clock menu more-arrow no yes

The Supreme Court appears likely to hand Trump an important victory in a showdown over the CFPB

An ideological crusade begun three decades ago by Justice Antonin Scalia is coming to fruition.

Supreme Court Justice Brett Kavanaugh listens to a discussion between Economic Club President David Rubenstein and NBA Commissioner Adam Silver about the state of the NBA and professional sports on May 9, 2019.
Zach Gibson/Getty Images

The plaintiff in Seila Law v. CFPB, a case the Supreme Court heard on Tuesday, pinned its hopes on a Hail Mary argument that was never likely to prevail — that the entire Consumer Financial Protection Bureau (CFPB), an agency created in response to the 2008 financial crisis, must be struck down because it is too difficult for the president to fire the agency’s director.

Tuesday’s argument largely confirmed that this plaintiff is unlikely to walk away with the relief that it sought from the justices, though the Court may end up advancing a theory long championed by conservative jurists.

Let’s back up for a minute. Seila Law concerns the unusual way that the CFPB, which was created largely due to the efforts of then-Harvard law professor Elizabeth Warren, is structured. Most federal agencies are led by a single individual, such as a cabinet secretary, who can be fired at will by the president. Meanwhile, some federal agencies, such as the Federal Reserve or the Federal Communications Commission, are led by multi-person boards whose members cannot be fired by the president except “for cause.” This latter kind of agency is often referred to as an “independent” agency.

The CFPB is unusual — though not unique — in that it is led by a single director, and this director may only be fired for “inefficiency, neglect of duty, or malfeasance in office.” The plaintiff in Seila Law argues that this unusual structure is unconstitutional because it effectively prevents the president from supervising a significant swath of the executive branch.

Some version of that argument appears likely to prevail in the Supreme Court. Four members of the Court’s Republican majority — Chief Justice John Roberts, and Justices Samuel Alito, Neil Gorsuch, and Brett Kavanaugh — all appeared sympathetic to the view that an agency cannot be led by a single person who cannot be easily removed by the president. (Justice Clarence Thomas, per his ordinary practice, did not speak during the argument.)

But the plaintiff in the Seila Law case wants the Court to go beyond that and strike down the entire agency — or, at least, to invalidate every enforcement action the agency has taken up to this point. That outcome is unlikely. As a lower court judge, Kavanaugh rejected a similar invitation to invalidate the entire CFPB, and he does not appear to have changed his view since his promotion to the Supreme Court. Indeed, Kavanaugh spent a decent part of Tuesday morning arguing forcefully against the idea that the entire CFPB should be eliminated.

The “Seila Law” in the Seila Law case is a law firm being investigated by the CFPB for allegedly engaging “in unlawful acts or practices in the advertising, marketing, or sale of debt relief services” an investigation unlikely to end unless the Court takes the unusual step of invalidating the entire agency. Yet, while the law firm is unlikely to receive much relief from the Supreme Court, the case is likely to fundamentally alter the relationship between the president and at least some federal agencies. Indeed, Seila Law is the vehicle some justices hope to use to advance an ideological crusade the late Justice Antonin Scalia began in 1988 — a crusade that could give the president far more power to fire the leaders of independent agencies.

At least in the short term, Seila Law could be good news for Democrats. It’s likely to mean that a new president may fire Trump’s CFPB director on their very first day in office. In the long run, however, Seila Law would also make it much harder for Congress to insulate certain federal officials from an imperious president.

Justice Scalia and the “unitary executive”

To understand why Seila Law matters so much to legal conservatives, it’s important to understand Scalia’s dissenting opinion in Morrison v. Olson (1988).

Morrison involved a federal law, which expired in 1999, that authorized “independent counsels” — special prosecutors who could only be fired for cause. The Court upheld this law in a 7-to-1 decision, with Scalia as the only dissenter.

According to Scalia, the Constitution provides that “the executive Power shall be vested in a President of the United States.” This provision, Scalia said, “does not mean some of the executive power, but all of the executive power.” Thus, because the power to bring prosecutions is vested in the executive branch, there cannot be an “independent” prosecutor who is not fully accountable to the president. Under Scalia’s view, federal officers must either serve at the pleasure of the president, or they must serve at the pleasure of a lesser official who is, themselves, accountable to the president.

This notion, that everyone who exercises federal executive power must be responsible to the president is the “unitary executive” theory.

