Amicus Curiae Brief — All American Check Cashing, Inc., et al., Petitioners v. Consumer Financial Protection Bureau

No. 19-432

3n tf )t Supreme Court of tfte Mmteti States

ALL AMERICAN CHECK CASHING , INC.,

ET AL ., PETITIONERS

V.

CONSUMER FINANCIAL PROTECTION BUREAU

ON PE T I T I O N FOR A W R I T OF C E R T I O R A R I

BEFORE JUDGMENT

TO T H E U N I T E D S T A T E S COURT OF A P P E A L S

FOR T H E F I F T H C IRCUIT

BRIEF FOR THE STATES OF TEXAS , ARKANSAS ,

INDIANA, KANSAS , LOUISIANA , NEBRASKA,

OHIO , OKLAHOMA, SOUTH CAROLINA,

UTAH , AND WEST VIRGINIA AS AMICI CURIAE

IN SUPPORT OF PETITIONERS

KEN PAXTON

Attorney General of Texas

JEFFREY C. MATEER

First Assistant

Attorney General

KYLE D. HAWKINS

Solicitor General

Counsel of Record

LANORA C. PETTIT

Assistant Solicitor General

OFFICE OF THE

ATTORNEY GENERAL

P.O. Box 12548 ( MC 059)

Austin, Texas 78711-2548

kyle.hawkins@ oae.texas.gov

(512) 936-1700

Q UESTIONS PRESENTED

1. Whether the structure of the Consumer Financial

Protection Bureau violates the separation of powers.

2. Whether a successful separation-of -powers challenger who is subject to an enforcement action by an unconstitutionally structured agency is entitled to meaningful relief , such as dismissal of the action, due to the

agency’s constitutional defect.

( I)

TABLE OF CONTENTS

Questions Presented

Table of Authorities

Interest of Amici Curiae

Summary of Argument

Argument

I. The CFPB’s Structure Violates the

Constitution’s Separation of Powers

A. The President must retain the

power to remove at will individuals

who wield executive power

B. Congress may restrict the

President’s removal power only

as to independent, multi-headed

commissions

C. The CFPB’s structure

unconstitutionally vests unchecked

power in a single director removable

only for cause

D. Ratification by a temporary director

does not cure this intolerable

concentration of power

II. This Case Is an Appropriate Vehicle to

Decide the Questions Presented

Conclusion

( ID

I

III

1

2

6

7

7

11

14

16

18

23

TABLE OF AUTHORITIES

Page(s)

Cases

Bowsher v. Synar,

478 U.S. 714 (1986) .......................................... 9, 10

Clinton v. City of New York,

524 U.S. 417 (1998) .............................................. 18

Collins v. Mnuchin,

938 F.3d 553 (5th Cir. 2019) (en banc) ........ passim

Consumer Fin. Prot. Bureau v.

RD Legal Funding, LLC,

332 F. Supp. 3d 729 (S.D.N.Y. 2018) ................... 20

Consumer Fin. Prot. Bureau v. Seila Law,

923 F.3d 680 (9th Cir. 2019) ................................ 22

Ex parte Hennen,

38 U.S. (13 Pet.) 230 (1839) ................................... 9

Free Enter. Fund v.

Pub. Co. Accounting Oversight Bd.,

561 U.S. 477 (2010) ...................................... passim

Humphrey’s Ex’r v. United States,

295 U.S. 602 (1935) ...................................... passim

Kisor v. Wilkie,

139 S. Ct. 2400 (2019) .......................................... 10

Lucia v. Sec. & Exch. Comm’n,

138 S. Ct. 2044 (2018) .......................................... 18

Massachusetts v. EPA,

549 U.S. 497 (2007) ................................................ 1

( HI )

IV

Page(s)

Cases (continued):

Metro. Washington Airports Auth. v.

Citizens for Abatement of Aircraft Noise, Inc.,

501 U.S. 252 (1991) ................................................ 2

Morrison v. Olson,

487 U.S. 654 (1988) .................................... 2, 15, 18

Myers v. United States,

272 U.S. 52 (1926) ........................................ passim

Nat’l Labor Relations Bd. v. Noel Canning,

573 U.S. 513 (2014) .............................................. 14

New York v. Fed. Energy Regulatory Comm’n,

535 U.S. 1 (2002) .................................................. 22

Norton v. Shelby County,

118 U.S. 425 (1896) ........................................ 20, 21

PHH Corp. v. Consumer Fin. Prot. Bureau,

881 F.3d 7 (D.C. Cir. 2018) (en banc) .......... passim

Printz v. United States,

521 U.S. 898 (1997) ................................................ 8

Swan v. Clinton,

100 F.3d 973 (D.C. Cir. 1996) .............................. 17

Texas v. United States,

809 F.3d 134 (5th Cir. 2015),

aff’d by equally divided Court,

136 S. Ct. 2271 (2016) ............................................ 1

United States v. Eaton,

169 U.S. 331 (1898) .............................................. 21

V

Page(s)

Cases (continued):

Wiener v. United States,

357 U.S. 349 (1958) .............................................. 12

Youngstown Sheet & Tube Co. v. Sawyer,

343 U.S. 579 (1952) .............................................. 19

Constitutional Provisions

U.S. Const. art. II

§ 1, cl. 1 ................................................................... 7

§ 3 ........................................................................... 7

