Consumer Fin. Prot. Bureau v. Seila Law LLC

• Decision Date: 06 May 2019
• Docket Number: No. 17-56324,17-56324
• Citation: 923 F.3d 680
• Parties: CONSUMER FINANCIAL PROTECTION BUREAU, Petitioner-Appellee, v. SEILA LAW LLC, Respondent-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

923 F.3d 680

CONSUMER FINANCIAL PROTECTION BUREAU, Petitioner-Appellee,

v.SEILA LAW LLC, Respondent-Appellant.

No. 17-56324

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 8, 2019 Pasadena, California

Filed May 6, 2019

Anthony Bisconti (argued) and Thomas H. Bienert Jr., Bienert Miller & Katzman PLC, San Clemente, California, for Respondent-Appellant.

Kevin E. Friedl (argued) and Christopher J. Deal, Attorneys; Steven Y. Bressler, Assistant General Counsel; John R. Coleman, Deputy General Counsel; Mary McLeod, General Counsel; Consumer Financial Protection Bureau, Washington, D.C.; for Petitioner-Appellee.

Before: Susan P. Graber and Paul J. Watford, Circuit Judges, and Jack Zouhary,^* District Judge.

WATFORD, Circuit Judge:

The Consumer Financial Protection Bureau (CFPB) is investigating Seila Law LLC, a law firm that provides a wide range of legal services to its clients, including debt-relief services. The CFPB is seeking to determine whether Seila Law violated the Telemarketing Sales Rule, 16 C.F.R. pt. 310, in the course of providing debt-relief services to consumers. As part of its investigation, the CFPB issued a civil investigative demand (CID) to Seila Law that requires the firm to respond to seven interrogatories and four requests for documents. See 12 U.S.C. § 5562(c)(1). After Seila Law refused to comply with the CID, the CFPB filed a petition in the district court to enforce compliance. See § 5562(e)(1). The district court granted the petition and ordered Seila Law to comply with the CID, subject to one modification that the CFPB does not contest. Seila Law challenges the district court’s order on two grounds, both of which we reject.

I

Seila Law’s main argument is that the CFPB is unconstitutionally structured, thereby rendering the CID (and everything else the agency has done) unlawful. Specifically, Seila Law argues that the CFPB’s structure violates the Constitution’s separation of powers because the agency is headed by a single Director who exercises substantial executive power but can be removed by the President only for cause. The arguments for and against that view have been thoroughly canvassed in the majority, concurring, and dissenting opinions in PHH Corp. v. CFPB , 881 F.3d 75 (D.C. Cir. 2018) (en banc). We see no need to re-plow the same ground here. After providing a summary of the CFPB’s structure, we explain in brief why we agree with the conclusion reached by the PHH Corp. majority.

Congress created the CFPB in 2010 when it enacted the Consumer Financial Protection Act, 12 U.S.C. §§ 5481 – 5603. The Act confers upon the CFPB a broad array of powers to implement and enforce federal consumer financial laws, with the overarching goals of "ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive." 12 U.S.C. § 5511(a). The agency’s powers include, among other things, the authority to promulgate rules (§ 5512), conduct investigations ( § 5562 ), adjudicate administrative enforcement proceedings (§ 5563), and file civil actions in federal court (§ 5564). Congress classified the CFPB as "an Executive agency" and chose to house it within the Federal Reserve System. § 5491(a).

The CFPB is led by a single Director appointed by the President with the advice and consent of the Senate. § 5491(b). The Director serves for a term of five years that may be extended until a successor has been appointed and confirmed. § 5491(c)(1)–(2). The Director may be removed by the President only for "inefficiency, neglect of duty, or malfeasance in office." § 5491(c)(3). A provision of this sort is commonly referred to as a "for cause" restriction on the President’s removal authority.

Seila Law contends that an agency with the CFPB’s broad law-enforcement powers may not be headed by a single Director removable by the President only for cause. That argument is not without force. The Director exercises substantial executive power similar to the power exercised by heads of Executive Branch departments, at least some of whom, it has long been assumed, must be removable by the President at will. The Supreme Court’s separation-of-powers decisions, in particular Humphrey’s Executor v. United States , 295 U.S. 602, 55 S.Ct. 869, 79 L.Ed. 1611 (1935), and Morrison v. Olson , 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), nonetheless lead us to conclude that the CFPB’s structure is constitutionally permissible.

