Notice & Comment

Ninth Circuit Review-Reviewed: CFPB Survives Another Separation of Powers Challenge, But Agency Isn’t Yet in the Clear, by William Yeatman

Welcome back to Ninth Circuit Review-Reviewed, your monthly recap of administrative law before arguably “the second most important court in the land.” Let’s get straight to last month’s controversies.

The Elusiveness of Plain Meaning in Organic Statutes

Outside of date-certain deadlines, are enabling acts ever truly plain? This week’s lead case presents an instance where the Supreme Court pronounced a statutory provision to be “unambiguous,” yet events have since demonstrated otherwise, and, as a result, many livelihoods linger in limbo.

Immigration law renders certain permanent residents eligible for cancellation of removal if they have lived here for seven years. See 8 U.S.C. § 1229b(a). Under the “stop-time” rule, the seven-year clock starts with his or her admission into the United States, and the clock stops when the resident is served a “Notice to Appear” (NTA) for deportation proceedings before an Immigration Judge. See 8 U.S.C. § 1229b(d)(1). By statute, Notices to Appear must include certain material, including a description of removal proceedings, requests for updated contact info, the time of the hearing, and where it will occur. See 8 U.S.C. § 1229(a)(1).

In a 2011 precedential order, the Board of Immigration Appeals (“Board”) found the “stop-time” provision to be ambiguous, and, accordingly, the agency interpreted the statute to allow for a two-step approach for giving notice of a deportation hearing. At the first step, the alien receives a Notice to Appear, which contains all the statutorily required information other than the time and place. Later, the alien would receive a Notice of Hearing, which supplied the date and time. In the 2011 order, the Board held that the “stop-time” rule is triggered—thereby stopping the clock on eligibility for cancellation of removal—at the first step, the Notice to Appear, before the alien receives notice regarding the place and time (at the second step). In a 2016 opinion, the Ninth Circuit joined  a number of her sister courts in upholding the Board’s statutory interpretation under Chevron v. NRDC.

In Pereira v. Sessions, however, the Supreme Court overturned these courts by holding that the immigration statute “unambiguously” requires that a Notice to Appear, at a minimum, must include the “time and place” of the removal hearing before it can implicate the “stop-time” rule—i.e., when the seven-year clock stops. Unfortunately, the Supreme Court left unaddressed whether the notice must contain all the statutorily required information within the four corners of a single document. On this question, moreover, the statute is silent.

After Pereira, the Board of Immigration Appeals issued a 2019 precedential order determining that the entire two-step process is statutorily sufficient to trigger the “stop-time” rule. According to the Board, the second notice perfects the first, and thereby constitutes a complete Notice to Appear that stops the seven-year clock.

Last month in Lorenzo Lopez v. Barr, a split Ninth Circuit panel rejected the Board’s “two-step approach” as being incompatible with the “unambiguous” statutory text as set forth by the Supreme Court in Pereira. That is, the majority held that “a Notice to Appear that is defective under Pereira cannot be cured by a subsequent Notice of Hearing.” In a dissenting opinion, Judge Consuelo Callahan sided with the government in arguing that the Supreme Court in Pereira did not speak to whether a viable Notice to Appear (for purposes of triggering the “stop-time” rule) could occur in a succession of documents that together include all the requisite information.

With the majority panel’s decision in Lorenzo Lopez v. Barr, circuit courts are now split. In an unpublished opinion from earlier this year, the Eleventh Circuit concluded that the two-step process creates a combined notice that passes statutory muster for the initiation of the “stop-time” rule. Although it didn’t rule squarely on the matter, the Seventh Circuit seemed to agree with the Ninth Circuit’s reasoning to the contrary.

This controversy is likely to percolate. As the government conceded in Pereira, nearly all Notices to Appear issued between 2015 and 2018 resulted from the “two-step” process. Whether and when these notices trigger the “stop-time” rule matters greatly to an alien that is near attainment of requisite years of residency, which, in turn, is crucial for determining his or her eligibility for cancellation of deportation. With atypical confidence, I predict the Supreme Court eventually will clarify its holding in Pereira regarding the putatively unambiguous “stop-time” rule.

CFPP Survives Another Separation of Powers Challenge

In Consumer Finance Protection Bureau v. Seila Law LLC, the Ninth Circuit joined the D.C. Circuit in rebuffing a separation of powers challenge to the CFPB.

At issue was Seila Law LLC’s refusal to comply with a civil investigative demand. The appellant argued that the CFPB is unconstitutionally structured, which rendered the investigation—and everything else the agency has done—unlawful. In fact, the crux of the appellant’s claim is the same as that denied by the en banc D.C. Circuit court in PHH Corporation v CFPB, a case which has been covered extensively at this blog. Specifically, Seila Law LLC argued that Congress impermissibly infringed on the president’s Take Care duty by rendering the CFPB too powerful and too independent.

Congress created the CFPB in response to the 2009 economic crisis. In a nutshell, the Bureau is a financial regulator that applies a set of preexisting statutes to financial services marketed primarily for personal, family, or household purposes. Its Director is a principal officer, who serves a five-year term and is removable only for-cause. The agency wields broad regulatory powers to promulgate rules and enforce violations.

