Amicus Curiae Brief — Seila Law LLC, Petitioner v. Consumer Financial Protection Bureau
Supreme Court briefDec 16, 2019
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No. 19-7
In the Supreme Court of the United States
S EILA L AW LLC, PETITIONER
v.
C ONSUMER F INANCIAL P ROTECTION B UREAU
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BRIEF FOR THE STATES OF TEXAS, ALABAMA,
ARKANSAS, GEORGIA, INDIANA, KANSAS,
LOUISIANA, NEBRASKA, OKLAHOMA,
SOUTH CAROLINA, SOUTH DAKOTA, UTAH,
AND WEST VIRGINIA AS AMICI CURIAE
IN SUPPORT OF PETITIONER
KEN PAXTON
Attorney General of Texas
KYLE D. HAWKINS
Solicitor General
Counsel of Record
JEFFREY C. MATEER
First Assistant
Attorney General
LANORA C. PETTIT
Assistant Solicitor General
OFFICE OF THE
ATTORNEY GENERAL
P.O. Box 12548 (MC 059)
Austin, Texas 78711-2548
Kyle.Hawkins@oag.texas.gov
(512) 936-1700
QUESTIONS PRESENTED
1. Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an
independent agency led by a single director, violates the
separation of powers.
2. Whether, assuming the Bureau is found unconstitutional, 12 U.S.C. § 5491(c)(3) can be severed from the
Dodd Frank Act.
(I)
T A B L E O F C O N T E N TS
Questions Presented ....................................................... I
Table of Authorities ..................................................... III
Interest of Amici Curiae................................................. 1
Summary of Argument ................................................... 2
Argument.......................................................................... 7
I.
The CFPB’s Design Violates the
Structural Protections of the Constitution ......... 7
A.
The CFPB’s structure violates the
Constitution’s horizontal separation
of powers by insulating an executive
officer from Presidential oversight ............ 8
B.
The CFPB’s structure poses grave
threats to the vertical separation of
powers in our federal system .................... 18
II. The Court Cannot Save This Enforcement
Proceeding by Severing the Director’s
For-Cause Removal Protections. ....................... 28
A.
Regardless of severability, this
enforcement proceeding must be
dismissed for lack of capacity .................... 28
B.
The for-cause removal provision is
not severable from the remainder
of Title X of Dodd Frank............................ 30
Conclusion ...................................................................... 37
(II)
TABLE OF AUTHORITIES
Page(s)
Cases
Alaska Airlines, Inc. v. Brock,
480 U.S. 678 (1987) ............................................ 31, 32, 33
Allen v. Wright,
468 U.S. 737 (1984) ........................................................ 29
Ayotte v. Planned Parenthood of N. New Eng.,
546 U.S. 320 (2006) ........................................................ 36
Bond v. United States,
564 U.S. 211 (2011) .................................................... 5, 19
Bowsher v. Synar,
478 U.S. 714 (1986) ........................................................ 10
Champlin Ref. Co. v. Corp. Comm’n of Okla.,
286 U.S. 210 (1932) ........................................................ 30
City of Arlington v. FCC,
569 U.S. 290 (2013) ........................................................ 25
Coleman v. Thompson,
501 U.S. 722 (1991) ........................................................ 19
Collins v. Mnuchin,
938 F.3d 553 (5th Cir. 2019) (en banc) ............... passim
Daimler Chrysler Corp. v. Cuno,
547 U.S. 332 (2006) ...................................................28-29
Ex parte Hennen,
38 U.S. (13 Pet.) 230 (1839) .......................................... 10
(III)
IV
Page(s)
Cases (continued):
FEC v. NRA Political Victory Fund,
6 F.3d 821 (D.C. Cir. 1993) ........................................... 29
Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta,
458 U.S. 141 (1982) ........................................................ 24
Free Enter. Fund v. PCAOB,
561 U.S. 477 (2010) ............................................... passim
Hill v. Wallace,
259 U.S. 44 (1922) .................................................... 31, 32
Humphrey’s Ex’r v. United States,
295 U.S. 602 (1935) ............................................... passim
Kisor v. Wilkie,
139 S. Ct. 2400 (2019) .................................................... 11
La. Pub. Serv. Comm’n v. FCC,
476 U.S. 355 (1986) ........................................................ 23
Lucia v. SEC,
138 S. Ct. 2044 (2018) .................................................... 29
Lujan v. Defenders of Wildlife,
504 U.S. 555 (1992) .................................................... 6, 29
Marquette Nat’l Bank of Minneapolis v.
First of Omaha Serv. Corp.,
439 U.S. 299 (1978) ....................................................... 20
Massachusetts v. EPA,
549 U.S. 497 (2007) .......................................................... 1
Metro. Wash. Airports Auth. v.
Citizens for Abatement of Aircraft Noise, Inc.,
501 U.S. 252 (1991) .......................................................... 2
V
Page(s)
Cases (continued):
Mistretta v United States,
488 U.S. 361 (1989) ........................................................ 26
Moffat Tunnel League v. United States,
289 U.S. 113 (1933) ........................................................ 29
Morrison v. Olson,
487 U.S. 654 (1988) .............................................. 2, 17, 18
Murphy v. NCAA,
138 S. Ct. 1461 (2018) .............................................. 32, 35
Myers v. United States,
272 U.S. 52 (1926) ................................................. passim
NLRB v. Noel Canning,
573 U.S. 513 (2014) .................................................. 15, 16
New York v. United States,
505 U.S. 144 (1992) .................................................... 2, 19
PHH Corp v. CFPB,
881 F.3d 75 (D.C. Cir. 2018) (en banc) ............... passim
Pollock v. Farmer’s Loan & Tr. Co.,
158 U.S. 601 (1895) ........................................................ 31
Printz v. United States,
521 U.S. 898 (1997) .......................................................... 8
Relfe v. Rundle,
103 U.S. 222 (1880) ........................................................ 29
Reno v. ACLU,
521 U.S. 844 (1997) .................................................. 30, 31
VI
Page(s)
Cases (continued):
Ryder v. United States,
515 U.S. 177 (1995) ........................................................ 29
Texas v. United States,
809 F.3d 134 (5th Cir. 2015),
aff’d by an equally divided Court,
136 S. Ct. 2271 (2016) (per curiam) ............................... 1
United States v. Jackson,
390 U.S. 570 (1968) ........................................................ 31
Waters v. Wachovia Bank, N.A.,
550 U.S. 1 (2007) ............................................................ 33
Whole Woman’s Health v. Hellerstedt,
136 S. Ct. 2292 (2016) .................................... 7, 30, 31, 36
Wiener v. United States,
357 U.S. 349 (1958) ........................................................ 13
Constitutional Provisions, Statutes, and Rules
U.S. CONST. art. II: .................................................... passim
§ 1, cl. 1 .............................................................................. 8
§ 3 ....................................................................................... 8
U.S. CONST. art. VI, cl. 2....................................................... 7
12 U.S.C.:
§ 4512(a)-(b) ...................................................................... 3
§ 5302 ........................................................................... 6, 31
§ 5481(6) .......................................................................... 21
§ 5481(15) ........................................................................ 21
§ 5491(b) .......................................................................... 16
§ 5491(b)-(c) ...................................................................... 3
VII
Page(s)
Constitutional Provisions, Statutes, and Rules (ctd.):
12 U.S.C. (continued):
§ 5491(c) .......................................................................... 17
§ 5491(c)(3) ............................................................ passim
§ 5497(a)(1) ..................................................................... 34
§ 5497(a)(2)(A)(iii) .......................................................... 34
§ 5497(a)(2)(B) ................................................................ 34
§ 5511(a) ............................................................................ 7
§ 5511(c) ............................................................................ 7
§ 5512(b)(1) ..................................................................... 17
§ 5536(a)(1)(B) ................................................................ 21
§§ 5562-64 ......................................................................... 7
§ 5562(c) .......................................................................... 17
§ 5562(e)(1) ..................................................................... 28
§ 5563(a) .......................................................................... 17
§ 5564 ............................................................................... 17
15 U.S.C.:
§1011 et seq. ................................................................... 20
§ 8232 ............................................................................... 31
§ 8302 ............................................................................... 32
Dodd Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203,
124 Stat. 1376 (2010) ............................................ passim
Housing and Economic Recovery Act of 2008,
Pub. L. No. 110-289, 122 Stat. 2654 (2008)................... 3
Telemarketing Sales Rule,
16 C.F.R. pt. 310 .............................................................. 1
VIII
Page(s)
Miscellaneous
51 Cong. Rec. 10,376 (1914) .................................................. 4
AKHIL REED AMAR, AMERICA’S CONSTITUTION:
A BIOGRAPHY (2005) ............................................... 8
ANNALS OF CONG. (1789) (Joseph Gales ed., 1834) ........... 9
Andra Ghent, The Historical Origins of
America’s Mortgage Laws, Research Inst.
