PHH Corp. v. Consumer Financial Protection Bureau

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 24, 2017 Decided January 31, 2018

No. 15-1177

PHH CORPORATION, ET AL.,

PETITIONERS

v.

CONSUMER FINANCIAL PROTECTION BUREAU,

RESPONDENT

On Petition for Rehearing En Banc

Theodore B. Olson argued the cause for petitioners. With

him on the briefs were Helgi C. Walker, Lucas C. Townsend,

Mitchel H. Kider, David M. Souders, Thomas M. Hefferon, and

William M. Jay.

Andrew J. Pincus, Stephen C.N. Lilley, Matthew A.

Waring, Kate Comerford Todd, and Steven P. Lehotsky were

on the brief for amicus curiae The Chamber of Commerce of

the United States of America in support of petitioners.

David K. Willingham, Michael D. Roth, Jeffrey M.

Hammer, and Kelly L. Perigoe were on the brief for amici

curiae RD Legal Funding, LLC, et al. in support of petitioners.

2

Joseph R. Palmore and Bryan J. Leitch were on the brief

for amici curiae American Bankers Association, et al. in

support of petitioners and vacatur.

David T. Case and Phillip L. Schulman were on the brief

for amicus curiae The National Association of Realtors7 in

support of petitioners and reversal of the June 4, 2015 order of

the Director of the Consumer Financial Protection Bureau.

Jay N. Varon and Jennifer M. Keas were on the brief for

amici curiae American Land Title Association, et al. in support

of petitioners.

Joshua D. Hawley, Attorney General, Office of the

Attorney General for the State of Missouri, and D. John Sauer,

State Solicitor, were on the brief for amici curiae the States of

Missouri, et al. in support of petitioners.

Kirk D. Jensen, Joseph M. Kolar, and Alexander S.

Leonhardt were on the brief for amicus curiae The Consumer

Mortgage Coalition in support of petitioner.

Marc J. Gottridge, Allison M. Wuertz, Ilya Shapiro, and

Thaya Brook Knight were on the brief for amicus curiae The

Cato Institute in support of petitioners.

Brian Melendez was on the brief for amicus curiae ACA

International in support of petitioners.

C. Boyden Gray, Adam R.F. Gustafson, James R. Conde,

Gregory Jacob, Sam Kazman, and Hans Bader were on the

brief for amici curiae State National Bank of Big Spring, et al.

in support of petitioners.

3

Hashim M. Mooppan, Attorney, U.S. Department of

Justice, argued the cause as amicus curiae United States of

America. On the brief were Douglas N. Letter, Mark B. Stern,

Daniel Tenny, and Tara S. Morrissey, Attorneys. Ian H.

Gershengorn, Attorney, entered an appearance.

Lawrence DeMille-Wagman, Senior Litigation Counsel,

Consumer Financial Protection Bureau, argued the cause for

respondent. With him on the brief was John R. Coleman,

Deputy General Counsel.

George Jepsen, Attorney General, Office of the Attorney

General for the State of Connecticut, and John Langmaid,

Assistant Attorney General, were on the brief for The States of

Connecticut, et al. in support of respondent.

Thomas C. Goldstein, Eric Citron, Tejinder Singh, and

Deepak Gupta were on the brief for amici curiae Americans For

Financial Reform, et al. in support of respondent.

Elizabeth B. Wydra, Brianne J. Gorod, and Simon Lazarus

were on the brief for amici curiae Current and Former Members

of Congress in support of respondent.

Scott L. Nelson and Allison M. Zieve were on the brief for

amici curiae Public Citizen, Inc., et al. in support of respondent.

Julie Nepveu was on the brief for amici curiae AARP and

AARP Foundation in support of respondent.

Deepak Gupta was on the brief for amici curiae Financial

Regulation Scholars in support of respondent.

4

Katharine M. Mapes, Jessica R. Bell, and Jeffrey M. Bayne

were on the brief for amici curiae Separation of Powers Scholars

in support of Consumer Financial Protection Bureau.

Before: GARLAND *, Chief Judge, HENDERSON, ROGERS,

TATEL, BROWN ∗∗, GRIFFITH, KAVANAUGH, SRINIVASAN,

MILLETT, PILLARD, WILKINS, and KATSAS *, Circuit Judges and

RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge PILLARD.

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 Circuit Judge KAVANAUGH,

with whom Senior Circuit Judge RANDOLPH joins.

Dissenting opinion filed by Senior Circuit Judge

RANDOLPH.

*

Chief Judge Garland and Circuit Judge Katsas did not participate in

this matter.

∗∗

Circuit Judge Brown was a member of the en banc court but retired

before issuance of this opinion.

5

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 (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.

Introduction

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

6

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 regulations and to give them a chance to work.

Congress determined that, to prevent problems that had

handicapped past regulators, the new agency needed a degree

of independence. Congress gave the CFPB a single Director

protected against removal by the President without cause. That

design choice is challenged here as an unconstitutional

impediment to the President’s power.

