by creating an independent agency with only a single Director. See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, Title X § 1011, 124 Stat. 1376, 1964 (codified at 12 U.S.C. § 5491). The single Director
Congress's choice of a single-Director CFPB was not an especially considered legislative decision. No committee report or substantial legislative history delved into the benefits of single-Director independent agencies versus multi-member independent agencies. No congressional hearings studied the question. Congress apparently stumbled into this single-Director structure as a compromise or landing point between the original Warren multi-member independent agency proposal and a traditional executive agency headed by a single person.
Under the law as enacted, the President may not supervise, direct, or remove at will the CFPB Director. As a result, a Director appointed by a President may continue to serve in office even if the President later wants to remove the Director based on a policy disagreement, for example. More importantly, a Director may continue to serve as Director under a new President (until the Director's statutory five-year tenure has elapsed), even though the new President might strongly disagree with that Director about policy issues or the overall direction of the agency.
Congress insulated the CFPB's Director from Presidential influence, yet also granted the CFPB extraordinarily broad authority to implement and enforce U.S. consumer protection laws. Under the Dodd-Frank Act, the CFPB may "implement[ ] the Federal consumer financial laws through rules, orders, guidance, interpretations, statements of policy, examinations, and enforcement actions." 12 U.S.C. § 5492(10). The CFPB may "prescribe rules or issue orders or guidelines pursuant to" 19 distinct consumer protection laws. Id. § 5581(a)(1)(A); see also id. §§ 5481(14), 5512(b). That rulemaking power was previously exercised by seven different government agencies. See id. § 5581(b) (transferring to the CFPB certain "consumer financial protection functions" previously exercised by the Federal Reserve, the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Department of Housing and Urban Development, and the Federal Trade Commission).
The CFPB may pursue enforcement actions in federal court, as well as before administrative law judges. The agency may issue subpoenas requesting documents or testimony in connection with those enforcement actions. See id. §§ 5562-5564. The CFPB may adjudicate disputes. And the CFPB may impose a wide range of legal and equitable relief, including restitution, disgorgement, money damages, injunctions, and civil monetary penalties. Id. § 5565(a)(2).
All of that massive power is ultimately lodged in one person—the Director of the CFPB—who is not supervised, directed, or removable at will by the President.
Because the Director acts alone and without Presidential supervision or direction, and because the CFPB wields broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency. By "unilateral power," I mean power that is not checked by the President or by other commissioners or board members. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire U.S. Government, at least when measured in terms of unilateral power. That is not an overstatement. What
To be sure, the Dodd-Frank Act requires the Director to establish and consult with a "Consumer Advisory Board." See id. § 5494. But the advisory board is just that: advisory. The Director need not heed the Board's advice. Without the formal authority to block unilateral action by the Director, the Advisory Board does not come close to the kind of check provided by the multi-member structure of traditional independent agencies.
The Act also, in theory, allows a supermajority of the Financial Stability Oversight Council to veto certain regulations of the Director. See id. §§ 5513, 5321. But by statute, the veto power may be used only to prevent regulations (not to overturn enforcement actions or adjudications); only when two-thirds of the Council members agree; and only when a particular regulation puts "the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk," a standard unlikely to be met in practice in most cases. Id. § 5513(c)(3)(B)(ii); see S. Rep. No. 111-176, at 166 ("The Committee notes that there was no evidence provided during its hearings that consumer protection regulation would put safety and soundness at risk."); see also Todd Zywicki, The Consumer Financial Protection Bureau: Savior or Menace?, 81 Geo. Wash. L. Rev. 856, 875 (2013) ("[S]ubstantive checks on the CFPB can be triggered . . . only under the extreme circumstance of a severe threat to the safety and soundness of the American financial system. It is likely that this extreme test will rarely be satisfied in practice."); Recent Legislation, Dodd-Frank Act Creates the Consumer Financial Protection Bureau, 124 Harv. L. Rev. 2123, 2129 (2011) ("[T]he high standard for vetoing regulations . . . will be difficult to establish."). In this case, for example, the veto power could not have been used to override the CFPB's statutory interpretation or its enforcement action against PHH.
The Act also technically makes the CFPB part of the Federal Reserve for certain administrative purposes. See, e.g., 12 U.S.C. § 5491(a); see also id. § 5493. But that is irrelevant to the present analysis because the Federal Reserve Board may not supervise, direct, or remove the CFPB Director.
In short, when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire U.S. Government, other than the President. Indeed, within his jurisdiction, the Director of the CFPB is even more powerful than the President. The Director's view of consumer protection law and policy prevails over all others. In essence, the Director of the CFPB is the President of Consumer Finance.
The concentration of massive, unchecked power in a single Director marks a dramatic departure from settled historical practice and makes the CFPB unique
As a single-Director independent agency exercising substantial executive authority, the CFPB is the first of its kind and an historical anomaly. Until this point in U.S. history, independent agencies exercising substantial executive authority have all been multi-member commissions or boards. A sample list includes:
Have there been any independent agencies headed by a single person? In an effort to be comprehensive, the three-judge
None of the three examples, however, has deep historical roots. Indeed, the Federal Housing Finance Agency has existed only since 2008, about as long as the CFPB. The other two are likewise relatively recent. And those other two have been constitutionally contested by the Executive Branch, and they do not exercise the core Article II executive power of bringing law enforcement actions or imposing fines and penalties against private citizens for violation of statutes or agency rules.
For those reasons, as I will explain, the three examples are different in kind from the CFPB. Those examples therefore do not count for much when compared to the deeply rooted historical practice of independent agencies as multi-member agencies. To borrow the words of Justice Breyer in Noel Canning, as weighed against the settled historical practice, "these few scattered examples" are "anomalies." NLRB v. Noel Canning, ___ U.S. ___, 134 S.Ct. 2550, 2567, slip op. at 21, 189 L.Ed.2d 538 (2014); see also Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 505-06, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010).
First, the CFPB cited and primarily relied on the example of the Social Security Administration, which is an independent agency headed by a single Social Security Commissioner. See 42 U.S.C. §§ 901(a), 902(a). But the current structure of the agency is relatively recent. The Social Security Administration long existed first as a multi-member independent agency and then as a single-Director executive agency within various executive departments, most recently the Department of Health and Human Services. Only in 1994 did Congress change the Social Security Administration to a single-Director independent agency. Importantly, when the agency's structure was altered in 1994, President Clinton issued a signing statement pronouncing that the change in the agency's structure was constitutionally problematic. See President William J. Clinton, Statement on Signing the Social Security Independence and Program Improvements Act of 1994, 2 Pub. Papers 1471, 1472 (Aug. 15, 1994). That agency's structure therefore is constitutionally contested. In those circumstances, the historical precedent counts for little because it is not settled. Cf. Noel Canning, 134 S.Ct. at 2563-64, 2567, slip op. at 14-15, 20-21 (discounting example of appointments during particular inter-session recess because of Senate Committee's strong opposition to those appointments); INS v. Chadha, 462 U.S. 919, 942 n.13, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983) (discounting prior legislative veto provisions because Presidents had objected to those provisions). If anything, when considered against the "settled practice," the Social Security example only highlights the anomaly of an independent agency headed by a single person. Noel Canning, 134 S.Ct. at 2567, slip op. at 21.