For Hous. Am. (2012),
https://www.mba.org/assets/Documents/Res
earch/RIHA/82406_11922_RIHA_Origins_R
eport.pdf ......................................................................... 20
Brief of Members of Congress Supporting
Rehearing En Banc, PHH Corp v. CFPB,
881 F.3d 75, 165 (D.C. Cir. 2018) (en banc) ................ 35
Charles Kruly, Self-funding and Agency
Independence,
81 GEO. WASH. L. REV. 1733 (2013) ........................34-35
Christopher L. Peterson, Consumer Fed’n of
Am., Dormant: The Consumer Financial
Protection Bureau’s Law Enforcement
Program in Decline (2019),
https://consumerfed.org/reports/dormantthe-consumer-financial-protection-bureauslaw-enforcement-program-in-decline/ ........................ 26
IX
Page(s)
Miscellaneous (ctd.):
Comment Letter from John Ryan, President
Conference of State Bank Supervisors, to
Monica Jackson, CFPB (May 21, 2018), https://
www.csbs.org/comment-letter-request-informationregarding-bureaus-supervision-program ........................ 25
Conference of State Bank Supervisors,
Relationship Lending Model at Risk?,
Nov. 9, 2017, https://www.csbs.org/
relationship-lending-model-risk....................................... 22
David H. Carpenter, Cong. Research Serv.,
R.41839, Limitations on the Secretary of the
Treasury’s Authority to Exercise the Powers
of the Bureau of Consumer Financial
Protection 1 (2011), https://www.llsdc.org/
assets/DoddFrankdocs/crs-r41839.pdf........... 17, 33, 34
Ernest A. Young, State Standing and
Cooperative Federalism,
94 NOTRE DAME L. REV. 1893 (2019) ......................... 24
X
Page(s)
Miscellaneous (ctd.):
Examining De-Risking and Its Effect on Access to
Financial Services Before the Subcommittee on
Financial Institutions and Consumer Credit,
House Committee on Financial Services,
115th Cong. 2d. (2018) (Testimony of Bryan A.
Schneider, Secretary of Illinois Department of
Financial and Professional Regulation Division
of Banking, on Behalf of the Conference of State
Bank Supervisors), https://www.csbs.org/sites/
default/ files/2018-02/ De-Risking%20Hill%20
Testimony%20Feb_15_FINAL.2.pdf .............20-21, 24, 25
JENNIFER L. SELIN & DAVID E. LEWIS,
SOURCEBOOK OF UNITED STATES
EXECUTIVE AGENCIES (2d ed. 2018) ...............12-13, 15
JOSEPH STORY, COMMENTARIES ON THE
CONSTITUTION OF THE UNITED STATES (1833)........... 9
Kirti Datla & Richard Revesz,
Deconstructing Independent Agencies (and
Executive Agencies),
98 CORNELL L. REV. 769 (2013)................................... 14
Letter from Brian Schatz et al. to Leandra
English as “Acting Director, Consumer
Financial Protection Bureau,” and Mick
Mulvaney, Director, Office of Management
and Budget (Feb. 7, 2018) ...................................... 21, 26
XI
Page(s)
Miscellaneous (ctd.):
Letter from Kathleen L. Kraninger, Director of
the CFPB, to Jerome Powell, Chairman,
Board of Governors of the Federal Reserve
System (Sept. 24, 2019)................................................. 34
Letter from Rob Portman, et al., to Richard
Cordray, Director CFPB (Oct. 30, 2013) ................... 22
Marc Labonte, Cong. Research Serv., R.44918, Who
Regulates Whom? An Overview of the U.S.
Financial Regulatory Framework (2017),
https://fas.org/sgp/crs/misc/R44918.pdf ......... 20, 21, 23
Neomi Rao, Removal: Necessary and
Sufficient for Presidential Control,
65 ALA. L. REV. 1205 (2014) ........................................... 9
Saikrishna Prakash,
New Light on the Decision of 1789,
91 CORNELL L. REV. 1021 (2006) ............................... 10
Senate Comm. on Gov’t Operations, Cong.
Oversight of Regulatory Agencies, 95th
Cong., 1st Sess. (1977) .................................................. 34
Senate Comm. on Governmental Affairs,
Study on Federal Regulations, S. Doc.
No. 95-91 (1977) ......................................................4-5, 24
S. Rep. 111-176 (2010) ................................................... 18, 22
XII
Page(s)
Miscellaneous (ctd.):
Steve Vockrodt, CFPB drops Kansas
payday lending case, stoking fears
Trump is backing off the industry,
THE KANSAS CITY STAR, Jan. 19, 2018 ....................... 27
SUSAN BERSON & DAVID BERSON, THE DODDFRANK WALL STREET REFORM AND
CONSUMER PROTECTION ACT: FROM
LEGISLATION TO IMPLEMENTATION TO
LITIGATION (2012) ................................................... 23, 35
THE FEDERALIST (C. Rossiter ed., 1961)................ passim
THE FEDERALIST (J. Cooke ed., 1961) ............................. 11
INTEREST OF AMICI CURIAE
Amici curiae are the States of Texas, Alabama, Arkansas, Georgia, Indiana, Kansas, Louisiana, Nebraska,
Oklahoma, South Carolina, South Dakota, 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), aff’d by an 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 compel
Seila Law LLC, a private law firm, to provide information as part of an investigation into whether it violated
the Telemarketing Sales Rule, 16 C.F.R. pt. 310, while
providing debt-relief services to its clients. States enforce robust consumer protections, including limitations
on unfair trade practices and law firms’ marketing activities. If Congress wishes to permit federal agencies to assist or preempt States in protecting consumers and policing deceptive trade practices, 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
No counsel for any party authored this brief, in whole or in
part. No person or entity other than amici contributed monetarily to its preparation or submission.