Statutes

12 U.S.C.

§ 4512(a) ................................................................. 3

§ 4512(b) ................................................................. 3

§ 5491(b) ........................................................... 3, 14

§ 5491(c) ........................................................... 3, 15

§ 5491(c)(3) ............................................................. 3

§ 5511(a) ................................................................. 7

§ 5511(c) ................................................................. 7

§ 5512 (b)(1) .......................................................... 15

§ 5514(b) ............................................................... 15

§ 5515(b) ............................................................... 15

§ 5516(c) ............................................................... 15

§ 5562-64 ................................................................ 7

§ 5562(c) ............................................................... 15

§ 5563(a) ............................................................... 15

§ 5564 ................................................................... 15

Federal Vacancies Reform Act,

5 U.S.C. §§ 3345-3349d ........................................ 16

VI

Page(s)

Statutes (continued):

Housing and Economic Recovery Act of 2008,

Pub. L. No. 110-289, 122 Stat. 2654 (2008) .......... 3

Miscellaneous

51 Cong. Rec. 10,376 (1914) ........................................ 4

AKHIL REED AMAR, AMERICA’S

CONSTITUTION: A BIOGRAPHY (2005) ...................... 7

ANNALS OF CONG. (1789) (Joseph Gales

ed., 1834) ................................................................ 8

Brief for the Respondent in Opposition,

State Nat’l Bank of Big Spring v.

Mnuchin, 139 S. Ct. 916 (2019) ............................. 19

Brief for the Respondent , Seila Law LLC v.

Consumer Fin. Prot. Bureau ,

No. 19-7 (2019) ......................................... 2, 4, 14, 19

CFPB, http://www.consumerfinance.gov/ ................. 21

En Banc Supplemental Brief of

Defendant-Appellees Federal

Housing Finance Agency and Joseph

M. Otting at 3, Collins v. Mnuchin,

938 F.3d 553 (5th Cir. 2019) (en banc) .................. 4

Enforcement Actions, CFPB,

https://www.consumerfinance.gov/po

licy-compliance/enforcement/actions/ .................. 20

JOSEPH STORY, COMMENTARIES ON THE

CONSTITUTION OF THE UNITED

STATES (1833) ......................................................... 8

VII

Page(s)

Miscellaneous (continued):

Kirti Datla & Richard Revesz,

Deconstructing Independent Agencies

(and Executive Agencies),

98 CORNELL L. REV. 769 (2013) ........................... 13

Letter from Director Kathleen L.

Kraninger, CFPB, to Hon. Mitch

McConnell, Majority Leader, U.S.

Senate, Sept. 17, 2019 ................................. 4, 6, 20

Motion for Leave to File Brief Out of

Time and Brief of Amicus Curiae

U.S. House of Representatives, Seila

Law v. Consumer Fin. Prot. Bureau,

No. 19-7 (Oct. 4, 2019) ......................... 9, 14, 15, 19

Neomi Rao, Removal: Necessary and

Sufficient for Presidential Control,

65 ALA. L. REV. 1205 (2014) ................................... 8

S. REP. 111-176 (2010) ............................................... 19

SENATE COMMITTEE ON GOVERNMENTAL AFFAIRS,

STUDY ON FEDERAL REGULATIONS,

S. DOC. NO. 95-91 (1977) ........................................ 5

Saikrishna Prakash, New Light on the

Decision of 1789, 91 CORNELL L. REV.

1021 (2006) ......................................................... 5, 9

THE FEDERALIST No. 47 (James Madison)

(C. Rossiter ed. 1961) ........................................... 19

THE FEDERALIST No. 70 (Alexander

Hamilton) (J. Cooke ed. 1961) ............................. 10

1

INTEREST OF AMICI CURIAE

Amici curiae are the States of Texas, Arkansas, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma,

South Carolina, Utah , and West Virginia.1 As this Court

has long recognized , States have “special solicitude” to

challenge unlawful federal Executive Branch actions.

Massachusetts v. EPA , 549 U.S. 497, 520 (2007). Such solicitude is necessary because States, whose law may be

preempted by federal agencies run amok , stand in a

unique position to guard “the public interest in protecting separation of powers by curtailing unlawful executive

action.” Texas v. United States , 809 F.3d 134, 187 (5th

Cir. 2015), affd by equally divided Court , 136 S. Ct. 2271

(2016) ( per curiam ).

In this case, the Consumer Financial Protection Bureau ( CFPB ) has wielded its unchecked power to bring

an enforcement action against All American Check Cashing, Inc., Mid -State Finance, Inc., and Michael Gray (collectively, “All American ” ), alleging abusive or deceptive

practices in connection with check-cashing services All

American provided . An acting director , purporting to be

removable for cause, then sought to paper over his predecessor’s unconstitutional action simply by notifying

the court below that he had “ratified ” the decision to proceed.

No counsel for any party authored this brief , in whole or in

part . No person or entity other than amici contributed mone tarily to its preparation or submission .

1

(1)

2

States enforce robust consumer protections designed

prevent

practices such as those at issue in this case.

to

Indeed, Mississippi has severely sanctioned All American for its conduct. If Congress wishes to permit federal

agencies to assist or preempt States in protecting con sumers, it must do so in a manner consistent with Article

II of the Constitution. For the reasons set out below, the

CFPB’s structure violates the Constitution whether its

director was (at any given point ) temporary or permanent. The CFPB thus had no authority to bring or to continue the enforcement action.