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; 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

7

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 (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 (1926), and a joint

resolution of Congress in Bowsher v. Synar, 478 U.S. 714

(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 (1958); see also

Morrison v. Olson, 487 U.S. 654, 687, 691 n.30 (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

8

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 unfair methods of

competition in commerce. The FTC, “charged with the

enforcement of no policy except the policy of the law,”

Humphrey’s Executor, 295 U.S. at 624, could be independent

consistent with the President’s duty to take care that the law be

faithfully executed. The CFPB’s focus on the transparency and

fairness of financial products geared toward individuals and

families falls squarely within the types of functions granted

independence in precedent and history. Neither PHH nor our

dissenting colleagues have suggested otherwise.

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.

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.

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, through Humphrey’s Executor, 295 U.S.

602, Wiener, 357 U.S. 349, Bowsher, 478 U.S. 714, Morrison,

9

487 U.S. 654, and Free Enterprise Fund, 561 U.S. 477. 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;

see Wiener, 357 U.S. at 356; Humphrey’s Executor, 295 U.S.

at 631. 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.

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

multi-member FTC but not the sole-headed CFPB. The

distinction is constitutionally required, PHH contends, because

“multi-member 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 practice, constitutional principle, or the

logic of presidential removal power. The relevance of “internal

checks” as a substitute for at-will removal by the President is

no part of the removal-power doctrine, which focuses on

10

executive control and accountability to the public, not the

competing virtues of various internal agency design choices.

Congress and the President have historically countenanced

sole-headed financial regulatory bodies. And the Supreme

Court has upheld Congress’s assignment of even unmistakably

executive responsibilities—criminal investigation and

prosecution—to a sole officer protected from removal at the

President’s will. Morrison, 487 U.S. at 686-96.

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.

Background

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

11

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 and six other federal agencies, virtually all of which

were also independent. These laws seek to curb fraud and

deceit and to promote transparency and best practices in

consumer loans, home mortgages, personal credit cards, and

retail banking. See 12 U.S.C. § 5481(12). The CFPB is

12

charged “to implement and, where applicable, enforce Federal

consumer financial law consistently for the purpose of ensuring

that all consumers have access to markets for consumer

financial products and services” that “are fair, transparent, and

competitive.” Id. § 5511(a). Additionally, the CFPB has

authority to prohibit any “unfair, deceptive, or abusive act or

practice under Federal law in connection with any transaction

with a consumer for a consumer financial product or service,

or the offering of a consumer financial product or service.” Id.

§ 5531(a).

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 multi-member 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. 1 12

1

Congressional inaction or delayed confirmation would not

necessarily extend the period of for-cause protection. Oral Arg. Tr.

48-49. Cf. Swan v. Clinton, 100 F.3d 973, 988 (D.C. Cir. 1996)

(“[E]ven if the [National Credit Union Administration] statute were

interpreted to grant removal protection to Board members during

their appointed terms[,] . . . this protection does not extend to

holdover members.”).

13

U.S.C. §§ 5491(c)(1)-(2). The President may remove the

Director “for inefficiency, neglect of duty, or malfeasance in

office,” i.e., for cause. Id. § 5491(c)(3). By providing the

Director with a fixed term and for-cause protection, Congress

sought to promote stability and confidence in the country’s

financial system.

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).

The Real Estate Settlement Procedures Act of 1974

(RESPA) is one of the eighteen preexisting statutes the CFPB

now administers. See 12 U.S.C. §§ 2601-2617. RESPA aims

at, among other things, “the elimination of kickbacks or referral

fees that tend to increase unnecessarily the costs of certain [real

estate] settlement services.” Id. § 2601(b)(2). To that end,

RESPA’s Section 8(a) prohibits giving or accepting “any fee,

14

kickback, or thing of value pursuant to any agreement or

understanding” to refer business involving a “real estate

settlement service.” Id. § 2607(a). The term “thing of value”

is “broadly defined” and includes “the opportunity to

participate in a money-making program.” 12 C.F.R.

§ 1024.14(d). Another provision of RESPA, Section 8(c)(2),

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 facilities

actually furnished or for services actually performed.” 12

U.S.C. § 2607(c).

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

15

[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 services that Atrium provided, PHH

and Atrium could still be liable under the Director’s reading of

RESPA insofar as their tying arrangement funneled valuable

business to Atrium that it would not have garnered through

open competition. The Director also held that RESPA’s three-

year statute of limitations does not apply to the agency’s

administrative enforcement proceedings (only to “actions” in

court) and that RESPA violations accrue not at the moment a

loan closes with a tying arrangement in place, but each time

monthly premiums are paid out pursuant to such a loan

16

agreement. Id. at 11, 22. Those interpretations raised the

disgorgement amount to more than $109 million.

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 for-cause 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

17

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, __ S. Ct. __, 2018 WL

386565 (Jan. 12, 2018).

Today, we hold that federal law providing the Director of

the CFPB with a five-year term in office, subject to removal by

the President only for “inefficiency, neglect of duty, or

malfeasance in office,” is consistent with the President’s

constitutional authority.

Analysis

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

18

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

19

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.

I. Precedent and History Establish the

Constitutionality of the CFPB

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. 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 faithfully executed.” U.S. Const. art. II, § 1, cl. 1; id. § 3.