1
(1)
2
Constitution. Moreover, the CFPB’s for-cause removal
protections cannot, consistent with congressional design,
be severed from the provisions empowering the CFPB to
oversee vast swaths of federal economic regulation.
SUMMARY OF ARGUMENT
I. The “ultimate purpose” of the structural provisions
of the Constitution “is to protect the liberty and security
of the governed.” Metro. Wash. Airports Auth. v. Citizens for Abatement of Aircraft Noise, Inc., 501 U.S. 252,
272 (1991). That is why the Framers viewed the “principle of separation of powers”—both horizontally among
the three co-equal branches of the federal government
and vertically between those branches and the States—
“as the absolute central guarantee of a just government.”
Morrison v. Olson, 487 U.S. 654, 697 (1988) (Scalia, J.
dissenting); see also, e.g., New York v. United States, 505
U.S. 144, 181 (1992). This case calls upon the Court to
vindicate that principle by striking down an unlawful enforcement action pursued by an administrative agency
built around a single unaccountable and unchecked administrator.
That agency—the CFPB—was created in 2010 under
Title X of the Dodd Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376
(2010) (“Dodd Frank”). Dodd Frank “transfers to the
Bureau much of the authority to regulate consumer financial products and services that had been vested in
other federal agencies.” Resp. Br. 3. Unlike the federal
agencies the CFPB replaced, however, the CFPB is
headed neither by a group of commissioners nor by an
3
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 Senate to a five-year term. 12 U.S.C. § 5491(b)-(c).
She 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, this Court has never ruled upon the legality of an
“independent agency exercising substantial executive
authority” that “has . . . been headed by a single person.”
PHH Corp v. CFPB, 881 F.3d 75, 165 (D.C. Cir. 2018) (en
banc) (Kavanaugh, J., dissenting) (emphasis in original).
Amici are aware of only one other federal agency with an
analogous structure and scope of authority: 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, the 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). Since the petition
was filed, a splintered Fifth Circuit has held that the
FHFA’s structure impermissibly “infringes Article II.”
Collins v. Mnuchin, 938 F.3d 553, 587 (5th Cir. 2019) (en
banc). The court reasoned that when an agency is headed
by a single director, limits on the President’s removal
4
power “do[] not fit within the recognized exception for
independent agencies.”2 Id.
A. This Court should adopt the view of the Fifth Circuit majority and the dissents in PHH. 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 166-67 (Kavanaugh, J., dissenting).
The Constitution forbids concentrating such unchecked authority in 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 and permits “precedents and traditions and a continuous policy and would be free from the effect of . . .
changing incumbency.” 51 Cong. Rec. 10,376 (1914)
(Federal Trade Commission); Humphrey’s Ex’r v.
United States, 295 U.S. 602, 629 (1935). An agency built
around a sole administrator, by contrast, is unchecked by
the constraints of group decisionmaking among members appointed by different presidents. PHH Corp., 881
F.3d at 166, 178 (Kavanaugh, J., dissenting) (citing
5 Senate Committee on Governmental Affairs, Study on
Both parties have sought certiorari in the Collins case. See
Mnuchin v. Collins, No. 19-563; Collins v. Mnuchin, No. 19422.
2
5
Federal Regulations, S. Doc. No. 95-91, at 35 (1977)); see
also Collins, 938 F.3d at 599-607 (Oldham, J., concurring) (tracing history of presidential removal powers to
founding period). 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.” PHH Corp.,
881 F.3d at 166 (Kavanaugh, J., dissenting).
B. This concentration of power in the hands of a single, unaccountable director also impedes the vertical
separation of powers within our federal system. No less
than the horizontal separation of powers, “[f]ederalism
also protects the liberty of all persons . . . by ensuring
that laws enacted in excess of delegated governmental
power cannot direct or control their actions.” Bond v.
United States, 564 U.S. 211, 222 (2011). The CFPB
should be reviewed with care as it reflects a significant
change to the distribution of power, shifting the primary
authority of protecting individual consumers from States
to the federal government. Moreover, the structure of
the CFPB significantly impedes the vertical separation
of powers because the President cannot ensure that all
officers wielding federal executive power row in the same
regulatory direction. The result is that States can be left
adrift as to how and to what extent they may enforce
their own laws, to the detriment of the consumers that
Dodd Frank was nominally passed to protect.
II. These structural defects cannot be removed from
the CFPB without destroying the integrity of the vessel
created by Congress to hold the numerous powers assigned by Dodd Frank.
6
A. Before the Court can reach the question, this case
runs aground because the CFPB lacked capacity to file
it. As the party invoking federal jurisdiction, the CFPB
must establish the right and power to bring its claim. Cf.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 569 n.4
(1992). Capacity to sue is a fundamental, if often undiscussed, component of that right. Because the removal
protection was in place at the time it brought suit, the
CFPB lacked such capacity. Severance of Section
5491(c)(3) cannot salvage the CFPB’s proceeding because it cannot solve that problem.
B. Moreover, Section 5491(c)(3) is not severable from
the remainder of Title X. Severability turns on a deceptively simple counterfactual: Would Congress have
passed Dodd Frank, creating and empowering the CFPB
as it currently exists, had it known that the director
would not be protected from presidential influence?
Dodd Frank has a severability clause, indicating a congressional preference against invalidating the entirety of
Dodd Frank, which addresses many issues unrelated to
the CFPB. 12 U.S.C. § 5302. Nevertheless, when
weighed against the statute’s history and structure (as
this Court’s precedent requires), the evidence shows that
Congress would not have granted the CFPB many of the
powers contained in Title X had Congress known that the
director would be removable at will. Such a grant would
have moved enormous economic power from entities
over which Congress had significant influence to an individual over whom it would have almost no influence. Such
an outcome is implausible. Though, in theory, the Court
could determine whether Congress would have wanted
7
an accountable CFPB to exercise particular powers, it is
up to Congress to engage in this fundamentally legislative act. Whole Woman’s Health v. Hellerstedt, 136 S. Ct.
2292, 2319 (2016).
