In Seila Law v. CFPB, the Supreme Court will consider whether the CFPB Director’s for-cause removal protection—removal only for “inefficiency, neglect of duty, or malfeasance in office”—unconstitutionally detracts from the President’s executive power.
But to decide that issue, doesn’t the Court need to first decide what “inefficiency,” “neglect of duty,” or “malfeasance in office” actually mean? And in particular, doesn’t this require the Court to decide whether policy disagreements between a President and a CFPB Director can fit any of those criteria?
The last agency-independence case offers a cautionary tale for the justices. In Free Enterprise Fund v. PCAOB (2010), the Court held that statutes cannot give agencies a “second level” of protection against at-will removal by the President. In that case, the PCAOB’s members could be removed only for cause, by the Securities and Exchange Commission. And the SEC Commissioners, in turn, were assumed to have similar for-cause removal protection against the President even though the SEC’s statutes did not expressly grant them such protection.
That assumption about the SEC’s “independence” was uncontroversial before the Court’s decision. The SEC’s independence had long been assumed in litigation, in governance, and in politics. The lack of express statutory protection was easily explainable, given the SEC’s creation after Myers but before Humphrey’s Executor. And judicial recognition of the SEC’s independence seemed a fairly straightforward application of the Court’s decision in Wiener v. US (1958).
I think it’s fair to say that the SEC’s independence was beyond reasonable question until the Free Enterprise Fund case arrived. It was no surprise for the Court to assume the SEC’s independence, since the all the parties—the challengers, the United States, and the PCAOB—conceded or assumed the SEC’s for-cause removal protection. But when the SEC’s long-assumed independence became the crux of the Court’s decision to strike down the PCAOB’s own independence, suddenly pro-SEC assumptions became much more problematic.
Justice Breyer highlighted this in his dissent, asking emphatically: “How can the Court simply assume without deciding that the SEC Commissioners themselves are removable only ‘for cause?’ … Unless the Commissioners themselves are in fact protected by a ‘for cause’ requirement, the Accounting Board statute, on the Court’s own reasoning, is not constitutionally defective.”
He added, again with emphasis, “I am not aware of any other instance in which the Court has similarly (on its own or through stipulation) created a constitutional defect in a statute and then relied on that defect to strike a statute down as unconstitutional.” If the SEC’s assumed independence really were fatal to PCAOB’s independence, he concluded, then principles of constitutional avoidance would counsel in favor of reading the SEC’s own statute as not providing implicit for-cause removal protection to SEC Commissioners.
Is the Court walking into a similar problem in Seila Law v. CFPB?
Of course there’s no dispute that the CFPB has statutory for-cause removal protection. But doesn’t the Court need to ascertain how independent the CFPB actually is, before it concludes that the CFPB’s independence is constitutional or unconstitutional? Unless the Court rules categorically that any degree agency independence is unconstitutional (or, less plausibly, that any degree of agency independence is constitutional), then applying the Morrison v. Olson test to the CFPB would seem to require a more searching inquiry into how much direct control the President actually has over the CFPB Director.
As it happens, there was much less need for the Court to undertake such an specific inquiry in Morrison itself. Having concluded that the Independent Counsel was merely “an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority,” the Court saw no plausible threat to “the President’s need to control the exercise of [the Counsel’s] discretion is so central to the functioning of the Executive Branch,” or the President’s duty “to ensure the ‘faithful execution” of the laws.'” The Court conceded that it did not know for certain what the Counsel’s removal protection (only for “good cause”) actually entailed, but it saw the Counsel as so limited in jurisdiction and power that the precise meaning of “good cause” was not an urgent issue.
But the CFPB Director is a profoundly different office: not an inferior officer, but an agency head; not limited in jurisdiction to particular cases, but having jurisdiction broadly over consumer financial products and services; not “lacking policymaking” authority, but vested with immense policymaking authority, as well as an automatic entitlement to hundreds and hundreds of millions of dollars each year from the Federal Reserve.
Whether one supports the CFPB Director’s statutory independence or not, it is impossible to suggest with a straight face that the CFPB Director is a less powerful policymaker or law-executor than the old Independent Counsel.
And that fact, in turn, will likely require the justices to think much more seriously about what the statutory terms “inefficiency, neglect of duty, or malfeasance in office” actually mean. More specifically, the Court may need to decide whether those removal protections leave room for Presidents to fire CFPB Directors over policy disputes.
The Court has never decided this issue previously, but it has offered conflicting signs of the years. In Free Enterprise Fund, the Court suggested that for-cause removal protections do not allow the President to remove an officer over a policy disagreement: “the Government does not contend that simple disagreement with the Board’s policies or priorities could constitute ‘good cause’ for its removal … [n]or do our precedents suggest as much.” The Court seemed to leave the door open for policy disagreement to satisfy the removal standard if the officer’s policy position were “so unreasonable as to constitute ‘inefficiency, neglect of duty, or malfeasance in office,'” but overall the Court plainly did not understand for-cause removal standards to include ordinary policy disagreement.