SUMMARY OF ARGUMENT

I. The “ ultimate purpose ” of our Constitution’s separation of powers “is to protect the liberty and security of

the governed.” Metro. Washington Airports Auth. v. Cit izens for Abatement of AircraftNoise, Inc. , 501 U.S. 252,

272 (1991). That is why the Framers “viewed the principle of separation of powers as the absolutely central

guarantee of a just Government.” Morrison v. Olson, 487

U.S. 654, 697 (1988) (Scalia, J., dissenting). This case

calls upon the Court to vindicate that principle by striking down the unlawful action of an administrative agency

built around a single unaccountable and unchecked administrator.

That agency—the CFPB—was created in 2010 under

the Dodd -Frank Act. The Act “transfers to the Bureau

much of the authority to regulate consumer financial

products and services that had been vested in other fed eral agencies.” Brief for the Respondent at 2, Seila Law

LLC v. Consumer Fin. Prot. Bureau , No. 19-7 (2019)

[ hereinafter uSeila BFR ”]. Unlike the federal agencies

3

the CFPB replaced , however, the CFPB is headed neither by a group of commissioners nor by an individual

who is removable at will by the President. Instead , the

CFPB is headed by a single director, who is appointed

by the President, with the advice and consent of the Sen ate, to a five-year term. 12 U.S.C. § 5491( b ), ( c). He may

be removed by the President only for “inefficiency, neglect of duty, or malfeasance in office.” Id. § 5491(c)(3).

The CFPB’s structure is virtually unprecedented. To

date, “[ n]o independent agency exercising substantial

executive authority” that has come before this Court

“has ever been headed by a single person.” PHH Corp.

v. Consumer Fin. Prot. Bureau , 881 F.3d 7, 165 ( D.C.

Cir. 2018) (en banc) ( Kavanagh , J., dissenting) (emphasis

in original ). Amici are aware of only one other federal

agency with a similar structure: the Federal Housing Finance Agency ( “ FHFA” ), which was created shortly before the CFPB. See Housing and Economic Recovery Act

of 2008, Pub. L. No. 110-289, 122 Stat. 2654 (2008). Like

the CFPB, FHFA is headed by a single director, who

serves a five-year term and is removable only for cause.

12 U.S.C. § 4512(a ), (b). Unlike the CFPB, however, at

least one circuit court has recognized that FHFA’s structure impermissibly “infringes Article II.” Collins v.

Mnuchin , 938 F.3d 553, 587 (5th Cir. 2019) (en banc). A

splintered majority of the en banc Fifth Circuit reasoned

that such limits on the President’s removal power “do[]

not fit within the recognized exception for independent

agencies, ” id. , whether they are applied to a permanent

or temporary director , id. at 588-89.

4

The Fifth Circuit’s interpretation of Article II was

correct and should be applied to the CFPB. As one member of this Court has noted, the directors of the CFPB

and FHFA “ possess[] more unilateral authority—that is

authority to take action on one’s own, subject to no

check— than any single commissioner or board member

in any other independent agency in the U.S. Government.” PHH Corp. , 881 F.3d at 165-66 ( Kavanaugh, J.,

dissenting). Indeed, “other than the President,” these directors enjoy “more unilateral authority than any other

official in any of the three branches of the U.S. Government.” Id. at 166.

Not even the United States or the CFPB still maintains that such a structure is constitutional. Seila BFR

at ll.2 And with good reason: The Constitution forbids

entrusting concentrated , unchecked authority to a sole,

unaccountable administrator charged with overseeing an

agency that wields executive power. This Court has permitted multi-member commissions on the basis that such

a structure poses less of a threat to individual liberty

than a single-headed commission. See, e.g. , Humphrey’s

Ex’r v. United States , 295 U.S. 602, 629 (1935) ; see also

51 Cong. Rec. 10,376 (1914) ( Federal Trade Commission

“would have precedents and traditions and a continuous

policy and would be free from the effect of . . . changing

2

See also En Banc Supplemental Brief of Defendant-Appellees

Federal Housing Finance Agency and Joseph M . Otting at 3,

Collins v. Mnuchin , 938 F.3d 553 (5th Cir. 2019 ) ( declining to

defend FHFA ) ; Letter from Director Kathleen L . Kraninger ,

CFPB , to Hon. Mitch McConnell , Majority Leader , U.S. Sen ate, Sept. 17, 2019.

5

incumbency.” ) - An agency built around a sole administrator , by contrast, is unchecked by the constraints of

group decisionmaking among members appointed by dif ferent presidents. PHH Corp., 881 F.3d at 166, 178 ( Kavanaugh, J., dissenting) (citing 5 SENATE COMMITTEE ON

GOVERNMENTAL AFFAIRS, STUDY ON FEDERAL REGULATIONS, S. Doc. No. 95-91, at 35 (1977)).3 A single director thus “ poses a far greater risk of arbitrary decisionmaking and abuse of power , and a far greater threat

to individual liberty, than a multimember independent

agency does.” Id. at 166.

In this case, the CFPB has brought that unchecked

power to bear on All American for allegedly unlawful

trade practices. Pet. App. 44a. It has done so free from

any executive oversight. Amici take no position on the

propriety or legality of the business practices targeted

by the CFPB except to note that Mississippi has already

required All American to close the majority of its stores

and pay nearly $900,000 in fines to settle an earlier state

enforcement action. Pet. 7; Pet. App. 33a. Regardless of

the merits of the CFPB’s additional claims, the agency

lacks power to litigate them. Because the CFPB’s structure renders it unconstitutional, any enforcement action

it takes is invalid.

