The D.C. Circuit issued an important decision today: it held that the removal protections for the Director of the Consumer Financial Protection Bureau violate Article II of the Constitution. As a remedy, the D.C. Circuit essentially excised the Director’s “for cause” removal protection from the U.S. Code. This means that if the President is unhappy with the Director for essentially any reason, he or she can “remove” the Director from office — i.e., send him packing. This potentially matters a lot because the Director’s term is five years, meaning that a director and president may be from different political parties.

Here, I hope to explain the constitutional issue so that everyone understands it, not just experts. So if you are an “admin law” guru, feel free to skip this analysis. This post is for the novices out there. (Unless things have changed since I summered on Capital Hill ten years ago, I imagine some interns are scrambling to write memos right about now.)

Here is the background. In the Dodd-Frank Act of 2010, Congress created the CFPB. Everyone agrees that the CFPB has a lot of power; indeed, it “unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices.” The CFPB also is headed by a single person — the Director. The Director, in turn, is “independent,” i.e., legally insulated from presidential control. This means it is hard to fire him. Such independence is accomplished through a “for cause” removal provision, which means that the President cannot simply fire the Director because of a political disagreement. In theory, this gives the Director authority to make technocratic, non-ideological decisions without fear of being second guessed by the White House. (Whether that is true in practice is contested; there is lots of scholarship on this.) In the context of the Federal Trade Commission, the Supreme Court upheld this sort of “for cause” protection in Humphrey’s Executor v. United States, 295 U.S. 602 (1935).

Humphrey’s Executor is a controversial case. Nine years earlier, in Myers v. United States, 272 U.S. 52 (1926), the Supreme Court had struck down a similar sort of removal protection for a postmaster. The Court’s analysis in Myers was expansive; indeed, Myers remains one of the longest decisions the Supreme Court has ever issued. In Myers, Chief Justice Taft — yes, dutiful interns, although it may seem incredible after watching a Nationals game, President Taft became Chief Justice Taft; he also was Judge Taft, Dean Taft, Solicitor General Taft, Provisional Governor of Cuba Taft, Governor of the Philippines Taft, and Secretary of War Taft — concluded for the Court that:

Article II grants to the President the executive power of the Government, i.e., the general administrative control of those executing the laws, including the power of appointment and removal of executive officers — a conclusion confirmed by his obligation to take care that the laws be faithfully executed; that Article II excludes the exercise of legislative power by Congress to provide for appointments and removals, except only as granted therein to Congress in the matter of inferior offices; that Congress is only given power to provide for appointments and removals of inferior officers after it has vested, and on condition that it does vest, their appointment in other authority than the President with the Senate’s consent; that the provisions of the second section of Article II, which blend action by the legislative branch, or by part of it, in the work of the executive, are limitations to be strictly construed and not to be extended by implication; that the President’s power of removal is further established as an incident to his specifically enumerated function of appointment by and with the advice of the Senate, but that such incident does not by implication extend to removals the Senate’s power of checking appointments; and finally that to hold otherwise would make it impossible for the President, in case of political or other differences with the Senate or Congress, to take care that the laws be faithfully executed.

In Humphrey’s Executor, however, the Justices took a different a view. (It is interesting that Humphrey’s Executor was decided on Black Monday.) There, the Court unanimously upheld “for cause” removal protections for FTC Commissioners, explaining that

The office of a postmaster is so essentially unlike the office now involved that the decision in the Myers case cannot be accepted as controlling our decision here. A postmaster is an executive officer restricted to the performance of executive functions. He is charged with no duty at all related to either the legislative or judicial power. … The Federal Trade Commission is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as a legislative or as a judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the executive. Its duties are performed without executive leave and, in the contemplation of the statute, must be free from executive control. In administering the provisions of the statute in respect of “unfair methods of competition” — that is to say in filling in and administering the details embodied by that general standard — the commission acts in part quasi-legislatively and in part quasi-judicially. … To the extent that it exercises any executive function — as distinguished from executive power in the constitutional sense — it does so in the discharge and effectuation of its quasi-legislative or quasi-judicial powers, or as an agency of the legislative or judicial departments of the government.