Moreover, the Social Security Administration is not a precedent for the CFPB because the Social Security Commissioner does not possess unilateral authority to bring law enforcement actions against private citizens, which is the core of the executive power and the primary threat to individual liberty posed by executive power. See Morrison v. Olson, 487 U.S. 654,
Second, the CFPB cited the example of the Office of Special Counsel, an independent agency headed by a single Special Counsel. The Office has a narrow jurisdiction and mainly enforces certain personnel rules against government employers and employees, such as the prohibition against improper political activity by government employees. Like the Social Security Administration, the Office of Special Counsel lacks deep historical roots. It became a single-Director agency in 1978. And like the Social Security Administration, the constitutionality of the Special Counsel has been contested since its creation. Under President Carter, the Department of Justice opined that the Special Counsel "must be removable at will by the President," and the Department opposed a for-cause restriction on removal of the Special Counsel. Memorandum Opinion for the General Counsel, Civil Service Commission, 2 Op. O.L.C. 120, 120 (1978). When Congress passed subsequent legislation regarding the Office of Special Counsel, President Reagan vetoed the bill due to "serious constitutional concerns" about the Office's status as an independent agency. President Ronald Reagan, Memorandum of Disapproval on a Bill Concerning Whistleblower Protection, 2 Pub. Papers 1391, 1392 (Oct. 26, 1988). The history of the Office of Special Counsel confirms what one former Special Counsel has acknowledged: The agency is "a controversial anomaly in the federal system." K. William O'Connor, Foreword to A LEGISLATIVE HISTORY OF THE MERIT SYSTEM PRINCIPLES, PROHIBITED PERSONNEL PRACTICES AND THE OFFICE OF THE SPECIAL COUNSEL, at v (1985). That agency's structure remains constitutionally contested and so is not a meaningful historical precedent for the CFPB.
Moreover, the Office of Special Counsel is not a precedent for the CFPB because the Office of Special Counsel is primarily responsible for enforcing personnel laws against government agencies and government employees. Unlike the CFPB, the Office of Special Counsel may not enforce laws against private citizens or impose fines and penalties on private citizens.
Third, the CFPB pointed to Congress's 2008 creation of a single-Director Federal Housing Finance Agency. See Housing and Economic Recovery Act of 2008, Pub. L. No. 110-289, § 1101, 122 Stat. 2654, 2662 (codified at 12 U.S.C. §§ 4511-4512). That agency is a contemporary of the CFPB and merely raises the same question we
Fourth, although not a regulatory agency precedent and not an example cited by the CFPB as precedent for its single-Director structure (for good reason), there is at least one other modern statute that created an independent entity headed by one person. It is the now-defunct independent counsel law. But the independent counsel was distinct in numerous meaningful ways from the CFPB Director. Unlike the CFPB Director, the independent counsel exercised only executive power, not rulemaking or adjudicative power. Unlike the CFPB Director, the independent counsel had only a limited jurisdiction for particular defined criminal investigations where the Department of Justice had a conflict of interest. Most importantly, unlike the CFPB Director, the independent counsel was an inferior officer, not a principal officer. The independent counsel was an inferior officer, according to the Supreme Court, because the independent counsel could be supervised and directed to some extent by the Attorney General, who is a principal executive officer accountable to the President.
Given those important distinctions, the independent counsel is not an historical precedent for a single principal officer as the head of an independent regulatory agency. That is no doubt why the CFPB has not relied on the independent counsel as an historical precedent for a single-Director CFPB.
So in terms of historical practice, that's all the CFPB has, and that's not much. As Justice Breyer stated for the Supreme Court when the Court faced a similar (actually, a more robust) historical record in Noel Canning, the few examples offered by the CFPB are "anomalies." 134 S.Ct. at 2567, slip op. at 21. Or as the Supreme Court put it in Free Enterprise Fund when confronting a similar historical record, a "handful of isolated" examples does not count for much when assessed against an otherwise settled historical practice. 561 U.S. at 505, 130 S.Ct. 3138.
To be sure, in "all the laws enacted since 1789, it is always possible that Congress" created some other independent agencies that exercised traditional executive functions but were headed by single Directors. Free Enterprise Fund v. Public Company Accounting Oversight Board, 537 F.3d 667,
In considering precedents for the single-Director structure of the CFPB, one may wonder about all of the executive departments and agencies headed by a single person. Why don't they provide a precedent for the CFPB? Consider for example the Department of Justice, the Department of the Treasury, the Department of State, the Department of Defense, and the EPA, all headed by a single person.
The distinction, of course, is that those departments and agencies are executive agencies. They operate within the Executive Branch chain of command under the supervision and direction of the President, and those agency heads are removable at will by the President. The President therefore is a check on those agencies. Those agencies are accountable to the President. The President in turn is accountable to the people of the United States for the exercise of executive power in the executive agencies. So a single person at the helm of an executive agency is perfectly constitutional.
By contrast, independent agencies operate free of the President's supervision and direction. Therefore, they traditionally have been headed by multiple commissioners or board members who check one another. An independent agency operates as "a body of experts appointed by law and informed by experience." Humphrey's Executor v. United States, 295 U.S. 602, 624, 55 S.Ct. 869, 79 S.Ct. 1611 (1935).
That deeply rooted tradition—namely, that independent agencies are headed by multiple commissioners or board members—has been widely recognized by leading judges, congressional committees, and academics who have studied the issue. Consider the following:
The bottom line is that independent agencies historically have been headed by multiple commissioners or board members. The CFPB's single-Director structure flouts that historical practice. See Who's Watching the Watchmen? Oversight of the Consumer Financial Protection Bureau: Hearing Before the Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs of the House Committee on Oversight and Government Reform, 112th Cong. 77 (2011) (statement of Andrew Pincus) (emphasis added) ("Dodd-Frank sets up for the Bureau an unprecedented structure that consolidates
In short, the CFPB is exceptional in our constitutional structure and unprecedented in our constitutional history.
The CFPB's departure from historical practice matters in this case because historical practice matters to separation of powers analysis. A long line of Supreme Court precedent commands that we heed history and tradition in separation of powers cases not resolved by the constitutional text alone.
All of this, Justice Breyer stated, is "neither new nor controversial." Id., slip op. at 7. Consider the following:
Stated simply, in separation of powers cases not resolved by the constitutional text alone, historical practice helps define the constitutional limits on the Legislative and Executive Branches.
In Free Enterprise Fund, the Supreme Court considered the constitutionality of the new Public Company Accounting Oversight Board created by the 2002 Sarbanes-Oxley Act. Independent agency heads are ordinarily removable for cause by the President. But the new Public Company Accounting Oversight Board's members were removable only for cause by the SEC Commissioners, and the SEC Commissioners in turn were understood to be removable only for cause by the President. In other words, there were two levels of for-cause removal between the President and the Accounting Oversight Board.
The Supreme Court drew a line between one level of for-cause removal, which was the structure of traditional independent agencies, and two levels of for-cause removal, the novel structure of the new Accounting Oversight Board. The Court ruled that the latter was unconstitutional. The Court drew that line in part because historical practice had settled on allowing only one level of for-cause removal between the President and independent agency heads. There were at most "only a handful of isolated" precedents for the new Board. Free Enterprise Fund, 561 U.S. at 505, 130 S.Ct. 3138. That mattered, according to the Court: "Perhaps the most telling indication of the severe constitutional problem with the PCAOB is the lack of historical precedent for this entity." Id. And as the Court noted, there was a difference
In Noel Canning, the Supreme Court, speaking through Justice Breyer, likewise stressed the importance of history when assessing the constitutionality of a novel practice—in that case, Presidential recess appointments in Senate recesses of fewer than 10 days. The Court said: "Long settled and established practice is a consideration of great weight in a proper interpretation of constitutional provisions regulating the relationship between Congress and the President." Noel Canning, 134 S.Ct. at 2559, slip op. at 7. Based on that history, the Supreme Court ruled that a Senate recess of "less than 10 days is presumptively too short" for constitutional purposes. Id. at 2567, slip op. at 21.
Why 10 days? After all, the text of the Constitution does not draw any such 10-day line. The Court reasoned that the historical practice between the President and the Senate had established a 10-day line.