The Court’s decisions, from Myers to Free Enterprise Fund,

also acknowledge the legitimacy, in appropriate circumstances,

of an agency’s independence from the President’s removal of

its leadership without cause. And history teaches that financial

regulators are exemplars of appropriate and necessary

independence. Congress’s decision to afford removal

protection to the CFPB Director puts the agency squarely

within the bounds of that precedent and history, fully consonant

with the Constitution.

A. Precedent

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

20

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. 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 for-cause 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

21

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.

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. 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. 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 official who “partakes strongly of the judicial character

. . . should not hold . . . office at the pleasure of the Executive

branch of the Government.” 5 The Writings of James Madison

413 (Hunt ed., 1904); see Humphrey’s Executor, 295 U.S. at

631. Because Congress may require quasi-legislative and

quasi-judicial administrators “to act in discharge of their duties

independently of executive control,” it may “forbid their

removal except for cause” during a fixed term in office. Id. at

629.

A generation later, an again-unanimous Court in Wiener v.

United States, 357 U.S. at 352-55, 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

22

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.

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. 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. 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; see

Humphrey’s Executor, 295 U.S. at 631 (“Whether the power of

the President to remove an officer shall prevail[,] . . . precluding

23

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. 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. 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 for-

cause removal provision, that “Congress did not wish to have

hang over the Commission the Damocles’ sword of removal by

the President for no reason other than that he preferred to have

on that Commission men of his own choosing.” Id. at 356.

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. 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. 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

24

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. 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.

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. 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). 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. 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

25

establish the necessary independence of the office.” Id. at 693.

To be sure, the office of independent counsel was potent: It

was empowered to prosecute high-ranking 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 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.

The Court noted that the President retained “ample authority”

to review the independent counsel’s performance and that,

because the independent counsel was removable by the

Attorney General for good cause, the President’s removal

power had not been “completely stripped.” Id. at 692.

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; Myers, 272 U.S. at 161, 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. 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 [at-will] removal power” that

26

otherwise “would ‘threaten the independence of the [agency].’”

Morrison, 487 U.S. at 690, 688; see Wiener, 357 U.S. at 356;

Humphrey’s Executor, 295 U.S. at 629-30.

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. 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.

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 (quoting Humphrey’s

Executor, 295 U.S. at 628-29). 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. The

problem was not congressional encroachment, but damage to

27

the President’s ability to supervise executive officers: “‘Even

when a branch does not arrogate power to itself,’ . . . it must

not ‘impair another in the performance of its constitutional

duties.’” Id. at 500 (quoting Loving v. United States, 517 U.S.

748, 757 (1996)). “The President cannot ‘take Care that the

Laws be faithfully executed’ if he cannot oversee the

faithfulness of the officers who execute them.” 561 U.S. at

484. Free Enterprise Fund distinguishes ordinary for-cause

requirements from abnormally constraining restrictions that

impair the President’s constitutional oversight prerogative.

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. As in Morrison,

the Court focused its inquiry on whether the President retains

“power to oversee executive officers through removal.” Id. at

492. 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. 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.

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; 15 U.S.C.

§ 7217(d)(3). On top of that, the SEC’s Commissioners—

tasked with removing such delinquent Board members—were

28

themselves protected from presidential removal except for

inefficiency, neglect of duty, or malfeasance in office. Free

Enterprise Fund, 561 U.S. at 487.

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. 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. 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. 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. The Court’s

solution to that problem was to retain one level of for-cause

protection and remove the other. Id. at 514. 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.

The traditional for-cause protection enjoyed by the SEC

Commissioners—and the officials in Morrison, Wiener, and

Humphrey’s Executor—remains untouched by and

constitutionally valid under Free Enterprise Fund. When an

official is so protected, the President may not remove her or

him for personal or partisan reasons, or for no reason at all.

But, because such a cause requirement does not prevent

29

removal by reason of incompetence, neglect of duty, or

malfeasance, it may apply without impairing the President’s

ability to assure the faithful execution of the law. See

Morrison, 487 U.S. at 691-92; Free Enterprise Fund, 561 U.S.

at 495-96.

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. 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 (quoting

Humphrey’s Executor, 295 U.S. at 626); see Wiener, 357 U.S.

at 351-52. 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

(quoting Myers, 272 U.S. at 117). 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

30

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

(quoting Humphrey’s Executor, 295 U.S. at 619; Morrison, 487

U.S. at 693; Wiener, 357 U.S. at 356).

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. 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. The question for us, then, is whether the requirement

that the President have cause before removing a Director of the

CFPB unconstitutionally interferes with the President’s Article

II powers.

B. History

“The subject [of the President’s removal authority] was

not discussed in the Constitutional Convention.” Myers, 272

U.S. at 109-10 (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.

31

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

32

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 “reasons” for

removing him. 12 U.S.C. § 2. Whatever the type of reason it

requires, the statute without question constrains the

presidential removal power. The U.S. Code accordingly

classifies the Comptroller of the Currency as an “independent

regulatory agency” along with all the other removal-

constrained independent agencies. 44 U.S.C. § 3502(5); see

also 12 U.S.C. § 1(b)(1) (prohibiting the Treasury Secretary

from interfering with the Comptroller); 2 Op. O.L.C. 129

(1978) (concluding that the Comptroller has independent

litigation authority).

