Notice & Comment

At the CFPB, Cordray Creates One Last Cloud of Controversy

cordray-obamaHistory doesn’t repeat, but it often rhymes. And so the circumstances of Richard Cordray’s departure from the Consumer Financial Protection Bureau seem fitting.

Nearly six years ago, Cordray arrived at the CFPB as one of purported “recess” appointments that President Obama ventured despite the fact that the Senate was not actually in recess, a maneuver that the Supreme Court promptly—and unanimously—declared unconstitutional. Cordray’s nomination eventually received the Senate’s advice and consent, and he issued a perfunctory statement purporting to ratifying all actions that the CFPB had taken during his unconstitutional year-plus initial tenure.

President Obama gave Cordray his unconstitutional appointment because the Senate majority had made clear that it would not be confirming him anytime soon. [A note after the original post: to be clear, Cordray’s nomination was actively opposed by only a minority bloc of Senators, not a majority. But he lacked a Senate majority willing to force his nomination through to confirmation.] As the President noted at the rally announcing Cordray’s original appointment, the Senate had “blocked” Cordray’s nomination. But, Obama concluded, “I refuse to take no for an answer.” Needless to say, the Supreme Court disagreed, and reminded us that the appointment of constitutional officers must be governed by the genuine rule of law, and not by sheer political maneuvers.

So it is interesting to see Richard Cordray return President Obama’s political favor to another colleague on his way out the door, by attempting to once again undermine the lawful process for appointing CFPB leadership.

In mid-November, Cordray announced his upcoming resignation from the CFPB—effective, he told staff, “before the end of the month.” Within days, the White House promptly informed the press that President Trump would appoint OMB Director Mick Mulvaney to serve as Acting CFPB Director, pursuant to the Federal Vacancies Reform Act.

Specifically, the FVRA authorizes the president to fill a “vacancy” in the leadership of an “Executive agency” by, inter alia, designating another Senate-confirmed officer to temporarily fill the vacancy in “an acting capacity.” President Trump formally announced his designation of Mulvaney as Acting CFPB Director on the Friday after Thanksgiving. The CFPB is expressly defined to be an “Executive agency” by the Dodd-Frank Act, so Director Mulvaney’s designation as Acting CFPB Director seemed rather straightforward under the FVRA.

But on the same day the CFPB announced that Cordray, in his last days as CFPB Director, was appointing his own chief of staff, Leandra English, to serve at the CFPB’s Deputy Director. (The Dodd-Frank Act purports to empower a CFPB Director to unilaterally appoint his Deputy, although Prof. Kent Barnett has explained at length why this provision appears to be unconstitutional.)

English’s appointment as Deputy Director would be rather unremarkable—notwithstanding the aforementioned constitutional questions surrounding that statutory provision—except that  some longtime proponents of Cordray’s tenure at the CFPB, ranging from Senator Liz Warren to Prof. Adam Levitin, are asserting that Deputy Director English will take over the CFPB as Acting Director, instead of the presidentially designated Director Mulvaney.

They base this argument on Dodd-Frank’s Section 1011(b)(5)(B) (codified at 12 U.S.C. 5491(b)(5)(B)), which provides that the “Deputy Director . . . shall . . . serve as acting Director in the absence or unavailability of the Director.” They argue that this provision nullifies the Federal Vacancies Reform Act, as applied to the position of CFPB Director. (Or, as Senator Warren pithily tweeted, the President “can’t override” this Dodd-Frank provision by applying the Federal Vacancies Reform Act.)

There is some superficial appeal to this argument, especially when one is familiar with the Dodd-Frank Act but unfamiliar with the FVRA’s separate provision for temporarily filling vacancies. But reading the two together makes clear that the President’s designation of OMB Director Mulvaney as the CFPB’s Acting Director “trumps” the Deputy Director’s unilateral claim to the office—not vice versa.

[Update, 7:50 pm: Immediately after writing and posting this analysis, I learned that the Justice Department’s Office of Legal Counsel released a formal opinion on the matter. It evidently was published a short time ago, here. As of the time of this writing, I’ve not seen it.]

Let’s start with the the Dodd-Frank Act’s provision. On its face, it does not expressly refer to “vacancies”; its terms apply only when “the Director” is “absen[t]” or “unavailabl[e].” Because other similar statutes refer expressly to “vacancies,” this statute might be read as applying not to formal vacancies, but rather just to occasions when a sitting CFPB Director is incapacitated. But that seems a less plausible interpretation; this provision is probably best read as also applying to actual vacancies, and not just when a sitting Director is incapacitated.

