PHH Corp. v. Consumer Fin. Prot. Bureau

• Court: U.S. Court of Appeals — District of Columbia Circuit
• Writing for the Court: Pillard, Circuit Judge
• Citation: PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75 (D.C. Cir. 2018)
• Decision Date: 31 January 2018
• Docket Number: No. 15-1177,15-1177
• Parties: PHH CORPORATION, et al., Petitioners v. CONSUMER FINANCIAL PROTECTION BUREAU, Respondent

881 F.3d 75

PHH CORPORATION, et al., Petitioners

v.CONSUMER FINANCIAL PROTECTION BUREAU, Respondent

No. 15-1177

United States Court of Appeals, District of Columbia Circuit.

Argued May 24, 2017

Decided January 31, 2018

Theodore B. Olson, Washington, argued the cause for petitioners. With him on the briefs were Helgi C. Walker, Lucas C. Townsend, Mitchel H. Kider, David M. Souders, Thomas M. Hefferon, and William M. Jay, Washington.

Andrew J. Pincus, Stephen C.N. Lilley, Matthew A. Waring, Kate Comerford Todd, and Steven P. Lehotsky, Washington, were on the brief for amicus curiae The Chamber of Commerce of the United States of America in support of petitioners.

David K. Willingham, Michael D. Roth, Los Angeles, Jeffrey M. Hammer, and Kelly L. Perigoe were on the brief for amici curiae RD Legal Funding, LLC, et al. in support of petitioners.

Joseph R. Palmore and Bryan J. Leitch, Washington, were on the brief for amici curiae American Bankers Association, et al. in support of petitioners and vacatur.

David T. Case, Washington, and Phillip L. Schulman were on the brief for amicus curiae The National Association of Realtors® in support of petitioners and reversal of the June 4, 2015 order of the Director of the Consumer Financial Protection Bureau.

Jay N. Varon and Jennifer M. Keas, Washington, were on the brief for amici curiae American Land Title Association, et al. in support of petitioners.

Joshua D. Hawley, Attorney General, Office of the Attorney General for the State of Missouri, and D. John Sauer, State Solicitor, were on the brief for amici curiae the States of Missouri, et al. in support of petitioners.

Kirk D. Jensen, Joseph M. Kolar, and Alexander S. Leonhardt, Washington, were on the brief for amicus curiae The Consumer Mortgage Coalition in support of petitioner.

Marc J. Gottridge, New York, Allison M. Wuertz, Ilya Shapiro, and Thaya Brook Knight were on the brief for amicus curiae The Cato Institute in support of petitioners.

Brian Melendez, Minneapolis, was on the brief for amicus curiae ACA International in support of petitioners.

C. Boyden Gray, Adam R.F. Gustafson, James R. Conde, Gregory Jacob, Sam Kazman, and Hans Bader, Washington, were on the brief for amici curiae State National Bank of Big Spring, et al. in support of petitioners.

Hashim M. Mooppan, Attorney, U.S. Department of Justice, argued the cause as amicus curiae United States of America. On the brief were Douglas N. Letter, Mark B. Stern, Daniel Tenny, and Tara S. Morrissey, Attorneys. Ian H. Gershengorn, Attorney, Washington, entered an appearance.

Lawrence DeMille-Wagman, Senior Litigation Counsel, Consumer Financial Protection Bureau, argued the cause for respondent. With him on the brief was John R. Coleman, Deputy General Counsel.

George Jepsen, Attorney General, Office of the Attorney General for the State of Connecticut, and John Langmaid, Assistant Attorney General, were on the brief for The States of Connecticut, et al. in support of respondent.

Thomas C. Goldstein, Eric Citron, Tejinder Singh, and Deepak Gupta, Washington, were on the brief for amici curiae Americans For Financial Reform, et al. in support of respondent.

Elizabeth B. Wydra, Washington,Brianne J. Gorod, and Simon Lazarus were on the brief for amici curiae Current and Former Members of Congress in support of respondent.

Scott L. Nelson and Allison M. Zieve, Washington, were on the brief for amici curiae Public Citizen, Inc., et al. in support of respondent.

Julie Nepveu, Washington, was on the brief for amici curiae AARP and AARP Foundation in support of respondent.

Deepak Gupta, Washington, was on the brief for amici curiae Financial Regulation Scholars in support of respondent.

Katharine M. Mapes, Jessica R. Bell, and Jeffrey M. Bayne, Washington, were on the brief for amici curiae Separation of Powers Scholars in support of Consumer Financial Protection Bureau.

Before: Garland^* , Chief Judge, Henderson, Rogers, Tatel, Brown^** , Griffith, Kavanaugh, Srinivasan, Millett, Pillard, Wilkins, and Katsas *, Circuit Judges and Randolph, Senior Circuit Judge.

Concurring opinion filed by Circuit Judge Tatel, with whom Circuit Judges Millett and Pillard join.