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,

33

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.

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

34

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.

C. Application to the CFPB

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 chose a constitutionally acceptable means

to protect it. First, the removal restriction here is wholly

ordinary—the verbatim protection approved by the Supreme

Court back in 1935 in Humphrey’s Executor and reaffirmed

ever since. The provision here neither adds layers of protection

nor arrogates to Congress any role in removing an errant

official. Second, the CFPB Director’s autonomy is consistent

with a longstanding tradition of independence for financial

regulators, and squarely supported by established precedent.

The CFPB’s budgetary independence, too, is traditional among

financial regulators, including in combination with typical

removal constraints. PHH’s constitutional challenge flies in

the face of the Supreme Court’s removal-power cases, and calls

into question the structure of a host of independent agencies

that make up the fabric of the administrative state.

35

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.

1. For-Cause Removal

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

36

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; Wiener, 357 U.S. at 356;

Humphrey’s Executor, 295 U.S. at 629-30; see also Free

Enterprise Fund, 561 U.S. at 509 (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”).

In analyzing where Congress may deploy such for-cause

protection, the Supreme Court looks to “the character of the

office” and the “proper functioning of the agency or official.”

Morrison, 487 U.S. at 687, 691 n.30; see Wiener, 357 U.S. at

353 (emphasizing the “nature of the function” of the agency);

Humphrey’s Executor, 295 U.S. at 631 (pointing to the

“character of the office”). As seen through that lens, the

CFPB’s function is remarkably similar to that of the FTC, a

consumer protection agency that has operated for more than a

century with the identical for-cause protection, approved by a

unanimous Supreme Court. Compare 12 U.S.C. §§ 5511-12,

5532, 5534, 5562-64, with Federal Trade Commission Act of

1914, 15 U.S.C. §§ 45-46; see Free Enterprise Fund, 561 U.S.

477; Humphrey’s Executor, 295 U.S. 602.

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

37

of clear statutory text so directing. See Free Enterprise Fund,

561 U.S. at 487 (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 (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”).

38

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 (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,

observing that Humphrey’s Executor “stands generally for the

proposition that Congress may, without violating Article II,

authorize an independent agency to bring civil law enforcement

actions where the President’s removal power was restricted.”

Blinder, Robinson, & Co., 855 F.2d at 682. And, in FEC v.

NRA Political Victory Fund, this court noted that Humphrey’s

Executor and Morrison confirmed the constitutionality of the

Federal Election Commission, which is “patterned on the

classic independent regulatory agency” and can both make

rules and order retrospective remedies. 6 F.3d 821, 826 (D.C.

Cir. 1993); see also 52 U.S.C. §§ 30107(a)(8), 30109 (setting

out the FEC’s enforcement power).

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. Within less than a decade,

however, the Supreme Court unanimously rejected that dicta in

Humphrey’s Executor, 295 U.S. at 628-29, and unanimously

did so again in Wiener, 357 U.S. at 351-52. 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

39

which PHH principally relies. See, e.g, Morrison, 487 U.S. at

686-87; see also Bowsher, 478 U.S. at 724-25; Free Enterprise

Fund, 561 U.S. at 483, 493, 502. Law and history put the

CFPB, led by a Director shielded from removal without cause,

on safe ground.

2. Budgetary Independence

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

40

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).

The CFPB’s independent funding source has no

constitutionally salient effect on the President’s power. The

Supreme Court has recently dismissed issues including “who

controls the agency’s budget requests and funding” as

“bureaucratic minutiae”—questions of institutional design

outside the ambit of the separation-of-powers inquiry. Free

Enterprise Fund, 561 U.S. at 499-500. The fact that “the

director need not ask the President for help negotiating

appropriations from Congress,” Pet’rs’ Br. 27, is neither

distinctive nor impermissible. Just as financial regulators

ordinarily are independent of the congressional appropriations

process, so, too, they typically are exempt from presidential

budgetary oversight. See, e.g., 12 U.S.C. § 250. That ensures

the measure of permissible independence instituted by for-

cause protection is not effectively eroded by virtue of

budgetary dependence on the President. The requirement that

the CFPB seek congressional approval for funding beyond the

statutory cap makes it more constrained in this regard than

other financial regulators.

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, 135 S.

Ct. 1225 (2015)). But that combination is not novel. See, e.g.,

12 U.S.C. § 243 (Federal Reserve’s budgetary independence);

41

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.

3. Multi-Member vs. Single-Director

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

42

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. 2

PHH’s emphasis on the CFPB’s leadership by a Director

rather than a board defies historical practice as well. The

Comptroller of the Currency, for example—an independent

federal financial regulator with statutory removal protection

dating back 150 years—is also headed by a single director,

2

The independent counsel’s inferior-officer status is not ground for

distinguishing Morrison from this case. The Appointments Clause

separately identifies the permissible appointing mechanisms for principal

and inferior officers, U.S. Const. art. II, § 2, cl. 2, because of such officers’

