Banking and Finance Law Daily Seila Law, CFPB respond in case concerning constitutionality of Bureau structure
Tuesday, February 18, 2020

Seila Law, CFPB respond in case concerning constitutionality of Bureau structure

By Nicole D. Prysby, J.D.

Seila Law and the CFPB respond to the amicus curiae in Seila Law LLC v. CFPB, both arguing that the amicus’ arguments are flawed, but take different positions on the severability of the for-cause removal provision for the CFPB Director.

The Consumer Financial Protection Bureau and Seila Law have submitted reply briefs in a U.S. Supreme Court case that could decide whether the structure of the CFPB is constitutional. The case stems from the CFPB’s attempt to enforce a civil investigative demand (CID) against Seila Law. Both Seila Law and the CFPB have taken the position that the CFPB’s structure is unconstitutional and responded to arguments from amicus curiae Paul Clement, who was appointed to argue in favor of the constitutionality of the Bureau. However, Seila Law and the CFPB have taken different positions on whether the removal provision may be severed from the remainder of the Dodd-Frank Act. Seila Law argues that the Court should invalidate Title X of the Dodd-Frank Act in its entirety. The CFPB argues that the provision containing the removal restriction for the CFPB Director may be severed from the rest of the Dodd-Frank Act. The Court will hear oral argument in the case from Seila Law, Solicitor General, Court-appointed amicus curiae, and House of Representatives on March 3, 2020 (Seila Law LLC v. Consumer Financial Protection Bureau, Case No. No. 19-7).

The CFPB issued a 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 and Seila Law appealed.

The Supreme Court appointed an amicus curiae to argue that the CFPB is constitutional, because the Bureau itself took 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. The amicus curiae asserted that petitioner’s injury is not traceable to the challenged removal restriction and is not ripe in the absence of a concrete dispute about removal. On the merits, the Court should hold that the removal provision is constitutional; 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.

Seila Law. The law firm argues in its reply brief that the amicus’ arguments on jurisdictional issues are flawed. Seila Law has standing as it is the defendant, not the plaintiff, in the case. The issue is not moot, because the CFPB has not withdrawn the petition for enforcement. And the question of constitutionality is ripe, even though a contested removal has not yet occurred. On the merits, Seila Law argues that Congress is not free to impose a for-cause restriction on the President’s removal power. A for-cause removal provision strikes at the heart of a President’s constitutional authority to exercise the executive power and to ensure that the laws are faithfully executed. Seila Law also argues that the Court should not extend the Humphrey’s Executor exception to the general rule that Article II gives the President "exclusive power of removal," to the CFPB, or in the alternative, that Humphrey’s Executor should be overruled. As to severability, the Court need not take up the issue because the disposition of the enforcement petition resolves the dispute between the parties. If the Court does take up severability, it should invalidate Title X of the Dodd-Frank Act in its entirety.

Bureau. The CFPB’s reply brief also argues that the constitutionality of the removal provision is properly presented. Seila Law’s injury is traceable to the CID and the current Director’s "ratification" of the CID does not eliminate the injury. As to the merits, under Article II, the President is required to retain the unrestricted ability to remove principal officers. Congress has no right to diminish this authority. In addition, the Humphrey’s Executor exception should not be extended to single-headed agencies. The CFPB also responded on the issue of severability, and again asserts that determining the severability of the removal restriction is necessary to resolving this case, and that the removal restriction may be severed from the rest of the Dodd-Frank Act.

Oral arguments. Also relevant to the case, the Supreme Court granted requests by Seila Law and the House of Representatives to enlarge and divide the time for oral argument scheduled for March 3, 2020. The Court divided the time as follows: 20 minutes for Seila Law; 20 minutes for the Solicitor General; 20 minutes for the Court-appointed amicus curiae; and 10 minutes for the House of Representatives.

Attorneys: Kannon K. Shanmugam (Paul, Weiss, Rifkind, Wharton & Garrison LLP) and Thomas H. Bienert, Jr. (Bienert Katzman PC) for Seila Law LLC. Noel J. Francisco, U.S. Department of Justice, for the CFPB.

Companies: Seila Law LLC

MainStory: TopStory CFPB DoddFrankAct SupremeCtNews

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