PHH Corp. v. Consumer Fin. Prot. Bureau, No. 15–1177

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtKavanaugh, Circuit Judge
Parties PHH Corporation, et al., Petitioners v. Consumer Financial Protection Bureau, Respondent
Decision Date11 October 2016
Docket NumberNo. 15–1177

839 F.3d 1

PHH Corporation, et al., Petitioners
v.
Consumer Financial Protection Bureau, Respondent

No. 15–1177

United States Court of Appeals, District of Columbia Circuit.

Argued April 12, 2016
Decided October 11, 2016


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

C. Boyden Gray, Adam J. White, Gregory Jacob, Sam Kazman, and Hans Bader were on the brief for amici curiae State National Bank of Big Spring, et al. in support of petitioners.

Kirk D. Jensen and Alexandar S. Leonhardt were on the brief for amicus curiae Consumer Mortgage Coalition in support of petitioners.

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

Andrew J. Pincus, Matthew A. Waring, Kathryn Comerford Todd, and Steven P. Lehotsky were on the brief for amicus curiae The Chamber of Commerce of the United States in support of petitioners.

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

Phillip L. Schulman and David T. Case were on the brief for amicus curiae National Association of Realtors in support of petitioners.

Lawrence DeMille–Wagman, Senior Litigation Counsel, Consumer Financial Protection Bureau, argued the cause for respondent. With him on the brief were

839 F.3d 5

Meredith Fuchs, General Counsel, and John R. Coleman.

Julie Nepveu was on the brief for amicus curiae AARP in support of respondent.

Before: Henderson and Kavanaugh, Circuit Judges, and Randolph, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge Kavanaugh, with whom Senior Circuit Judge Randolph joins, and with whom Circuit Judge Henderson joins as to Parts I, IV, and V.

Concurring opinion filed by Senior Circuit Judge Randolph.

Opinion concurring in part and dissenting in part filed by Circuit Judge Henderson.

Kavanaugh, Circuit Judge:

INTRODUCTION AND SUMMARY

This is a case about executive power and individual liberty. The U.S. Government's executive power to enforce federal law against private citizens—for example, to bring criminal prosecutions and civil enforcement actions—is essential to societal order and progress, but simultaneously a grave threat to individual liberty.

The Framers understood that threat to individual liberty. When designing the executive power, the Framers first separated the executive power from the legislative and judicial powers. “The declared purpose of separating and dividing the powers of government, of course, was to ‘diffus[e] power the better to secure liberty.’ ” Bowsher v. Synar , 478 U.S. 714, 721, 106 S.Ct. 3181, 92 L.Ed.2d 583 (1986) (quoting Youngstown Sheet & Tube Co. v. Sawyer , 343 U.S. 579, 635, 72 S.Ct. 863, 96 L.Ed. 1153 (1952) (Jackson, J., concurring)). To ensure accountability for the exercise of executive power, and help safeguard liberty, the Framers then lodged full responsibility for the executive power in the President of the United States, who is elected by and accountable to the people. The text of Article II provides quite simply: “The executive Power shall be vested in a President of the United States of America.” U.S. CONST. art. II, § 1. And Article II assigns the President alone the authority and responsibility to “take Care that the Laws be faithfully executed.” Id. § 3. As Justice Scalia explained: “The purpose of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom.” Morrison v. Olson , 487 U.S. 654, 727, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988) (Scalia, J., dissenting).

Of course, the President executes the laws with the assistance of subordinate executive officers who are appointed by the President, often with the advice and consent of the Senate. To carry out the executive power and be accountable for the exercise of that power, the President must be able to control subordinate officers in executive agencies. In its landmark decision in Myers v. United States , 272 U.S. 52, 47 S.Ct. 21, 71 L.Ed. 160 (1926), authored by Chief Justice and former President Taft, the Supreme Court therefore recognized the President's Article II authority to supervise, direct, and remove at will subordinate officers in the Executive Branch.

In 1935, however, the Supreme Court carved out an exception to Myers and Article II by permitting Congress to create independent agencies that exercise executive power. See Humphrey's Executor v. United States , 295 U.S. 602, 55 S.Ct. 869, 79 L.Ed. 1611 (1935). An agency is considered “independent” when the agency heads are removable by the President only for cause, not at will, and therefore are not

839 F.3d 6

supervised or directed by the President. Examples of independent agencies include well-known bodies such as the Federal Communications Commission, the Securities and Exchange Commission, the Federal Trade Commission, the National Labor Relations Board, and the Federal Energy Regulatory Commission. Those and other established independent agencies exercise executive power by bringing enforcement actions against private citizens and by issuing legally binding rules that implement statutes enacted by Congress.

The independent agencies collectively constitute, in effect, a headless fourth branch of the U.S. Government. They exercise enormous power over the economic and social life of the United States. Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.

To help mitigate the risk to individual liberty, the independent agencies, although not checked by the President, have historically been headed by multiple commissioners, directors, or board members who act as checks on one another. Each independent agency has traditionally been established, in the Supreme Court's words, as a “body of experts appointed by law and informed by experience.” Humphrey's Executor , 295 U.S. at 624, 55 S.Ct. 869 (internal quotation marks omitted). The multi-member structure reduces the risk of arbitrary decisionmaking and abuse of power, and thereby helps protect individual liberty.

