February 13, 2020
The State of Utah joined a 13-state amicus brief supporting the petitioner in Seila Law v. Consumer Financial Protection Bureau. Utah Solicitor General Tyler R. Green wrote the following article in the Supreme Court of the United States (SCOTUS) Blog. Read the article here.
Symposium: Why a Justice James Madison and a Justice Jerry Jones would vote for Seila Law
By Solicitor General Tyler R. Green
Seila Law v. Consumer Financial Protection Bureau might be this term’s most important case that nonlawyers outside of Washington, D.C., haven’t heard of. It presents classic governmental power struggles—the president versus Congress, and the federal government versus the states—that gripped the Founders in Philadelphia more than 200 years ago. They understood that the outcome of those struggles would shape how the Constitution protects individual liberty. Anyone still interested in that issue would do well to follow this case closely.
The facts giving rise to those questions here are straightforward enough. Prompted by the Great Recession, Congress passed a law in 2010 that came to be known as the Dodd-Frank Act (after two of its main sponsors). Among other things, Dodd-Frank created a new federal agency named the Consumer Financial Protection Bureau. The federal government describes the CFPB’s job as “regulat[ing] a substantial segment of the Nation’s economy.” In fact, the government says the CFPB wields “much of the authority to regulate consumer financial products and services that had been vested in other federal agencies.”
But those other federal agencies and the CFPB have vastly different leadership structures. At the other agencies, the bosses are either a group of commissioners—so official action requires a majority vote—or a single person whom the president may remove at will. In contrast, the CFPB’s director is one person appointed by the president and confirmed by the Senate to a five-year term. And during that five-year term, the president may remove the director only for “inefficiency, neglect of duty, or malfeasance in office.”
So constituted, the CFPB decided to investigate whether Seila Law, a solo-practitioner law firm, violated federal consumer-financial regulations when it helped clients obtain consumer debt relief. The CFPB asked Seila Law to give it documents and information related to its investigation. Seila Law responded by asking the CFPB to withdraw its demand for documents, arguing that the agency’s leadership structure violates the Constitution’s separation of powers. When the CFPB persisted, Seila Law responded to only part of the demand, continuing to argue that the agency’s structure is unconstitutional. The CFPB then obtained an order from a federal district court in California requiring Seila Law to comply with the CFPB’s demand (narrowed slightly). The U.S. Court of Appeals for the 9th Circuit affirmed that district court order.
What about those facts moved 13 states to file a friend-of-the-court brief urging the Supreme Court to agree with the federal government, which itself has conceded that the CFPB’s structure violates the separation of powers? Readers with enough time and interest can find full explanations in the states’ brief. For everyone else, here’s the CliffsNotes version of the two critical points. And to try to make those points even clearer, I’ll use a metaphor based on America’s apparent de facto religion: the National Football League.
Suppose you own an NFL team. You and millions of your fans share the same obvious goal—win the Super Bowl. That’s easier said than done; every year, 31 teams fall short. Consider all the pieces that must fall into place for you to become the champion: You need the right players executing the right plays at the right time for the better part of at least 19 weeks. With so many moving pieces, arguably the most important decision you’ll make is whom to hire to fit them all into place—who will be your head coach?
So much flows from that crucial decision. Your head coach sets your team’s tone, and not just by his personal demeanor. As head coach, he’ll make scores of critical choices that saturate every aspect of team life. He’ll hire an offensive and a defensive coordinator and position coaches. He’ll implement a practice system. He’ll need to communicate his vision to his staff and players and decide how to respond if they disagree with him or fail to meet expectations. In short, to paraphrase President Harry Truman, the buck stops with him.
Given those realities, if you decided to fire your head coach and hire a new one, no one would take seriously the suggestion that the new guy must retain the old one’s coordinators or position coaches—or that, going forward, the new coach could not make changes to his staff as he deems appropriate. You’ve given him a job to do; like Jerry Jones, you want to give your coach “carte blanche to form his staff as he sees fit.” Even players recognize that a new head coach doesn’t “want to inherit a whole lot of coaches” because “he has to make sure everyone he has in place is on the same page as him.”
So it is here. That’s the states’ first critical point. Truman was right—the buck does stop with the president. After a long campaign, Americans hire just one person to do the specific job of carrying out the federal government’s constitutional duties in a way that honors the Constitution’s text but reflects the majority’s political and policy preferences. The president must be able to pick his own department and agency heads—that is, his coordinators and position coaches—to give him the best chance of implementing his vision and keeping his political promises. Hence James Madison’s insistence, quoted in Free Enterprise Fund v. Public Company Accounting Oversight Board, that the president has “the power of appointing, overseeing, and controlling those who execute the laws.”
Dodd-Frank’s removal restriction on the CFPB’s director violates that intuitive order. And upholding it would break new constitutional ground. Never before has the Supreme Court held that Congress can restrict the president’s ability to remove a single-person agency head. This is no time for the court to change course and effectively hold that, like it or not, some presidents must do part of their job with a prior president’s person.
The states’ second point concerns the limits of the coach’s and team’s control. Though a head coach bears ultimate final responsibility for the parts of a player’s life bound up with the team, he has little control over a player’s choices outside that realm. Take nutrition, for example. Even if a team hires a dietitian to give its players nutritional advice, or provides some meals during training camp or other parts of the year, players can still hire their own consultants to advise on specific nutrition or other fitness needs. When that advice makes a player more valuable to the team, no harm done. But sometimes disputes arise between the team’s and the player’s preferences, and the coach needs unfettered flexibility to respond to them.
Just like the team and the coach, the federal government and the president have limits on their power. Madison wrote in Federalist No. 39 that the federal government’s “jurisdiction extends to certain enumerated objects only, and leaves to the several States a residuary and inviolable sovereignty.” And historically, consumer-protection laws have been the states’ domain. Yet as financial markets have matured, federal regulators—typically multi-member commissions—have begun to exercise some overlapping consumer-protection power in this area. Over time, state regulators and their federal counterparts have joined forces to create regulatory regimes that foster the consistency necessary to both protect consumers and keep financial markets stable. No harm, no foul.
Ironically, in the name of protecting consumers, Dodd-Frank created a system that threatens to upend that cooperative framework. The CFPB’s largely unremovable director can exercise vast amounts of regulatory power with no input from the president or any state legislature. The reality that one politically unaccountable federal agency head can make (or unmake) consumer-financial policies affecting millions of people and billions of dollars is more than a little hard to square with the Framers’ promise of retained state sovereignty.
At bottom, the states’ concerns here are not the separation of powers or state sovereignty for their own sake. The Framers deployed each of those devices for one overarching purpose: to protect individual liberty. A federal agency head with vast regulatory power over “a substantial segment of the Nation’s economy”—but who is largely insulated from the president’s political control, and who need not bother consulting with the states before acting—epitomizes the very type of threat to liberty that the Constitution guards against. Disapproving the restrictions on the president’s power to remove the CFPB director would affirm the Constitution’s first principles by protecting the structures that protect us.
Posted in Seila Law LLC v. Consumer Financial Protection Bureau, Symposium before oral argument in Seila Law v. Consumer Financial Protection Bureau, Featured