Today the Supreme Court issued its decision in Collins v. Yellen, the constitutional challenge to the single-head leadership structure of the Federal Housing Finance Authority (FHFA). This is a follow-on case to the Supreme Court’s decision last Term in Seila Law v. Consumer Financial Protection Bureau, in which the Court held that the CFPB’s leadership by a single director removable only for certain causes (“inefficiency, neglect or malfeasance”) violates the separation of powers. Like the CFPB Director, the FHFA Director, by statute, has a type of for-cause removal protection, such that the President cannot remove the FHFA Director at will.
In a fractured decision, the Court held that the FHFA single-head structure is unconstitutional and remanded the case to the lower courts to sort out the remedy (and the remedy debate here is messy). In this post, I’ll focus on the merits and then the remedy, in turn, before offering some concluding thoughts. (I will not endeavor to discuss the statutory holding, which is unanimous and discussed in Part II of the Court’s opinion.)
At the outset, I should note my involvement in this case. Last August, the Court appointed my frequent collaborator (and co-blogger) Aaron Nielson as amicus to defend the FHFA’s constitutionality. I helped Aaron in his amazing work on the case and am listed as co-counsel on the amicus brief.
On the merits, Justice Alito wrote the opinion for the Court, holding (Part III.B) that the single-head structure of the FHFA violates the separation of powers, largely for the same reasons the CFPB’s leadership structure was deemed unconstitutional in Seila Law:
The Recovery Act’s for-cause restriction on the President’s removal authority violates the separation of powers. Indeed, our decision last Term in Seila Law is all but dispositive. There, we held that Congress could not limit the President’s power to remove the Director of the Consumer Financial Protection Bureau (CFPB) to instances of “inefficiency, neglect, or malfeasance.” 591 U. S., at _ (slip op., at 11). We did “not revisit our prior decisions allowing certain limitations on the President’s removal power,” but we found “compelling reasons not to extend those precedents to the novel context of an independent agency led by a single Director.” Id., at _ (slip op., at 2). “Such an agency,” we observed, “lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control.” Id., at _ (slip op., at 2–3).
A straightforward application of our reasoning in Seila Law dictates the result here. The FHFA (like the CFPB) is an agency led by a single Director, and the Recovery Act (like the Dodd-Frank Act) restricts the President’s removal power. Fulfilling his obligation to defend the constitutionality of the Recovery Act’s removal restriction, amicus attempts to distinguish the FHFA from the CFPB. We do not find any of these distinctions sufficient to justify a different result.
The Court rejects amicus’s (our) attempts to distinguish the FHFA from the CFPB, including that the FHFA exercises less (i.e., “not significant”) executive power, that the FHA largely acts as a conservator (not a regulator), and that the FHFA Director has more modest tenure protections. In footnote 21, the Court also refuses to engage with the parade of horribles that would ensue if the Court does not cabin Seila Law to distinguish between the CFPB and FHFA:
Amicus warns that if the Court holds that the Recovery Act’s removal restriction violates the Constitution, the decision will “call into question many other aspects of the Federal Government.” Brief for Court-Appointed Amicus Curiae 47. Amicus points to the Social Security Administration, the Office of Special Counsel, the Comptroller, “multi-member agencies for which the chair is nominated by the President and confirmed by the Senate to a fixed term,” and the Civil Service. Id., at 48 (emphasis deleted). None of these agencies is before us, and we do not comment on the constitutionality of any removal restriction that applies to their officers.
Indeed, the Court seems to reject any line-drawing in its standard, as Justice Kagan observes in her separate opinion (discussed below).