Collins , 938 F .3d at 599-607 ( Oldham , J . , concurring) ( tracinghistory of presidential removal powers to the founding period ) ;

Saikrishna Prakash , New Light on the Decision of 1789 , 91

CORNELL L. REV. 1021, 1026 ( 2006 ) ( arguing that the first

Congress “ assumed [ that ] the President enjoyed a preexisting

removal power ” and that “ majorities in the House and Senate

affirmed ” that assumption “ on three separate occasions ” ) .

3

6

II. This case allows the Court to resolve the lingering

question of whether the appropriate remedy for Con gress’s impermissible attempt to impinge on the President’s removal power changes simply because an actor

who claims to be removable at will purports to ratify the

decision of an otherwise unconstitutional agency. This is

an important and necessary follow-on question: the

CFPB, which interacts with all facets of the economy,

has for nearly two years been run by individuals who

claim to be removable by the President.4 During that

time , these individuals have taken numerous acts that

have either ratified or enforced actions taken by their

predecessor who claimed not to be so removable. Clarification is necessary regarding what legal effect (if any)

should be given to these directors’ decisions. The Fifth

Circuit has not yet ruled on All American’s appeal raising

this question , but it has thoroughly canvassed the core

legal issues in the context of the FHFA. See generally

Collins , 938 F.3d 553. Delay will serve only to prolong

confusion in the multi-billion-dollar market in consumer

financial products.

ARGUMENT

The CFPB has the power to “seek to implement and ,

where applicable, enforce Federal consumer financial

law” as a means of ensuring that “all consumers have access to markets for consumer financial products and

4

Richard Cordray resigned from office in November 2017. He

was replaced first by Acting Director Mick Mulvaney and then

by Director Kathy Kraninger , each of whom has claimed to be

removable at will , albeit for different reasons. See Pet. App.

20 a ; Kraninger , supra n . 2 , at 2.

7

services” and that the markets for such products and services are “fair , transparent, and competitive.” 12 U.S.C.

§ 5511(a ). The CFPB may also prescribe rules implementing consumer-protection laws; conduct investigations of market actors; and enforce consumer-protection

laws in administrative proceedings in federal court. See,

e.g. , id . §§ 5511( c ), 5562-64. The Court should grant certiorari and hold that (1) the Constitution does not permit

Congress to consolidate such sweeping executive powers

in an administrative agency headed by a sole director

whom the President may remove only for cause, and

(2) the appropriate remedy does not change simply be cause the action at issue was ratified by a director (or

acting director ) who claimed to be removable at will.

I. The

Structure

CFPB’s

Violates

the

Constitution’s Separation of Powers.

The Constitution vests “[t]he executive power ” in the

President and compels him to “take care that the laws be

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

II , § 3. Precedent provides that removal restrictions such

as those applicable to the CFPB are permissible only for

multi-member commissions—not for those headed by a

single director.

A. The President must retain the power to remove

at will individuals who wield executive power.

Article II bestows “[t]he executive power ” in a single,

unitary executive. It makes “emphatically clear from

start to finish ” that “the president would be personally

responsible for his branch.” AKHIL REED AMAR , AMER ICA S CONSTITUTION: A BIOGRAPHY 197 (2005). The

Framers demanded “unity in the Federal Executive ” to

8

guarantee “ both vigor and accountability.” Printz v.

United States , 521 U.S. 898, 922 (1997). This unitary executive further promotes “[d ]ecision , activity, secre[c]y,

and d[i]spatch ” in ways that a “greater number ” cannot.

3 JOSEPH STORY, COMMENTARIES ON THE CONSTITUTION OF THE UNITED STATES § 1414, at 283 (1833).

Of course, as a practical matter , the President cannot

carry out the full scope of “the executive power ” on his

own. This limitation is why, “as part of his executive

power ,” the President “select[s] those who [are] to act

for him under his direction in the execution of the laws.”

Myers v. United States , 272 U.S. 52, 117 (1926). Selecting

assistants and deputies lies at the heart of “the executive

power ,” which necessarily includes “the power of appointing, overseeing, and controlling those who execute

the laws.” Free Enter. Fund v. Pub. Co. Accounting

Oversight Bd . , 561 U.S. 477, 492 (2010) (quoting 1 ANNALS OF CONG. 463 (1789) (Joseph Gales ed., 1834) ( remarks of James Madison ) ).

The President’s essential power to select administrative officials necessarily includes the power to “remov[e ]

those for whom he cannot continue to be responsible.”

Myers , 272 U.S. at 117; see also PHH Corp. , 881 F.3d at

168 ( Kavanaugh , J., dissenting) ( “To supervise and direct executive officers, the President must be able to remove those officers at will.” ) ; Neomi Rao, Removal: Necessary arid Sufficient for Presidential Control , 65 ALA.

L. REV. 1205, 1215 (2014) ( “The text and structure of Article II provide the President with the power to control

subordinates within the executive branch.” ).

9

Since the Founding, it has been understood that the

removal power is necessary “to keep [executive ] officers

accountable.” Free Enter. Fund , 561 U.S. at 483; cf. Prakash, supra n.3, at 1067 ( “After a great deal of high-level

debate leading to the Decision of 1789, Congress decided

that the President had a constitutional right to remove ”

principal officers.). This view “soon became the ‘settled

and well understood construction of the Constitution.”’

Free Enter. Fund , 561 U.S. at 492 (quoting Ex parte

Hennen, 38 U.S. (13 Pet.) 230, 259 (1839)).

