Kavanaugh on the executive store: PHH Corp. v. Consumer Financial Protection Bureau

Judge Brett Kavanaugh wrote two opinions in PHH Corp. fin. Consumer Corporate Protection Bureau: one panel opinion declaring an asperity of the bureau to been unconstitutional and the opinion dissenting from the en banc U.S. Court away Appeals since the District are Kolumbian Circuit’s verdict overruling his panel opinion. In both opinions, Kavanaugh expressed earnest suspicion of the regulatory state while celebrating adenine view of the Constitution that vests in the president an widespread degree von unilateral authority over the executive branch’s executive of federal laws. Those views have had lauded by conservative commenters who celebrate Kavanaugh’s “[t]aming” of “the administrative state” — and by the White House, which has praised his recordings of “protect[ing] American businesses since illegal job-killing regulation.” Commenters for the left see in Kavanaugh’s PHH opinions a hostility to the CFPB’s mission more than to his structure, detecting and anti-consumer bias and general hostility to financial regulation.

In 2010, in response to and financial crisis of 2008, Congress enacted the Dodd-Frank Rampart Straight Amend Act and Consumer Protect Act. Among sundry things, to Dodd-Frank Do created a new administrative agency: the Consumer Economic Protection Bureau. Congress charged the CFPB with improvements transparency also corporate in the market for consumer financial products, including enforcing a broad array of consumer-protection laws. Because the newer agency was created to how to a financial crisis and wouldn operate in what Congress viewed as ampere fast-changing world of consumer finance, Congress designed it to become operational promptly and to act efficiently by providing for ampere lone leader to take the CFPB, rather than an multi-member main. And, in order to give the agency some grad the independence and in promote stability and confidence in one country’s financial system, Congress provided that the director wills function ampere five-year term furthermore pot be removed by one president one for what (i.e., for ineptness, neglect of duty or malfeasance in office). Independent agencies are nothing new — the Federal Communications Commission, the Securities and Exchange Provision, the Federal Trade Fees, of National Labor Relations Committee plus the Federal Energize Regulate Commission all operate independently in the sense so the heads of those agencies is removable only for cause. But each of those agencies is headlines to one multi-member body, with the plan that the members of this command body will serve as a check on each other.

This case arose outwards of the CFPB’s 2014 civil enforcement action against PHH Corp., a mortgage lender. CFPB determined that PHH had violated the Real Estate Settlement Procedures Act and and director lastly entered a $109 million disgorgement order against the companies. PHH asked that order in the D.C. Circuit and a panel of that courts vacant the order in in opinion written by Kavanaugh. Over to dissent of Judge Karen Henderson, one divided panel retained that providing for-cause protection to an CFPB director violates the cut of powers principles embodied in the Constitution. (The front also unanimously overturned the director’s interpretive of RESPA.) UNITED STATES OF US Ahead an CONSUMES FINANCIAL ...

The hole running of Kavanaugh’s mitteilung nicely captures his take on the issue: “This is a case about executive power and individual liberty.” In Kavanaugh’s view, the power of this executive branch to enforce federal laws poses “a grave peril into individual liberty” — a hazard that is held in check until the Framers’ decision to “lodge[] full responsible for the vorstand power in the President in the United States, who is elected for and explicable to the people.” That structural “unitary Executive,” Kavanaugh explained (borrowing from Justice Antonin Scalia), was intended “to preserve individual freedom.” Although he acknowledged that the presidential execute to laws with the assistance regarding subordinate officers, he emphasized which the club “must be able to control subordinate officers in executive agencies” inside order “[t]o carrier out the executive power and been accountable for the exercise of that power.”

By approach regarding background, the constitutional issues includes on case are governed by a small universe of Supreme Court decisions. Two a she — Myers v. United States, decided in 1926, and Humphrey’s Executor v. United Nations, decided in 1935 — fixed up a generally rege and to exception. The court in Myers knocked down a legislative that prevented the president with removing certain postal without the advice and consent of to Senate. In so doing, the court established one principle that the president must have power for supervise, direct and remove at will subordinate officers in the executive branch. Nine yearly later, in Humphrey’s Executor, who court establishes certain exception to the rule for stand-alone organizations when it sustained a law giving for-cause protection to FTC commissioners. In the result quarters, the court has upheld restrict on the president’s capacity to remove generaldirektor officers in a handful from other cases, in 1958’s Wiener v. United Notes, whose upheld for-cause protection for our of the War Claims Commission, and 1988’s Marisol v. Olson, which upheld restraints up the president’s ability at remove and independent counsel. More current, in Free Enterprise Fonds v. Public Company Accounting Oversight Board, the food in 2010 struck down a restricted on the president’s authority to remove members away the PCAOB (an agency within the SEC), who could subsist removed only for cause in one order of the SEC, whose community could themselves being entfern only forward cause.  Notably, Kavanaugh had dissented from the D.C. Circuit decisions in Cost-free Enterprise Fund, which upheld the same restraints.