Six Justices join this constitutional merits decision in full (Part III.B): Alito, Roberts, Thomas, Gorsuch, Kavanaugh, and Barrett. Justice Kagan writes on the merits to say that Seila Law and stare decisis control the outcome in this case (despite her trenchant dissent in Seila Law):
I agree with the majority that Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. _ (2020), governs the constitutional question here. See ante, at 26. In Seila Law, the Court held that an “agency led by a single [d]irector and vested with significant executive power” comports with the Constitution only if the President can fire the director at will. 591 U. S., at (slip op., at 18). I dissented from that decision—vehemently. See id., at (KAGAN, J., dissenting) (slip op., at 4) (“The text of the Constitution, the history of the country, the precedents of this Court, and the need for sound and adaptable governance—all stand against the majority’s opinion”). But the “doctrine of stare decisis requires us, absent special circumstances, to treat like cases alike”—even when that means adhering to a wrong decision. June Medical Services L.L.C. v. Russo, 591 U. S., (2020) (ROBERTS, C.J., concurring in judgment) (slip op., at 2). So the issue now is not whether Seila Law was correct. The question is whether that case is distinguishable from this one. And it is not. As I observed in Seila Law, the FHFA “plays a crucial role in overseeing the mortgage market, on which millions of Americans annually rely.” 591 U. S., at _ (slip op., at 31). It thus wields “significant executive power,” much as the agency in Seila Law did. And I agree with the majority that there is no other legally relevant distinction between the two. See ante, at 29–32.
Kagan explains that she normally joins a majority opinion where stare decisis controls, but couldn’t here for two reasons: (1) the majority’s political theory is deeply flawed; and (2) the majority removed Seila Law‘s limiting principle of “significant executive authority.” On the second point, she explains:
Any “agency led by a single Director,” no matter how much executive power it wields, now becomes subject to the requirement of at-will removal. Ante, at 26. And the majority’s broadening is gratuitous—unnecessary to resolve the dispute here. As the opinion later explains, the FHFA exercises plenty of executive authority: Indeed, it might “be considered more powerful than the CFPB.” Ante, at 28. So the majority could easily have stayed within, rather than reached out beyond, the rule Seila Law created.
In thus departing from Seila Law, the majority strays from its own obligation to respect precedent. To ensure that our decisions reflect the “evenhanded” and “consistent development of legal principles,” not just shifts in the Court’s personnel, stare decisis demands something of Justices previously on the losing side. Payne v. Tennessee, 501 U. S. 808, 827 (1991). They (meaning here, I) must fairly apply decisions with which they disagree. But fidelity to precedent also places demands on the winners. They must apply the Court’s precedents—limits and all—wherever they can, rather than widen them unnecessarily at the first opportunity. Because today’s majority does not conform to that command, I concur in the judgment only.
Justice Sotomayor, joined by Justice Breyer, dissents on the merits, finding a constitutionally significant difference between the CFPB and the FHFA, even under Seila Law‘s precedent: “To recap, the FHFA does not wield significant executive power, the executive power it does wield is exercised over Government affiliates, and its independence is supported by historical tradition. All considerations weigh in favor of recognizing Congress’ power to make the FHFA Director removable only for cause.” Sotomayor continues:
The Court today also suggests that whether an agency regulates private individuals or Government actors does not meaningfully affect the separation-of-powers analysis. Ante, at 30–31 (“[T]he President’s removal power serves important purposes regardless of whether the agency in question affects ordinary Americans by directly regulating them or by taking actions that have a profound but indirect effect on their lives”). That, too, is flatly inconsistent with Seila Law, which returned repeatedly to this consideration. Not only did Seila Law distinguish the CFPB from the independent counsel in Morrison on this basis, see 591 U. S., at _ (slip op., at 18), it distinguished the CFPB from both the FHFA and the Office of Special Counsel for the same reason, see id., at _ (slip op., at 20). That the Court is unwilling to stick to the methodology it articulated just last Term in Seila Law is a telltale sign that the Court’s separation-of-powers jurisprudence has only continued to lose its way.