In 1988, this theory was also considered to be fairly radical. Scalia’s Morrison dissent, after all, is a dissent. Scalia couldn’t convince even a single one of his colleagues to join his opinion.

But in the last three decades, the Morrison dissent developed a cult following among conservatives. Kavanaugh said in 2016 that he wanted to “put the final nail” in the Morrison majority opinion’s coffin. The Trump Justice Department also filed a brief arguing that the CFPB director’s job protections are unconstitutional (though it rejected the view that the entire CFPB should be struck down).

And, at Tuesday’s argument, it appeared that Scalia’s view appealed to a majority of the Supreme Court. The one problem for the Court’s majority is that they appeared uncertain how to reach the result they want in Seila Law without disrupting numerous other agencies.

The problem of Humphrey’s Executor

Tuesday’s entire argument was overshadowed by Humphrey’s Executor v. United States (1935), a Roosevelt Era decision holding that Congress may create independent agencies led by multi-person, bipartisan boards — and that the members of these boards could be given job security protections. Many of these boards perform functions that are insulated from the president for very good reason.

If Federal Reserve governors could be fired at will by the president, for example, the president could pressure them to slash interest rates during an election year — potentially injecting cocaine in the nation’s economy at the very moment when it is most likely to boost an incumbent president’s shot at reelection.

At least some of the Court’s conservative majority seemed uncomfortable with a decision allowing the president to apply such pressure to the Federal Reserve, and Kannon Shanmugam, the lawyer representing Seila Law, offered one potential solution to this dilemma. The Court could retain Humphrey’s Executor’s holding for multi-member agencies while striking down the CFPB’s single-director structure.

But it’s hard to find a principled way to draw that line in the Constitution’s text. Recall that this entire case turns on the proper meaning of the Constitution’s declaration that “the executive power shall be vested in a President of the United States of America.” One searches this vague constitutional provision in vain for language creating a distinction between single-member and multi-member agency heads.

Nevertheless, the Court’s right flank seemed to view a system that allows an agency to be led by a single individual who cannot immediately be fired by the president as unacceptable. Both Alito and Gorsuch, for example, warned of a situation where the president could not fire cabinet secretaries, potentially forcing a new president to retain a cabinet appointed by someone they just defeated in a presidential election.

Kavanaugh, meanwhile, suggested that maybe the Court’s interpretation of the Constitution should be shaped by “historical practice.” Whatever the wisdom of Humphrey’s Executor at the time that it was decided, multi-member independent agencies are now part of the nation’s structure and cannot be easily dismantled. But that doesn’t mean that the Court should allow single-member independent agencies to exist.

Such a decision would stretch beyond the CFPB — as Justice Sonia Sotomayor pointed out, the Social Security Administration is also led by a single leader who is protected from firing — but it would be relatively narrow in scope.

Another possibility, initially floated by Chief Justice Roberts, would be to simply read the statute protecting the CFPB director narrowly. Recall that the director may be fired for “inefficiency.” Roberts suggested that a president might deem a CFPB director that they disagree with on some fundamental grounds to be inefficient.

As a practical matter, however, that decision could strip the CFPB director of their protections against firing. Indeed, several justices questioned whether such a decision would allow a president to fire a CFPB director simply because they disagreed with the director. And, if the statute protecting the CFPB director from firing can be rewritten, so too could the statute protecting Federal Reserve governors.

There is another way that the Court could resolve this case. There is an entire branch of government whose job is to make discretionary policy judgments when the Constitution does not clearly state what the law should be. It’s called Congress. The Court could simply defer to the legislature’s determination that certain agencies should enjoy a degree of independence and leave it at that.

But, while the idea that courts should defer to elected lawmakers when the Constitution is unclear used to drive the Supreme Court’s decisions, judicial modesty has fallen out of favor with the Republican Party and with the Republican justices who control the Supreme Court.

So what happens now?

One piece of good news for consumers is that there almost certainly are not five votes to strike down the CFPB itself. All four of the Court’s Democratic appointees appeared reluctant to strike down the CFPB’s current leadership structure, and Kavanaugh stated fairly clearly that he does not believe that the agency should be eliminated.

As Kavanaugh noted, the text of the law creating the CFPB explicitly states that courts should retain as much of that law as possible if they strike down an individual provision. And Kavanaugh indicated that he believes he is bound by that text.

So Seila Law is unlikely to end in a bloodbath for the CFPB. But it is very likely to end in a victory for Scalia’s vision of the unitary executive.