Specifically, the Noel Canning Court stated that it had "not found a single example of a recess appointment made during an intra-session recess that was shorter than 10 days." Id. at 2566, slip op. at 20. Although the Court did find "a few historical examples of recess appointments made during inter-session recesses shorter than 10 days," the Court stated: "But when considered against 200 years of settled practice, we regard these few scattered examples as anomalies." Id. at 2567, slip op. at 20-21.
According to the Court, therefore, allowing recess appointments in Senate recesses of fewer than 10 days would depart from the settled historical practice and alter the relative powers of the President and Senate over appointments. So, too, disallowing recess appointments in Senate recesses of 10 or more days would depart from settled historical practice. In Noel Canning, the Supreme Court relied on that historical practice in defining the constitutional rule.
The history-based analysis of Free Enterprise Fund and Noel Canning underscores the broader jurisprudential principle long applied by the Supreme Court: In
The CFPB's single-Director structure is without meaningful historical precedent. Here, as in Free Enterprise Fund and prior cases, the lack of historical precedent matters. To borrow the words of the Supreme Court in Free Enterprise Fund: "Perhaps the most telling indication of the severe constitutional problem" with the CFPB "is the lack of historical precedent for this entity." 561 U.S. at 505, 130 S.Ct. 3138.
The CFPB's single-Director structure not only departs from historical practice. It also threatens individual liberty more than the traditional multi-member structure does.
The historical practice of structuring independent agencies as multi-member commissions or boards is the historical practice for a reason: It reflects a deep and abiding concern for safeguarding the individual liberty protected by the Constitution.
"The Framers recognized that, in the long term, structural protections against abuse of power were critical to preserving liberty." Bowsher v. Synar, 478 U.S. 714, 730, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986). The "structural principles secured by the separation of powers protect the individual as well." Stern v. Marshall, 564 U.S. 462, 483, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). As Justice Scalia stated: "The purpose of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom." Morrison v. Olson, 487 U.S. 654, 727, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988) (Scalia, J., dissenting).
The basic constitutional concern with independent agencies is that the agencies are unchecked by the President, the official who is accountable to the people and responsible under Article II for the exercise of executive power. Recognizing the broad and unaccountable power wielded by independent agencies, Congress has traditionally required multi-member bodies at the helm of independent agencies. In the absence of Presidential control, the multi-member structure of independent agencies serves as a critical substitute check on the excesses of any individual independent agency head.
But in this new agency, the CFPB, that critical check is absent. And the lack of that traditional safeguard threatens the individual liberty protected by the Constitution's separation of powers.
How does a single-Director independent agency fare worse than multi-member independent agencies in protecting individual liberty? A single-Director independent agency concentrates enforcement, rulemaking, and adjudicative power in one individual. By contrast, multi-member independent agencies do not concentrate all of that power in one individual. The multi-member structure thereby helps to prevent arbitrary decisionmaking and abuse of power, and to protect individual liberty.
The point is simple but profound. In a multi-member independent agency, no single commissioner or board member can affirmatively do much of anything. Before the agency can infringe your liberty in some way—for example, by enforcing a law against you or by issuing a rule that affects your liberty or property—a majority of commissioners must agree. As a former Chair of the Federal Trade Commission
In addition, unlike single-Director independent agencies, multi-member independent agencies "can foster more deliberative decision making." Kirti Datla & Richard L. Revesz, Deconstructing Independent Agencies (and Executive Agencies), 98 Cornell L. Rev. 769, 794 (2013). Multi-member independent agencies benefit from diverse perspectives and different points of view among the commissioners and board members.
As compared to a single-Director independent agency structure, a multi-member independent agency structure—and its inherent requirement for compromise and consensus—will tend to lead to decisions that are not as extreme, idiosyncratic, or otherwise off the rails. Cf. Stephen M. Bainbridge, Why a Board? Group Decisionmaking in Corporate Governance, 55 Vand. L. Rev. 1, 12-19 (2002). A multi-member independent agency can go only as far as the middle vote is willing to go. Conversely, under a single-Director structure, an agency's policy goals "will be subject to the whims and idiosyncratic views of a single individual." Joshua D. Wright, The Antitrust/Consumer Protection Paradox: Two Policies at War with Each Other, 121 Yale L.J. 2216, 2260 (2012); cf. Recent Legislation, Dodd-Frank Act Creates the Consumer Financial Protection Bureau, 124 Harv. L. Rev. 2123, 2128 (2011) (multi-member commission structure "reduces the variance of policy and improves accuracy through aggregation"); Michael B. Rappaport, Essay, Replacing Independent Counsels with Congressional
Relatedly, as compared to a single-Director independent agency, a multi-member independent agency (particularly when bipartisan) supplies "a built-in monitoring system for interests on both sides because that type of body is more likely to produce a dissent if the agency goes too far in one direction." Rachel E. Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 Tex. L. Rev. 15, 41 (2010). A dissent, in turn, can serve "as a `fire alarm' that alerts Congress and the public at large that the agency's decision might merit closer scrutiny." Id.; see also Dodd-Frank Act Creates the Consumer Financial Protection Bureau, 124 Harv. L. Rev. at 2128 (the "presence of dissenters" in agency proceedings "provides new information and forces the proponent to articulate a coherent rationale, thus acting as a constraining force").
Moreover, multi-member independent agencies are better structured than single-Director independent agencies to guard against "capture" of—that is, undue influence over—independent agencies by regulated entities or interest groups, for example. As Elizabeth Warren noted in her original proposal for a multi-member consumer protection agency: "With every agency, the fear of regulatory capture is ever-present." Elizabeth Warren, Unsafe at Any Rate: If It's Good Enough for Microwaves, It's Good Enough for Mortgages. Why We Need a Financial Product Safety Commission, Democracy, Summer 2007, at 8, 18. Capture can infringe individual liberty because capture can prevent a neutral, impartial agency assessment of what rules to issue or what enforcement actions to undertake or how to resolve adjudications. In a multi-member agency, however, the capturing parties "must capture a majority of the membership rather than just one individual." Lisa Schultz Bressman & Robert B. Thompson, The Future of Agency Independence, 63 Vand. L. Rev. 599, 611 (2010); see also ROBERT E. CUSHMAN, THE INDEPENDENT REGULATORY COMMISSIONS 153 (1941) (noting, in reference to Federal Reserve Act of 1913, that it "seemed easier to protect a board from political control than to protect a single appointed official"); Barkow, Insulating Agencies, 89 Tex. L. Rev. at 38 ("[O]nly one person at the apex can also mean that the agency is more easily captured."); Robinson, On Reorganizing the Independent Regulatory Agencies, 57 Va. L. Rev. at 962 ("[T]he single administrator may be more vulnerable" to interest group pressures "because he provides a sharper focus for the concentration of special interest power and influence.").
In short, when an independent agency is structured as a multi-member agency rather than as a single-Director agency, the agency can better protect individual liberty because it can better prevent arbitrary
Notably, the multi-member structure of independent agencies is not an accident. On the contrary, Congress has traditionally designed independent agencies as multi-member bodies in order to protect liberty and prevent arbitrary decisionmaking by a single unaccountable Director.
As Franklin Roosevelt's Administration explained in its comprehensive study of independent agencies, the "popular belief that important rule-making functions ought to be performed by a group rather than by a single officer, by a commission rather than by a department head," was a reason "for the establishment of independent regulatory agencies." THE PRESIDENT'S COMMITTEE ON ADMINISTRATIVE MANAGEMENT, REPORT OF THE COMMITTEE WITH STUDIES OF ADMINISTRATIVE MANAGEMENT IN THE FEDERAL GOVERNMENT 216 (1937). In a leading study of independent commissions, a member of the Roosevelt Administration analyzed the creation of the Federal Trade Commission and explained: "The two ideas, a commission and independence for the commission, were inextricably bound together. At no point was it proposed that a commission ought to be set up unless it be independent or that an independent officer should be created rather than a commission." ROBERT E. CUSHMAN, THE INDEPENDENT REGULATORY COMMISSIONS 188 (1941) (emphasis added).
