Seila Law and CFPB file briefs in U.S. Supreme Court

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Seila Law and the CFPB filed their briefs yesterday in the U.S. Supreme Court.  Both briefs address the question presented in Seila Law’s certiorari petition, which is whether the CFPB’s single-director-removable-only-for-cause structure violates the separation of powers in the U.S Constitution.  They both also address the second question that the Court asked the parties to brief in its order granting Seila Law’s petition, which is whether, if the CFPB is found to be unconstitutional, the Dodd-Frank Act’s for-cause removal provision can be severed from the remainder of the Act.  While Seila Law and the CFPB respond similarly to the first question, their responses to the second question are very different.

With regard to the CFPB’s constitutionality, Seila Law and the CFPB both argue that the CFPB’s structure violates the separation of powers because it impermissibly restricts the President’s exercise of his executive authority.  In its decision upholding the CFPB’s constitutionality, the Ninth Circuit relied substantially on the Supreme Court’s 1935 decision in Humphrey’s Executor v. United States.  In that decision, the Court ruled that a for-cause removal restriction on FTC commissioners did not violate separation of powers.  Both Seila Law and the CFPB argue that for various reasons, including that it dealt with a “non-partisan” multi-member commission, Humphrey’s Executor has no application to the CFPB’s single-director structure.  Alternatively, they both argue that if the Supreme Court nevertheless determines that Humphrey’s Executor is controlling, the Court should overrule it.

With regard to whether severance is the appropriate remedy should the Court find the CFPB’s structure to be unconstitutional, Seila Law and the CFPB take opposite positions, with Seila Law arguing that the for-cause removal provision is not severable and the CFPB arguing that severance would be the appropriate remedy.  As an initial matter, Seila Law argues that, even if the Supreme Court determines that the CFPB’s structure is unconstitutional, it does not need to reach the severance question.  According to Seila Law, the Court can give it complete relief simply by holding that the CID issued to Seila Law is invalid and it is questionable whether the Court even has Article III power “to take an eraser to statutory provisions when doing so will have no bearing on the judgment in the pending case.”

Seila Law also asserts that “there is a particularly good reason” for the Court not to address severability, namely that Congress would have structured the CFPB as a multi-member commission rather than as an agency headed by a single director removable by the President at will.  It asserts that if it reaches the question of severability, the Court will be left with an “unpalatable choice” between “mak[ing] the Director of the CFPB removable at will” and “eliminat[ing] the CFPB altogether.”  Seila Law argues that if the Court were to “simply hold that the CFPB’s structure violates the separation of powers and enter judgment for the petitioner,” the CFPB “will be on notice of its unconstitutionality–just as it has been since the Director acknowledged its constitutional defect several months ago.”  And “more importantly, Congress will be on notice that it should amend the Dodd-Frank Act to remedy that defect—and that it, not this Court, should make that quintessentially legislative decision in the first instance.”

Finally, Seila Law argues that the for-cause removal provision is not severable and the appropriate remedy “under a severability analysis is to invalidate the entirety of Title X of the Dodd-Frank Act.”  Once again, Seila Law asserts that making the CFPB’s Director removable at will would “create an agency that the Congress that enacted the Dodd-Frank Act would surely not have wanted.”  It also argues that although the Dodd-Frank Act has a general severability clause, “the clause does not reflect a congressional judgment that every single provision within each title is severable from the title in which it resides.” As evidence of that, Seila Law asserts that “when Congress wanted specific provisions within a title of the Dodd-Frank Act to be severable, it included an additional severability clause within that title.  Congress conspicuously did not do so in Title X.” (emphasis provided, citations omitted.)  It argues that a holding that the removal provision cannot be severed would restore the status quo before the Dodd-Frank Act was enacted “pending, of course, any action by Congress in response to the Court’s decision.”  According to Seila Law, “it would not eliminate federal consumer-financial protection; instead, it would return authority under the eighteen preexisting federal consumer-protection laws to other agencies…to administer and enforce those laws.”

In contrast, the CFPB argues that the appropriate remedy for the CFPB’s unconstitutionality is for the Supreme Court to sever the for-cause removal provision from the Dodd-Frank Act.  Pointing to the Dodd-Frank Act’s general severability clause, the CFPB asserts “there is no basis to conclude that Congress would have preferred to have no Bureau at all rather than a Bureau headed by a Director who would be removable like almost all other single-headed agencies.”  The CFPB does not argue, however, that the CID issued to Seila Law remains valid despite the Bureau’s unconstitutionality nor does it reference the argument that it has previously made that former Acting Director Mulvaney’s ratification of its petition to enforce the CID cured any constitutional defect.  Rather, it only asks the Court to vacate the Ninth Circuit’s judgment and remand the case to the Ninth Circuit for further proceedings.

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