But it is a much greater leap of logic to assert not merely that this provision implicitly covers vacancies, but also that this provision implicitly nullifies any other statute empowering the President to temporarily fill the vacancy.

Which brings us to the Federal Vacancies Reform Act. It provides, at 5 U.S.C. 3345(a):

If an officer of an Executive agency (including the Executive Office of the President, and other than the Government Accountability Office) whose appointment to office is required to be made by the President, by and with the advice and consent of the Senate, dies, resigns, or is otherwise unable to perform the functions and duties of the office . . . the President (and only the President) may direct a person who serves in an office for which appointment is required to be made by the President, by and with the advice and consent of the Senate, to perform the functions and duties of the vacant office temporarily in an acting capacity subject to the time limitations of section 3346[.]

Section 3347, in turn, provides that the FVRA is the “exclusive means for temporarily authorizing an acting official to perform the functions and duties of any office of an Executive agency” . . . “unless” another “statutory provision expressly . . . designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity,” or if the President fills the vacancy with a recess appointment “pursuant to clause 3 of section 2 of article II of the United States Constitution” (emphasis added).

So there’s the rub: how do Sections 3345-3347 of the Federal Vacancies Reform Act interact with Section 1011(b)(5)(B) of the Dodd-Frank Act? Do they co-exist, or does Dodd-Frank trump the FVRA?

Readers familiar with the canons of statutory construction will recognize here that the analysis must begin with a fundamental assumption about the proper relationship between statutes— namely, that “when two statutes are capable of coexistence,” the Supreme Court reiterated in JEM Ag Supply v. Pioneer Hi-Bred Int’l (2011), “it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective” (emphasis added).

Even when a newer statute overlaps with an older one, the courts must seek wherever possible to give both statutes substantive meaning, as the Court reiterated in Nat’l Ass’n of Home Builders v. Defenders of Wildlife (2007): “We will not infer a statutory repeal unless the later statute expressly contradicts the original act or unless such a construction is absolutely necessary in order that the words of the later statute shall have any meaning at all” (quotation marks, brackets, and ellipses omitted). All of this reflects the “cardinal rule,” reiterated in TVA v. Hill (1978) and other cases, that “repeals by implication are not favored,” and thus that “the only permissible justification for a repeal by implication is when the earlier and later statutes are irreconcilable,” demonstrating Congress’s “clear and manifest” intention to implicitly repeal the earlier statute.

Then how do we give genuine effect to both the Federal Vacancies Reform Act and the Dodd-Frank Act? By concluding that the CFPB Director is one of those positions for which, under 5 U.S.C. 3347, the FVRA is no longer the “exclusive” means for appointing an Acting Director. In other words, a vacancy atop the CFPB can be filled either by the President’s designation of an Acting Director under the FVRA, or by the President’s passive allowance of the Deputy Director to temporarily serve as Acting Director.

In short, by designating OMB Director Mulvaney to serve as Acting CFPB Director under 5 U.S.C. 3345, there is no vacancy (or, more precisely, no “absence or unavailability”) to be filed by the CFPB’s Deputy Director per 12 U.S.C. 5491.

As it happens, this is precisely the approach that the Ninth Circuit took last year in Hooks v. Kitsap Tenant Support Services (2016), affirming a similar FVRA appointment by President Obama, in light of a similar alternative statute. In that case, President Obama had designated the NLRB’s Acting General Counsel pursuant to the FVRA, despite the fact that the National Labor Relations Act contains a provision akin to the Dodd-Frank Act’s provision. Solomon was ineligible for appointment under the qualifications set by the National Labor Relations Act, and thus the challengers in that case argued that Solomon’s designation as Acting General Counsel was null and void. But the Ninth Circuit held that the existence of an alternative statutory provision for temporarily filling a vacant office simply gives the President two statutory options for temporarily filling the vacancy—either by the alternative statute (be it the NLRA or the Dodd-Frank Act), or the Federal Vacancies Reform Act. In that case, President Obama elected to fill the vacancy via the FVRA, and the Ninth Circuit affirmed his action.

As it happens, that is precisely what the FVRA’s own legislative history instructed (as the Ninth Circuit observed), for cases when both the FVRA and an alternative statute provide a means for a vacant office to be temporarily filled. As Senate Report 105-250 explains, “even with respect to the specific positions in which temporary officers may serve under the specific statutes this bill retains, the Vacancies Act would continue to provide an alternative procedure for temporarily occupying the office” (emphasis added by the Ninth Circuit).