After all, if the President could not remove agents,

then a “subordinate could ignore the President’s supervision and direction without fear , and the President could

do nothing about it.” PHH Corp. , 881 F.3d at 168 ( Kavanaugh, J., dissenting) (citing Bowsher v. Synar , 478

U.S. 714, 726 (1986) (“Once an officer is appointed , it is

only the authority that can remove him . . . that he must

fear and, in the performance of his functions, obey.” )

( quotation marks omitted )).5 That risk , in turn, would intolerably impinge on the President’s duty to execute the

law. Id. And it would upend the chain of command upon

which the Executive Branch relies to function properly.

See Free Enter. Fund , 561 U.S. at 513-14. Put simply,

See also Motion for Leave to File Brief Out of Time and Brief

of Amicus Curiae U.S. House of Representatives at 6, Seila

Law v. Consumer Fin. Prot. Bureau , No. 19- 7 ( Oct. 4 , 2019 )

( filed by divided Bipartisan Legal Advisory Group ) [ hereinaf ter “ Seila House Br.” ] ( conceding that the structure of the

CFPB was designed so that the director could be “ depended

upon to maintain an attitude of independence against the

[ President’s ] will ” ) ( quotation marks omitted ).

5

10

“[t]he President cannot ‘take Care that the Laws be

faithfully executed’ if he cannot oversee the faithfulness

of the officers who execute them.” Id. at 484.

The Court recognized this common-sense understanding in Myers, when it struck down as unconstitutional a statutory provision that restricted the President’s power to remove certain executive officers. 272

U.S. at 176. The Court held: “[W]hen the grant of the executive power is enforced by the express mandate to take

care that the laws be faithfully executed, it emphasizes

the necessity for including within the executive power as

conferred the exclusive power of removal.” Id. at 122. If

the President lacked the exclusive power of removal, he

could not “‘take care that the laws be faithfully executed.’” Id. at 164.

This Court has repeatedly reaffirmed the Myers rule

to the present day. It did so most recently in Free Enterprise Fund , reiterating that the President’s executive

power “includes, as a general matter, the authority to remove those who assist him in carrying out his duties” to

faithfully execute the laws. 561 U.S. at 513-14. “Without

such power, the President could not be held fully accountable ” for how executive power is exercised, and

“[s]uch diffusion of authority ‘would greatly diminish the

intended and necessary responsibility of the chief magistrate himself.’” Id. at 514 (quoting THE FEDERALIST

No. 70, at 478 (Alexander Hamilton ) (J. Cooke ed. 1961)) ;

cf. Kisorv. Wilkie , 139 S. Ct. 2400, 2413 (2019) ( Agencies

“have political accountability, because they are subject

to the supervision of the President, who in turn answers

to the public.”).

11

B . Congress may restrict the President’s removal

power only as to independent, multi - headed

commissions.

There is only one narrow exception to the general

rule in Myers. In 1935, this Court held that Congress

could create “independent ” agencies headed by commissions or boards whose members were not removable at

will and would operate free of the President’s supervision and direction. Humphrey’s Ex’r , 295 U.S. at 625,

631-32.

Humphrey’s Executor concerned President Franklin

Roosevelt’s dispute with a commissioner of the Federal

Trade Commission. President Roosevelt attempted to

fire the commissioner, but the commissioner contested

his removal, claiming that he was protected against firing by the FTC’s for-cause removal provision. Id. at 62122. Before this Court, the Roosevelt Administration relied in “chief ’ on Myers and its articulation of the Article

II executive power. Id. at 626.

This Court rejected that argument and held that Article II did not forbid Congress to create an independent

agency “wholly disconnected from the executive department.” Id. at 630. The Court deferred to the FTC’s “nonpartisan ” nature and its charge to “act with entire impartiality” while “exercis[ing] the trained judgment of a

body of experts appointed by law and informed by experience.” Id. at 624 (quotation marks omitted ). Where

those two features are present , this Court held, Congress may validly limit the President’s power to remove

the commissioners. Id. at 628-30.

12

Predictably, following Humphrey’s Executor, independent agencies came to populate all corners of the fed eral government. These agencies “play[] a significant

role in the U.S. Government” and “ possess extraordinary

authority over vast swaths of American economic and social life from securities to antitrust to telecommunications to labor to energy.” PHH Corp. , 881 F.3d at 170

( Kavanaugh, J., dissenting). Several of these agencies af fect the daily lives of countless Americans in significant

ways, including the Federal Reserve Board, the Federal

Communications Commission , the Federal Deposit Insurance Corporation , the Securities and Exchange Commission, the National Labor Relations Board , the Consumer Product Safety Commission, and many others. Id.

at 173.

Importantly, those independent agencies share the

two features recognized in Humphrey’s Executor.

(1) leadership composed of multiple members who

(2) are appointed at staggered terms. As this Court observed in Humphrey’s Executor , the FTC had five mem bers with staggered terms, and no more than three of

them could be of the same political party. 295 U.S. at 61920. The Court thus held that the Commission was a “ body

of experts” deliberately “so arranged that the membership would not be subject to complete change at any one

time.” See id. at 624. Those features have come to be regarded as the Humphrey’s Executor exception to the

general rule announced in Myers. See, e.g. , Wiener v.