Senator Newlands, the sponsor of the legislation creating the Federal Trade Commission, emphasized the need for a commission rather than a single Director: "If only powers of investigation and publicity are given a single-headed organization, like the Bureau of Corporations, might be the best for the work; but if judgment and discretion are to be exercised, or if we have in contemplation the exercise of any corrective power hereafter, or if the broad ends above outlined are to be attained, it seems to me that a commission is required." 51 Cong. Rec. 11,092 (1914).
In Humphrey's Executor, the Supreme Court recognized that Congress intended independent agencies to be multi-member bodies. The Court repeatedly noted that the Federal Trade Commission is "a body of experts." Humphrey's Executor v. United States, 295 U.S. 602, 624, 55 S.Ct. 869, 79 S.Ct. 1611 (1935). The Court stated that the nature and functions of the Commission evinced Congress's "intent to create a body of experts who shall gain experience by length of service—a body which shall be independent of executive authority, except in its selection, and free to exercise its judgment without the leave or hindrance of any other official or any department of the government." Id. at 625-26, 55 S.Ct. 869 (first emphasis added).
In short, Congress structured independent agencies as multi-member agencies for good reason—namely, to safeguard individual liberty from the excesses of a
When examining the relevant history, we can see that the original design, common understanding, and consistent historical practice of independent agencies as multi-member bodies reflect the larger values of the Constitution. The Constitution as a whole embodies the bedrock principle that dividing power among multiple entities and persons helps protect individual liberty. The Framers created a federal system with the national power divided among three branches. The Framers "viewed the principle of separation of powers as the absolutely central guarantee of a just Government." Morrison v. Olson, 487 U.S. 654, 697, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988) (Scalia, J., dissenting).
The principle of checks and balances influenced how the Framers allocated power within the three national branches. For example, the Framers divided the Legislative Branch into two houses, each with multiple members. No one person operates as Legislator in Chief. Rather, 535 Members of Congress do so, divided into two Houses. Likewise, the Framers established "one supreme Court" composed of multiple "Judges" rather than a single judge. No one person operates as the Supreme Justice. Rather, the Court consists of one Chief Justice and several Associate Justices, all of whom have equal votes on cases.
Of course, the one exception to the Constitution's division of power among multiple parties within the branches is the President, who is the lone head of the entire Executive Branch. But the President is the exception that proves the rule. For starters, the Framers were concerned that dividing the executive power among multiple individuals would render the Executive Branch too weak as compared to the more formidable Legislative Branch. See THE FEDERALIST No. 48 (Madison) (It is "against the enterprising ambition" of the Legislative Branch "that the people ought to indulge all their jealousy and exhaust all their precautions. The legislative department derives a superiority in our governments. . . ."). The Framers sought "[e]nergy in the executive." THE FEDERALIST No. 70 (Hamilton).
At the same time, the Framers certainly recognized the risk that a single President could lead to tyranny or arbitrary decisionmaking. To mitigate the risk to liberty from a single President, the Framers ensured that the President had "a due dependence on the people." Id. The President is nationally elected. In choosing the President, "the whole Nation has a part, making him the focus of public hopes and expectations." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 653, 72 S.Ct. 863, 96 S.Ct. 1153 (1952) (Jackson, J., concurring). Presidential candidates are put through the wringer precisely because of the power they may someday wield. In other words, the Framers concentrated executive power in a single President on the condition that the President would be nationally elected and nationally accountable.
The President is therefore the exception to the ordinary constitutional practice of dividing power among multiple entities and persons. Apart from the President, the Constitution reflects the basic commonsense principle that multi-member bodies—the House, the Senate, the Supreme Court—do better than single-member bodies in avoiding arbitrary decisionmaking and abuses of power, and thereby protecting individual liberty.
That background constitutional principle buttresses the conclusion that a single-Director independent agency lies outside
Justice Kennedy has stated: "Liberty is always at stake when one or more of the branches seek to transgress the separation of powers." Clinton v. City of New York, 524 U.S. 417, 450, 118 S.Ct. 2091, 141 L.Ed.2d 393 (1998) (Kennedy, J., concurring). In this case, the CFPB's novel single-Director structure departs from history, transgresses the separation of powers, and threatens individual liberty.
The single-Director structure of the CFPB not only departs from history and threatens individual liberty. It also diminishes the President's power to exercise influence over the CFPB, as compared to the President's power to exercise influence over traditional multi-member independent agencies. That additional diminution of Presidential authority exacerbates the Article II problem posed by the single-Director CFPB.
In traditional multi-member agencies, the President may designate the chair of the agency, and the President may remove a chair at will from the chair position. (Of course, the President may not remove that official from the commission or board altogether, only from the position as chair.) By contrast, the CFPB has only one Director, and the President may not designate a new Director until the former Director leaves office or the Director's term expires. That structure diminishes the President's power to influence the direction of the CFPB, as compared to the President's power to influence the direction of traditional multi-member independent agencies.
That diminution of Presidential power runs afoul of the Article II principle articulated by the Supreme Court in Free Enterprise Fund. Indeed, this case involves a greater diminution of Presidential power than occurred in Free Enterprise Fund.
As the Supreme Court stated in Free Enterprise Fund, the "landmark case of Myers v. United States reaffirmed the principle that Article II confers on the President the general administrative control of those executing the laws." Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 492-93, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010). In other words, when it comes to the "responsibility to take care that the laws be faithfully executed," Article II of the Constitution means that the "buck stops with the President." Id. at 493, 130 S.Ct. 3138. At the same time, the Free Enterprise Fund Court acknowledged that the general rule of Presidential removal was cabined by the Court's decision in Humphrey's Executor.
But as the Supreme Court indicated in Free Enterprise Fund, an independent agency's structure violates Article II when it is not historically rooted and when it causes an additional diminution of Presidential control beyond that caused by a traditional independent agency. See id. at 501, 130 S.Ct. 3138 ("We deal with the unusual situation, never before addressed
The CFPB's single-Director structure contravenes that diminution principle. As a result of the CFPB's novel single-Director structure and the five-year fixed term for the Director, a President may be stuck for years—or even for his or her entire four-year term—with a single Director who was appointed by a prior President and who has different policy views.
Nothing comparable happens in traditional multi-member independent agencies. Rather, the traditional multi-member structure ordinarily allows the current President to exercise some influence over the agency through Presidential appointment. That is because the President may designate agency chairs and may remove agency chairs at will from their positions as chairs.
The power to designate and remove chairs at will is important because, by statute, the "chairs of multimember agencies have been granted budget, personnel, and agenda control." Kirti Datla & Richard L. Revesz, Deconstructing Independent Agencies (and Executive Agencies), 98 Cornell L. Rev. 769, 818 (2013). "In many agencies, the chair has the right to appoint staff directly and is the public voice of the agency. These powers allow the chair to exercise significant control over the agency's agenda." Rachel E. Barkow, Insulating Agencies: Avoiding Capture Through Institutional Design, 89 Tex. L. Rev. 15, 39 (2010).
Professor Revesz is one of the Nation's leading scholars of the administrative state. He and Kirti Datla have succinctly summarized the President's authority with respect to chairs:
Datla & Revesz, Deconstructing Independent Agencies, 98 Cornell L. Rev. at 819 (internal quotation marks omitted) (emphases added); see also Glen O. Robinson, Independent Agencies: Form and Substance in Executive Prerogative, 1988 Duke L.J. 238, 245 n.24 (1988) ("It is important to note that since Humphrey's Executor the President generally has been
To be sure, the chair alone ordinarily may not affirmatively issue rules, initiate enforcement actions, or adjudicate disputes. But the chair both controls the agenda and may prevent certain actions from occurring. So the President's ability to designate a chair is valuable, even in circumstances where the agency as a whole continues to be controlled by commissioners or board members who might oppose the President's views.