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 services” and that these markets be “fair, transparent, and
competitive.” 12 U.S.C. § 5511(a). The CFPB may also
proscribe rules implementing consumer-protection laws;
conduct investigations of market actors; and enforce consumer-protection laws in administrative proceedings and
in federal court. See, e.g., id. §§ 5511(c), 5562-64. Its actions preempt any state law to the contrary. U.S. CONST.
art. VI, cl. 2. The consolidation of such sweeping power in
the hands of an administrative agency headed by a single
director runs afoul of both the horizontal and vertical separation of powers. The history and structure of the CFPB
show that this structure is integral to its function and cannot be severed.
I.
The CFPB’s Design Violates the Structural Protections of the Constitution.
Our constitutional design is built on the bedrock principle that “[t]he accumulation of all powers, legislative,
executive, and judiciary in the same hands . . . may justly
be pronounced the very definition of tyranny.” THE FEDERALIST No. 47, at 298 (Madison) (C. Rossiter ed., 1961).
To guard against such oppression, the Founders divided
8
power horizontally among the three co-equal branches of
the federal government and vertically between that government and the States. By concentrating vast swaths of
federal power in the hands of one bureaucrat, the CFPB
departs from these moorings.
A. The CFPB’s structure violates the Constitution’s
horizontal separation of powers by insulating an
executive officer from Presidential oversight.
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.
1.
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, AMERICA’S CONSTITUTION: A BIOGRAPHY 197 (2005). The
Framers demanded “unity in the Federal Executive” to
guarantee “both vigor and accountability.” Printz v.
United States, 521 U.S. 898, 922 (1997); THE FEDERALIST No. 70, at 427 (Hamilton) (noting that without such
unity, the people lose their “two greatest securities”
against public malfeasance, the “restraints of public
opinion” and the “opportunity of discovering” any abuse
9
of trust). 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 is why, “as part of his executive power,” the
President may “select 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. PCAOB, 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 and Sufficient for Presidential Control, 65 ALA.
L. REV. 1205, 1215 (2014) (“The text and structure of Article II provide the President with the power to control
subordinates within the executive branch.”).
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.
10
Saikrishna Prakash, New Light on the Decision of 1789,
91 CORNELL L. REV. 1021, 1067 (2006) (“After a great
deal of high-level debate leading to the Decision of 1789,
Congress decided that the President has 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); 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). That risk, in turn, would intolerably impinge on the President’s duty to execute the law and 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, “[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; accord THE FEDERALIST No. 70,
at 423 (noting that the Executive cannot properly function if power, though “vest[ed] ostensibly in one man,”
remains “subject in whole or in part to the control and
cooperation of others”).
The Court recognized this common-sense understanding in Myers v. United States, when it struck down
as unconstitutional a statutory provision that restricted
11
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 (Hamilton) (J. Cooke ed., 1961)); cf. Kisor
v. 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.”).
2.
Congress may restrict the President’s removal power only as to independent, multiheaded commissions.
This Court has recognized only one narrow exception
to the general rule in Myers. In 1935, this Court held that
12
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.
In a thinly reasoned opinion, 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.
Predictably, following Humphrey’s Executor, independent agencies came to populate all corners of the federal government. There is “no authoritative list” of such
agencies. JENNIFER L. SELIN & DAVID E. LEWIS,
SOURCEBOOK OF UNITED STATES EXECUTIVE AGENCIES
13
12 (2d ed. 2018); id. at 5 (estimating that approximately
80 exist). But they clearly “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 affect the lives
of countless Americans in significant ways, including the
Federal Reserve Board, the Federal Communications
Commission, the Federal Deposit Insurance Company
(FDIC), the Securities and Exchange Commission
(SEC), and many others. Id. at 173; see also SELIN &
LEWIS, supra, at 97 (listing agencies with for-cause removal protections).
Importantly, almost without exception, these 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
members with staggered terms, and no more than three
of them could be of the same political party. 295 U.S. at
619-20. 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 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
Humphey’s Executor, . . . we held that Congress can,
14
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.”).
In the past, courts have pointed to 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 multimember 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. This
structure further discourages arbitrary, unsound agency
actions driven by the whims of the one individual. Id.
Each commissioner or board member, in other words,
acts as a check on the others through the process of “deliberate decisionmaking.” Kirti Datla & Richard Revesz,
Deconstructing Independent Agencies (and Executive
Agencies), 98 CORNELL L. REV. 769, 794 (2013).3
As a practical matter, the President has also maintained significant pull over these agencies, if not direct control, because
he can typically appoint the chair. See PHH, 881 F.3d at 189
n.15 (Kavanaugh, J., dissenting). Because the chair is usually
a multi-member commission’s “most dominant figure,” this allows the President to “retain policy influence” by setting the
agency’s budget and agenda. Datla & Revesz, supra, at 81819.
3
15
Second, multi-member independent agencies have a
historical tradition since Humphrey’s Executor. PHH
Corp., 881 F.3d at 177-78 (Kavanaugh, J., dissenting)
(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-power cases, “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).4
Those legislators who supported and continue to defend Dodd Frank read these cases to “allow[] Congress
to provide limited protection against removal” whenever
it decides that an officer should “perform [his] duties
without executive leave” and “free from executive control.” Amicus Br. of U.S. House of Representatives 7-8,
To be sure, history includes some agencies headed by single
individuals who have served fixed terms. See S ELIN & L EWIS ,
supra, at 48-49. But those agency heads typically lack forcause removal protection. Id. Apart from the FHFA and
CFPB, only two agencies (the Office of the Special Counsel
and the Social Security Administration) have single heads with
removal protections, and those two have jurisdictions limited
to enforcing federal law against federal officers or pertaining
to federal spending. Id. For the reasons Petitioner explains (at
23-24), the legitimacy of these agencies is also subject to question.
4
16
(filed by divided Bipartisan Legal Advisory Group)
[hereinafter “Seila House Br.”]. Such a rule is without
limits and is irreconcilable with Myers, Noel Canning,
and Free Enterprise Fund. Moreover, it would undermine the foundational principle that the three branches
of government are to be co-equal so that “[a]mbition
[may] be made to counteract ambition.” THE FEDERALIST No. 51, at 319 (Madison). The Founders “fortif[ied]”
the Executive, making it the only place in our government where power is concentrated in the hands of a single individual, precisely because “[i]n republican government the legislative authority necessarily predominates.” Id. at 319-20. If Congress could simply decide
that it wanted certain duties to be performed “free from
executive control,” Seila House Br. 8, such measures
would be for naught. See Resp. Br. 26-30.
In sum, only independent agencies with several directors serving staggered terms can possibly fall within the
Humphrey’s Executor exception to the Myers rule. To
hold otherwise would erode the Founder’s use of diffuse
and checked power to protect liberty.
3.
The CFPB’s structure unconstitutionally
vests unchecked power in a single director
removable only for cause.
This Court’s precedent thus makes clear that the
CFPB’s structure is impermissible under Article II. See
Myers, 272 U.S. at 117. 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).
She serves a five-year term and may only be fired for
17
“inefficiency, neglect of duty, or malfeasance in office.”