Humphrey’s Executor infuriated President Roosevelt more than any other decision. If an agency is executing the law, why doesn’t it fall within the Executive Power, especially after Myers? Even so, the Court made its decision: Removal restrictions are generally okay.

Fast forward half a century to Morrison v. Olson, 487 U.S. 654 (1988). This case concerned the independent counsel — a prosecutor with essentially “for cause” removal protection. (The target of the investigation was Ted Olson, a high-level official within the Department of Justice; hold onto that point because it matters later.) Is that constitutional? Prosecution, after all, does not seem “quasi-legislative or quasi-judicial” — it looks like a core Executive Branch power. Even so, the Supreme Court said yes, upholding Humphrey’s Executor, although changing the analysis:

We undoubtedly did rely on the terms “quasi-legislative” and “quasi-judicial” to distinguish the officials involved in Humphrey’s Executor … from those in Myers, but our present considered view is that the determination of whether the Constitution allows Congress to impose a “good cause”-type restriction on the President’s power to remove an official cannot be made to turn on whether or not that official is classified as “purely executive.” The analysis contained in our removal cases is designed not to define rigid categories of those officials who may or may not be removed at will by the President, but to ensure that Congress does not interfere with the President’s exercise of the “executive power” and his constitutionally appointed duty to “take care that the laws be faithfully executed” under Article II. … We do not mean to suggest that an analysis of the functions served by the officials at issue is irrelevant. But 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.

The Court thus upheld the removal protection because, among other things, an independent counsel has “limited jurisdiction and tenure and lack[s] policymaking or significant administrative authority.”

Justice Scalia objected to this reasoning — in perhaps his most famous dissent:

That is what this suit is about. Power. The allocation of power among Congress, the President, and the courts in such fashion as to preserve the equilibrium the Constitution sought to establish — so that “a gradual concentration of the several powers in the same department,” Federalist No. 51, p. 321 (J. Madison), can effectively be resisted. Frequently an issue of this sort will come before the Court clad, so to speak, in sheep’s clothing: the potential of the asserted principle to effect important change in the equilibrium of power is not immediately evident, and must be discerned by a careful and perceptive analysis. But this wolf comes as a wolf.

His analysis compared the text of the Constitution — “The executive Power shall be vested in a President of the United States” — with the majority’s analysis:

The Court has … replaced the clear constitutional prescription that the executive power belongs to the President with a “balancing test.” What are the standards to determine how the balance is to be struck, that is, how much removal of Presidential power is too much? Many countries of the world get along with an executive that is much weaker than ours — in fact, entirely dependent upon the continued support of the legislature. Once we depart from the text of the Constitution, just where short of that do we stop? The most amazing feature of the Court’s opinion is that it does not even purport to give an answer. It simply announces, with no analysis, that the ability to control the decision whether to investigate and prosecute the President’s closest advisers, and indeed the President himself, is not “so central to the functioning of the Executive Branch” as to be constitutionally required to be within the President’s control. Apparently that is so because we say it is so.

Scalia also attempted to attack the Court’s balancing on its own terms, explaining the “frightening” prospect of a prosecutor operating without presidential control:

The mini-Executive that is the independent counsel, however, operating in an area where so little is law and so much is discretion, is intentionally cut off from the unifying influence of the Justice Department, and from the perspective that multiple responsibilities provide. What would normally be regarded as a technical violation (there are no rules defining such things), may in his or her small world assume the proportions of an indictable offense. What would normally be regarded as an investigation that has reached the level of pursuing such picayune matters that it should be concluded, may to him or her be an investigation that ought to go on for another year. How frightening it must be to have your own independent counsel and staff appointed, with nothing else to do but to investigate you until investigation is no longer worthwhile — with whether it is worthwhile not depending upon what such judgments usually hinge on, competing responsibilities. And to have that counsel and staff decide, with no basis for comparison, whether what you have done is bad enough, willful enough, and provable enough, to warrant an indictment. How admirable the constitutional system that provides the means to avoid such a distortion. And how unfortunate the judicial decision that has permitted it.

