On March 3, the Supreme Court heard argument in Seila Law LLC v. Consumer Financial Protection Bureau, a case involving two questions about the structure of the CFPB: (1) whether the provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that limits removal of the CFPB Director to “inefficiency, neglect of duty, or malfeasance in office” impermissibly restricts the President’s ability to remove the Director and therefore violates the separation of powers; and (2) if so, whether that provision can be severed from the remainder of Dodd-Frank, or whether the entire statute must fall.
The government conceded that Dodd-Frank’s for-cause removal provision is unconstitutional, so Seila Law and the government were largely in sync during the argument. They both argued that, under the Court’s precedents, a single “principal officer” (as opposed to an “inferior officer,” like the head of the Office of Independent Counsel) cannot be removable only for cause—that would effectively vest executive power in an unelected official who is answerable to no one. They say that the primary case that arguably established a contrary rule involving members of the Federal Trade Commission, Humphrey’s Executor v. United States, should be interpreted as being limited to the context of multimember commissions, which contain structural protections (such as the need to build consensus) that decrease the likelihood of arbitrary agency decisionmaking. They also argued that if the Court cannot read Humphrey’s Executor in this way, then it should overturn that 90-year-old case, which they say was wrongful decided and poorly reasoned. Notably, overturning Humphrey’s Executor could cast into doubt the constitutionality of dozens of statutes with identical for-cause removal provisions, including statutes creating the Federal Labor Relations Authority, the Merits Systems Protection Board, the Nuclear Regulatory Commission, and the Federal Energy Regulatory Commission.
Seila Law and the CFPB parted ways, however, with respect to whether the for-cause removal provision could simply be severed from the statute, which would remove the unconstitutional limitation on presidential power by allowing the Director to be removed by the President at will without doing away with Dodd-Frank entirely. Dodd-Frank contains a severability clause stating that “[i]f any provision of this Act . . . is held to be unconstitutional, the remainder of this Act . . . shall not be affected thereby.” Seila Law argued that this clause provides merely a presumption of severability, and that presumption is overcome here because Congress indicated clearly that it wanted a truly independent agency, insulated from executive control. At the argument, Seila Law’s counsel quoted the CFPB’s “progenitor,” Elizabeth Warren (who was not a lawmaker at the time), as saying that if Congress did not create an agency with functional independence, “my second choice is no agency at all and plenty of blood and teeth left on the floor.” The government, in contrast, argued that the question of severability was “very easy” because Dodd-Frank’s severability clause was “unambiguous” and so there was no need for the Court to “engage in this navel-gazing” about what Congress would have done had it considered the issue.
Because the government was not defending the constitutionality of Dodd-Frank’s for-cause removal provision, Justice Kagan appointed Paul Clement as an amicus to argue for the constitutionality of the CFPB. The Court-appointed amicus argued that the Court’s cases establish that Congress may not give removal power to someone other than the President, but Congress may place modest restrictions on the President’s power of removal, and requiring removal to be for cause is not a significant limitation on executive authority. At the very least, the amicus argued, the Court should construe the for-cause removal provision to set a relatively low bar for removal—closer to an “at will” standard.
It is exceedingly difficult to predict the result of this case based on what was said during the argument, as no majority of five Justices clearly coalesced around a particular viewpoint on either the constitutional question or the severability question. But a few things seemed apparent. First, several of the Justices seemed to disagree with the argument that for-cause removal is less problematic for multi-member commissions than for single agency heads—indeed, arguably multi-member commissions are more difficult for the President to control than a single member removable even for cause.
Second, many of the Justices expressed serious concerns with the argument of the Court-appointed amicus that the Court should construe the for-cause removal provision to effectively allow at-will removal. This type of argument (which several Justices referred to as a “watered down” version of for-cause removal) could implicate agency power even more significantly than striking down the CFPB’s for-cause removal provision or even striking down Dodd-Frank altogether: it could make vulnerable the independence of numerous agencies with similar for-cause removal provisions—potentially even the Federal Reserve. It could also lead to myriad future cases about whether that watered-down standard was satisfied—a result the Chief Justice referred to as the “worst of all possible worlds.”
Third, no Justice seemed to obviously adopt or advocate for Seila Law’s argument that the Court should strike down Dodd-Frank entirely if the for-cause provision is unconstitutional. Justice Kavanaugh, who wrote an opinion rejecting such an argument when he was a judge in the D.C. Circuit (in PHH Mortgage v. CFPB) said that ignoring Dodd-Frank’s severability clause would be akin to “rewriting it.”
Fourth, there was very little interest from the Court in dismissing the case without deciding the merits, as the Court-appointed amicus argued it should do.
Perhaps the most likely scenario is a fractured opinion in which a majority of the Court ultimately agrees that the CFPB structure is unconstitutional (perhaps not all for the same reasons), and a different majority agrees that the for-cause removal provision should be severed. We will not know until the opinion issues, which should occur by the end of June.
Editor’s Note: This post was authored by guest author Jaime Santos, a partner in Goodwin’s Appellate Litigation practice.