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Financial Services Law Insights and Observations

Basis for invalidating CFPB is “remarkably weak,” says court-appointed defender

Courts U.S. Supreme Court CFPB Single-Director Structure Seila Law Constitution

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On January 15, Paul Clement, the lawyer selected by the U.S. Supreme Court to defend the leadership structure of the CFPB, filed a brief in Seila Law LLC v. CFPB arguing that Seila Law’s constitutionality arguments are “remarkably weak” and that “a contested removal is the proper context to address a dispute over the President’s removal authority.” First, Clement stated that “there is no ‘removal clause’ in the Constitution,” and that because the “constitutional text is simply silent on the removal of executive officers” it does not mean there is a “promising basis for invalidating an Act of Congress.” Moreover, the Constitution leaves it to Congress to decide “all manner of questions about the organization and structure of executive-branch departments and officers,” Clement wrote. Second, Clement disagreed with the argument that Congress cannot impose modest restrictions on the President’s ability to remove executive officers, so long as the President is the one exercising the removal powers. Third, Clement noted that in the past, the Court has repeatedly upheld the ability to place permissible restrictions on a President’s removal authority.

Clement further contended, among other things, that the dispute in Seila is “not just unripe, but entirely theoretical.” He referenced the Bureau’s brief filed last September (covered by InfoBytes here), in which the CFPB argued that the for-cause restriction on the President’s authority to remove the Bureau’s single director violates the Constitution’s separation of powers, and noted that “[w]hatever was true when this suit was first filed, the theory of the unitary executive appears alive and well in the Director’s office.” Rather, Clement stated, the Court should wait for an instance where a CFPB director has been fired for something short of the “inefficiency, neglect of duty, or malfeasance in office” threshold that Congress set for dismissing a CFPB director in Dodd-Frank before ruling on the question. Clement also emphasized that “text, first principles and precedent” all “strongly support” upholding the U.S. Court of Appeals for the Ninth Circuit’s decision from last May, which deemed the CFPB to be constitutionally structured and upheld a district court’s ruling enforcing Seila Law’s compliance with a 2017 civil investigative demand.

As previously covered by InfoBytes, the 9th Circuit held that the for-cause removal restriction of the CFPB’s single director is constitutionally permissible based on existing Supreme Court precedent. The panel agreed with the conclusion reached by the U.S. Court of Appeals for the D.C. Circuit majority in the 2018 en banc decision in PHH v. CFPB (covered by a Buckley Special Alert) stating, “if an agency’s leadership is protected by a for-cause removal restriction, the President can arguably exert more effective control over the agency if it is headed by a single individual rather an a multi-member body.”

The parties in Seila filed briefs last December. While both parties are in agreement on the CFPB’s single-director leadership structure, they differ on how the matter should be resolved. Seila Law argued that the Court should invalidate all of Title X of Dodd-Frank, whereas the Bureau contended that the for-cause removal provision should be severed from the rest of the law in accordance with Dodd-Frank’s express severability clause. Oral arguments are scheduled for March 3. (Previous InfoBytes coverage here.)

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