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D.C. Circuit: CFPB structure is constitutional

D.C. Circuit: CFPB structure is constitutional

The last time the Supreme Court considered the constitutionality of an agency’s structure was in 2010

https://www.youtube.com/watch?v=UYRQhvPT-ZY

In October 2016, a conservative panel on the D.C. Circuit ruled, 2–1, that too much unilateral power was concentrated in the independent Director of the Consumer Financial Protection Bureau, unconstitutionally infringing upon the President’s Article II executive powers.

In February, the full D.C. Circuit agreed to en banc rehearing of this case—entitled PHH Corporation v. CFPB—meaning that all 11 active judges would decide the case from scratch.


The en banc court heard oral arguments back in May, and on Wednesday reversed the panel and upheld the single-Director structure of the CFPB. The opinion (embedded) was written by Nina Pillard and joined by all of the participating Democratic-appointees.

Because this dispute raises critical questions about the limits of independent executive authority, pundits believe that the Supreme Court is likely to review the case.

The CFPB, established in 2010 by the Dodd-Frank Act, is headed by a single Director, who is appointed by the President and confirmed by the Senate. This Director can be removed by the President only for “inefficiency, neglect of duty, or malfeasance in office” (INM protection”).

As such, mere personal or policy disagreements do not provide a sufficient basis for the Director’s termination. Most commissioners of regulatory agencies—like the Federal Trade Commission, Federal Elections Commission or National Labor Relations Board—enjoy this INM protection, which distinguishes them from Cabinet members who serve entirely at the pleasure of the President.

This independence has become the basis of the modern regulatory state and found constitutional endorsement in the landmark 1935 case of Humphrey’s Executor v. United States.

President Hoover appointed William Humphrey to the Federal Trade Commission for a seven-year term beginning in 1931. Roosevelt became president in 1933, and viewed Humphrey as insufficiently supportive of the New Deal. Roosevelt asked him to resign, but Humphrey refused. On October 7, 1933, Roosevelt fired Humphrey from his position as a commissioner on the FTC.

Humphrey sued, arguing that his termination was invalid because he wasn’t guilty of “inefficiency, neglect of duty, or malfeasance.” The Supreme Court unanimously ruled for Humphrey, holding that INM protection did not infringe upon presidential power.

But Judge Kavanaugh argues that Humphrey’s blessing should extend only to multi-member commissions, not unitary directors.

The Director of the CFPB wields enormous power over American businesses, American consumers, and the overall U.S. economy. The Director unilaterally implements and enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone may decide what rules to issue. The Director alone may decide how to enforce, when to enforce, and against whom to enforce the law. The Director alone may decide whether an individual or entity has violated the law. The Director alone may decide what sanctions and penalties to impose on violators of the law.

“That combination,” Judge Kavanaugh writes, leads to “power that is massive in scope, concentrated in a single person, and unaccountable to the President” and “triggers the important constitutional question at issue in this case.”

Pillard responds that “the constitutional distinction…between the CFPB’s leadership structure and that of multi-member independent agencies is untenable. That distinction finds no footing in precedent, historical practice, constitutional principle, or the logic of presidential removal power.”

Her opinion relied heavily on the 1988 case of Morrison v. Olson, where SCOTUS upheld the Independent Counsel Act, which allowed the appointment of an investigative prosecutor whom the President could not fire.

It’s worth noting that Kavanaugh was joined in his theory only by A. Raymond Randolph. Another GOP-appointee, Thomas Griffith, concurred with the Democratic-majority on the grounds that the INM standard is flexible enough to permit the President to fire the Director for “ineffective policy choices.” Another judge, Karen L. Henderson, dissented on statutory grounds but thought it unnecessary to reach the constitutional questions addressed by Pillard and Kavanaugh.

The last time the Supreme Court considered the constitutionality of an agency’s structure was in 2010, in Free Enterprise Fund v. Public Company Accounting Oversight Board.

The Court split 5–4 against the agency.

CFPB Ruled Constitutional by Legal Insurrection on Scribd

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Comments

but of course they did…

did anyone expect anything else?

4th armored div | January 31, 2018 at 2:41 pm

what period of time are these dictators given ?
how can these commission heads be independent of executive oversight ?

see what happened with the FBI pre and post JE HOOVER

“…the Supreme Court is likely to review the case.”

Maybe. Maybe not. What I hear is the ghost of Scalia saying, “If you don’t like an agency created by law, then change the law. Why is this the court’s problem?”