In other words, to help preserve individual liberty under Article II, the heads of executive agencies are accountable to and checked by the President, and the heads of independent agencies, although not accountable to or checked by the President, are at least accountable to and checked by their fellow commissioners or board members. No head of either an executive agency or an independent agency operates unilaterally without any check on his or her authority. Therefore, no independent agency exercising substantial executive authority has ever been headed by a single person .

Until now.

In the Dodd–Frank Act of 2010, Congress established a new independent agency, the Consumer Financial Protection Bureau. As proposed by then-Professor and now-Senator Elizabeth Warren, the CFPB was to be another traditional, multi-member independent agency. See Elizabeth Warren, Unsafe at Any Rate: If It's Good Enough for Microwaves, It's Good Enough for Mortgages. Why We Need a Financial Product Safety Commission , Democracy, Summer 2007, at 8, 16–18. The initial Executive Branch proposal in 2009 likewise envisioned a traditional, multi-member independent agency. See DEPARTMENT OF THE TREASURY, FINANCIAL REGULATORY REFORM: A NEW FOUNDATION: REBUILDING FINANCIAL SUPERVISION AND REGULATION 58 (2009). The House-passed bill sponsored by Congressman Barney Frank and championed by Speaker Nancy Pelosi also contemplated a traditional, multi-member independent agency. See H.R. 4173, 111th Cong. § 4103 (as passed by House, Dec. 11, 2009).

But Congress ultimately departed from the Warren and Administration proposals, and from the House bill. Congress established the CFPB as an independent agency headed not by a multi-member commission but rather by a single Director.

Because the CFPB is an independent agency headed by a single Director and not by a multi-member commission, the Director of the CFPB possesses more unilateral

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authority—that is, authority to take action on one's own, subject to no check—than any single commissioner or board member in any other independent agency in the U.S. Government. Indeed, as we will explain, the Director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.

At the same time, the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy. The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what...

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38 practice notes
  • Donaldson v. Primary Residential Mortg., Inc., Civil Action No. ELH-19-1175
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • June 12, 2020
    ...and supracompetitive prices" All Star charged for title and settlement services. Id. at 21. In PHH v. Consumer Financial Protection Bureau, 839 F.3d 1 (D.C. Cir. 2016), rev'd on other grounds, 881 F.3d 75 (D.C. Cir. 2018) (en banc), a panel of the D.C. Circuit considered aPage 35 civil enfo......
  • Munoz v. PHH Mortg. Corp., No. 1:08-cv-00759-DAD-BAM
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • August 11, 2020
    ...arrangements where mortgage insurers pay no more than reasonable market value to the reinsurers" is "not a close call." PHH Corp. v. CFPB , 839 F.3d 1, 41 (D.C. Cir. 2016), reinstated in relevant part and rev'd in part on other grounds , 881 F.3d 75 (D.C. Cir. 2018) (en banc ).15 As the D.C......
  • U.S. Telecom Ass'n v. Fed. Commc'ns Comm'n, No. 15-1063
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 1, 2017
    ...President [from] supervis[ing], direct[ing], and remov[ing] at will the" FCC Commissioners. See PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 18 n.4 (D.C. Cir. 2016). "We need not tackle that question in this case," however, id., because the rulemaking exercised here facilitates a ch......
  • United States v. Conyers, S13 15–CR–537 (VEC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • December 29, 2016
    ...and (ii) the law with the offending provision severed would remain 'fully operative as a law.' " PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 37 (D.C. Cir. 2016) (quoting Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 509, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010)......
  • Request a trial to view additional results
38 cases
  • Donaldson v. Primary Residential Mortg., Inc., Civil Action No. ELH-19-1175
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • June 12, 2020
    ...and supracompetitive prices" All Star charged for title and settlement services. Id. at 21. In PHH v. Consumer Financial Protection Bureau, 839 F.3d 1 (D.C. Cir. 2016), rev'd on other grounds, 881 F.3d 75 (D.C. Cir. 2018) (en banc), a panel of the D.C. Circuit considered aPage 35 civil enfo......
  • Munoz v. PHH Mortg. Corp., No. 1:08-cv-00759-DAD-BAM
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • August 11, 2020
    ...arrangements where mortgage insurers pay no more than reasonable market value to the reinsurers" is "not a close call." PHH Corp. v. CFPB , 839 F.3d 1, 41 (D.C. Cir. 2016), reinstated in relevant part and rev'd in part on other grounds , 881 F.3d 75 (D.C. Cir. 2018) (en banc ).15 As the D.C......
  • U.S. Telecom Ass'n v. Fed. Commc'ns Comm'n, No. 15-1063
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • May 1, 2017
    ...President [from] supervis[ing], direct[ing], and remov[ing] at will the" FCC Commissioners. See PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 18 n.4 (D.C. Cir. 2016). "We need not tackle that question in this case," however, id., because the rulemaking exercised here facilitates a ch......
  • United States v. Conyers, S13 15–CR–537 (VEC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • December 29, 2016
    ...and (ii) the law with the offending provision severed would remain 'fully operative as a law.' " PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1, 37 (D.C. Cir. 2016) (quoting Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 509, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010)......
  • Request a trial to view additional results

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