This is also the approach endorsed by the Justice Department’s Office of Legal Counsel. In 2007, analyzing whether a vacancy in the office of Attorney General could be filled by the FVRA or by an alternative statute, the OLC concluded:

That the Vacancies Reform Act is not exclusive does not mean that it is unavailable. By its terms, the Vacancies Reform Act (with express exceptions not relevant here) applies whenever a Senate-confirmed officer in an executive agency resigns. 5 U.S.C. § 3345(a). The Vacancies Reform Act nowhere says that, if another statute remains in effect, the Vacancies Reform Act may not be used.

This conclusion reiterated a point made by the OLC in 2003, concluding that when both the FVRA and another statute allow for a vacant office to be filled temporarily, “[t]he legislative history squares with the conclusion that, in such circumstances, the Vacancies Reform Act may still be used.”

The Ninth Circuit’s and OLC’s approach strikes me as the sensible one: that the vacant CFPB Director’s seat can be filled either by the Deputy Director pursuant to Dodd-Frank, or by the President’s designee pursuant to the Federal Vacancies Reform Act. And because the President’s designation of Director Mulvaney fills the “vacancy” left by Cordray’s resignation, there is no (in Dodd-Frank’s words) “absence or unavailability” needing to be filled by the Deputy Director.

Indeed, the contrary approach strikes me as rather startling: namely, that a Deputy Director appointed unilaterally by a “lame-duck” CFPB Director could strip the President of his power to fill vacancies under the FVRA.

(In a blog post anticipating the President’s designation of Mulvaney, Prof. Levitin seems to endorse that opposite interpretation, based on the fact that a precursor bill to Dodd-Frank had some language indicating that the FVRA could be used to fill a vacant CFPB Director seat; he reads the deletion of that provision as implying contrary intent by the congressional majorities that eventually enacted Dodd-Frank. Even setting aside the usual cautions about legislative history in general, it seems especially a stretch to try to invoke an earlier bill that wasn’t enacted, to define the operation today of both the eventually enacted Dodd-Frank Act and the pre-existing Federal Vacancies Reform Act. Levitin’s approach calls to mind Justice Kagan’s recent warning of “the perils of relying on the fate of prior bills to divine the meaning of enacted legislation.”)

One wonders whether Cordray and his proponents are adopting this approach not simply to fill a vacancy, but to rather to at least throw a monkey wrench into the works by creating a fog of litigation risk around the agency going forward—or, as Senator Warren announced in a statement on Twitter, “enormous cloud of uncertainty” around the CFPB. Prof. Levitin goes even further, focusing on the CFPB Director’s ex officio role in other agencies: “Bottom line: any appointment of Mick Mulvaney … or Steve Mnuchin … or anyone by President Trump to be acting CFPB Director would be illegal, and would call into question not only any actions taken by the CFPB, but also actions undertaken by the FDIC and FSOC, as the CFPB Director serves on those boards” (emphasis in original).

As I noted at the outset, it seems fitting that Cordray would leave behind himself a cloud of appointment-related controversy, given the circumstances of his original unconstitutional appointment. Indeed, Cordray’s tenure has been marked by actions that seemed to maximize the political heat surrounding his agency—exemplified most of all by his startling decision to increase an ALJ’s $6 million fine against PHH Corp. nearly twentyfold into a $109 million fine, exemplifying the concerns about unchecked CFPB power that undergirded a D.C. Circuit panel‘s conclusion that the agency’s very structure is unconstitutional.

Even while we await the en banc court’s rehearing of that decision, the end of Cordray’s tenure found even one of Rep. Barney Frank’s own aides becoming a vocal critic of the agency, in an op-ed last week. With Cordray’s departure, and the eventual arrival of a successor appointed by President Trump with Senate advice and consent, it remains to be seen whether the CFPB can ever evolve from a turbocharged engine of Progressive financial policies into a less partisan expert agency, with or without reforming it into a multimember commission subjected to Congress’s power of the purse.

Cordray’s closing days in office—and the efforts by his proponents to use litigation to nullify or at least slow the straightforward operation of the Federal Vacancies Reform Act to seat a temporary successor, makes the CFPB’s long-term standing less tenable, not more.

Maybe the Senate’s upcoming December recess will spur President Trump to simply cut through all of this controversy by appointing a CFPB Director without any Senate participation. As Cordray and his proponents know, it wouldn’t be the first time.

Adam J. White is a research fellow at the Hoover Institution, and executive director of the Center for the Study of the Administrative State at George Mason University’s Antonin Scalia Law School. (In 2012 he helped to file the original constitutional lawsuit against the CFPB’s structure and Cordray’s recess appointment, and later the constitutional amicus brief in PHH v. CFPB, as counsel at Boyden Gray & Associates. He is no longer involved in the litigation.)

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