United States , 357 U.S. 349, 355-56 (1958) ( upholding the

removal provisions of the three-member War Claims

Commission ) ; see also Free Enter. Fund , 561 U.S. at 483

( “ In Humphrey’s Executor . . ., we held that Congress

—

13

can , under certain circumstances, create independent

agencies run by principal officers appointed by the President, whom the President may not remove at will but

only for good cause.” ).

There are two reasons why the Constitution may tolerate limits on the President’s power to remove the

heads of independent agencies headed by multiple members serving staggered terms. First , “[i]n the absence of

Presidential control, the multi-member structure of independent agencies serves as a critical substitute check

on the excesses of any individual independent agency

head.” PHH Corp., 881 F.3d at 183 ( Kavanaugh , J., dissenting). That is, “[t]he multi-member structure thereby

helps to prevent arbitrary decisionmaking and abuse of

power , and to protect individual liberty.” Id. ; see also

Collins , 938 F.3d at 587-88. That basic structure makes

it harder for the independent agency to impinge on individual freedom. PHH Corp. , 881 F.3d at 183. It further

discourages arbitrary, unsound agency actions driven by

the whims of one individual. Id. Each commissioner or

board member, in other words, acts as a check on the

others through the process of “deliberative decision

making.” Kirti Datla & Richard Revesz, Deconstructing

Independent Agencies ( and Executive Agencies ) , 98

CORNELL L. REV. 769, 794 (2013).

Seco?id , multi-member independent agencies have a

historical tradition since Humphrey’s Executor. PHH

Corp. , 881 F.3d at 182-83 ( Kavanaugh, J., dissenting) ; see

also id. at 178 (citing, e.g. , Free Enter. Fund , 561 U.S. at

547 ( Breyer , J., dissenting)) ; Collins , 938 F.3d at 600-04

( Oldham, J., concurring). In separation of powers cases,

14

“historical practice matters.” PHH Corp. , 881 F.3d at

182-83 ( Kavanaugh , J., dissenting). For example, in National Labor Relations Board v. Noel Canning , this

Court relied on “[l]ong settled and established practice ”

to reach “a proper interpretation of constitutional provisions regulating the relationship between Congress and

the President.” 573 U.S. 513, 524 (2014) ( quotation marks

omitted ).

In sum, only independent agencies with several directors serving staggered terms can possibly fall within the

Humphrey’s Executor exception to the Myers rule.6

C. The CFPB’s structure unconstitutionally vests

unchecked power in a single director removable

only for cause.

As the United States has now conceded , this Court’s

precedent makes clear that “the structure of the

[CFPB], including the for-cause restriction on the removal of its single director , violates the constitutional

separation of powers.” Seila BFR at 7.

Unlike the multi-member boards approved in

Humphrey’s Executor and its progeny, the CFPB is

headed by a single director. 12 U.S.C. § 5491( b). He

serves a term of five years and may be fired only for

The CFPB’s few remaining defenders assert that these cases

[ ] Congress to provide limited protection against reallow

“

moval ” whenever it decides that an officer should “ perform

their duties without executive leave ” and “free from executive

control. ” Seila House Br. 7-8 ( quotation marks omitted ). Such

a rule is without limit and should be rejected as irreconcilable

with Myers , Noel Canning , and Free Enterprise Fund .

6

15

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

Id. § 5491(c). And he wields “ unmistakably executive responsibilities, ” including “criminal investigation and

prosecution.” PHH Corp. , 881 F.3d at 80 ( majority op.).

The director wields that executive power over nine teen different federal consumer-protection statutes. 12

U.S.C. § 5512 ( b)(1). He may examine and investigate in dividuals and entities to assess their compliance with

those statutes. Id. §§ 5514( b), 5515( b), 5516(c). He may

issue “civil investigative demand[s]. ” Id. § 5562(c). He

may institute enforcement actions and conduct “adjudication proceedings.” Id. § 5563(a ). And he may (as he did

in this case ) sue in state or federal court to enforce consumer-protection laws. Id. § 5564.

Those facts reveal the fundamental flaw in the position advocated by the CFPB’s defenders that this case is

controlled by Morrison. Seila House Br. at 7. As the

Court explained in Free Enterprise Fund , it “considered

the status of inferior officers in Morrison,” including

whether Congress may limit an agency head’s ability to

terminate an inferior officer at will. 561 U.S. at 494. The

Court concluded that Congress may do so in light of the

inferior officer’s “limited jurisdiction and tenure and

lack[] [of ] policymaking or significant administrative authority.” Morrison , 487 U.S. at 691. But the Court said

nothing about whether Congress may also limit the President’s ability to remove a principal officer who has “all

but exclusive power to make and enforce rules” under

nineteen federal statutes, PHH Corp. , 881 F. 3d at 153

( Henderson, J., dissenting) , on topics “covering everything from home finance to student loans to credit cards

16

to banking practices, ” id. at 165 ( Kavanaugh, J., dissenting). Cf Free Enter. Fund , 561 U.S. at 494-95 (limiting

Morrison to its facts).

Instead , the extent of the CFPB’s ability to set and

enforce federal economic policy demonstrates why this

case is controlled by the Court’s original Myers rule. My ers provides that the President’s subordinates must be

removable at will. FImnphrey’s Executor creates a narrow exception for multi-director independent agencies

with directors serving staggered terms. Because the

CFPB has a sole director , appointed for a term of five

years and removable only for cause, its structure violates

Article II by preventing the President from carrying out

the executive power.

D. Ratification by a temporary director does not

cure this intolerable concentration of power.