    Its the court’s problem for the same reason as it was the last three or four times it’s been to SCOTUS, starting with Humphrey: because this is Congress infringing on the president’s authority. The constitution says the executive power belongs to the president. There is no “executive branch” apart from the president. Congress has no right to change that. And yet by creating agencies like this one, which exercise executive power independently of the president, it is effectively doing that. Last I heard the state of the law was as Kavanaugh has it: Congress can limit the president’s authority to fire members of multi-member commissions, but not sole commissioners.

      starride in reply to Milhouse. | January 31, 2018 at 4:09 pm

      I agree, what is to stop congress from instituting a completely separate, 2nd, executive branch.

        @StarRide: “What is to stop congress from instituting a completely separate, 2nd, executive branch.”

        And that is a potent, super potent reason to vacate particular agency and indeed to eradicate every entire poisoned noxious vines of “Administrative law”, and also of omnibus legislations.

      Paul In Sweden in reply to Milhouse. | January 31, 2018 at 4:57 pm

      Agreed. Once the SCOTUS rules against the agency, the path is clear for congress to eliminate the Consumer Financial Protection Bureau.

      In a way, I see this as a typical Trump move. If the CFPB is declared unconstitutional by the Supremes, he can move quickly to chop it up into little pieces and distribute those required-by-statute responsibilities among a dozen other agencies. One quick move and no more CFPB without the need for filibusters in the Senate et al.

      While doing that, I’m fairly sure he is peeling away those responsibilities which are *not* directly assigned to the CFPB by statute, but were glommed onto by an energetic bureaucracy. Those tasks can be assigned as above, reducing the power of the bureau, as well as staffing, etc… At the same time, there is (or should be) a CFPB bill being crafted to assign the whole kit and kaboodle to where it belongs in the first place. This bill cannot be brought out now with only 51 Senators who would even consider voting for it, but can be stashed and polished until the appropriate time. Keeping the rest of it intact, but putting it *under* a major Department, would bring it in line with the rest of the executive office positions, and from there it can be pruned or grafted where it needs to go.

      “And yet by creating agencies like this one, which exercise executive power independently of the president, it is effectively doing that.”

      Wrong and you’re proving my point. The CFPB is exercising extra-constitutional power created by Congress, independent of Congress.

      It’s why this court challenge is wrong-headed. Obama appointed the 1st CFPB head in 2012. Mr. Corday resigned and installed his illegitimate successor, Mrs. English. Trump was well within the law to brush her aside and appoint his own CFPB head – awaiting Senate confirmation. Executive power unabridged.

      It’s Congress that has the true complaint because the CFPB is funded from the Treasury Dept., and Congress lacks direct oversite of CFPB via the coveted committee chairman.

      Your reference of ‘Humphry’ is immaterial in this regard.

      Like I said, if either branch (L or E) objects to the structure of an agency created by law, change the law. Why is this the court’s problem?

Ok, so in English what does this mean? The Mick is no longer leading the CFPB and that other democrat woman takes over?

Thanks Millhouse.

So given the moron resigned then what’s the drama here? Trump has his man firmly in charge so surely a moot point now?

How about the fact that it is funded, at Director’s discretion, by the Federal Reserve – specifically to prevent Congress from holding the purse strings as required by the Constitution?

How about the fact that the law creating it tries to prevent future Congresses from repealing the legislation?

The law creating it also tries to limit, or even exclude, judicial oversight.

The ONLY real check on it, if the law is allowed to stand, is POTUS being able to install a Director. But, even that is limited in that he is prohibited from firing at will – can only replace when the Director’s term is up.

The Ninth certainly seems to need a lot of words to say “We just make things up to support our unconstitutional decisions.”

I hope this is appealed to SCOTUS so the Ninth Circus can earn another well deserved slap-down.

And in THIS DAY OF THIS ARTCLE describing an infamy under color of law, that is the forward reachings of a perverted chain of stare decisis, which hath enacted authoritarian whimsy into our legal system from the training of legal minds, through the rulings of courts and even into the acts (aberrant and beyond constituted metes and bounds) like the tiny worm toxoplasma gondii has afflicted both crazy cat ladies and wealthy animal “lovers” for some generations now, so I receive from the World’s Richest Pedro Pan scion’s company, Amazon, a note saying I might like this work of a book: “Law’s Abnegation: From Law’s Empire to the Administrative State 1st Edition” (November 14 2016) by Adrian Vermeule

How far far far from reality of the human mind is AI! If that choice by the Bezosian Artificial Intellect Machina Amazonea is a guide! While I most highly regard the works of Philip Hamburger, his master work of 2014 Gregorian: “Is Administrative Law Unlawful?” And also the work of Donald Lutz (The Origins of American Constitutionalism), this circuit court ruling and the “law” it is based on are a debased and debasing mockery of the founding of this great ideal of a nation, and so also appears that Amazon suggestion of a great modern legal PILLAR’s work that JUSTIFIES CALUMNY to our honest heritage.

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