differing routes of accountability to the President: Principal officers are

directly accountable, while inferior officers are indirectly accountable

through the principal officer to whom they report. While that distinction is

constitutionally relevant to the President’s appointments power, it is not

determinative of the removal-power question. That is because the removal

inquiry asks not whether an official exercises significant governmental

authority, but whether a measure of independence in the exercise of such

power interferes with the President’s constitutional duty and prerogative to

oversee the executive branch and take care that the laws are faithfully

executed. The degree of removal constraint effected by a single layer of

for-cause protection is the same whether that protection shields a principal

or inferior officer. In either case, the President—or a principal officer acting

as the President’s agent—may not fire the independent officer except for

cause. Indeed, the objective of the independent counsel statute was to

protect the counsel’s independence, not only from the President’s direct

interference, but also from interference by the President’s agent, the

Attorney General. The question whether a removal restriction

unconstitutionally constrains presidential power thus does not track whether

the shielded official is a principal or inferior officer. Even the mildest

degree of removal protection of certain subordinate officers—such as the

Secretary of the Navy or the Chief of Staff to the Secretary of State—could

pose a constitutional problem, whereas Supreme Court precedent treats

ordinary for-cause protection of some principal officers, such as members

of the Federal Trade Commission or the SEC, to be permissible.

43

insulated from removal. See 12 U.S.C. § 2. Other historical

examples of sole-headed independent agencies similarly

counter PHH’s claim. See supra Part I.B; H.R. Conf. Rep. No.

103-670, at 89-90 (1994) (explaining that sole administrator of

Social Security Administration would enhance “management

efficiency” and reduce “inappropriate influence”). Historical

practice of independent agencies, including the earliest

examples of independent financial regulators which operated

under single heads, suffices to place the CFPB on solid footing.

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, 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.

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 multi-headed

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 responsive than one led by multiple commissioners or

44

board members. If anything, the President’s for-cause removal

prerogative may allow more efficient control over a solo head

than a multi-member directorate. Consider the case of

Humphrey’s Executor. There, President Roosevelt attempted

to remove an FTC Commissioner based on policy

disagreements. Of course, the Supreme Court put a stop to the

President’s effort to sway the agency, upholding the

Commissioner’s removal protection. 295 U.S. at 625-26. But

had the Court not so held, perhaps that would not have been the

last of the personnel changes at the FTC. Removal of just one

Commissioner by the President might not have had any

substantial effect on the multi-member body’s direction, which

he so strongly disfavored. The President might have had to

remove multiple Commissioners in order to change the

agency’s course.

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

45

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 (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). 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

with the separation of powers—the Court needed to discern

whether the statute in question actually required for-cause

removal. To do so, the Court asked whether the express

statutory term allowing removal “by the President for

46

inefficiency, neglect of duty, or malfeasance in office” carried

a negative implication barring the President from removing

Commissioners for other reasons or for no reason at all. 295

U.S. at 619. The Court reasoned that the FTC’s composition

as a “body of experts” “made clear” that “the intention of

Congress” was to limit removal to the enumerated causes. Id.

at 623-24. Independence from presidential control, Congress

believed, would facilitate the Commission’s access to apolitical

expertise and its exercise of neutral judgment. Even as to the

statutory question, the Court emphasized the Commissioners’

expertise more than their number: “The commission is to be

nonpartisan; and it must, from the very nature of its duties, act

with entire impartiality. It is charged with the enforcement of

no policy except the policy of the law.” Id. at 624. PHH further

suggests that the terms “quasi-legislative” and “quasi-judicial”

in Humphrey’s Executor implicitly emphasize collective

leadership, because legislatures and appellate courts have more

than one member. Oral Arg. Tr. at 40-42. But those terms refer

to the functions and powers of the agency, not its singular or

plural head. See Humphrey’s Executor, 295 U.S. at 629. The

fact that district judges sit alone, for example, makes them no

less judicial.

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,

47

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 being presidentially appointed, rotates among the

members annually. 52 U.S.C. §§ 30106(a)(2), (5). The

International Trade Commission’s Chair, which changes

biannually, must alternate between political parties without

regard to who is in the White House. 19 U.S.C. § 1330. And

among agencies with chairs chosen by the President, not all

may be replaced by the President for any reason at any time.

The Chair of the Federal Reserve serves a fixed four-year term,

48

and the Federal Deposit Credit Insurance Corporation’s Chair

serves a five-year term. 12 U.S.C. § 242; id. § 1812(b)(1).

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

49

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. After all, the

terms “inefficiency, neglect of duty, or malfeasance in office”

are “very broad.” Bowsher, 478 U.S. at 729. 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 regulators designed to protect the

public interest in the integrity and stability of markets from

short-term political or special interests, the CFPB is without

constitutional defect.

II. Broader Theories of Unconstitutionality

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

50

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.

51

A. Scope of Agency Power

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 anti-fraud 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—that had authority, with limited exceptions, over

commerce generally.

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.

52

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.

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. 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. 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

53

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.

B. Novelty

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 (2012) (opinion of Roberts, C.J.); see also Mistretta

v. United States, 488 U.S. 361, 385 (1989) (addressing the

constitutionality of the Sentencing Commission and noting that

“[o]ur constitutional principles of separated powers are not

violated . . . by mere anomaly or innovation”). The

independent counsel, the Sentencing Commission, and the FTC

were each “novel” when initiated, but all are constitutional. In

the precedents PHH invokes, novelty alone was insufficient to

establish a constitutional defect.