This analysis does not change simply because the

CFPB, as it did in this case, attempts to ratify its own

past decisions through the fiat of an acting director. The

CFPB notified the Court on February 5, 2018, that Acting Director Mulvaney had ratified the decision to proceed with this action. Pet. App. 20a-21a. The CFPB asserted that under the Federal Vacancies Reform Act

( “ FVRA” ), 5 U.S.C. §§ 3345-3349d , Director Mulvaney

was removable at will, Pet. App. 20a, and thus his ratification cured any constitutional deficiencies in the case,

id.

While the Fifth Circuit has yet to rule on the effect of

this purported ratification on All American’s constitu tional injury, it correctly rejected very similar arguments in Collins , 938 F.3d at 588-89. Specifically, the

17

highly splintered Fifth Circuit made two relevant rulings. First , the majority announcing Collins' merits

holding stated that under the FVRA, an acting director

of an administrative agency is not necessarily removable

at will. Id. at 589. Instead, absent language to the contrary in the agency’s enabling act which does not exist

here removal protections follow the office. Id. (distinguishing Swan v. Clinton, 100 F.3d 973 ( D.C. Cir. 1996)).

Second , a different majority announcing the Fifth Circuit’s remedial holding concluded that the removal restrictions must be excised because an agency head “could

not ratify any previous actions or even continue operating” so long as those restrictions remain in place. Id. at

594-95 ( Haynes, J. op.). Nevertheless, this remedial majority found that the Executive Branch can signal its ratification of a particular action by (among other things )

allowing briefs supporting that action to be filed in court.

Id.

1

—

—

Applying these two pieces of Collms , Acting Director

Mulvaney’s purported ratification of this and other acts

was both ineffective and legally irrelevant. As an initial

matter , under the merits-majority in Collins , he was not

removable during his tenure because the removal protections given to the CFPB’s director applied to him (even

if he was unlikely to enforce them ). Id. at 588-89. Thus,

under the remedial-majority, he could not ratify any outof-court actions by the agency. Id. at 594-95. This rule is

consistent with this Court’s prior precedent. See Pet. at

22-23 (summarizing prior cases ). Yet , under the remainder of the Fifth Circuit’s rule, the Executive perhaps

could have ratified the CFPB’s ( now-repudiated ) defense

of its own constitutionality by allowing the agency to file

18

briefs before the Fifth Circuit. Such an outcome makes

little sense, and it should be rejected as doing nothing

either to protect individual liberty or to “create incentives to raise Appointments Clause challenges.” Lucia v.

Sec. & Exch. Comm’n , 138 S. Ct. 2044, 2055 n. 5 (2018)

(cleaned up) (explaining the considerations driving remedies in appointments-clause jurisprudence).7

II . This Case Is an Appropriate Vehicle to Decide the

Questions Presented.

This Court should grant review in this case to definitively resolve the lingering question of whether the appropriate remedy for Congress’s impermissible attempt

to impinge on the President’s removal power changes

simply because an actor who claims to be removable at

will purports to ratify the decision of an otherwise unconstitutional agency.

First , as this Court recognized in granting review in

Seila , questions regarding the legality of the CFPB are

of vital importance. This Court has heldthat, the “[separation of powers was designed to implement a fundamental insight: Concentration of powers in the hand of a

single branch is a threat to liberty.” Clinton v. City of

New York , 524 U.S. 417, 450 (1998) ( Kennedy, J., concurring) ; see also, e.g. , Morrison , 487 U.S. at 697 (Scalia, J.,

dissenting) (“ No political truth is certainly of greater intrinsic value, or is stamped with the authority of more

A similar rule would apply to any purported ratification by

Director Kraninger before this Court’s ruling on Seila because

she is still legally insulated even if she is likely to accept a

termination decision by the President.

7

19

enlightened patrons of liberty.” (quoting THE FEDERALIST No. 47, at 301 (James Madison ) ( C. Rossiter ed.

1961))) (alterations omitted ); Youngstown Sheet & Tube

Co. v. Sawyer , 343 U.S. 579, 634 (1952) (Jackson, J., con curring) (“[T]he Constitution diffuses power the better

to secure liberty.” ).

The threat to liberty posed by the CFPB is uniquely

acute. In a supposed effort to protect consumers, the

Dodd- Frank Act deliberately stripped power that had

been spread across “seven different federal regulators ”

as well as their state-law counterparts. See S. REP. 111176, at 10 (2010) (asserting a purpose to reduce “fragmentation ” and supposed “regulatory arbitrage between

federal regulators and the [S]tates ” ); id. at 16-17 (discussing history of state regulation of areas relating to

consumer financial products ). Rather than shift that

power to an existing Department overseen by a cabinet

Secretary, however, Congress chose a “single-Director

design ” to “imbue the agency” with what certain of its

members considered the “requisite initiative and decisiveness to do the job” it had in mind, free from presidential influence. Seila House Br. at 4. The result is that

the Act concentrated enormous policy-setting authority

in the hands of a bureaucrat who need not seek the approval either of the electorate or an elected official.

The United States has conceded for nearly a year

that this concentration of power poses a threat to our

constitutional system and should be invalidated. Seila

BFR at 7 (citing Brief for the Respondent in Opposition

at 10, State Nat’l Bank of Big Spring v. Mnuchin , 139 S.

Ct. 916 (2019)). Nevertheless, first Acting Director Mulvaney and then Director Kraninger have continued to

20

effectuate and enforce various agency actions begun by

former Director Cordray. See, e.g. , Enforcement Ac tions , CFPB, https://www.consumerfinance.gov/policycompliance/enforcement/actions/ (last visited October

23, 2019) (listing subset of enforcement actions made

public, including federal complaint filed on October 1).