Id. § 5491(c). And she wields “unmistakably executive responsibilities.” PHH Corp., 881 F.3d at 80 (majority op.).
The director wields that executive power over nineteen different federal consumer-protection statutes,
some of which have existed for many years, but others of
which were created in Dodd Frank itself. David H. Carpenter, Cong. Research Serv., R.41839, Limitations on
the Secretary of the Treasury’s Authority to Exercise the
Powers of the Bureau of Consumer Financial Protection
1
(2011),
https://www.llsdc.org/assets/DoddFrankdocs/crs-r41839.pdf. She may investigate compliance
with those statutes. 12 U.S.C. § 5512(b)(1). She may (as
she did in this case) issue civil-investigative demands. Id.
§ 5562(c). She may institute enforcement actions and
conduct “adjudication proceedings.” Id. § 5563(a). And
she may sue in state or federal court to enforce consumer-protection laws. Id. § 5564.
Those facts reveal the fundamental flaw in the Ninth
Circuit’s conclusion that this case is “control[led by the]
standard enunciated in Morrison v. Olson.” Pet. App.
12a. As this 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 lac[k] [of] policymaking or significant administrative authority.” Morrison, 487 U.S. at 691. But the
Court said nothing about whether Congress may impose
similar limits on the President’s ability to remove a
18
principal officer who has “all but exclusive power to make
and enforce rules” under numerous 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 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.
Myers provides that the President’s subordinates
must be removable at will. Humphrey’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 falls
outside that exception, thus violating Article II by preventing the President from carrying out the executive
power.
B. The CFPB’s structure poses grave threats to the
vertical separation of powers in our federal system.
The CFPB’s structure is especially troubling because
it also erodes the vertical separation of powers. The
CFPB was designed, not only to concentrate power from
“seven different federal regulators” that have previously
overseen consumer financial products, but also to eliminate supposed “regulatory arbitrage between federal
regulators and the [S]tates.” S. Rep. 111-176, at 10
(2010). In so doing, Dodd Frank worked a major change
19
in our federal system by taking the primary role of protecting consumers from States and placing it in a federal
agency. The Court should scrutinize this shift carefully
because federalism—no less than the separation of federal powers—serves to “protect[] the liberty of the individual” by “denying any one government complete jurisdiction over all the concerns of public life.” Bond, 564
U.S. at 222.5 By insulating the CFPB director from presidential control, Dodd Frank exacerbates the impact of
this shift by empowering a second captain to chart the
course for federal economic policy. This leaves state regulators without a clear guide as to how to navigate complex federal regulations, and by extension, to enforce
their own laws to protect their own citizens.
1.
Dodd Frank shifts the balance of power between the national and state governments.
Since the Founding, States have generally been the
first line of defense for consumers. Indeed, this view was
so engrained that Alexander Hamilton scoffed at the idea
that federal officials would even want to become involved
in the “administration of private justice between the citizens of the same State.” THE FEDERALIST No. 17, at 114
(opining that such “domestic” matters “hold out slender
allurements to ambition” for national actors).
This principle has extended to state regulation of consumer financial products. Our system has long allowed
See also, e.g., New York, 505 U.S. at 181 (citing Coleman v.
Thompson, 501 U.S. 722, 759 (1991) (Blackmun, J., dissenting)).
5
20
banks and other financial institutions to opt whether to
be chartered—and therefore primarily regulated—under federal or state law. See generally Marc Labonte,
Cong. Research Serv., R.44918, Who Regulates Whom?
An Overview of the U.S. Financial Regulatory Framework (2017), https://fas.org/sgp/crs/misc/R44918.pdf.
Consumer financial products in particular were usually
regulated at the state level, including, for example: insurance, 15 U.S.C. §1011 et seq.; mortgages, Andra
Ghent, The Historical Origins of America’s Mortgage
Laws, Research Inst. For Hous. Am. (2012),
https://www.mba.org/assets/Documents/Research/RIHA/82406_11922_RIHA_Origins_Report.pdf;
disclosure rules for local distribution of securities, Labonte, supra, at 25; and the rates that banks may charge
on credit cards, Marquette Nat’l Bank of Minneapolis v.
First of Omaha Serv. Corp., 439 U.S. 299, 318 n.31 (1978).
As the economy developed, financial institutions became larger, leading to efforts to make laws more uniform across states or to calls for federal regulation.
Ghent, supra, at 3 & n.1. Nevertheless, States have maintained a significant role in regulating financial services
and service providers within their borders. Id.; Labonte,
supra, at 24-26. To this day, States remain the chartering
authority and primary regulators of 78% of the nation’s
banks and 23,000 non-depository financial-services providers.6
Examining De-Risking and Its Effect on Access to Financial
Services Before the Subcommittee on Financial Institutions
and Consumer Credit, House Committee on Financial
6
21
The advent of the CFPB worked a significant shift of
this authority. The jurisdiction of federal financial regulators has typically been defined either by the type of institution (e.g., the Federal Reserve) or the type of product (e.g., the SEC). The CFPB, by contrast, seeks to regulate institutions, activities, and products based largely
on the identity of the end user. Labonte, supra, at Figure
1. This grants the CFPB regulatory authority throughout the financial sector and beyond. 12 U.S.C. §§ 5481(6),
5481(15), 5536(a)(1)(B) (providing regulatory authority
to those engaged in a broad range of regulated activity).
And it leads to considerable gray area for the agency to
define its own jurisdiction.7
The effects of this transfer of authority are significant. Money moves like the tide in a constant competition
for limited capital. This leads to difficult policy questions
regarding how to balance competing interests. For example, community banks can be the best way to promote
small business, but they lack the resources to shoulder
Services, 115th Cong. 2d. (2018) (Testimony of Bryan A.
Schneider, Secretary of Illinois Department of Financial and
Professional Regulation Division of Banking, on Behalf of the
Conference
of
State
Bank
Supervisors
(CSBS)),
https://www.csbs.org/sites/default/files/2018-02/De-Risking%20Hill%20Testimony%20Feb_15_FINAL.2.pdf.
Cf., Letter from Brian Schatz et al. to Leandra English as
“Acting Director, Consumer Financial Protection Bureau,”
and Mick Mulvaney, Director, Office of Management and
Budget (Feb. 7, 2018) (discussing the CFPB’s aborted probe
into Equifax data breach).
7
22
heavy reporting requirements.8 Allowing the sellers of
large commercial goods to compete with financial institutions may be the best way to ensure that consumers
receive competitive financing arrangements, but the results can appear to some to be unfair or to lack transparency.9 Before Dodd Frank, individual state legislatures
could decide what solutions were right for their communities. Now, in the name of preventing “regulatory arbitrage,” S. Rep. 111-176, at 10, Congress has allowed a
single, unelected and unaccountable bureaucrat what is
effectively a veto over these legislatures’ chosen solutions.
2.
The CFPB’s structure exacerbates these
federalism concerns by creating two
sources of federal financial law.
