The Supreme Court of the United States today issued its opinion in Seila Law, LLC v. CFPB, finding the CFPB’s single-director structure unconstitutional, and severing the for-cause removal provision to cure the constitutional defect.
The Court applied its authority from Free Enterprise Fund v. Public Company Accounting Oversight Board, which found unconstitutional a similar structure in the PCAOB—a public company accounting oversight board created by the Sarbanes-Oxley Act. The Court found the for-cause removal provision, which provided that the Director of the CFPB could only be removed from the position for cause, to unconstitutionally impinge upon the President’s duty to execute the laws, and therefore violated the Constitution’s separation of powers.
The opinion largely mirrored the U.S. Court of Appeals’ for the D.C. Circuit’s original panel opinion in the PHH Mortg. v. CFPB matter, which WBK was counsel on. Notably, that initial opinion from the DC Circuit was written by then-D.C. Circuit Judge, and now Supreme Court Justice, Brett Kavanaugh, who joined the majority opinion here in full. While that initial opinion in PHH was reversed by the DC Circuit sitting en banc, the Supreme Court’s majority opinion here cites then-Judge Kavanaugh’s dissenting opinion from that en banc decision, and adopted similar reasoning as well:
“The CFPB’s single-Director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one. The Director is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is. The Director does not even depend on Congress for annual appropriations. Yet the Director may unilaterally, without meaningful supervision, issue final regulations, oversee adjudications, set enforcement priorities, initiate prosecutions, and determine what penalties to impose on private parties. With no colleagues to persuade, and no boss or electorate looking over her shoulder, the Director may dictate and enforce policy for a vital segment of the economy affecting millions of Americans. The CFPB Director’s insulation from removal by an accountable President is enough to render the agency’s structure unconstitutional.”
Slip op. at 23 (citations and quotations omitted).
The Court also ruled on the severability of the for-cause removal provision—i.e., whether or not the offending provision could be excised and leave the remainder of the statute intact, or whether the entire statute (and therefore the CFPB’s existence) would fall with the offending provision. The Court found the provision to be severable, noting that the statute explicitly contains a severability clause, but also finding that the provision satisfied the analysis for severability even if there had not been a severability clause, just like the Court found in Free Enterprise Fund.
The petitioner here sought a remedy of dismissal of the action to enforce the CID, based upon it being issued by an unconstitutionally-structured bureau. The Bureau argued that the actions to issue and enforce the CID had been ratified by Acting Director Mulvaney, who was accountable to the President, and so no constitutional infirmity exists. The Supreme Court remanded for the lower courts to determine the question of ratification in the first instance.
The opinion may be found here.