Justice Scalia’s dissent demands a great deal of intellectual respect. But it was a dissent; when it came to actual votes, Scalia lost. Many contend, however, that Scalia’s fears were vindicated in the 1990s with the Whitewater investigation. (Note, Brett Kavanaugh was Associate Counsel in the Office of Independent Counsel for that investigation. This is interesting too, for reasons that will soon become apparent.)

Fast forward again, this time to Free Enterprise Fund v. Public Company Accounting Oversight Board, 130 S. Ct. 3138 (2010). In this case, there was double for-cause removal — i.e., the President (arguably) could only remove SEC Commissioners for cause, while SEC Commissioners could only remove Board Members for cause. Judge Brett Kavanaugh, now a judge on the D.C. Circuit, argued in a dissent that this arrangement — which he dubbed “Humphrey’s Executor squared” — was unconstitutional. The Supreme Court largely agreed in an opinion by Chief Justice Roberts. The Court did not question Humphrey’s Executor or Morrison — “the parties do not ask us to reexamine” such cases — but it weakened those cases’ foundation. Indeed, much of the Court’s constitutional analysis could be applied to Humphrey’s Executor itself. After all, if two levels of “for cause” removal is unconstitutional because it infringes on the President’s authority, why is one level of “for cause” removal okay? (This realization, by the way, no doubt is the reason for the fierce dissent in Free Enterprise.) As a remedy, the Supreme Court majority eliminated — i.e., “severed” — the “for cause” removal protection for Board Members.

Now, at last, we can understand the D.C. Circuit’s decision today. (A case argued, by the way, by none other than Ted Olson! See, I told you to remember that tidbit from Morrison.) For the CFPB, Congress did not create a “Humphrey’s Executor squared” situation. But it did empower a single director, rather than a set of commissioners, to control the agency. Per Judge Kavanaugh, that decision was also unconstitutional.

The Court first explains that the CFPB is quite powerful:

Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB’s broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency. By “unilateral power,” we mean power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement. What about the Speaker of the House, you might ask? The Speaker can pass legislation only if 218 Members agree. The Senate Majority Leader? The Leader needs 60 Senators to invoke cloture, and needs a majority of Senators (usually 51 Senators or 50 plus the Vice President) to approve a law or nomination. The Chief Justice? The Chief Justice must obtain four other Justices’ votes for his or her position to prevail. The Chair of the Federal Reserve? The Chair needs the approval of a majority of the Federal Reserve Board. The Secretary of Defense? The Secretary is supervised and directed by the President. On any decision, the Secretary must do as the President says. So too with the Secretary of State, and the Secretary of the Treasury, and the Attorney General.

Moreover, according to the D.C. Circuit, this sort of assignment of power to a single individual has no (relevant) historical precedent:

Have there been any independent agencies headed by a single person? Prior to oral argument, in an effort to be comprehensive, the Court issued an order asking the CFPB for all historical or current examples it could find of independent agencies headed by a single person removable only for cause. The CFPB found only three examples: the Social Security Administration, the Office of Special Counsel, and the Federal Housing Finance Agency. Tr. of Oral Arg. at 19. But none of the three examples has deep historical roots. Indeed, the Federal Housing Finance Agency was created only in 2008, about the same time as the CFPB. The other two are likewise relatively recent. And those other two have been constitutionally contested by the Executive Branch, and they do not exercise the core Article II executive power of bringing law enforcement actions or imposing fines and penalties against private citizens for violation of statutes or agency rules. For those reasons, as we will explain, the three examples are different in kind from the CFPB and other independent agencies such as the FCC, the SEC, and FERC. Those examples therefore do not count for much when weighed against the deeply rooted historical practice demonstrating that independent agencies are multi-member agencies.

