Today, June 29, 2020, the United States Supreme Court handed down its decision in Seila Law v. CFPB. The Court found the structure of the Consumer Financial Protection Bureau (“CFPB”), whereby it is led by a single director who may be removed by the president only for reasons of “inefficiency, neglect or malfeasance” to be a violation of the separation of powers required by the United States Constitution. While the Court found this provision to be unconstitutional, the decision leaves the agency otherwise fully intact and only modifies this provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), which created the agency.
The Court found that the Dodd-Frank provision establishing the Director of the CFPB as removable only for cause, i.e., for reasons of inefficiency, neglect, or malfeasance, to be a violation of the separation of powers established by the Constitution. The U.S. Constitution established a federal government consisting of three branches: Judicial, Legislative and Executive. The executive branch is vested in the President of the United States who is vested with the entire “executive power” of the Constitution, according to the Court – a singularly powerful executive who is ultimately accountable to voters.
While the president may enlist lesser executive officers to assist in discharging his duties, their power necessarily must still reside and originate from the president. The majority finds, based on earlier precedent, that a necessary component of the supervisory authority the president exercises over lesser officers includes the power to remove those officers without restriction. The majority reviews those rare instances in US history where the Court has accepted some congressional restriction on the power to remove but finds these distinguishable from the CFPB Director primarily on the basis of the broad administrative power the director holds and the fact that the director is a lone individual serving for a five-year term. In other cases, agencies with directors removable only for cause are led by a panel of individuals, hold limited powers, or exist only for a limited time and purpose. Thus, the Court finds the for-cause provision applicable to the CFPB Director to violate the principles vesting executive power of the federal government in the president alone.
Once the Court found the for-cause provision unconstitutional, it was then faced with a decision of what effect that had on the CFPB and the case before it. By 7-2, the Court found that the provision of the law dictating the removal of the director can be struck down without invalidating the entirety of Dodd-Frank. The majority relied on both the severability provision included in Dodd-Frank, as well as its own precedent in severing unconstitutional provisions to support that outcome. Therefore, the effect of the Court’s decision is to leave the CFPB intact, led by a single director who is removable at will by the president – Chief Justice Roberts wrote that the agency may continue to operate, but its director, “in light of our decision, must be removable by the president at will.”
Chief Justice John Roberts wrote the opinion of the Court, and the sections dealing with the structure of the CFPB were joined by Thomas, Alito, Gorsuch and Kavanaugh. The section of the Opinion dealing with the severability of the for-cause provision from the rest of Dodd-Frank was joined by Alito and Kavanaugh. Kagan wrote an opinion which, while disagreeing with the Court on the constitutionality of the structure of the CFPB, concurred with the majority opinion on severability of the for-cause provision and was joined by Ginsburg, Breyer, and Sotomayor. Thomas issued an opinion, which Gorsuch joined, concurring with the majority on the structure of the CFPB but dissenting from the majority opinion on whether the for-cause provision can be severed from the Dodd-Frank statute. The Thomas opinion instead argues that the Court should not decide severability but simply decline to enforce the unconstitutional statue in the instant case, by declining to enforce the civil investigative demand against Seila Law.