Concurring opinion filed by Circuit Judge Wilkins, with whom Circuit Judge Rogers joins.

Opinion concurring in the judgment filed by Circuit Judge Griffith.

Dissenting opinion filed by Circuit Judge Henderson.

Dissenting opinion filed by Circuit Judge Kavanaugh, with whom Senior Circuit Judge Randolph joins.

Dissenting opinion filed by Senior Circuit Judge Randolph.

Pillard, Circuit Judge:

We granted en banc review to consider whether the federal statute providing the Director of the Consumer Financial Protection Bureau (CFPB) with a five-year term in office, subject to removal by the President only for "inefficiency, neglect of duty, or malfeasance in office," 12 U.S.C. § 5491(c)(3), is consistent with Article II of the Constitution, which vests executive power "in a President of the United States of America" charged to "take Care that the Laws be faithfully executed," U.S. Const. art. II, § 1, cl. 1 ; id. § 3. Congress established the independent CFPB to curb fraud and promote transparency in consumer loans, home mortgages, personal credit cards, and retail banking. See 12 U.S.C. § 5481(12). The Supreme Court eighty years ago sustained the constitutionality of the independent Federal Trade Commission, a consumer-protection financial regulator with powers analogous to those of the CFPB. Humphrey's Executor v. United States , 295 U.S. 602, 55 S.Ct. 869, 79 L.Ed. 1611 (1935). In doing so, the Court approved the very means of independence Congress used here: protection of agency leadership from at-will removal by the President. The Court has since reaffirmed and built on that precedent, and Congress has embraced and relied on it in designing independent agencies. We follow that precedent here to hold that the parallel provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act shielding the Director of the CFPB from removal without cause is consistent with Article II.

Introduction

The 2008 financial crisis destabilized the economy and left millions of Americans economically devastated. Congress studied the causes of the recession to craft solutions; it determined that the financial services industry had pushed consumers into unsustainable forms of debt and that federal regulators had failed to prevent mounting risks to the economy, in part because those regulators were overly responsive to the industry they purported to police. Congress saw a need for an agency to help restore public confidence in markets: a regulator attentive to individuals and families. So it established the Consumer Financial Protection Bureau.

Congress's solution was not so much to write new consumer protection laws, but to collect under one roof existing statutes and regulations and to give them a chance to work. Congress determined that, to prevent problems that had handicapped past regulators, the new agency needed a degree of independence. Congress gave the CFPB a single Director protected against removal by the President without cause. That design choice is challenged here as an unconstitutional impediment to the President's power.

To analyze the constitutionality of the CFPB's independence, we ask two questions:

First , is the means of independence permissible? The Supreme Court has long recognized that, as deployed to shield certain agencies, a degree of independence is fully consonant with the Constitution. The means of independence that Congress chose here is wholly ordinary: The Director may be fired only for "inefficiency, neglect of duty, or malfeasance in office," 12 U.S.C. § 5491(c)(3) —the very same language the Supreme Court approved for the Federal Trade Commission (FTC) back in 1935. Humphrey's Executor , 295 U.S. at 619, 629-32, 55 S.Ct. 869 ; see 15 U.S.C. § 41. The CFPB's for-cause removal requirement thus leaves the President no less removal authority than the provision sustained in Humphrey's Executor ; neither PHH nor dissenters disagree. The mild constraint on removal of the CFPB Director contrasts with the cumbersome or encroaching removal restrictions that the Supreme Court has invalidated as depriving the President of his Article II authority or otherwise upsetting the separation of powers. 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 in place ordinary for-cause protection at the Securities and Exchange Commission (SEC)—the same protection that shields the FTC, the CFPB, and other independent agencies—even as it invalidated an unusually restrictive second layer of for-cause protection of the SEC's Public Company Accounting Oversight Board (PCAOB) as an interference with Article II. In its only other decisions invalidating removal restrictions, the Supreme Court disapproved of means of independence not at issue here, specifically, Congress's assigning removal power to itself by requiring the advice and consent of the Senate in Myers v. United States , 272 U.S. 52, 47 S.Ct. 21, 71 L.Ed. 160 (1926), and a joint resolution of Congress in Bowsher v. Synar , 478 U.S. 714, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986). The Supreme Court has never struck down a statute conferring the standard for-cause protection at issue here.

Second , does "the nature of the function that Congress vested in" the agency call for that means of independence? Wiener v. United States , 357 U.S. 349, 353, 78 S.Ct. 1275, 2 L.Ed.2d 1377 (1958) ; see also Morrison v. Olson , 487 U.S. 654, 687, 691 n.30, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988). The CFPB is a financial regulator that applies a set of preexisting statutes to financial services marketed "primarily for personal, family, or household purposes." 12 U.S.C. § 5481(5)(A) ; see also id. §§ 5481(4), (6), (15). Congress has historically given a modicum of independence to financial regulators like the Federal Reserve,...