Seila Law LLC claims the CFPB is too far removed from presidential oversight. Of course, the Supreme Court long has allowed Congress to employ for-cause employment protections to insulate leaders of “independent” agencies from direct presidential oversight. The appellant, however, argues that these independent agencies almost always entail multi-member commissions, rather than a single director, like the CFPB. According to Seila Law LLC, a multi-member board is characterized by internal checks that are absent from a single-director structure. The appellant also argues that the CFPB is more powerful than the handful of other independent regulatory agencies headed by a single director. Due to the aggregate nexus of these factors—not one of which would prove dispositive on its own—Seila Law LLC argues that the Bureau is an unconstitutional historical anomaly.

In a brief order issued in early May, a unanimous Ninth Circuit panel sided with the government. The court’s reasoning tracked that of the D.C. Circuit in PHH Corporation, albeit in a much shorter opinion. Like the en banc D.C. Circuit, the Ninth Circuit panel leaned on Supreme Court precedent, but particularly Humphrey’s Executor and Morrison v. Olson, to find the CFPB constitutional.

Notwithstanding Seila Law LLC and PHH Corporation, the CFPB is not yet in the clear from existential legal challenges. To wit, a federal district court in New York in 2018 held the CFPB’s structure to be unconstitutional, though that order is being appealed before the Second Circuit.

Parallel controversies also are similarly percolating. For example, the Federal Housing Financing Authority is one of a handful of regulatory agencies, like the CFPB, with a single director who enjoys removal protections, and, in Collins v. Mnuchin, the Fifth Circuit held the FHFA’s structure to be unconstitutional. That decision, however, is being reheard en banc. A district court in the Eight Circuit recently has held the opposite regarding the FHFA’s constitutionality.

In sum, CFPB last month won a battle before a Ninth Circuit panel, but the war is far from over.

Ninth Circuit’s Expansive Framework for Discerning “General Statements of Policy”

APA § 553 exempts “general statements of policy” from notice-and-comment procedures otherwise required for agency “rules.” Under black-letter law, such policy statements “advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power.” Instead of rulemaking procedures, “general statements of policy” are required only to be published, see 5 U.S.C. § 552(a)(2), though agencies routinely make such documents all but impossible to find, see Wayne Crews, Regulatory Dark Matter (2019).

For the most part, courts have adopted the “binding norm” test to discern “general statements of policy,” which do not have to undergo §553 procedures, from rules that do. Simply put, the crucial question is whether the document has “binding effect” or “binding practical effect.” If it does, then it’s a legislative rule subject to notice-and-comment.

But whom do the rules bind?

In its original form, the “binding norms” test pertained to the extent to which the agency’s issuance was binding on regulated parties. See, e.g., Pacific Gas & Electric Co. v. FPC, 506 F.2d 33, 38 (D.C. Cir. 1974). Some circuits, however, have held that a policy statement is a legislative rule if it binds the agency rather than the public. See, e.g., 818 F.2d 943, 948 (D.C. Cir. 1987); see also Texas v. United States, 86 F. Supp. 3d 591, 610 (S.D. Tex.), aff’d, 809 F.3d 134 (5th Cir. 2015) (employing this reasoning to find unlawful the Obama-era deferred action immigration policy).

Esteemed scholars argue that courts are mistaken to apply the binding norm test to an agency’s internal law of administration. Prof. Peter Strauss, for example, recently argued on this blog that “treating impact on agency staff and impact on outsiders as equivalent, is badly mistaken and counterproductive.” For Prof. Strauss and other venerable scholars, agency recourse to “soft law” is essential to foster administrative efficiency, a more uniform rule of law, and (relatedly) the constitutional duty for effective supervision of agency decision-making.

These arguments are well-taken, and their authors are brilliant admin law scholars, but I’m unconvinced. For me, the problem is with their attempts to draw a bright-line distinction between an issuance that “impacts agency staff” and one that “impacts outsiders.” According to Prof. Strauss, binding guidance on the former (“inside” government) is welcome, while binding guidance on the latter (“outside” government) is rightly objectionable. Yet, at some point, the two concepts must bleed into one another. If a purported “general statement of policy” instructs agency enforcement staff to significantly change its long-held behavior regarding a policy of great consequence, then I think it’s obvious that the agency has tried to circumvent notice-and-comment procedures in violation of the APA. Because I think it’s impossible to draw bright lines in discerning APA “rules” from “general statements of policy” (and “interpretative rules,” for that matter), I would instead rely on a case-by-case approach that focused on reliance interests, the importance of the policy, and the magnitude of the agency’s policy shift..

In any case, such nuance is immaterial to the Ninth Circuit, which has adopted the “binding effect” test regardless whether the policy statement implicates the agency or the public. Last month, for example, the panel’s per curiam opinion in Innovation Law Lab v. McAleenan, employed the “inside agency” variation of the test; in 2004, a Ninth Circuit panel adopted the “outside agency” approach. On this matter, it should go without saying that I’m sympathetic to the Ninth Circuit’s doctrinal evolution.

Cool Case Alert!

In Murray v. BEJ Minerals, an en banc Ninth Circuit panel certified the following question to the Montana Supreme Court: “Whether, under Montana law, dinosaur fossils constitute “minerals” for the purpose of a mineral reservation.” In other words, are dinosaur fossils subject to above-ground or below-ground property rights regimes. Although it has nothing to do with administrative law, this is a really cool sounding case.


William Yeatman is a research fellow at the Cato Institute.

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