By exercising their power to appoint chairs of the major multi-member independent agencies, Presidents may gain some control over the direction of those agencies within days of taking office at the start of their first terms. For example, President Trump replaced the chairs of the FTC, FCC, SEC, and NLRB within one week of taking office in January 2017. President Obama did the same by March 2009.
But a President has no such power when it comes to the single Director of the CFPB, who serves a fixed five-year term. Unlike with the FTC, FCC, SEC, and NLRB, for example, the President was not able to designate a new Director of the CFPB in January 2017.
That problem will only grow worse for the next few Presidents. The most recent CFPB Director left office in November 2017. Assuming for present purposes that a new Director is appointed in 2018 for a five-year term, that Director may serve until 2023—several years after the 2020 election. The President who is elected (or re-elected) in 2020 will have no power to remove that Director until 2023, some two or three years into that Presidential term. A new Director then will be appointed in 2023. That Director could serve until 2028—nearly the entire term of the President elected in 2024. Another new Director may be appointed in 2028. That Director could serve until 2033, meaning for the entirety of the term of the President elected in 2028.
Those very realistic scenarios expose the CFPB's flagrant disregard of constitutional text, history, structure, and precedent (not to mention, common sense). And those scenarios convincingly demonstrate that the single-Director CFPB, with its fixed five-year Director term, causes a diminution of Presidential power greater than the diminution that occurs in traditional multi-member independent agencies.
There is more. In a multi-member agency, the commissioners or board members other than the chair serve staggered terms and are replaced by the President as their terms expire. A tradition has developed by which some commissioners or board members of the opposite party resign from independent agencies when a new President takes office. See Datla & Revesz, Deconstructing Independent Agencies, 98 Cornell L. Rev. at 820-21. Even apart from that tradition, the staggered terms mean that a President will have ever-increasing influence (through appointments) over an independent agency during the course of that President's term. That does not occur with the single-Director CFPB. Until the Director's term expires, the new President has zero influence through appointment, and the zero remains zero until the Director's term expires. Although this line of reasoning "may be criticized as elementary arithmetical logic," some influence exceeds zero influence. Free Enterprise Fund, 561 U.S. at 501, 130 S.Ct. 3138.
This is a much starker case of unconstitutionality than Free Enterprise Fund. In Free Enterprise Fund, the second for-cause
Here, by contrast, Presidents will be stuck for years at a time with CFPB Directors appointed by prior Presidents. This case therefore involves a substantial additional diminution of Presidential authority beyond the diminution that occurs in a traditional independent agency. The additional diminution exacerbates the Article II problem posed by the single-Director CFPB.
The CFPB says that a single head of an independent agency might be more responsive on an ongoing basis to the President than multiple heads of an independent agency are, thereby mitigating the Article II concern with a single-Director independent agency. That argument is wrong, both as a matter of theory and as a matter of fact.
To begin with, whether headed by one, three, or five members, an independent agency's heads are not removable at will by the President. With independent agencies, the President is limited (after designation of the chair and appointment of new members) in essence to indirect cajoling. Cf. Elena Kagan, Presidential Administration, 114 Harv. L. Rev. 2245, 2323 (2001) ("[A] for-cause removal provision would buy little substantive independence if the President, though unable to fire an official, could command or, if necessary, supplant his every decision.").
Moreover, even assuming that ongoing influence of independent agencies can occur in indirect ways, it is not plausible to say that a President could have more indirect ongoing influence over (i) a single Director who has policy views contrary to the President's than the President has over (ii) a multi-member independent agency headed by a chair who is appointed by the President and shares the same policy views as the President.
In short, given the President's inability to designate a new CFPB Director at the beginning of the Presidency—in contrast to the President's ability to appoint chairs of the FTC, FCC, SEC, and NLRB, for example—the single-Director CFPB structure diminishes the President's power more than the traditional multi-member independent agency does.
The CFPB also says that Congress's creation of the single-Director structure is unlikely to afford Congress any greater influence over the CFPB than Congress has over a multi-member independent agency. Perhaps true, perhaps not. Either way, however, the Supreme Court has stressed that congressional aggrandizement is not a necessary feature of an Article II violation in this context. The Court squarely said as much in Free Enterprise Fund. "Even when a branch does not arrogate power to itself, therefore, it must not impair another in the performance of its constitutional duties." 561 U.S. at 500, 130 S.Ct. 3138. And to take an obvious example of the point, if Congress enacted legislation converting the Department of Justice into an independent agency, there would be no formal congressional aggrandizement. But there is little doubt that such legislation would violate Article II. See Morrison v. Olson, 487 U.S. 654, 695-96, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988).
In considering the Presidential power point, keep in mind that the CFPB repeatedly compares itself to the FTC. That comparison is wrong as a matter of history and liberty, as discussed above. But the comparison is also wrong as a matter of Presidential authority. When the three-judge panel first heard this case in 2016, some of the threats to Presidential power may have appeared theoretical. In 2017, those threats became much more concrete. In January 2017, the President designated new Chairs of the FTC, FCC, SEC, and
In the wake of the CFPB's activities over the past year, the question that the Supreme Court asked in Free Enterprise Fund is right on point: "where, in all this, is the role for oversight by an elected President?" 561 U.S. at 499, 130 S.Ct. 3138. By disabling the President from supervising and directing the Director of the CFPB, the Dodd-Frank Act contravenes the Supreme Court's statement in Free Enterprise Fund: "Congress cannot reduce the Chief Magistrate to a cajoler-in-chief." Id. at 502, 130 S.Ct. 3138.
In sum, the novel single-Director structure of the CFPB diminishes Presidential authority more than the traditional multi-member agencies do. That diminution of Presidential authority exacerbates the Article II problem with the single-Director CFPB.
The CFPB's departure from historical practice, threat to individual liberty, and diminution of Presidential authority combine to make this an overwhelming case of unconstitutionality.
But suppose that there were no additional diminution of Presidential authority caused by the single-Director structure of the CFPB, beyond that which occurs with traditional multi-member independent agencies. Would the single-Director structure still be unconstitutional? The answer is yes.
Neither Humphrey's Executor nor any later case has granted Congress a free pass, without boundaries, to create independent agencies that depart from history and threaten individual liberty. Humphrey's Executor is not a blank check for Congress. Humphrey's Executor does not mean that anything goes. In that respect, keep in mind (in case I have not mentioned it enough already) that the Constitution's separation of powers is not solely or even primarily concerned with preserving the powers of the branches. The separation of powers is primarily designed to protect individual liberty.
As I have explained, the single-Director CFPB departs from settled historical practice and threatens individual liberty far more than a multi-member independent agency does. The single-Director CFPB therefore poses a constitutional problem even if (counter-factually) it does not occasion any additional diminution of Presidential power beyond that caused by traditional multi-member independent agencies.
Notwithstanding all of the above, the CFPB argues that, as a matter of vertical stare decisis, this case is controlled by (i) Humphrey's Executor; (ii) Morrison; or (iii) general principles of judicial deference. The CFPB is incorrect.
