Neil J. Kinkopf // 4/17/17 //
The Department of Justice recently submitted a brief in PHH v. Consumer Financial Protection Bureau, which raises questions about the constitutionality of how the CFPB is structured. (Deepak Gupta and Jon Taylor have analyzed that brief on Take Care, here and here.) The Department's Brief is alarming.
The CFPB had issued a penalty of $109 million against PHH for using a captive mortgage reinsurer. PHH, in turn, challenged the constitutionality of the CPFB’s structure. The CFPB is an independent regulatory agency created by the Dodd-Frank Act. Unlike most independent regulatory agencies, it is headed by a single Director, Richard Cordray, rather than by a multi-member commission or board. A panel of the D.C. Circuit bought PHH’s novel argument and the CFPB appealed to the D.C. Circuit en banc, which has accepted the appeal.
Throughout the litigation, the Department of Justice has performed its usual function of advocating the validity of the law establishing the CFPB. There is, however, a new Administration, and the Trump Department of Justice has changed its position in the case, filing an amicus brief in support of PHH’s challenge. Being an independent agency, the CFPB represents itself in litigation. It is, nonetheless, a highly unusual step for the Department of Justice to oppose the constitutionality of a duly enacted law. The Brief that the Department filed in this case is alarming on several grounds.
The Brief makes the claim, at page 3, that "limitations on the President's authority to remove a single agency head are a recent development to which the Executive Branch has consistently objected." This is patently wrong. Most obviously, when the CFPB itself was enacted, the President did not merely refrain from objecting, President Obama actively supported its establishment as an independent agency. Under the Obama Administration, the Justice Department has defended the constitutionality of the CFPB Director's independence in at least two lawsuits. In addition, no President has objected to the limit on removal authority with respect to the Director of the Federal Housing Finance Agency. It is especially telling that the provision did not elicit a signing statement when it was signed into law by President George W. Bush, "the Mahatma Gandhi of" signing statement issuers. Cf. Clinton v. New York, 524 U.S. 714 (1998) (Scalia, J., dissenting).
I should point out that I have done no independent research on this point. These examples of unobjected-to removal restrictions appear in the Brief itself!
Lest you think that only two counterexamples do not undermine the thrust of the statement, consider the remainder of the Brief's claim: this form of limit on presidential power is a relatively recent development. It is a few decades old, but in the span of our constitutional history, that is fairly recent. Left implicit, but also true, is that the innovation is rare. Given the recency and rarity of removal limits on an individual agency head (as opposed to the more common commission-headed agency), it is simply untenable to claim that Presidents have consistently objected. What is a court that receives a submission that is not credible on its face to think of the party who submits it?
I worry about the lasting damage to the credibility of the Department of Justice as an institution.
The Brief offers a narrative that is meant to describe the development of the law regarding the constitutionality of statutory limits on the President's removal power. The narrative is wildly inaccurate, verging on sheer fiction.
The Brief takes as its starting point Myers v. United States, 272 U.S. 52 (1926). Myers involved the constitutionality of the Tenure in Office Act (which required Senate confirmation for removals from covered offices) as applied to a Postmaster First Class. The opinion for the Court striking down the Tenure in Office Act was not nearly so narrow as my description of the facts. Chief Justice William Howard Taft's opinion reads like the work of a former President. It based the holding on an expansive theory of presidential power that, today, we would call the unitary executive. This theory led Justice Taft, over the remarkable dissents of Justices Holmes and Brandeis, to conclude that the Constitution requires the President to have complete, unfettered removal authority over virtually all officers other than Article III judges.
History, however, has not been kind to Chief Justice Taft's opinion.
The Supreme Court returned to the question of the President's removal power just nine years later in Humphrey's Executor v. United States, 295 U.S. 602 (1935). Humphrey's Executor involved a different sort of restriction and a different sort of office. There, the statute establishing the Federal Trade Commission provided that could be removed by the President for inefficiency, neglect of duty, or malfeasance in office. President Franklin Roosevelt removed FTC Commissioner Humphrey on the ground that Humphrey's views on economics were incompatible with the New Deal. Humphrey objected that his removal was unlawful under the FTC's organic statute. The case involved an issue of statutory interpretation (was list of grounds for removal exclusive or was the President statutorily authorized also to remove a commissioner for other reasons such as policy disagreement) and a constitutional issue (if the listed grounds were exclusive, did the limit violate the President's constitutional executive powers).
The Supreme Court unanimously rejected the President's removal of Commissioner Humphrey. In doing so, the Court specifically rejected the reasoning of Myers, referring to it as obiter dictum. The Humphrey's Executor Court specifically limited the application of the Myers precedent to purely executive, as opposed to administrative (or, in the Court's terms, "quasi legislative and quasi judicial") functions.
