Justices to review constitutionality of CFPB structure

The website of the Consumer Financial Protection Bureau, created in 2010 under the Dodd-Frank Act as a response to the 2008 financial crisis, describes the CFPB as a “U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.” Today the Supreme Court agreed to hear a challenge to the constitutionality of statutory restrictions on the president’s ability to remove the director of the CFPB from office. The dispute is not merely an academic one: If the justices agree that the restrictions violate the doctrine known as the separation of powers – the idea that the Constitution divides the different functions of government among the executive, judicial and legislative branches – their ruling could potentially unravel all the CFPB’s decisions in the nine years since its creation.

The case now before the court was filed by Seila Law, a law firm that provides, according to its briefs, “a variety of legal services to consumers, including assistance with the resolution of consumer debt.” When the CFPB began an investigation into whether Seila had violated federal telemarketing laws, it sought information and documents from the firm. Seila objected to the request. It argued that the structure of the CFPB is unconstitutional because the bureau is headed by a single director, who has significant power but can only be removed by the president “for cause” – that is, for a very good reason.

The U.S. Court of Appeals for the 9th Circuit conceded that Seila’s argument was “not without force,” but it ultimately concluded that the Supreme Court’s cases point in the other direction. Although the director can only be removed for cause, the court of appeals reasoned, that restriction does not “impede the President’s ability to perform his constitutional duty to ensure that the laws are faithfully executed.”

Seila went to the Supreme Court at the end of June, asking the justices to weigh in. It told the court that the question presented by its case is “exceptionally important” and that “the time for this Court to resolve the long-running debate about the constitutionality of the CFPB is now.”

In a brief filed last month, the CFPB agreed with Seila that the court should grant review and hold that the restriction on removal of the agency’s director “impermissibly infringes the separation of powers fundamental to our constitutional structure.” Today the justices granted Seila’s request, and they instructed Seila and the CFPB to brief an additional question: If the court agrees that the provision limiting the president’s ability to remove the CFPB director is unconstitutional, can that provision be separated from the rest of the Dodd-Frank Act? The CFPB argued that it can be, which would give the court a way to strike down the specific provision without invalidating the entire CFPB, but now the Supreme Court will decide.

The justices will not hear oral argument until early next year, but one justice – Brett Kavanaugh – has already tipped his hand. When he was still a judge on the U.S. Court of Appeals for the District of Columbia Circuit, Kavanaugh dissented from a decision by the full court of appeals that rejected a similar challenge to the constitutionality of the CFPB’s leadership structure. Characterizing the director’s authority as “power that is massive in scope, concentrated in a single person, and unaccountable to the President,” Kavanaugh agreed with the challenger that what he described as the CFPB’s “novel structure” violates the Constitution.

The challenge to the constitutionality of the CFPB’s leadership structure is one of four cases granted this afternoon, following the justices’ private conference this morning. Another grant today involves the Constitution’s suspension clause, which provides that the “writ of habeas corpus” – the opportunity to challenge the validity of imprisonment or detention – “shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it.” In Department of Homeland Security v. Thuraissigiam, the justices will decide whether a federal law that limits judicial review of expedited deportation orders in habeas corpus proceedings to three specific determinations violates the suspension clause. The question arises in the case of a Sri Lankan citizen who was arrested after crossing the U.S.-Mexico border without documentation and was placed in expedited deportation proceedings. When his asylum claims were rejected, Thuraissigiam filed a habeas petition in federal court, arguing that the deportation order violated his rights and seeking a new chance to apply for asylum. The 9th Circuit ruled that, at least as applied to Thuraissigiam, the limitations imposed by federal law violate the suspension clause; the justices will now review that ruling.

The court will also wade into the immigration arena in Nasrallah v. Barr, in which it will consider whether the federal courts of appeals have the authority to review the factual findings at the heart of decisions denying withholding of removal, which is available to individuals who are not eligible for asylum. The petition for review was filed by Nidal Nasrallah, a Lebanese citizen who became a lawful permanent resident of the United States in 2007. DHS began proceedings to deport him after he pleaded guilty to two counts of receiving stolen property. An immigration judge agreed that he was eligible for temporary relief from deportation, but the Board of Immigration Appeals reversed, concluding that Nasrallah had not shown that he would be tortured (the standard for relief) if he were returned to Lebanon. The court of appeals ruled that it lacked the power to review that determination, and now the Supreme Court will weigh in.

Finally, in Lomax v. Ortiz-Marquez, the justices will decide whether a dismissal without prejudice for failure to state a claim counts as a “strike” for purposes of the Prison Litigation Reform Act, which bars inmates from filing or appealing a federal civil action without paying the associated fees if they have filed three or more cases or appeals that were dismissed because the lawsuits were frivolous or malicious or did not make out a proper claim.

The four cases granted today are likely to be scheduled for oral argument early next year, with a decision to follow by summer. Additional orders from today’s conference are expected on Monday, October 21, at 9:30 a.m.

This post was originally published at Howe on the Court.