First, the CFPB contends that Humphrey's Executor controls this case—in other words, that Humphrey's Executor by its terms upheld all independent agencies, including single-Director independent agencies. That is wrong. In Humphrey's Executor, the Supreme Court did not say (or articulate a principle) that single-Director
After all, Humphrey's representative argued to the Supreme Court that the "nature" of the Federal Trade Commission justified independence from the President: "With the increasing complexity of human activities many situations arise where governmental control can be secured only by the `board' or `commission' form of legislation." Brief for Samuel F. Rathbun, Executor, at 41, Humphrey's Executor v. United States, 295 U.S. 602, 55 S.Ct. 869, 79 S.Ct. 1611 (1935) (citation and internal quotation marks omitted). In its opinion, the Court agreed. The Court noted that the Federal Trade Commission "is to be non-partisan" and, like the Interstate Commerce Commission, be composed of members "called upon to exercise the trained judgment of a body of experts." Humphrey's Executor, 295 U.S. at 624, 55 S.Ct. 869. The Court stated that the nature and functions of the FTC evinced Congress's "intent to create a body of experts who shall gain experience by length of service—a body which shall be independent of executive authority, except in its selection, and free to exercise its judgment without the leave or hindrance of any other official or any department of the government." Id. at 625-26, 55 S.Ct. 869 (emphasis omitted).
The CFPB responds that the Humphrey's Executor Court's multiple references to a "body of experts" were not relevant to the Court's constitutional holding. That is incorrect. The Court repeatedly referenced the Federal Trade Commission's status as a body of experts in concluding that Congress could permissibly insulate the FTC commissioners from Presidential removal. The Court wrote: "The Federal Trade Commission is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid." Id. at 628, 55 S.Ct. 869. "Such a body," according to the Court, "cannot in any proper sense be characterized as an arm or an eye of the executive," and thus such a body can be made independent of the President. Id.
In short, Humphrey's Executor repeatedly emphasized the multi-member structure of the FTC. In doing so, Humphrey's Executor drew (at least implicitly) the same distinction between multi-member agencies and single-Director agencies that I am drawing in this case. At best for the CFPB, Humphrey's Executor leaves open the single-Director question. Humphrey's Executor does not hold that single-Director independent agencies are constitutional.
Moreover, no party in Morrison argued that the Office of the Independent Counsel was unconstitutional because a single person headed it. And it is black-letter law that cases are not precedent for issues that were not raised or decided. See BRYAN A. GARNER ET AL., THE LAW OF JUDICIAL PRECEDENT 46, 84, 226-28 (2016). For that reason, too, it is impossible to rely on the result in Morrison as a binding precedent on the single-Director question.
The CFPB separately argues that the so-called Morrison "test"—as distinct from Morrison's result—dictates a particular conclusion in this case. In Morrison, the Court said that removal restrictions could not be "of such a nature that they impede the President's ability to perform his constitutional duty." Morrison v. Olson, 487 U.S. 654, 691, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988). As relevant here, Morrison and Free Enterprise Fund together mean that Congress may not diminish Presidential control over independent agencies more than the diminution that occurs with traditional multi-member agencies.
As explained above, the single-Director independent agency structure does diminish Presidential authority more than traditional multi-member independent agencies do. So the CFPB flunks the Morrison and Free Enterprise Fund test.
Even if that were not the case, however, the Morrison "test" is not the exclusive way that a novel independent agency structure may violate Article II. Neither Humphrey's Executor nor any later case gives Congress blanket permission to create independent agencies that depart from history and threaten individual liberty.
In that regard, I repeat what I wrote 10 years ago in Free Enterprise Fund:
Free Enterprise Fund v. Public Company Accounting Oversight Board, 537 F.3d 667, 698 (D.C. Cir. 2008) (Kavanaugh, J., dissenting).
Third, in addition to invoking Humphrey's Executor and Morrison, the CFPB and its amici cite various arguments for judicial deference to Congress's choice of a single-Director structure. Those scattershot arguments are all unavailing.
Some speak of the CFPB as a one-off congressional experiment (like the independent counsel law) and suggest that we should let it go as a matter of judicial deference to Congress. But even apart from the fundamental point that our job as judges is to enforce the law, not abdicate to the political branches, cf. Boumediene v. Bush, 553 U.S. 723, 765-66, 128 S.Ct. 2229, 171 L.Ed.2d 41 (2008), we cannot think of this as a one-off case because we could not cabin the consequences in any principled manner if we were to uphold the CFPB's single-Director structure. As the Supreme Court has warned: "Slight encroachments create new boundaries from which legions of power can seek new territory to capture." Stern v. Marshall, 564 U.S. 462, 503, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Justice Frankfurter captured it well in his opinion in Youngstown: "The accretion of dangerous power does not come in a day. It does come, however slowly, from the generative force of unchecked disregard of the restrictions that fence in even the most disinterested assertion of authority." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 594, 72 S.Ct. 863, 96 S.Ct. 1153 (1952) (Frankfurter, J., concurring).
That fairly describes what a ruling upholding the CFPB's single-Director structure would mean. As the CFPB acknowledged at oral argument before the three-judge panel, a ruling in its favor would necessarily allow all extant independent agencies to be headed by one person. The CFPB's position, if accepted, would give Congress the green light to convert other heads of independent agencies into single Directors rather than multi-member commissions. A single-Director SEC, with the power to unilaterally impose $500 million penalties? A single-Director FCC, with the power to unilaterally mandate or rescind "net neutrality"? A single-Director NLRB, with the power to unilaterally supervise employer-employee relations nationwide? A single-Director Federal Reserve, with the power to unilaterally set monetary policy for the United States? That's what the CFPB's position would usher in.
"In the past, when faced with novel creations of this sort, the Supreme Court has looked down the slippery slope—and has ordinarily refused to take even a few steps down the hill." Free Enterprise Fund, 537 F.3d at 700 (Kavanaugh, J., dissenting).
More broadly, some suggest that judges should generally defer to Congress's understanding of the Constitution's separation of powers. But that hands-off attitude would flout a long, long line of Supreme Court precedent. See Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 508, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010) (invalidating structure of Public Company Accounting Oversight Board); Boumediene, 553 U.S. at 765-66, 792, 128 S.Ct. 2229 (invalidating provision of Military Commissions Act); Clinton v. City of New York, 524 U.S. 417, 448-49, 118 S.Ct. 2091, 141 L.Ed.2d 393 (1998) (invalidating Line Item Veto Act); Metropolitan Washington Airports Authority v. Citizens for the Abatement of Aircraft Noise, Inc., 501 U.S. 252, 265-77, 111 S.Ct. 2298, 115 L.Ed.2d 236 (1991) (invalidating structure of Metropolitan Washington Airports Authority Board of Review); Bowsher v. Synar, 478 U.S. 714, 733-34, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986) (invalidating Comptroller General's powers under reporting provisions of Balanced Budget and Emergency Deficit Control Act); INS v. Chadha, 462 U.S. 919, 942 n.13, 957-59, 103 S.Ct. 2764, 77 L.Ed.2d 317 (1983) (invalidating legislative veto provision of Immigration and Nationality Act); Buckley v. Valeo, 424 U.S. 1, 134-35, 140, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976) (invalidating structure of Federal Election Commission); Myers v. United States, 272 U.S. 52, 47 S.Ct. 21, 71 S.Ct. 160 (1926) (invalidating provision requiring Senate consent to President's removal of executive officer).
Citing the fact that President Obama signed the Dodd-Frank Act that created the CFPB, some argue that the Executive Branch has somehow waived any objection to this Article II violation. But President George W. Bush signed the Sarbanes-Oxley Act that created the PCAOB. That fact did not deter the Supreme Court in Free Enterprise Fund. The Court firmly declared that "the separation of powers does not depend on the views of individual Presidents, nor on whether the encroached-upon branch approves the encroachment." Free Enterprise Fund, 561 U.S. at 497, 130 S.Ct. 3138. A President cannot "choose to bind his successors by diminishing their powers." Id.
Some argue that the courts need not intervene to address the CFPB's structural flaw because the CFPB is checked by Congress through Congress's oversight power and ultimate control over appropriations. But Congress cannot supervise or direct the Director on an ongoing basis regarding what rules to issue, what enforcement actions to bring (or decline to bring), or how to resolve adjudications.