(Justice Kavanaugh echoed this understanding in his own opinion for the D.C. Circuit panel in PHH Corp. v. CFPB, and in his dissent from rehearing en banc—an understanding that some of his colleagues disagreed with.)
But years earlier, in Bowsher v. Synar, the Supreme Court expressed the precise opposite view. In considering the statute protecting the Comptroller General from removal except in cases of “inefficiency,” “neglect of duty,” or “malfeasance in office,” the Court indicated that the statutory standard would allow the Comptroller to be removed “for any number of actual or perceived transgressions” of the “will” of the remover. (Of course, in that case the “remover” was Congress, not the President, which proved to be a more immediate constitutional problem.)
The seminal precedent, Humphrey’s Executor, offers no clear answer to this question. In his passive-aggressive attempts to cajole FTC Commissioner Humphrey into resigning, President Roosevelt told him that “your mind and my mind go along together on either the policies or the administering of the Federal Trade Commission.” But when FDR fired Humphrey, his cursory statement—”Effective as of this date, you are hereby removed from the office of Commissioner of the Federal Trade Commission”—stated no actual cause for his resignation.
Similarly, in Wiener v. US, President Eisenhower gave no substantive reason for his removal of Commissioner Wiener; he said only, “I regard it as in the national interest to complete the administration of the War Claims Act of 1948, as amended, with personnel of my own selection.”
Given the absence of clear precedent on this point, the Supreme Court’s analysis of the CFPB Director’s statutory protection will need to rest not on the competing dicta of Free Enterprise Fund and Bowsher, but rather on a direct analysis of the statutory terms’ original meaning. Only after ascertaining what “inefficiency, neglect of duty, or malfeasance in office” actually mean—and specifically the extent to which those terms allow or prohibit removals based on policy disagreements—can the Court then conclude whether affording that kind of protection to the CFPB Director violates the functional standard set in Morrison v. Olson.
As I’ve noted elsewhere, there already is scholarship favoring the construction for-cause removal standards as allowing policy-based removals, and I think it is sensible to construe at least “malfeasance” to include the President’s disagreement over whether the officer is properly doing his job as the President sees it. Pardon a string cite full of parentheticals, but …
See, e.g., Richard J. Pierce, Jr., Morrison v. Olson, Separation of Powers, and the Structure of Government, 1988 Sup. Ct. Rev. 1, 25 (1988) (“officers whose responsibilities include both policymaking and some significant role in adjudicatory proceedings can be the subject of ‘for cause’ limits on the President’s removal power, but ‘cause’ must include failure to comply with any valid policy decision made by the President or his agent”); Lawrence Lessig & Cass Sunstein, The President and the Administration, 94 Colum. L. Rev. 1, 110–111 (1994) (“We think that it would indeed be possible to interpret the relevant statutes as allowing a large degree of removal and supervisory power to remain in the President. … The statutory words might even allow discharge of commissioners who have frequently or on important occasions acted in ways inconsistent with the President’s wishes with respect to what is required by sound policy. Perhaps in some such cases, the statutory basis for discharge has been met.”); Richard Pildes & Cass Sunstein, Reinventing the Regulatory State, 62 U. Chi. L. Rev. 1, 29 (1995) (“Perhaps too they allow him to discharge officials whom he finds incompetent because of their consistently foolish policy choices.”); see also Steven G. Calabresi & Christopher S. Yoo, The Unitary Executive 423 (2008).
Other scholars disagree, of course. Most recently, Jane Manners and Lev Menand conclude in their brand-new draft paper that policy disagreements are insufficient cause for removal under such statutes.
In the Seila Law case, however, the justices’ construction of CFPB’s Director’s for-cause removal statute will necessarily be informed by the canon of constitutional avoidance. If a majority of the justices concludes that the CFPB statute unconstitutionally impairs the President’s executive powers, then they might be able to avoid striking down the statute altogether by concluding that the provision can be reasonably construed as allowing policy-based removal. Under such a construction, removal statutes would give officers some procedural protection by requiring the President to state reasons justifying removal, but they would give officers far less substantive protection. Some justices might find that the right balance to strike.
This is the great irony of debates surrounding agency independence: Advocates of agency independence are loath to construe removal statutes to allow policy-based removals, because they want the agency to be independent of the President’s policy judgments. Meanwhile, critics of agency independence are loath to construe removal statutes to allow policy based removals, because watering down the statute makes the constitutional conflict less acute.
And I suppose it would be similarly ironic if the CFPB, an agency created by President Obama and Professor Warren to enjoy unprecedented power and independence, turned out to be the very thing that ultimately spurs the Court to conclude that agency “independence” is much less than its advocates assumed.