In a decision that seemed split nearly as many ways as there are justices on the court, the U.S. Supreme Court on July 29 struck down a unique feature of the Consumer Financial Protection Bureau while allowing the agency as a whole to continue.
The agency’s setup with a single director insulated from firing by the president except for cause is unique, and the court found that structure violates the separation of powers constitutional doctrine.
In a previous case, Humphrey’s Executor v. United States, the Supreme Court ruled Congress can create specialty agencies led by a group of people insulated from firing. In another, the court allowed tenure protections for junior officers with narrow duties.
“We are now asked to extend these precedents to a new configuration: an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met. We decline to take that step,” wrote Chief Justice John Roberts in the decision.
Congress created the Consumer Financial Protection Bureau through the 2010 Dodd-Frank Act, which implemented sweeping financial regulations reform. A director’s term is five years, and the CFPB is intended to be further insulated from political whims by receiving its appropriation from the Federal Reserve. The president can only fire the director for “inefficiency, neglect of duty, or malfeasance in office.”
John Holcomb, a professor of business ethics and legal studies at the University of Denver’s Daniels College of Business, said the decision’s realistic impact on the CFPB’s operation is probably not earth-shaking because the ruling said the single-director structure is severable from the rest of the law that established the CFPB. But he said he believes it’s likely to influence future legislation.
“I think Congress will be very loathe to have the single director independent regulatory body,” Holcomb said, adding, “I think there’s real concern that we have gutted the purpose of this entity and that we might have to rewrite the legislation; go back and amend it to transfer the power from a single director to a commission if you want to have it truly independent. So I think it’s a warning shot across the bow.”
Richard Collins, a constitutional law professor at the University of Colorado, said the decision moves the needle a small amount for a future case for the Supreme Court to decide the president also has authority to fire the Federal Reserve chair at will.
“It leaves intact the precedents that say that he cannot do that. But it moves in the direction of that idea,” Collins said.
The court mostly split along ideological lines, with Roberts leading a majority that Justices Neil Gorsuch, Clarence Thomas, Samuel Alito and Brett Kavanaugh joined. But Thomas also filed a partial concurrence and partial dissent to another part of the opinion, which Alito and Kavanaugh joined.
Justice Elena Kagan filed another partial concurrence and partial dissent, joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor.
In the Humphrey precedent, Federal Trade Commission member William Humphrey refused to accept his firing by President Franklin D. Roosevelt. When he died a few months later, his estate challenged the firing in court by seeking Humphrey’s salary between the date of his removal and the date of his death.
In his separate opinion, Thomas was direct about his dislike for the Humphrey’s Executor precedent and the power of independent agencies as a de facto fourth branch of government. The Constitution just doesn’t give Congress authority to delegate its legislative power or create agencies that have functions of multiple branches of government, he said.
“Humphrey’s Executor relies on one key premise: the notion that there is a category of ‘quasi-legislative’ and ‘quasi-judicial’ power that is not exercised by Congress or the Judiciary, but that is also not part of ‘the executive power vested by the Constitution in the President,’” he wrote. “The problem is that the Court’s premise was entirely wrong.”
Thomas agreed with the majority’s decision to limit the Humphrey’s Executor precedent, but in his partial dissent he said he does not believe the court should have addressed the severability of the CFPB’s single-director structure from the rest of the law establishing the agency.
Holcomb said under Thomas’ reasoning to outright overturn the Humphrey’s Executor precedent, it would create case law to eliminate all independent agencies and put them under the president’s authority.
“He wants to use this as an occasion, number one, to strengthen the president, but number two, to attack the ‘deep state.’ And that phrase he never uses, of course, because it’s so politically charged. But I think that is his goal.”
But in her own separate opinion, Kagan wrote the Constitution doesn’t address the president’s authority to fire agency leaders. She believes Congress has historically had wide authority to establish independent agencies, and insulation of their heads from firing except for cause has allowed Congress to set up an agency with a structure that is best for its specific purpose.
“Judicial intrusion into this field usually reveals only how little courts know about governance. Even everything I just said is an over-simplification,” Kagan wrote. “A given agency’s independence (or lack of it) depends on a wealth of features, relating not just to removal standards, but also to dissenting appointments practices, procedural rules, internal organization, oversight regimes, historical traditions, cultural norms, and (inevitably) personal relationships.
—Julia Cardi