But what about Morrison? The Independent Counsel was a single individual. Yet the Supreme Court upheld that removal protection. Why not here? Here is Judge Kavanaugh’s answer:

Although not a regulatory agency precedent and not an example cited by the CFPB as precedent for its single-Director structure (for good reason), there is at least one other modern example of an independent entity headed by one person. It is the now-defunct independent counsel law that was upheld in Morrison v. Olson, 487 U.S. 654 (1988). But that decision did not expressly consider whether an independent agency could be headed by a single director. The independent counsel, moreover, had only a limited jurisdiction for particular defined investigations. Id. at 671-72. In addition, the independent counsel experiment ended with nearly universal consensus that the experiment had been a mistake and that Justice Scalia had been right back in 1988 to view the independent counsel system as an unconstitutional departure from historical practice and a serious threat to individual liberty. See id. at 699 (Scalia, J., dissenting) (“this wolf comes as a wolf”); see also Stanford Lawyer, Spring 2015, at 4 (quoting Justice Kagan’s statement that Justice Scalia’s dissent in Morrison is “one of the greatest dissents ever written and every year it gets better”). The independent counsel experience, if anything, strongly counsels caution with respect to single-Director independent agencies.6

This is interesting analysis from a very smart judge. But it will receive a lot of scrutiny too. As to the first argument, it is true that Morrison “did not expressly consider whether an independent agency could be headed by a single director.” But which way does that cut? One might think — to borrow the “quasi” language of Humphrey’s Executor — that if even a restriction on removal for a “pure” executive power like prosecution can be upheld, then surely such a restriction can be upheld for a less “pure” executive power. (Personally, I think the Morrison Court was right to jettison the “quasi” language; it does not seem intellectually coherent. And the Court did jettison it. Accordingly, Judge Kavanaugh is right that Morrison is not squarely on point.)

As to the second argument, it is also true that the Morrison Court noted that the independent counsel had “only a limited jurisdiction for particular defined investigations.” But Justice Scalia, in dissent, vigorously attacked that suggestion as false. And in any event, is it really true that an independent counsel exercised less “unilateral power” than the CFPB Director? Sure, the CFPB Director has a wider docket, but perhaps the independent counsel had deeper powers. The ability to credibly threaten someone with years of prison may be a “limited” power, but boy, it is an important one. To be sure, I don’t think Judge Kavanaugh was bound by Morrison here (in other words, his efforts to distinguish Morrison are not nothing — the cases are different, and reasonable minds can disagree how similar the two contexts are), but this part of the analysis will no doubt attract attention.

And third, is it persuasive to say that “the independent counsel experiment ended with nearly universal consensus that the experiment had been a mistake and that Justice Scalia had been right back in 1988 to view the independent counsel system as an unconstitutional departure from historical practice and a serious threat to individual liberty”? Morrison either applies or does not; if it does, then the lower courts must follow it until it is overruled — no matter what the “consensus” is. Accordingly, at least as a formal matter, for a lower court, Judge Kavanaugh’s first two points must bear the load. (Perhaps Kavanaugh is sending a hint to the Justices, however, who are not bound by Morrison.)

After finding the removal restriction unconstitutional, the D.C. Circuit — like the Supreme Court in Free Enterprise — severed it from the statute.

So there you have it: the gist of the D.C. Circuit’s analysis. (Needless to say, this is abridged; the Court’s opinion is 110 pages, including the separate writings.*) What will happen next? My bet is that the government will seek rehearing en banc. And if the panel’s decision survives the D.C. Circuit en banc process, there is a very good shot that the Supreme Court will grant cert. In any event, it is safe to say that we have not heard the last of this case.

Good luck interns! You’ve just learned a lot of law. Go forth and finish your memos.

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* Note, Judge Randolph concurred in full but wrote separately to argue that the administrative law judge (“ALJ”) who imposed the $109 million penalty at issue in this case was an inferior offer who was unconstitutionally appointed. That analysis is fascinating too. It is not unthinkable that an ALJ who can impose such fines exercises “significant authority under the laws of the United States.” Alas, this post is too long already. I also won’t address Judge Henderson’s separate opinion, which concludes that it is not necessary to reach the constitutional issues here. Again, her opinion is also worth a read. But I’m just writing a blog post here; not a law review article.

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