In a more recent removal power case, Morrison v. Olson, 487 U.S. 654 (1988), the Supreme Court collated these and numerous other separation of powers cases into a framework. Chief Justice Rehnquist formulated the general rule in the following way: "The real question is whether the removal restrictions are of such a nature that they impede the President's ability to perform his constitutional duty, and the functions of the officials in question must be analyzed in that light." Id. at 691. Myers, according to Justice Rehnquist, dealt with a peculiar and very narrow issue, the constitutionality of a limit on the President's removal power that gives Congress itself a role in the exercise of that power. Id. at 688-90. This is a flatly impermissible mechanism of congressional aggrandizement. As long as Congress does not assign itself a role in the removal, other limitations (such as the standard "for cause" restriction) are analyzed under the general rule of Morrison.
The application of the Morrison standard was, until a few years ago, treated as a functional inquiry calling for great deference by the judiciary to the deal between the political branches embodied in the statute. In other words, the courts have in nearly every case upheld statutory limits on presidential power. In the Supreme Court's most recent removal power case, Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010), the Court withheld its standard deference and instead seemed concerned to protect the President from interference. Nonetheless, the Court expressly decided the case within the framework Justice Rehnquist had set forth in Morrison. This description of the Court's removal power jurisprudence should be familiar to anyone who has taken even a basic course in Constitutional or Administrative Law.
Against this background, it is jarring to read the Justice Department's Brief. The Brief asserts that the general rule on the President's removal authority is Myers. According to the brief, Humphrey's Executor is a narrow exception dealing with removal limits on agencies headed by a multi-member commission or board.
The Brief takes a quote from Humphrey's Executor that discusses the FTC's status as multi-member headed agency and the importance of this mechanism in establishing the non-partisan independence of the agency. The quote is taken entirely out of context. The Court notes this as one factor supporting its conclusion on the statutory interpretation issue -- i.e., whether the list of grounds for removal is exclusive. In the section of the opinion dealing with the constitutional question -- whether Congress may limit the President's authority to remove FTC commissioners -- the Court never mentions the FTC's multi-headedness as opposed to the singularity of the Postmaster First Class at issue in Myers.
As anyone who has even casually glanced at a hornbook on this area of law will know, the Humphrey's Executor Court distinguished Myers on the basis of the nature of the duties the office performed (purely executive versus quasi-legislative and quasi-judicial). The composition of the office (singular versus multiple) had nothing at all to do with the Court's analysis.
Well, so what?! Isn't this type of playing fast and loose with facts and precedents what lawyers do?
It strikes me that this sort of lawyering risks the considerable institutional capital of the Justice Department. The Department, through Administrations of both parties, has established itself as not an ordinary litigant. As a repeat player in the judicial system, it is crucial that courts be able to place greater reliance on the representations of the government they do on the briefs of private parties. One brief will not undermine that role, but I am concerned that this may be emblematic of lawyering in the current Administration. If so, it will gravely threaten the ability of the Justice Department to play its traditional role as a trusted institution in our justice system.
As to the substance of the issue, you may also be wondering how important it is. After all, the Brief itself says it is merely addressing a narrow question -- whether Congress may provide an officer protection against the President's at-will removal authority where that officer is the single head of an agency (as opposed to the standard model agency that is headed by a multi-member commission or board). There are only a few such offices and they are of relatively recent vintage. This is the sheep's clothing that hides the wolf. The real danger is the alternative history the Justice Department's Brief. If the Justice Department succeeds in convincing the Supreme Court to accept Myers as stating the general rule as to the President's removal power and restores Chief Justice Taft's unitary executive theory, the consequences could be extraordinary.
First, with respect to removals it is unclear which if any independent regulatory agency could retain its independent status. If Myers states the general rule (removal at will) and Humphrey's Executor states a narrow exception (for multi-headed agencies that have truly quasi-legislative and quasi-judicial powers), what is to be done with regulatory agencies that also have executive enforcement powers? Nearly all independent agencies have some executive functions. The SEC, for example, has significant investigatory and enforcement powers. Is it a Myers agency or a Humphrey's agency? The United States Postal Service is headed by an independent board. It has virtually nothing but executive power, yet I am not sure any President has noticed it has left his supervision and control or, if he has, has missed it even a little bit.
Perhaps most significantly, what of the Federal Reserve? The Court in Humphrey's Executor suggested that an agency remains properly considered quasi-legislative and quasi-judicial if its executive powers are merely incidental to its primary quasi-legislative and quasi-judicial role. Is setting the nation's monetary policy a quasi-legislative endeavor or an executive action? If this is not clear, then the fact that Myers establishes the general rule and Humphrey's Executor a minor exception would indicate that doubt is to be resolved in favor of the President's removal authority.
Putting these powers under the complete, unfettered control of the President would represent a seismic expansion of the power of that office. It is an expansion that should give one pause even when considered in the abstract. But in the very real setting of the Trump presidency, it is hair-raising.