This regulatory veto is particularly problematic because the CFPB’s structure places the director outside
of the control of the President who was provided unified
authority to execute laws precisely so that a “dependence
on the people” serves as the “primary control on the government.” THE FEDERALIST No. 51 at 319. The CFPB’s
remit is capacious, but it must work with others both in
state and federal governments to ensure a properly functioning marketplace. The President’s inability to oversee
that cooperation at the federal level impacts not only the
CSBS, Relationship Lending Model at Risk?, Nov. 9, 2017,
https://www.csbs.org/relationship-lending-model-risk.
8
Letter from Rob Portman, et al., to Richard Cordray, Director CFPB (Oct. 30, 2013).
9
23
ability of individuals to comply with federal law but that
of States to enforce their own sovereign policies.
While extremely powerful, the CFPB has to coordinate with other regulators on several different levels. At
the policy-setting level, “while the Act would seem to divide” the world cleanly between consumer and other
types of financial products, “in practice, the realities of
technology and economics belie such a clean parceling of
responsibility.” La. Pub. Serv. Comm’n v. FCC, 476 U.S.
355, 360 (1986). Similarly, at the enforcement level, the
CFPB has full, direct supervisory authority only over institutions of a certain size. SUSAN BERSON & DAVID BERSON, THE DODD-FRANK WALL STREET REFORM AND
CONSUMER PROTECTION ACT: FROM LEGISLATION TO
IMPLEMENTATION TO LITIGATION 53-54 (2012). Preexisting regulators retain direct supervision of other institutions’ compliance with CFPB regulations, though they
must respond to recommendations from the CFPB
within a certain period. Id.
These complex interdependencies mean that by necessity as much as by statute, the CFPB must coordinate
with federal agencies that are accountable to the President and with States to accomplish its regulatory functions. State financial regulatory authorities have long
had working relationships with federal regulators
charged with overseeing the safety and soundness of our
financial institutions. Labonte, supra, at Table 1 (listing
regulators). Maintaining consistency and clarity in these
relationships is crucial because under the Supremacy
Clause, and this Court’s jurisprudence, the actions of all
federal regulators preempt state laws and regulations to
24
the contrary. E.g., Fid. Fed. Sav. & Loan Ass’n v. de la
Cuesta, 458 U.S. 141, 154 (1982). Because these federal
and state agencies have interlocking jurisdictions, arbitrary shifts in policy at one regulator can throw the entire system into disarray. Ernest A. Young, State Standing and Cooperative Federalism, 94 NOTRE DAME L.
REV. 1893, 1903-05 (2019). It is for that reason that until
2008, nearly all federal regulators were multi-member
independent agencies whose structure was designed specifically to improve that consistency. S. Doc. 95-91 at 2930. The exceptions were Bureaus within the Department
of Treasury that were (and are) accountable to the President (e.g., the Comptroller of the Currency).
The advent of the CFPB has complicated these relationships by creating the possibility of inconsistent federal economic policies. By way of example, consider the
transaction undertaken by parents in Kansas who wish
to wire money to a child, who is studying at a university
in Virginia. This sounds like a simple transaction. But, in
reality, this type of “money services business” touches
the jurisdiction of two state banking authorities (in Kansas and Virginia) as well as multiple federal agencies, including the CFPB, Treasury’s Financial Crimes Enforcement Network, and the Internal Revenue Service.
See generally Schneider, supra n.6. If criminal charges
become necessary, the Department of Justice and the local Office of the U.S. Attorney may also become involved.
That is a lot of regulators patrolling the same pool of entities.
To keep themselves from colliding, regulators have
written agreements to share information and coordinate
25
examination and enforcement activities. Id. at 6-7. These
agreements are crucial because investigating and prosecuting widespread financial crimes that affect multiple
consumers is both time-consuming and expensive. Comment Letter from John Ryan, President Conference of
State Bank Supervisors, to Monica Jackson, CFPB (May
21, 2018), https://www.csbs.org/comment-letter-requestinformation-regarding-bureaus-supervision-program.
Without these agreements, duplicated efforts would hinder enforcement at both the state and federal levels.
The CFPB’s unprecedented structure interferes with
these necessary relationships. To function properly, intergovernment agreements require clear channels of authority and consistent enforcement. The structure of the
CFPB obstructs these channels because it allows for the
very real possibility that the CFPB’s director and the
President will be of different political parties and pursue
different policy aims. See Resp. Br. 28-29. This can lead
to States receiving both unclear and inconsistent guidance on how to navigate enforcing their own policies in
compliance with federal law.
First, by granting unilateral executive authority to
the CFPB’s director, Dodd Frank created two binding
sources of federal financial law. Because the CFPB and
the Treasury Department are federal agencies, their interpretations of any law that arguably falls within their
jurisdiction preempt state law. City of Arlington v. FCC,
569 U.S. 290, 296-97 (2013). If these agencies do not
agree, there would be two source of federal law that are
theoretically binding on States and their citizens. Even
on a temporary basis, this is impermissible because the
26
Constitution does not permit such “a sort of junior-varsity” President. Mistretta v United States, 488 U.S. 361,
427 (1989) (Scalia, J., dissenting). But because the
CFPB’s director is appointed for five years, it is possible
that this lack of clarity could persist for more than an entire presidential term.
An exaggerated example of this confusion can be seen
when Leandra English claimed to be the CFPB director
and continued the policies that her predecessor had put
into place. This effort was supported by several Senators. Letter from Schatz, supra n.7. At the same time the
President’s choice, Acting Director Mick Mulvaney began to chart a new course, leaving States and regulated
entities having to choose between the two. Id.
Second, for the reasons discussed above, because the
CFPB’s structure lacks the traditional features designed
to promote consistency in financial policy, any change of
regime can bring wide swings in policy choices and enforcement priorities. See Christopher L. Peterson, Consumer Fed’n of Am., Dormant: The Consumer Financial
Protection Bureau’s Law Enforcement Program in Decline (2019), https://consumerfed.org/reports/dormantthe-consumer-financial-protection-bureaus-law-enforcement-program-in-decline/ (analyzing statistical changes
between Cordray and his successors). This can harm individual rights and impede the ability of States to enforce
their own laws.
Again, this is best shown by way of example: After
the 2016 election but before the resignation of Director
Cordray, the CFPB brought an enforcement action
against four payday lenders in Kansas, which was
27
promptly dropped after Acting Director Mulvaney took
office. Cf. Steve Vockrodt, CFPB drops Kansas payday
lending case, stoking fears Trump is backing off the industry, THE KANSAS CITY STAR, Jan. 19, 2018,
https://www.kansascity.com/news/politics-government/article195623824.html. It is unknowable how much
this aborted case cost these companies, but we do know
that had Cordray not resigned to run for Governor of
Ohio, it may have been fully litigated without an accountable officer ever being able to review its merits. Moreover, Kansas had to decide whether to shift resources to
pursue a state enforcement action, notwithstanding any
preexisting divisions of labor with other regulators. Such
an about-face may have been impracticable or impossible, and it would have been unnecessary had the CFPB
either had a traditional multi-headed structure or had
been accountable to the President.