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.” 134 S. Ct. 2550, 2556 (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

54

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 (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. 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. 316, 415

(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 sole-director structure makes it historically

exceptional, Pet’rs’ Br. 23—we again must disagree. For

starters, there is no appreciable difference between the

55

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

sole-headed 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. § 1211; Civil Service Reform

Act of 1978, Pub. L. No. 95-454, 92 Stat. 1111 (1978).

Congress established the sole-headed, for-cause-protected

Federal Housing Finance Agency in 2008, in response to

similar concerns as gave rise to the CFPB. See 12 U.S.C. §

4512. This longstanding tradition provides historical pedigree

to the CFPB, and refutes the contention that the CFPB’s single-

director structure is anything new. See supra Parts I.B., I.C.3.

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);

56

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.

57

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 dollars. And the

Office of Special Counsel enforces workplace rules for federal

government employers and employees. Casting these agencies

as somehow less important than the CFPB does not show them

to be less “executive” in nature. The CFPB’s single Director

is not an historical anomaly.

C. Freestanding Liberty

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,

58

478 U.S. at 730; see also Free Enterprise Fund, 561 U.S. at

501 (quoting Bowsher, 478 U.S. at 730). 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,

the purposes of the separation of powers are too general

and diverse to offer much concrete guidance. Among

other things, the separation of powers and the

accompanying checks and balances promote

efficiency, energy, stability, limited government,

control of factions, deliberation, the rule of law, and

accountability. . . . [I]n the absence of any specific

textual home or pattern of historical practice or judicial

precedent, one could reasonably move from these

broad and often-conflicting purposes to any number of

59

fair conclusions about . . . almost any freestanding

separation of powers question.

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 attempt to re-measure the provision’s

potential effect on liberty or any other separation-of-powers

objective.

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

60

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.

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

hem 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.

D. The Cabinet and the Slippery Slope

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.

61

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 (White, J., dissenting);

see Morrison, 487 U.S. at 690 (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 the central consideration in whether Congress may

grant it a measure of independence. The Court has held, time

and again, that while the Constitution broadly vests executive

power in the President, U.S. Const. art. II, § 1, cl. 1, that does

not require that the President have at-will authority to fire every

officer. Doctrine and history squarely place the CFPB Director

among those officials who may constitutionally have for-cause

protection. At the same time, there are executive officials

whom the President must be able to fire at will. See generally

Marbury v. Madison, 5 U.S. 137, 166 (1803) (“[W]here the

heads of departments are the political or confidential agents of

the executive, merely to execute the will of the President, or

rather to act in cases in which the executive possesses a

constitutional or legal discretion, nothing can be more perfectly

clear than that their acts are only politically examinable.”).

Those would surely include Cabinet members—prominently,

the Secretaries of Defense and State—who have open-ended

and sweeping portfolios to assist with the President’s core

constitutional responsibilities. See generally Myers, 272 U.S.

at 141 (suggesting that “ministerial” acts of Secretary of State

were “entirely to be distinguished from his duty as a

subordinate to the President in the discharge of the President’s

political duties which could not be controlled”). Executive

functions specifically identified in Article II would be a good

62

place to start in understanding the scope of that executive core:

It includes, at least, the President’s role as Commander in

Chief, and the foreign-affairs and pardon powers. U.S. Const.

art. II, § 2; see Zivotofsky ex rel. Zivotofsky v. Clinton, 566 U.S.

189, 211 (2012) (“The President has broad authority in the field

of foreign affairs.”). Although this case does not require us to

catalogue every official on either side of the constitutional line,

we emphasize that certain governmental functions may not be

removal-restricted.

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 (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

63

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). The

Court held no such thing. And if we were to embrace an

analysis invalidating any independent agency that does not

mirror the 1935-era FTC, our decision would threaten many, if

not all, modern-day independent agencies, perhaps including

the FTC itself. See Pet’rs’ Reply Br. 6 (noting that the FTC did

not claim rulemaking authority until 1962).

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,

64

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 28-29

(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

65

agency independence that demonstrate the rich diversity of

institutional design. See Kirti Datla & Richard L. Revesz,

Deconstructing Independent Agencies (and Executive

Agencies), 98 Cornell L. Rev. 769, 774 (2013) (“Congress

can—and does—create agencies with many different

combinations of indicia of independence . . . .”); Barkow,

Insulating Agencies, 89 Tex. L. Rev. at 16-18 (urging a

functionalist analysis beyond the “obsessive focus on removal

as the touchstone of independence”—and emphasizing the

“failure of banking agencies to guard against lending abuses”