Whether an appropriately removable CFPB director

(or acting director ) can ratify the otherwise unconstitu tional actions of a predecessor is itself an important

question requiring this Court’s attention. As the Fifth

Circuit’s splintered decision demonstrates, there is con siderable confusion in this area. Compare Collins , 938

F.3d at 594-95 ( Haynes, J. op.) (concluding that the Executive had ratified Net Worth Sweep even if the FHFA

could not ), with id. at 608 ( Oldham, J. op.) (concluding

that the only appropriate remedy is to invalidate Net

Worth Sweep ), and id. at 628 (Willett, J. op.) (same for

different reasons) ; see also Consumer Fin, Prot. Bureau

v. RD Legal Funding, LLC , 332 F. Supp. 3d 729, 785

(S.D. N .Y. 2018) ( “The Court agrees with Defendants

that the CFPB’s Ratification does not address accurately

the constitutional issue raised in this case, which con cerns the structure and authority of the CFPB itself, not

the authority of an agent to make decisions on the

CFPB’s behalf.” ). Ratification has, at times, been permitted to address third -party reliance when technical defects render an officer’s appointment invalid. See Norton

v. Shelby County , 118 U.S. 425, 443 (1896). And Directors

Mulvaney and Kraninger have relied on this principle in

conducting the daily business of the agency. Kraninger ,

supra n. 2, at 2; Pet. App. 20a-21a.

21

This Court has, however , refused to extend that principle to cases where the office itself never existed because the statutory provision creating it was invalid.

Norton , 118 U.S. at 443; see also United States v. Eaton ,

169 U.S. 331, 335 (1898). If the Court is to change this

understanding, it should do so (if possible ) at the same

time it decides the legality of the CFPB’s structure to

avoid further proliferation of litigation. As the Fifth Circuit bluntly noted , sending cases like this back to the trial

courts without clear guidance on the question of remedy

“would cast one of the most financially consequential

agencies into chaos.” See Collins , 938 F.3d at 595.

Second , any further delay in definitively resolving the

issues presented in this case will prolong a period of regulatory confusion without appreciable benefit to this

Court. Due to its sprawling mandate, the CFPB interacts directly with innumerable participants in American

economic life from law firms such as the petitioner in

Seila to financial-services providers like All American to

individual consumers. For example, in addition to its

rulemaking activity, the CFPB has received more than

1.9 million complaints and obtained more than $13.2 billion in relief from enforcement actions during its

lifespan. CFPB, http://www.consumerfinance.gov/ (last

visited October 23, 2018). That number grows every day.

These economic actors need to understand the rules of

the road if the multi-billion -dollar market in consumer

financial products is to function. They also need to know

whether the current director can, with the stroke of a

pen, approve everything her predecessors did.

Until this Court definitively decides those questions ,

effective regulation of consumer financial products will

22

be hampered at both the federal and state levels. The

CFPB is the only federal entity with a current statutory

mandate to propound regulations and enforce policy under nineteen separate federal statutes relating to consumer financial products. Moreover, to the extent that

the CFPB has acted within the scope of a valid congressional mandate, its rules have preempted inconsistent

state law. Cf , e.g. , New York v. Fed. Energy Regulatory

Comm’n, 535 U.S. 1, 17-18 (2002). Until this Court determines not only whether the CFPB has a permissible statutory mandate but also whether its past actions can continue in effect, both regulators and the regulated will remain uncertain regarding their scope of permissible action. Further litigation will inevitably result.

At the same time, this is not a case in which the Court

will appreciably benefit from further development of the

law in lower courts. As the Ninth Circuit correctly noted ,

the arguments involved in this constitutional debate have

been “thoroughly canvassed.” Consumer Fin. Prot. Bureau v. Seila Law , 923 F.3d 680, 682 (9th Cir. 2019); see

generally Collins , 938 F.3d at 553-629 (addressing hundreds of pages of briefing and reinstating portions of the

53-page panel opinion ). It is extremely unlikely that any

further circuit-court ruling will aid this Court’s consideration of these issues.

*

The Court should grant review and hold that the appropriate remedy for Congress’s impermissible effort to

insulate federal economic policy does not change simply

because the action at issue was ratified by an acting director who claimed to be removable at will.

23

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

LESLIE RUTLEDGE

Attorney General of

Arkansas

KEN PAXTON

Attorney General of

Texas

CURTIS T. HILL, JR.

Attorney General of

Indiana

JEFFREY C. MATEER

First Assistant

Attorney General

DEREK SCHMIDT

Attorney General of

Kansas

KYLE D. HAWKINS

Solicitor General

Counsel of Record

JEFF LANDRY

Attorney General of

Louisiana

LANORA C. PETTIT

Assistant Solicitor General

DOUG PETERSON

Attorney General of

Nebraska

OFFICE OF THE

ATTORNEY GENERAL

P.O. Box 12548 (MC 059)

Austin, Texas 78711-2548

kyle.hawkins@oag.texas.gov

(512) 936-1700

24

DAVE YOST

Attorney General of

Ohio

MIKE HUNTER

Attorney General of

Oklahoma

ALAN WILSON

Attorney General of

South Carolina

SEAN REYES

Attorney General of

Utah

PATRICK MORRISEY

Attorney General of

West Virginia

NOVEMBER 2019