*
*
*
In sum, federal financial regulations have long been
promulgated by groups of experts, who have worked
with their state counterparts to promote stability in the
marketplace. In a supposed effort to protect consumers,
Dodd Frank reversed course and poured enormous
amounts of economic power into the hands of one individual. This individual can—without input from either the
President or any state legislature—make or unmake policies that impact millions of people and billions of dollars.
No matter how benevolent the intention, that is the very
essence of financial dictatorship and cannot be squared
with the structural provisions of our Constitution that
are premised on the dispersion of power.
28
II. The Court Cannot Save This Enforcement Proceeding by Severing the Director’s For-Cause Removal Protections.
The Court cannot resolve these fundamental problems with the CFPB’s structure by deleting the for-cause
removal protections from 12 U.S.C. § 5491(c)(3). Severability is a question of statutory interpretation: Assuming
that the removal protections cannot be enforced, can the
remainder of Title X of the Dodd Frank Act be enforced
in a manner consistent with the statute’s language, structure, and drafting history? This question often involves
difficult counterfactuals about what Congress would
have wanted had it known that the statute it created
would not withstand constitutional scrutiny. The Court
need not delve into these issues because, regardless of
severability, this case would need to be dismissed because the CFPB lacked capacity to bring it. If the Court
does reach the question, however, the structure and history of Dodd Frank amply demonstrate that the CFPB
director’s removal protection cannot be severed from
those provisions creating and empowering her office.
A. Regardless of severability, this enforcement proceeding must be dismissed for lack of capacity.
As an initial matter, regardless of severability, this
enforcement action must be dismissed for lack of capacity to bring it. The CFPB filed this action to enforce a
civil-investigative demand. Pet App. 10a-11a.; see 12
U.S.C. § 5562(e)(1). The CFPB, “as the part[y] now asserting federal jurisdiction, [carries] the burden of establishing [its] standing under Article III.” Daimler
29
Chrysler Corp. v. Cuno, 547 U.S. 332, 342 (2006); see also
Allen v. Wright, 468 U.S. 737, 752 (1984) (stating that the
Court may not entertain a case where “the particular
plaintiff is [not] entitled to an adjudication of the particular claims asserted”). It must also show that it had capacity to sue. E.g., Moffat Tunnel League v. United
States, 289 U.S. 113, 118-19 (1933); Relfe v. Rundle, 103
U.S. 222, 224 (1880). Whether the CFPB has met this
burden is measured at the time that the complaint was
filed. Lujan, 504 U.S. at 569-70.
The CFPB did not have capacity to sue when this action was filed in mid-2017. So long as the constitutionally
impermissible removal protections have remained in
place, the director of the CFPB could not bring this enforcement action because there was no constitutional
statute granting her such power. See Free Enter. Fund,
561 U.S. at 513 (holding that “the reporting requirements and auditing standards to which [petitioners] are
subject will be enforced only be a constitutional agency
accountable to the Executive”); Collins, 938 F.3d at 59495; FEC v. NRA Political Victory Fund, 6 F.3d 821, 82728 (D.C. Cir. 1993); accord Lucia v. SEC, 138 S. Ct. 2044,
2055 (2018) (“This Court has held that ‘one who makes a
timely challenge to the constitutional validity of the appointment of an officer who adjudicates his case’ is entitled to relief.”) (quoting Ryder v. United States, 515 U.S.
177, 182 (1995)). Nothing this Court holds about Section
5491(c)(3)’s future can change whether the CFPB had capacity in the past.
30
B. The for-cause removal provision is not severable
from the remainder of Title X of Dodd Frank.
If the Court does reach the question of severability,
it should hold that Section 5491(c)(3) is not severable
from the remainder of Title X of Dodd Frank, which created and empowered the CFPB. It is well established
that severability is a question of statutory interpretation
that turns on whether Congress would have created the
CFPB with its myriad powers had it known that the director’s for-cause removal protections were not enforceable. Though Dodd Frank contains a boilerplate severability clause, the history of these powers and the structure of the statute demonstrate that Congress would not
have created the CFPB as it did with an accountable director. Though the Court could, in theory, determine
which powers Congress would have provided to an accountable director, the Court’s jurisprudence does not
permit such an effort to “‘substitute the judicial for the
legislative department of the government.’” Hellerstedt,
136 S. Ct. at 2319 (quoting Reno v. ACLU, 521 U.S. 844,
884-85 n.49 (1997)).
Though courts will avoid invalidating more of an act
than necessary to remedy a constitutional defect, severability is ultimately a question of legislative intent. Free
Enter. Fund, 561 U.S. at 508. Courts should not leave
pieces of a statute afloat when “it is evident that [Congress] would not have enacted those provisions which are
within its power, independently of that which is not.”
Champlin Ref. Co. v. Corp. Comm’n of Okla., 286 U.S.
210, 234 (1932). To do so would exchange one separationof-powers problem for another as the Court would be
31
amending Dodd Frank to something that Congress likely
would “never have been willing, by itself, to enact.” Pollock v. Farmer’s Loan & Tr. Co., 158 U.S. 601, 636 (1895)
(quotation marks omitted); Hellerstedt, 136 S. Ct. at
2319.
As with any question of statutory interpretation, the
first source of congressional intent is the text. Dodd
Frank has a severability clause. 12 U.S.C. § 5302.10 This
clause is evidence that Congress had a “preference for a
narrow judicial remedy” if certain provisions were held
unenforceable. Hellerstedt, 136 S. Ct. at 2319. But this
Court has repeatedly held that such a clause “‘is an aid
merely; not an inexorable command.’” Id. (quoting Reno,
521 U.S. at 884-85 n.49); Hill v. Wallace, 259 U.S. 44, 70
(1922). Contra Resp. Br. 46-47. Indeed, far from conclusive, this Court has stated that the “ultimate determination of severability will rarely turn on the presence or
absence of such a clause.” United States v. Jackson, 390
U.S. 570, 585 n.27 (1968).
In addition to the severability clause, the Court will
consider the structure and statutory history of Dodd
Frank to determine whether Congress intended the statute to survive without Section 5491(c)(3). For example,
the Court looks to whether the statute (or titles within it)
could perform any work independent of the severed provision. Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684
(1987) (citing Hill, 259 U.S. at 70-72). This is a necessary
In fact, the statute has two. Title V, which addresses insurance, has a separate severability clause. 15 U.S.C. § 8232. No
such title-specific severance clause exists in Title X.
10
32
inquiry because if a statute could not operate as a law
absent the unconstitutional provision, it is strong evidence that Congress would not have passed the statute
without that provision. Id. at 684-85. Once again, bare
functionality is insufficient to save the rest of the statute
because severability—like all issues of statutory interpretation—turns on “whether the statute will function in
a manner consistent with the intent of Congress.” Id. at
685 (emphasis in original). If the impermissible provision
is “so interwoven with” the remainder of the statute
“that they cannot be separated” without unravelling the
entire statutory scheme designed by Congress, the
Court will treat the provision as inseverable. Hill, 259
U.S. at 70; see also Murphy v. NCAA, 138 S. Ct. 1461,
1482-83 (2018).
