Banking and Finance Law Daily Amicus curiae Paul Clement submits brief arguing that CFPB’s structure is constitutional
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Thursday, January 16, 2020

Amicus curiae Paul Clement submits brief arguing that CFPB’s structure is constitutional

By Nicole D. Prysby, J.D.

At the request of the U.S. Supreme Court, former Solicitor General Paul D. Clement has filed an amicus curiae brief in Seila Law LLC v. CFPB, arguing that the CFPB’s independent single-director structure does not violate constitutional separation-of-powers principles.

On Jan. 15, 2020, the court-appointed amicus curiae filed a brief in a U.S. Supreme Court case that will decide whether the structure of the Consumer Financial Protection Bureau is constitutional. Former Solicitor General Paul D. Clement was asked by the Supreme Court to make the argument that the vesting of substantial executive authority in the CFPB, an independent agency led by a single director, does not violate constitutional separation-of-powers principles (see Banking and Finance Law Daily, Oct. 28, 2019). An amicus curiae is needed because the Justice Department and the CFPB itself are taking the position that the CFPB’s structure is unconstitutional. The amicus curiae asserts that the Ninth Circuit’s decision upholding the CFPB’s structure should be affirmed on two grounds unrelated to the merits: traceability and ripeness. Alternatively, if the Court does reach the question presented, it should hold that the removal provision is constitutional, based on text, first principles, and precedent, or avoid the constitutional issue by interpreting the key statutory phrase "inefficiency, neglect of duty, or malfeasance in office" as giving substantial discretion and control to the removing authority (Seila Law LLC v. Consumer Financial Protection Bureau, Sup. Ct. Dckt. No. 19-7).

Petitioner Seila Law LLC is a law firm that provides "debt-relief services." The CFPB issued a civil investigative demand (CID) to Seila Law to determine whether it had engaged in unlawful acts or practices in the advertising, marketing, or sale of debt relief services. Seila Law petitioned the CFPB to modify or set aside the CID, on the grounds that "an unconstitutional agency" had issued it, because the Dodd Frank Act’s restriction on the President’s authority to remove the Bureau’s director violates the separation of powers. The CFPB sought to enforce the CID in a federal district court, which was not persuaded that the CFPB is unconstitutionally structured. The Ninth Circuit Court of Appeals affirmed, pointing out that financial regulators like the CFPB have long been afforded a measure of independence and that the Supreme Court has rejected a separation-of-powers challenge to the Federal Trade Commission, an agency similar in character to the CFPB.

An amicus curiae is needed because the Justice Department and the Bureau itself are taking the position that the Bureau’s structure interferes with presidential powers to an extent that the constitution’s separation-of-powers principle has been violated. Three distinct positions are being presented to the Court:

  1. Seila Law argues that the CFPB’s organization is not only unconstitutional but irremediable, which would void the Dodd-Frank Act’s creation of the Bureau.
  2. The Justice Department argues that the organization is unconstitutional but that the defect can be cured by severing the Dodd-Frank Act section that allows the president to remove the director only for cause. This would leave the Bureau’s regulatory, supervisory, and enforcement powers intact but transform the Bureau from an independent agency to an executive branch agency.
  3. The amicus curiae argues that the Ninth Circuit’s opinion should be affirmed, leaving the CFPB as it was created by the Dodd-Frank Act.

Specifically, the amicus curiae asserts that the Ninth Circuit’s decision should be affirmed on two grounds unrelated to the merits. First, the petitioner’s injury is not traceable to the challenged removal restriction. The idea that either the CID or the CFPB’s decision to go to court to enforce it had any real connection to the Director’s removal status was always tenuous at best and subsequent events have severed the connection entirely. Since the enforcement petition was first filed, it has been maintained by an Acting Director subject to at-will removal and a Senate-confirmed Director who has adopted the view that she serves at the pleasure of the President. Therefore, in Article III terms, Seila Law’s injury is not traceable to the constitutional issue it wishes to have adjudicated. In addition, its claim is not ripe in the absence of a concrete dispute about removal. The Director believes that she is entirely answerable to the President and serves at his pleasure. No constitutional issue is present under the current circumstances. A contested removal is the proper context to address a dispute over the President’s removal authority.

If the Court does reach the question presented, it should hold that the removal provision is constitutional, based on text, first principles, and precedent. The Constitution has no "removal clause." Other than the provisions for impeachment, the constitutional text is silent on the removal of executive officers. In addition, given Congress’ significant control over the structure of executive-branch agencies and officers, the argument that Congress cannot impose even modest restrictions on the President’s ability to remove executive-branch officers makes little sense as a matter of first principles. As long as the President is the one exercising the power to remove executive-branch officers, modest restrictions on that authority do not cross a constitutional line.

Finally, U.S. Supreme Court precedents reflect the fundamental distinction between forbidden efforts to assign the executive removal authority elsewhere and permissible restrictions on the President’s removal authority. When the Court has confronted statutes that leave removal authority with the President subject to the modest restriction that removal be for "inefficiency, neglect of duty, or malfeasance," it has uniformly rejected the challenge. The Court should decline to overrule that precedent. Further, the Court could also avoid the constitutional issue by interpreting the key statutory phrase "inefficiency, neglect of duty, or malfeasance in office" to give substantial discretion and control to the removing authority.

Companies: Seila Law LLC

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