One final note on the merits (or perhaps a note on a threshold issue): An interesting wrinkle in this case is that the agency action (the Third Amendment) was adopted by an acting FHFA Director. Amicus (we) argued that an acting Director is removable at will under the statute, and thus the action was done by a constitutionally removable officer. The Court agreed that an acting FHFA Director under this statute is removable at will (because Congress didn’t impose any removal restrictions), but it held that the agency action was ongoing such that the subsequent Senate-confirmed FHFA Directors also acted:
But the harm allegedly caused by the third amendment did not come to an end during the tenure of the Acting Director who was in office when the amendment was adopted. That harm is alleged to have continued after the Acting Director was replaced by a succession of confirmed Directors, and it appears that any one of those officers could have renegotiated the companies’ dividend formula with Treasury. From what we can tell from the record, the FHFA and Treasury consistently reevaluated the stock purchasing agreements and adopted amendments as they thought necessary. Nothing in the third amendment suggested that it was permanent or that the FHFA lacked the ability to bring Treasury back to the bargaining table. After all, the agencies adopted a fourth amendment just this year. The federal parties and amicus do not dispute this. Accordingly, continuing to implement the third amendment was a decision that each confirmed Director has made since 2012, and because confirmed Directors chose to continue implementing the third amendment while insulated from plenary Presidential control, the survival of the shareholders’ constitutional claim does not depend on the answer to the question whether the Recovery Act restricted the removal of an Acting Director.
This holding (Part III.A) appears to garner eight votes, the six who joined the merits decision (Part III.B) and Breyer and Kagan. Although the reasons are unclear from Sotomayor’s separate opinion, Sotomayor does not join this part of the opinion. As an editorial aside, the idea that an agency action is a continuing or renewed agency action when a new director doesn’t withdraw it is hard for me to wrap my head around, but I will save that for another blog post (or article).
[6/24 UPDATE: Based on footnote 1 of Sotomayor’s opinion where she says she joins Parts I, II, and III.C of Alito’s opinion, I had previously stated that Breyer also does not join Part III.A. But a helpful reader pointed out that the syllabus says Breyer joins Part III.A, so I’ve corrected this post.]
Importantly, though, the Court’s holding that the acting FHFA Director’s action was not unconstitutional has the potential to significantly limit the remedy on remand (which is probably one reason why Kagan joined):
On the other hand, the answer to that question could have a bearing on the scope of relief that may be awarded to the shareholders. If the statute unconstitutionally restricts the authority of the President to remove an Acting Director, the shareholders could seek relief rectifying injury inflicted by actions taken while an Acting Director headed the Agency. But if the statute does not restrict the removal of an Acting Director [and the Court holds it doesn’t], any harm resulting from actions taken under an Acting Director would not be attributable to a constitutional violation. Only harm caused by a confirmed Director’s implementation of the third amendment could then provide a basis for relief.
Turning to the remedy, all the Justices but Justice Gorsuch say they are joining Alito’s remedy opinion (Part III.C). And the remedy at this point is merely retrospective, as the FHFA and Treasury have subsequently amended the agreement to eliminate the offending provisions. Importantly and as hinted above, the Court rejects the request to void the Third Amendment because the FHFA had a constitutionally permissible, at-will removable acting Director at that time:
We have already explained that the Acting Director who adopted the third amendment was removable at will. See supra, at 22–26. That conclusion defeats the shareholders’ argument for setting aside the third amendment in its entirety. We therefore consider the shareholders’ contention about remedy with respect to only the actions that confirmed Directors have taken to implement the third amendment during their tenures. But even as applied to that subset of actions, the shareholders’ argument is neither logical nor supported by precedent. All the officers who headed the FHFA during the time in question were properly appointed. Although the statute unconstitutionally limited the President’s authority to remove the confirmed Directors, there was no constitutional defect in the statutorily prescribed method of appointment to that office. As a result, there is no reason to regard any of the actions taken by the FHFA in relation to the third amendment as void.
But that does not necessarily leave the plaintiffs with no remedy. The Court remands for the lower courts to figure out whether there was any harm from actions by the subsequent, unconstitutional Senate-confirmed FHFA Directors:
That does not necessarily mean, however, that the shareholders have no entitlement to retrospective relief. Although an unconstitutional provision is never really part of the body of governing law (because the Constitution automatically displaces any conflicting statutory provision from the moment of the provision’s enactment), it is still possible for an unconstitutional provision to inflict compensable harm. And the possibility that the unconstitutional restriction on the President’s power to remove a Director of the FHFA could have such an effect cannot be ruled out. Suppose, for example, that the President had attempted to remove a Director but was prevented from doing so by a lower court decision holding that he did not have “cause” for removal. Or suppose that the President had made a public statement expressing displeasure with actions taken by a Director and had asserted that he would remove the Director if the statute did not stand in the way. In those situations, the statutory provision would clearly cause harm.