Congress likely would have passed much of Dodd
Frank without Section 5491(c)(3). The statute is nearly
1,000 pages long statute, is divided into sixteen titles, and
addresses numerous topics that have nothing to do with
the CFPB. For example, Amici are aware of no concrete
evidence that Congress would have preferred not to
adopt the provision of Dodd Frank that requires the
SEC and the Commodity Futures Trading Commission
to create detailed new regulations about the swaps and
derivatives markets had it known that the CFPB director would have been accountable to the President. 15
U.S.C. § 8302. For these unrelated provisions, located in
different titles of the Act, the severability clause is likely
conclusive.
By contrast, there is considerable evidence that Title
X of Dodd Frank would not “function in a manner
33
consistent with the intent of Congress” were the CFPB
director to be directly accountable to the President.
Brock, 480 U.S. at 685. This includes the historical context of the powers granted to the CFPB, the structure of
the CFPB itself, and actions taken by the CFPB’s creators to preserve its original structure.
First, there is the history of the CFPB’s powers
themselves, which fall into two categories: those transferred from other agencies and those created by Dodd
Frank. Carpenter, supra, at 1. The majority of the powers that were transferred to the CFPB came from other
independent agencies, such as the Federal Reserve,
FDIC, or FTC. Id. at 3-4. Congress developed these
agencies over a period of decades so that they function
relatively independently from the Executive Branch. A
corollary to that independence, however, has long been
understood to be that these agencies would be subject to
greater influence from the Legislative Branch. See, e.g.,
Waters v. Wachovia Bank, N.A., 550 U.S. 1, 12 (2007). It
is unlikely that Congress would have transferred power
from such agencies to the CFPB, had it known a court
would “effectively turn[] the CFPB into an instrumentality of the President.” PHH Corp., 881 F.3d at 83 (majority op.).
That Congress did not intend such an outcome is confirmed by how Congress treated the CFPB’s new powers
in the gap period between Dodd Frank’s effective date
and when this administrative leviathan reached its full
size. Dodd Frank effectively transferred the powers discussed above from their original agencies on July 21,
2011; its first director was not confirmed until January
34
2012. During this interregnum, Congress authorized the
Treasury Secretary “to perform the functions of the Bureau under . . . subtitle [F],” which included the transferred power. Carpenter, supra, at 2-3. But the Secretary was not allowed to exercise—even temporarily—
“[t]he Bureau’s newly established authorit[y].” Id. at 5-6
(listing excluded authorities). If Congress refused to allow a terminable-at-will officer to exercise the full power
of the CFPB even temporarily, it defies belief that Congress would have wanted to allow such an officer to exercise such authority on a permanent basis.
Second, additional structural protections of the
CFPB effectively insulate the CFPB from any significant influence from Congress. For example, the director
of the CFPB may requisition up to 14% of the combined
earnings of the Federal Reserve System outside the ordinary appropriations process after statutory adjustments. See Pet. Br. 7; see also 12 U.S.C. §§ 5497(a)(1),
(2)(A)(iii), (2)(B). This translates to hundreds of millions
of dollars per quarter over which Congress has no control. See, e.g., Letter from Kathleen L. Kraninger, Director of the CFPB, to Jerome Powell, Chairman, Board of
Governors of the Federal Reserve System (Sept. 24,
2019) (requesting $223,300,000 for FY2020 Q1). Selffunding agencies such as the CFPB are rare because appropriations are considered the “most potent form of
[c]ongressional oversight.” 2 Senate Comm. on Gov’t Operations, Cong. Oversight of Regulatory Agencies, 95th
Cong., 1st Sess. 42 (1977). In the past, self-funding agencies have always been created to be “independent of the
President” as well. Charles Kruly, Self-funding and
35
Agency Independence, 81 GEO. WASH. L. REV. 1733, 1738
(2013). It is “most unlikely” (Murphy, 138 S. Ct. at 1482)
that Congress would have consolidated power from numerous independent agencies in an officer directly accountable to the President and simultaneously insulate
that officer from its own power of the purse. See THE
FEDERALIST No. 58, at 359 (Madison) (describing the
“power over the purse” as Congress’s “most complete
and effectual weapon” to “obtain[] a redress of every
grievance”).11
Third, since before its passage, the architects of the
CFPB have repeatedly confirmed that they considered
its single-headed structure crucial to its function. For example, as Petitioner explains (at 40), the Senate refused
to pass a House-endorsed version of the CFPB headed
by a multi-member commission. On the day Dodd Frank
became effective, the House again passed a bill that
would have replaced the current structure with the traditional multi-member board approved by Humphrey’s
Executor. See BERSON & BERSON, supra, 39 & n.1. Again
the Senate refused to pass it, and President Obama
threatened a veto. Id. In the intervening years, numerous legislators have urged that a removable-at-will director would “fundamentally alter[] the CFPB and hamper[] its ability to function as Congress intended.” Brief
of Members of Congress Supporting Rehearing En Banc
at 2, 5, PHH Corp., 881 F.3d 75. But see Seila House Br.
For other examples of how Dodd Frank insulated the CFPB
from existing checks on power, see Pet. Br. 43.
11
36
10 n.4 (arguing without explanation that provision should
be severed).
In light of this history, it is clear that Congress did
not intend for the CFPB, as it exists, to be headed by an
individual who is accountable to the President. Thus Section 5491(c)(3) cannot be severed from Title X of Dodd
Frank. It is theoretically possible for the Court to “go
through the individual components” of the statute to determine which powers Congress might have allowed such
an officer to wield. Hellerstedt, 136 S. Ct. at 2319-20. But
that is the type of “quintessentially legislative work” that
this Court’s severance jurisprudence does not permit.
Ayotte v. Planned Parenthood of N. New Eng., 546 U.S.
320, 329 (2006).
[Remainder of page intentionally left blank.]
37
C O N C L U S IO N
The judgment of the court of appeals should be reversed, and the enforcement action against Seila Law
dismissed.
Respectfully submitted.
STEVE MARSHALL
Attorney General of
Alabama
LESLIE RUTLEDGE
Attorney General of
Arkansas
CHRISTOPHER M. CARR
Attorney General of
Georgia
CURTIS T. HILL, JR.
Attorney General of
Indiana
DEREK SCHMIDT
Attorney General of
Kansas
JEFF LANDRY
Attorney General of
Louisiana
DOUG PETERSON
Attorney General of
Nebraska
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@oag.texas.gov
(512) 936-1700
38
MIKE HUNTER
Attorney General of
Oklahoma
ALAN WILSON
Attorney General of
South Carolina
JASON R. RAVNSBORG
Attorney General of
South Dakota
SEAN REYES
Attorney General of
Utah
PATRICK MORRISEY
Attorney General of
West Virginia
DECEMBER 2019
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.