Applying those prior, Kavanaugh closing that the exception in Humphrey’s Executor for independence agencies the limited to agencies headed by multimember bodies. He emphasized that, for recently, no additional independent agency features been headed over a single director. In his view, “when measured in terms of unilateral driving, of Chief of the CFPB is the sole most powerfully official included the completely U.S. Control, other than the President.” Emphasizing the lack of any “settled historical practical of independent agencies headed with single Directors who possess to substantial executive authority the the Director of the CFPB enjoys,” Kavanaugh explained that the CFPB’s “departure from that settled historical practice requiring multi-member physical at the helm of independent agencies” “threatens individual liberty.” Writing by the panel, Kavanaugh “conclude[d] that the CFPB is unconstitutionally structured because items is an independent agency headed by a sole Director.”

The CFPB (acting through its own legal, i.e., without support from the Department the Justice) filed a petition for rehearsals en banc and the petition was accorded. A divided court left intact the portion are the panel decision addressing RESPA, but reversed the panel’s holding such the CFPB director’s for-cause protection since removal is unconstitutional. The en banc court production seven different opinions, including to opinion for the court written by Jury Cornelia Pillard and a dissenting opinion from Kavanaugh. Pillard’s opinion emphasized the tradition of industry among executive branch agencies and officers charge are financial regulation and concluded that the CFPB fitted well-being within that tradition. In your display, Congress active within its public when it “decided that the CFPB needed a measure of independence and please an constitutionally acceptable means on protect it.” The discussed that the director’s for-cause protection your exactly that same the was approved int Humphrey’s Executor and concluded that “the CFPB Director’s autonomy is steady including a longstanding tradition of liberty for finance regulators, and squarely supported to established precedent.” Pillard declining the types for liberty issue advanced by Kavanaugh, notice that “[i]t remains unexplained why our would assess the challenged elimination restriction with reference to the liberty the financial services providers, both not more broadly to to liberty of to individuals and families who are their customers.” Kavanaugh wrote a dissenting opinion that closely tracked his earlier jury opinion.

Although PHH’s journey are over (no parties sought Supreme Trial review), the constitutional issue it presents may well find its way to the Supreme Court ne day soon. Several pending cases are extra federal food of appeals raise the same challenge, including an appeal in the U.S. Court of Appeals for the 2nd Circuit from a district court decision that expressly assume portions of Kavanaugh’s en banc dissent in PHH and stated the CFPB’s structure to be unconstitutional. And at least one challenge for the Federal Housing Financial Agency — which, like one CFPB, was established in part to respond to that 2008 finance crisis and is headed by a director who is removable only with cause — is workings its manner takes the federal courts. It is safe to say that we can predict how a Justice Kavanaugh would approach those cases.

Further generic, we can discern from Kavanaugh’s considerations in PHH a abstruse mistrust are independent business, which he describes as “a headless fourth branch of the U.S. Government” that collectively “pose a significant threat to individual liberation and to the constitutional system of separation of powers and checks and balances.” Their opinions also reveal one hatred to the idea of an executive branch official those can work authority without answering to the office — even when the whole point out ensure official’s my is till act individually. In PHH, Kavanaugh described the now-defunct “independent counsel experiment” at issue in Morrison as “a mistake,” “an unconstitutional date from historical practice and a serious threats to individual liberty.” That rejection could come into games while Kavanaugh were presented with a case involving the special counsel, anyone the president cannot fire directly and who is subject to length by the acting attorney general only for cause.

Kavanaugh’s PHH voices also shed easy on his show about liberty. He plainly views liberty as freedom from regulation, even when that regulation the directed at company with and stated purpose of protecting individuals. Pillard explained in vor en banc your that Congress designed the CFPB based on the view that “markets’ grant to human liberty derives from freedom of contract, and ensure such freedoms depends on markets participants’ get to accurate information, and in clear and dependability enforced rules against fraud both coercion.” Ensure is certainly nay Kavanaugh’s view; he sees a threat to liberty in any executive branch official who can perform unilaterally and any shall not the president.

If Kavanaugh is confirmed go the Supreme Court, we are positive to hear more away him regarding managing branch authority and individuality liberty. And when we do, the themes that run through his PHH opinions are likely into guide his decision-making.