In sum, the CFPB's single-Director structure departs from settled historical practice, threatens individual liberty, and diminishes the President's Article II authority to exercise the executive power. Applying the Supreme Court's separation of powers precedents, I conclude that the CFPB is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director.
Having concluded that the CFPB is unconstitutionally structured, I reach the question of the appropriate remedy.
In light of this one specific constitutional flaw in the Dodd-Frank Act, must that whole Act be struck down? Or must we strike down at least those statutory provisions creating the CFPB and defining the CFPB's duties and authorities? Or do we more narrowly strike down and sever the for-cause removal provision that is the source of the constitutional problem?
Not surprisingly, PHH wants us, at a minimum, to strike down the CFPB and prevent its continued operation. The United States as amicus curiae agrees with PHH on the merits, but disagrees on the remedy. According to the United States, the Supreme Court's case law requires us to impose the narrower remedy of simply severing the for-cause removal provision. I agree with the United States' reading of the Supreme Court precedent.
In Free Enterprise Fund, the Supreme Court confronted a similar issue with respect to the Public Company Accounting Oversight Board. Having found that Board's structure unconstitutional, would the Court invalidate the agency (or even the whole Sarbanes-Oxley Act) or simply sever the for-cause provision? The Court stated: "Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact." Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 508,
Severability is appropriate, the Free Enterprise Fund Court stated, so long as (i) Congress would have preferred the law with the offending provision severed over no law at all; and (ii) the law with the offending provision severed would remain "fully operative as a law." Id. at 509, 130 S.Ct. 3138. Both requirements are met here.
First, in considering Congress's intent with respect to severability, courts must decide—or often speculate, truth be told—whether Congress would "have preferred what is left of its statute to no statute at all." Ayotte v. Planned Parenthood of Northern New England, 546 U.S. 320, 330, 126 S.Ct. 961, 163 L.Ed.2d 812 (2006); see also Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 685, 107 S.Ct. 1476, 94 L.Ed.2d 661 (1987) (The "unconstitutional provision must be severed unless the statute created in its absence is legislation that Congress would not have enacted."). Importantly, courts need not speculate and can presume that Congress wanted to retain the constitutional remainder of the statute when "Congress has explicitly provided for severance by including a severability clause in the statute." Id. at 686, 107 S.Ct. 1476; see also id. (The "inclusion of such a clause creates a presumption that Congress did not intend the validity of the statute in question to depend on the validity of the constitutionally offensive provision.").
The statute at issue in Free Enterprise Fund had no express severability clause. By contrast, in this case, the Dodd-Frank Act contains an express severability clause that instructs: "If any provision" of the Act "is held to be unconstitutional, the remainder of" the Act "shall not be affected thereby." 12 U.S.C. § 5302.
This case therefore presents an even easier case than Free Enterprise Fund for severability of the for-cause provision. Through its express severability clause, the Dodd-Frank Act itself all but answers the question of presumed congressional intent. It will be the rare case when a court may ignore a severability provision set forth in the text of the relevant statute. See Alaska Airlines, 480 U.S. at 686, 107 S.Ct. 1476. I see no justification for tilting at that windmill in this case.
Second, we also must look at "the balance of the legislation" to assess whether the statute is capable "of functioning" without the offending provisions "in a manner consistent with the intent of Congress." Id. at 684-85, 107 S.Ct. 1476 (emphasis omitted). That prong of the analysis in essence turns on whether the truncated statute is "fully operative as a law." Free Enterprise Fund, 561 U.S. at 509, 130 S.Ct. 3138. To take just one example, in Marbury v. Madison, the Court concluded that Section 13 of the Judiciary Act of 1789 was unconstitutional in part. 5 U.S. (1 Cranch) 137, 179-80, 2 S.Ct. 60 (1803). But the Court did not disturb the remainder of the Judiciary Act. Id. at 179-80.
Here, as in Free Enterprise Fund, the Dodd-Frank Act and its CFPB-related provisions will remain "fully operative as a law" without the for-cause removal restriction. Free Enterprise Fund, 561 U.S. at 509, 130 S.Ct. 3138. Operating without the for-cause removal provision and under the supervision and direction of the President, the CFPB may still "regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws," 12 U.S.C. § 5491(a), much as the Public Company Accounting Oversight Board has continued fulfilling its statutorily authorized mission in the wake
To be sure, one might ask whether, instead of severing the for-cause removal provision, which would make the CFPB an executive agency, we should rewrite and add to the Dodd-Frank Act by restructuring the CFPB as a multi-member independent agency. But doing so would require us to create a variety of new offices, designate one of the offices as chair, and specify various administrative details of the reconstituted agency. In Free Enterprise Fund, the Supreme Court firmly rejected that approach. As the Supreme Court said, all of that "editorial freedom" would take courts far beyond our judicial capacity and proper judicial role. 561 U.S. at 510, 130 S.Ct. 3138. In comparable circumstances, no Supreme Court case has adopted such an approach. We therefore may not do so here. Congress of course remains free, if it wishes, to reconstruct the CFPB as a traditional multi-member independent agency.
In similar circumstances, the Supreme Court in Free Enterprise Fund severed the unconstitutional for-cause provision but did not otherwise disturb the Sarbanes-Oxley Act or the operation of the new Public Company Accounting Oversight Board created by that Act. See id. at 508-10, 130 S.Ct. 3138. Similarly, in a recent case involving the Copyright Royalty Board, we severed the for-cause provision that rendered that Board unconstitutional, but did not otherwise disturb the copyright laws or the operation of the Copyright Royalty Board. See Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board, 684 F.3d 1332, 1340-41 (D.C. Cir. 2012).
In light of the Dodd-Frank Act's express severability clause, and because the Act and the CFPB may function without the CFPB's for-cause removal provision, we must remedy the constitutional violation by severing the for-cause removal provision from the statute. Under that approach, the CFPB would continue to operate, but would do so as an executive agency. The President of the United States would have the power to supervise and direct the Director of the CFPB, and to remove the Director at will at any time.
The CFPB violates Article II of the Constitution because the CFPB is an independent agency that exercises substantial executive power and is headed by a single Director. We should invalidate and sever the for-cause removal provision and hold that the Director of the CFPB may be supervised, directed, and removed at will by the President. I respectfully dissent.
Randolph, Senior Circuit Judge, dissenting:
I entirely agree with Judge Kavanaugh's dissenting opinion.
After the CFPB's enforcement unit filed a Notice of Charges against PHH, an Administrative Law Judge held a nine-day hearing and issued a recommended decision, concluding that petitioners had violated the Real Estate Settlement Procedures Act of 1974. In PHH's administrative appeal, the Director "affirm[ed]" the ALJ's conclusion that PHH had violated that Act.
I believe the ALJ who presided over the hearing was an "inferior Officer" within the meaning of Article II, section 2, clause 2 of the Constitution. That constitutional provision requires "inferior Officers" to be appointed by the President, the "Courts of Law," or the "Heads of Departments." This ALJ was not so appointed. Pursuant to an agreement between the CFPB and the Securities and Exchange Commission, the SEC's Chief Administrative Law Judge assigned him to the case. In addition to the unconstitutional structure of the CFPB, this violation of the Appointments Clause rendered the proceedings against PHH unconstitutional.
This case is indistinguishable from Freytag v. Commissioner of Internal Revenue, 501 U.S. 868, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991). My reasoning is set forth in Landry v. Federal Deposit Insurance Corp., 204 F.3d 1125, 1140-44 (D.C. Cir. 2000) (Randolph, J., concurring in part and concurring in the judgment). There is no need to repeat what I wrote there, The majority opinion in Landry disagreed with my position, but PHH has preserved the issue for judicial review. The CFPB has argued that PHH waived the issue because it did not raise it before the CFPB. But the Freytag petitioners also raised their constitutional objection to the appointment of the special trial judge for the first time on appeal. See Freytag, 501 U.S. at 892-95, 111 S.Ct. 2631 (Scalia, J., concurring). There is no difference between this case and Freytag, except that in light of the majority opinion in Landry it would have been futile for PHH to object, a point that cuts in PHH's favor.