as a reason for agency independence); Lisa Schultz Bressman

& Robert B. Thompson, The Future of Agency Independence,

63 Vand. L. Rev. 599, 607-10 (2010) (describing “[f]inancial

agencies . . . [as] among the most prominent independent

agencies” and independent agencies as having “some variety in

design,” with some generally “share[d]” attributes); Breger &

Edles, Established by Practice, 52 Admin L. Rev at 1113-14

(“[W]e review the structure and internal operations of

independent agencies, not[ing] several similarities and

differences among them . . . .”); id. at 1137-38 (describing

many “modern” independent agencies as adopting “the

commission form” but describing “the protection . . . against

removal ‘for cause’” as the “critical element of

independence”); The President’s Committee on Administrative

Management, Report of the Committee with Studies of

Administrative Management in the Federal Government 216

(1937) (theorizing that there are “[s]ome regulatory tasks” that,

per “popular belief,” “ought to be performed by a group,” while

others call for “regional representation”); id. (emphasizing the

importance of agency independence to ensure that certain

regulatory functions are “kept free from the pressures and

influences of political domination”); see also Free Enterprise

Fund, 561 U.S. at 547 (Breyer, J., dissenting) (describing

“[a]gency independence [a]s a function of several different

factors” and finding the “absence” of one—in the case of the

66

SEC, an express “for cause” provision—“not fatal to agency

independence”). Today’s independent agencies are diverse in

structure and function. They have various indicia of

independence, including differing combinations of

independent litigation and adjudication authority, budgetary

independence, autonomy from review by the Office of

Management and Budget, and the familiar removal restrictions.

See Datla & Revesz, Deconstructing Independent Agencies, 98

Cornell L. Rev. at 772.

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 (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, may serve the liberty of the people. That is why

the Supreme Court has acknowledged congressional latitude to

fashion agencies in different ways, recognizing that the

67

“versatility of circumstances often mocks a natural desire for

definitiveness.” Wiener, 357 U.S. at 352.

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. 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 61 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.

Conclusion

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

68

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 (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.

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

2

meaning”—as we must when the statute supplies no definition

of its own, FDIC v. Meyer, 510 U.S. 471, 476 (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

(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 Greater Oregon, 515 U.S. 687, 704 n.18

(1995) (noting that the Court has “never suggested that the rule

of lenity should provide the standard for reviewing facial

challenges to administrative regulations whenever the

governing statute authorizes criminal enforcement”). Though

there is some dispute about whether Chevron deference

remains appropriate for agency interpretations of statutes with

both civil and criminal applications, see Whitman v. United

States, 135 S. Ct. 352, 352–54 (2014) (Scalia, J., respecting the

3

denial of certiorari) (calling Babbitt into question (citing

Leocal v. Ashcroft, 543 U.S. 1, 11–12 n.8 (2004))), our court

continues to adhere to the view that it is, see Competitive

Enterprise Institute v. Department of Transportation, 863 F.3d

911, 915 n.4 (D.C. Cir. 2017) (“We apply the Chevron

framework to this facial challenge even though violating [the

statute] can bring criminal penalties.”). Even were Chevron

inapplicable, given my view that the agency’s interpretation

was correct as well as reasonable, PHH has failed to show that

the statute is sufficiently ambiguous as to merit application of

the rule of lenity. “[T]he rule of lenity only applies if, after

considering text, structure, history, and purpose, there remains

a grievous ambiguity or uncertainty in the statute, such that the

Court must simply guess as to what Congress intended.” United

States v. Castleman, 134 S. Ct. 1405, 1416 (2014) (quoting

Barber v. Thomas, 560 U.S. 474, 488 (2010)). Because RESPA

Section 8 is ambiguous, and because the Bureau’s

interpretation is reasonable, I would have held that PHH is

liable under the statute.

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.

4

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 run against the King.” BP America Production Co. v.

Burton, 549 U.S. 84, 95–96 (2006). “A corollary of this rule is

that when the sovereign elects to subject itself to a statute of

limitations, the sovereign is given the benefit of the doubt if the

scope of the statute is ambiguous.” Id. at 96. Given this, the

court would have to presume that RESPA’s statute of

limitations does not cover administrative actions. The Supreme

Court addressed a remarkably similar issue in BP America, 549

U.S. 84, in which the Court unanimously held that a general

statute of limitations for Government contract actions applied

only to court actions, not to administrative proceedings

initiated by the Government.

5

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 (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 (1988).

6

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 (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 CFPB’s Director that, together,

constitute the Bureau’s final agency action in an adjudication.

Petition 1-3. The petitioners (and our dissenting colleagues)

seek to downplay this basic fact, even though it is the bedrock

for the exercise of our jurisdiction. They do so because

acknowledging that the Director has significant adjudicatory

responsibilities – indeed, the Director’s adjudicatory functions

are the only powers at issue in this case – seriously

undermines the separation-of-powers challenge before us. All

in all, those significant quasi-judicial duties, as well as the

Director’s quasi-legislative duties and obligations to

coordinate and consult with other expert agencies, provide

additional grounds for denial of the separation-of-powers

claim before us.

I.

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.

2

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

3

“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

recommended decision.” Id. § 1081.405(a). The Director’s

final decision must be served on the parties and published in

an order. Id. § 1081.405(e).

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.

II.

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 (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

4

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 (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. The Court continued:

We think it plain under the Constitution that

illimitable power of removal is not possessed

by the President in respect of officers of the

character of those just named. The authority of

Congress, in creating quasi legislative or quasi

judicial agencies, to require them to act in

discharge of their duties independently of

executive control cannot well be doubted; and

that authority includes, as an appropriate

incident, power to fix the period during which

they shall continue, and to forbid their removal

except for cause in the meantime. For it is

quite evident that one who holds his office

only during the pleasure of another cannot be

depended upon to maintain an attitude of

independence against the latter’s will.

