[19-7] Seila Law LLC v. Consumer Financial Protection Bureau

Seila Law LLC v. Consumer Financial Protection Bureau

Wikipedia · Justia (with opinion) · Docket · oyez.org

Argued on Mar 3, 2020.
Decided on Jun 29, 2020.

Petitioner: Seila Law LLC.
Respondent: Consumer Financial Protection Bureau.

Advocates:

• Kannon K. Shanmugam (for the Petitioner)
• Noel J. Francisco (the Respondent, supporting vacatur)
• Paul D. Clement (Court-appointed amicus curiae in support of the judgment on Q1)
• Douglas N. Letter (for the U.S. House of Representatives, as amicus curiae)

Facts of the case (from oyez.org)

The Consumer Financial Protection Bureau (CFPB) was investigating Seila Law LLC, a law firm that provides debt-relief services, among others. As part of its investigation, the CFPB issued a civil investigative demand to Seila Law that requires the firm to respond to several interrogatories and requests for documents. Seila Law refused to comply with the demand, so the CFPB filed a petition in the district court to enforce compliance. The district court granted the petition and ordered Seila Law to comply with the CID. Seila Law appealed the district court’s order on two grounds, one of which was that the CFPB is unconstitutionally structured.

Specifically, Seila Law argued that the CFPB’s structure violates the Constitution’s separation of powers because it is an independent agency headed by a single Director who exercises substantial executive power but can be removed by the President only for cause. The Ninth Circuit disagreed.

The court found two Supreme Court decisions on separation of powers controlling: Humphrey’s Executor v. United States, 295 U.S. 602 (1935), and Morrison v. Olson, 487 U.S. 654 (1988). According to the Ninth Circuit panel, those cases indicate that the for-cause removal restriction protecting the CFPB’s Director does not “impede the President’s ability to perform his constitutional duty” to ensure that the laws are faithfully executed. 

Question

1. Does the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violate the separation of powers principle?
2. If it does, is 12 U.S.C. § 5491(c)(3) severable from the Dodd-Frank Act?

Conclusion

The Consumer Financial Protection Bureau’s leadership by a single Director removable only for inefficiency, neglect, or malfeasance violates the separation of powers, but that provision is severable from the Dodd-Frank Act. Chief Justice John Roberts authored the opinion of the Court.

Article II of the federal Constitution vests the entire “executive Power” in the President alone, though lesser executive officers may assist the President in discharging his duties. The President retains the power supervise and to remove these lesser executive officers, and Congress may not restrict the President’s power to remove such officers, except in two circumstances, neither of which was present in this case.

First, Congress may grant for-cause removal protection to a multimember body of experts who were balanced along partisan lines, appointed to staggered terms, performed only “quasi-legislative” and “quasi-judicial functions,” and were said not to exercise any executive power. Second, Congress may grant for-cause removal protection to an inferior officer—the independent counsel—who had limited duties and no policymaking or administrative authority.

The director of the CFPB falls within neither of these exceptions, and the Court declined to extend the exceptions to a new situation because the CFPB’s structure has no foothold in history or tradition and the CFPB’s single-director configuration is incompatible with the structure of the Constitution, which “scrupulously” avoids concentrating power in the hands of any single individual, save the President.

The Chief Justice, joined by Justices Samuel Alito and Brett Kavanaugh, concluded that the Director’s removal protection is severable from the other provisions of the Dodd-Frank Act that establish the CFPB and define its authority.

Justice Clarence Thomas authored an opinion in which Justice Neil Gorsuch joined, concurring with the Chief Justice’s conclusion that the CFPB’s structure violates the separation of powers but dissenting as to the severability of the clause. Justice Thomas argued that he would repudiate entirely the first exception in which Congress may restrict the President’s power to remove lesser executive officers and that the doctrine of severability is entirely unfounded because it “involves nebulous inquir[ies] into hypothetical congressional intent.”

Justice Elena Kagan authored an opinion in which Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor joined, concurring with the Chief Justice’s conclusion as to severability but dissenting as to the conclusion that the configuration violates the separation of powers. Justice Kagan argued that for-cause removal restrictions serve to create in administrative agencies “a measure of independence from political pressure” and that “the text of the Constitution, the history of the country, the precedents of this Court, and the need for sound and adaptable governance—all stand against the majority’s opinion.