Since the panel decision in this case, several developments have occurred with respect to the Appointments Clause issue. The Tenth Circuit in Bandimere v. SEC, 844 F.3d 1168 (10th Cir. 2016), pet. for cert. pending, No. 17-475 (filed Sept. 29, 2017), disagreed with the majority opinion in Landry and held that the SEC's ALJs are invested with powers that require their appointment as inferior officers under the Appointments Clause. In addition, the Fifth Circuit granted a stay of an FDIC order because the respondent had established a likelihood of success on his claim that the ALJ who presided over his proceeding was an officer who was not properly appointed under the Appointments Clause. Burgess v. FDIC, 871 F.3d 297 (5th Cir. 2017). In so ruling, the Fifth
In the meantime, our court, sitting en banc, split 5 to 5 in Lucia v. SEC, a case in which the panel—relying on Landry -had reached a conclusion in direct conflict with Bandimere. Raymond J. Lucia Cos. v. SEC, 868 F.3d 1021 (D.C. Cir. 2017) (en banc). On June 26, 2017, the equally-divided en banc court issued a per curiam order denying the petition for review.
On November 29, 2017, the Solicitor General, on behalf of the SEC, filed a response to Lucia's certiorari petition. The Solicitor General confessed error and acquiesced in certiorari. That is, the S.G. agreed that the SEC's ALJs are "inferior officers" within the meaning of the Appointments Clause and, as such, were not properly appointed. Brief for the Respondent at 10-19, Lucia v. SEC, No. 17-130 (filed Nov. 29, 2017). On January 12, 2018, the Supreme Court granted certiorari. 2018 WL 386565, ___ U.S. ___, 138 S.Ct. 736, ___ L.Ed.2d ____ (S.Ct. Jan. 12, 2018).
Given this state of affairs, the en bane majority should withhold any order remanding this case to the CFPB until the Supreme Court decides Lucia. Cf. Order, Timbervest, LLC v. SEC, No. 15-1416 (D.C. Cir. Aug. 8, 2017); Order, J.S. Oliver Capital Mgmt. v. SEC, No. 16-72703 (9th Cir. Oct. 25, 2017). As the Court held in Freytag, Appointments Clause violations go "to the validity" of the underlying proceedings. 501 U.S. at 879, 111 S.Ct. 2631. Suppose the Supreme Court agrees with the Solicitor General in Lucia, which seems entirely probable. Then not only the CFPB Director's order, but also all proceedings before the ALJ, including the ALJ's Recommended Decision, would be invalid.
Nevertheless, the majority—relying on the order granting en bane in PHH—remands the case to the CFPB without waiting for the Supreme Court to decide Lucia. Maj. Op. at 83-84. The en bane order stated: "While not otherwise limited, the parties are directed to address" the consequences of a decision that the ALJ in Lucia was an inferior officer. Order, PHH Corp. v. CFPB, No. 15-1177 (D.C. Cir. Feb. 16, 2017) (emphasis added).
Two points about the order are worth noting. The first is that the order limited neither the issues to be argued nor the issues to be decided. The second is that the order embodied the en bane court's judgment that the proper disposition of this case required consideration of the out-come in Lucia. Of course, the posture has changed. At the time of the en banc order, Lucia was pending in this court; now Lucia is pending in the Supreme Court. That difference makes it all the more important that we wait for the Supreme Court's decision.
By contrast, the removal standard for ALJs is quite modest. ALJs can be removed for "good cause," 5 U.S.C. § 7521, which has been interpreted to require that an ALJ "act at all times in a manner that promotes public confidence in [ ] independence, integrity, and impartiality . . . and . . . avoid[s] impropriety and the appearance of impropriety," a standard borrowed from the American Bar Association's Model Code of Judicial Conduct. Long v. Soc. Sec. Admin., 635 F.3d 526, 533 (Fed. Cir. 2011). Accordingly, ALJs have been disciplined or removed for a wide variety of job-related misconduct, such as improperly using the imprimatur of the agency for personal business, Steverson v. Soc. Sec. Admin., 383 Fed.Appx. 939 (Fed. Cir. 2010); lack of productivity in comparison to colleagues, Shapiro v. Soc. Sec. Admin., 800 F.3d 1332, 1334-36 (Fed. Cir. 2015); failure to follow mandatory office procedures, Brennan v. Dept of Health & Human Servs., 787 F.2d 1559, 1561 (Fed. Cir. 1986), as well as for misbehavior not directly connected to official duties, such as domestic violence, Long, 635 F.3d 526. And in contrast to the Court's concern in Free Enterprise Fund about the inability to remove a tax-cheating Board member, an All has been fired for "financial irresponsibility" in failing to repay debts. See McEachern v. Macy, 341 F.2d 895 (4th Cir. 1965).
In this section of the opinion, I am addressing the historical practice of how independent agencies are structured. A separate question is whether Morrison v. Olson constitutes a judicial precedent on the question of whether a single-Director independent regulatory agency is constitutional. The answer to that question is also no, for similar reasons. I will address the Morrison point more fully in Part IV below.
A predecessor Comptroller of the Treasury, established in 1789, likewise was not independent. In Free Enterprise Fund, the Supreme Court definitively explained that the original Comptroller of the Treasury was removable at will by the President. See 561 U.S. at 500 n.6, 130 S.Ct. 3138. The Free Enterprise Fund opinion also addressed the alleged attribution to Madison of "a belief that some executive officers, such as the Comptroller, could be made independent of the President." Id. The Free Enterprise Fund Court explained that "Madison's actual proposal, consistent with his view of the Constitution, was that the Comptroller hold office for a term of `years, unless sooner removed by the President. . . .'" Id. (quoting 1 ANNALS OF CONGRESS 612 (1789)) (emphasis added).
To cabin the effects of Humphrey's Executor on the Presidency, some have proposed reading the standard for-cause removal restrictions in the statutes creating independent agencies to allow for Presidential removal of independent agency heads based on policy differences. But as the Supreme Court recently explained, Humphrey's Executor refuted the idea that "simple disagreement" with an agency head's "policies or priorities could constitute `good cause' for its removal." Free Enterprise Fund, 561 U.S. at 502, 130 S.Ct. 3138. The Free Enterprise Fund Court expressly confirmed that Humphrey's Executor "rejected a removal premised on a lack of agreement on either the policies or the administering of the Federal Trade Commission." Id.
For those reasons, among others, PHH preserves the argument that Humphrey's Executor should be overruled by the Supreme Court. Overruling Humphrey's Executor would not mean the end of the agencies that are now independent. The agencies would instead transform into executive agencies supervised and directed by the President. So the question is not the existence of the agencies; the question is the President's control over the agencies and the resulting accountability of those agencies to the people.
In any event, it is not our job to decide whether to overrule Humphrey's Executor. As a lower court, we must follow Supreme Court precedent, including Humphrey's Executor. But it is emphatically our job to apply Humphrey's Executor in a manner consistent with settled historical practice, the Constitution's protection of individual liberty, and Article II's assignment of executive authority to the President.
That said, the single-Director CFPB would constitute an Article II problem even if the CFPB were subject to the usual appropriations process. The CFPB's exemption from the ordinary appropriations process is at most just "extra icing on" an unconstitutional "cake already frosted." Yates v. United States, ___ U.S. ___, 135 S.Ct. 1074, 1093, slip op. at 6, 191 L.Ed.2d 64 (2015) (Kagan, J., dissenting).