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

5

the President directly by the Constitution.” Wiener v. United

States, 357 U.S. 349, 356 (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

cannot be made to turn on whether or not that official is

classified as ‘purely executive.’” Morrison v. Olson, 487 U.S.

654, 689 (1988). Thus, rather than “defin[ing] rigid

categories of those officials who may or may not be removed

at will by the President,” courts focus squarely on the

separation-of-powers principle at stake: “ensur[ing] 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 (footnote omitted).

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. 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

(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

6

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

(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”). 1

1

The substantive differences between the removal restrictions of

Board members and ALJs provided another important distinction in

Free Enterprise Fund. The tenure protection struck down in Free

Enterprise Fund was “unusually high.” 561 U.S. at 503. The only

violations of law that could lead to removal were violations of

“provision[s] of [the Sarbanes-Oxley] Act, the rules of the

[PCAOB], or the securities laws,” 15 U.S.C. § 7217(d)(3)(A), and

Board members could only be removed if those violations or abuses

were committed “willfully,” id. § 7217(d)(3)(A)-(B). The Court

noted that a Board member could not be removed even if, for

example, he cheated on his taxes, even though such an action could

greatly diminish the confidence that the member would faithfully

carry out his or her duties. Free Enterprise Fund, 561 U.S. at 503.

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

7

In sum, the Supreme Court has consistently rendered its

“judgment that it was not essential to the President’s proper

execution of his Article II powers that [quasi-judicial and

quasi-legislative] agencies be headed up by individuals who

were removable at will.” Morrison, 487 U.S at 691. Indeed,

in his dissent in Morrison, Justice Scalia even acknowledged

that “removal restrictions have been generally regarded as

lawful” for independent agencies “which engage substantially

in what has been called the ‘quasi-legislative activity’ of

rulemaking” and “the ‘quasi-judicial’ function of

adjudication.” Id. at 724-25 (citations omitted, emphasis

added). Here, is there any doubt that the CFPB Director

substantially engages in both of these activities? Of course

not. In addition to the final adjudication authority described

above, Congress granted the Director rulemaking authority for

the Bureau. 12 U.S.C. § 5512(b). Thus, the Director (and the

Bureau) fit squarely within the zone “generally regarded as

lawful” by every Justice in Morrison and in the unbroken line

of authority from the Supreme Court described above and in

our Majority Opinion.

misconduct, such as improperly using the imprimatur of the agency

for personal business, Steverson v. Soc. Sec. Admin., 383 F. App’x

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. Dep’t 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 ALJ

has been fired for “financial irresponsibility” in failing to repay

debts. See McEachern v. Macy, 341 F.2d 895 (4th Cir. 1965).

8

III.

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; see also id. at 5, 7, 8, 18, 68, 73

(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.

9

§ 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 (1922), but it nonetheless

upheld the removal protections of FTC Commissioners. 295

U.S. at 629. Similarly, in Free Enterprise Fund, the Court

was not troubled that Securities and Exchange Commission

(“SEC”) Commissioners enjoyed strong removal protection,

561 U.S. at 487, even though the Commission quite obviously

both enforces and adjudicates. As explained by the Court in

Morrison, the cramped view of the separation of powers

favored by the dissenters must be rejected:

The dissent says that the language of Article II

vesting the executive power of the United

States in the President requires that every

officer of the United States exercising any part

of that power must serve at the pleasure of the

President and be removable by him at will. . . .

This rigid demarcation—a demarcation

incapable of being altered by law in the

slightest degree, and applicable to tens of

thousands of holders of offices neither known

nor foreseen by the Framers—depends upon an

extrapolation from general constitutional

language which we think is more than the text

will bear. It is also contrary to our holding in

United States v. Perkins, [116 U.S. 483,]

decided more than a century ago.

Morrison, 487 U.S. at 690, n.29 (emphasis added).

10

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

(quoting Humphrey’s Executor, 295 U.S. at 628). 2

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 multi-

member commissions. In this regard, a few other points bear

mention.

2

The dissenters seek to cast aspersions on Humphrey’s

Executor, painting it as an outlier in the Court’s separation-of-

powers jurisprudence. See Kavanaugh Dissenting Op. 61

n.18; Henderson Dissenting Op. 36-37. Perhaps all that need

be said in response is that the case binds us, as an inferior

court. U.S. Const. Art. III, § 1. Nonetheless, it is worth

noting that Humphrey’s Executor was a unanimous opinion

and that all four Justices from the Myers majority who

remained on the Court nine years later joined the opinion;

indeed, one of those members of the Myers majority, Justice

Sutherland, wrote the opinion. It thus seems inconceivable

that the Court in Humphrey’s Executor did not understand

what part of Myers was its holding rather than dictum.

11

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 (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 the Founding, see Maj. Op. 42-43, so I am

not swayed by the dissenters’ suggestion that the possibility

of poor decisionmaking creates a constitutional defect.

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.

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. I

12

fear the dissenters have overstated the power of the Director

and understated the checks on that power.

I g

This text is long and has been trimmed here. Open the source document for the complete record.