In Humphrey’s Executor , the Court rejected a separation-of-powers challenge to the structure of the Federal Trade Commission (FTC), an agency similar in character to the CFPB. The petitioner in that case argued that the FTC’s structure violates Article II of the Constitution because the agency’s five Commissioners, although appointed by the President with the advice and consent of the Senate, may be removed by the President only for cause. The Court rejected that argument, relying heavily on its determination that the agency exercised mostly quasi-legislative and quasi-judicial powers, rather than purely executive powers. 295 U.S. at 628, 631–32, 55 S.Ct. 869. The Court reasoned that it was permissible for Congress to decide, "in creating quasi-legislative or quasi-judicial agencies, to require them to act in discharge of their duties independently of executive control." Id. at 629, 55 S.Ct. 869. The for-cause removal restriction at issue there, the Court concluded, was a permissible means of ensuring that the FTC’s Commissioners would "maintain an attitude of independence" from the President’s control. Id.

This reasoning, it seems to us, applies equally to the CFPB, whose Director is subject to the same for-cause removal restriction at issue in Humphrey’s Executor . Like the FTC, the CFPB exercises quasi-legislative and quasi-judicial powers, and Congress could therefore seek to ensure that the agency discharges those responsibilities independently of the President’s will. In addition, as the PHH Corp. majority noted, the CFPB acts in part as a financial regulator, a role that has historically been viewed as calling for a measure of independence from Executive Branch control. 881 F.3d at 91–92.

To be sure, there are differences between the CFPB and the FTC as it existed when Humphrey’s Executor was decided in 1935. The Court’s subsequent decision in Morrison v. Olson , however, precludes us from relying on those differences as a basis for distinguishing Humphrey’s Executor .

The most prominent difference between the two agencies is that, while both exercise quasi-legislative and quasi-judicial powers, the CFPB possesses substantially more executive power than the FTC did back in 1935. But Congress has since conferred executive functions of similar scope upon the FTC, and the Court in Morrison suggested that this change in the mix of agency powers has not undermined the constitutionality of the FTC. See Morrison , 487 U.S. at 692 n.31, 108 S.Ct. 2597. Indeed, in Morrison the Court upheld the constitutionality of a for-cause removal restriction for an official exercising one of the most significant forms of executive authority: the power to investigate and prosecute criminal wrongdoing. And more recently, in Free Enterprise Fund v. Public Company Accounting Oversight Board , 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010), the Court left undisturbed a for-cause removal restriction for Commissioners of the Securities and Exchange Commission, who are charged with overseeing a board that exercises "significant executive power." Id. at 514, 130 S.Ct. 3138.

The other notable difference between the two agencies is that the CFPB is headed by a single Director whereas the FTC is headed by five Commissioners. Some have found this structural difference dispositive for separation-of-powers purposes. See PHH Corp. , 881 F.3d at 165–66 (Kavanaugh, J., dissenting). But as the PHH Corp. majority noted, see id. at 98–99, the Supreme Court’s decision in Humphrey’s Executor did not appear to turn on the fact that the FTC was headed by five Commissioners rather than a single individual. The Court made no mention of the agency’s multi-member leadership structure when analyzing the constitutional validity of the for-cause removal restriction at issue. See Humphrey’s Executor , 295 U.S. at 626–31, 55 S.Ct. 869. And the Court’s subsequent decision in Morrison seems to preclude drawing a constitutional distinction between multi-member and single-individual leadership structures, since the Court in that case upheld a for-cause removal restriction for a prosecutorial entity headed by a single independent counsel. 487 U.S. at 696–97, 108 S.Ct. 2597 ; see PHH Corp. , 881 F.3d at 113 (Tatel, J., concurring). As the PHH Corp. majority noted, if an agency’s leadership is protected by a for-cause removal restriction, the President can arguably exert more effective control over the...