Gorsuch disagrees sharply with the Court’s remedial approach, arguing that the actions taken by the unconstitutional Senate-confirmed FHFA Directors regarding the Third Amendment should be set aside as void. He blisters the Court’s alternative approach. Here are a few of the highlights:
Instead of applying our traditional remedy for constitutional violations like these, the Court supplies a novel and feeble substitute. The Court says that, on remand in this suit, lower courts should inquire whether the President would have removed or overruled the unconstitutionally insulated official had he known he had the authority to do so. Ante, at 35. So, if lower courts find that the President would have removed or overruled the Director, then the for-cause removal provision “clearly cause[d] harm” and the Director’s actions may be set aside. Ibid.
Other problems attend the Court’s remedial science fiction. It proceeds on an assumption that Congress would have adopted a version of the Housing and Economic Recovery Act (HERA) that allowed the President to remove the Director. But that is sheer speculation. It is equally possible that—had Congress known it could not have a Director independent from presidential supervision—it would have deployed different tools to rein in Fannie Mae and Freddie Mac. Surely, Congress possessed no shortage of options. By way of example, it could have conferred new regulatory functions on an existing (and accountable) agency like the Department of Housing and Urban Development, or it might have enacted detailed statutes to govern Fannie and Freddie’s activities directly. For that matter, Congress might have opted for no additional oversight rather than subject the Federal Housing Finance Agency (FHFA) to supervision by the President.
The Court’s conjecture does not stop there. After guessing what legislative scheme Congress would have adopted in some hypothetical but-for world, the Court tasks lower courts and the parties with reconstructing how executive agents would have reacted to it. On remand, we are told, the litigants and lower courts must ponder whether the President would have removed the Director had he known he was free to do so. Ante, at 35. But how are judges and lawyers supposed to construct the counterfactual history? It is no less a speculative enterprise than guessing what Congress would have done had it known its statutory scheme was unconstitutional. It’s only that the Court prefers to reserve the big hypothetical (legislative) choice for itself and leave others for lower courts to sort out.
On the flipside, Kagan (joined by Breyer and Sotomayor) praise (and join) the Court’s remedial approach (Part III.C) as limiting the damage of the Court’s merits holding—and limiting the parade of horribles amicus (we) raised. Citing her seminal Harvard Law Review article that celebrates its twentieth anniversary this year, Kagan explains:
The majority’s remedial holding limits the damage of the Court’s removal jurisprudence. As the majority explains, its holding ensures that actions the President supports—which would have gone forward whatever his removal power—will remain in place. See ante, at 35. In refusing to rewind those presidentially favored decisions, the majority prevents theories of formal presidential control from stymying the President’s real-world ability to carry out his agenda. Similarly, the majority’s approach should help protect agency decisions that would never have risen to the President’s notice. Consider the hundreds of thousands of decisions that the Social Security Administration (SSA) makes each year. The SSA has a single head with for-cause removal protection; so a betting person might wager that the agency’s removal provision is next on the chopping block. Cf. ante, at 32, n. 21. But given the majority’s remedial analysis, I doubt the mass of SSA decisions—which would not concern the President at all—would need to be undone. That makes sense. “[P]residential control [does] not show itself in all, or even all important, regulation.” Kagan, Presidential Administration, 114 Harv. L. Rev. 2245, 2250 (2001). When an agency decision would not capture a President’s attention, his removal authority could not make a difference—and so no injunction should issue.
Indeed, Kagan suggests that the Fifth Circuit has already determined there should be no remedy (as there was no harm):
My final point relates to the last sentence of the majority’s remedial section. There, the Court holds that the decisive question—whether the removal provision mattered—“should be resolved in the first instance by the lower courts.” Ante, at 36. That remand follows the Court’s usual practice: We are, as we often say, not a “court of first view.” Alabama v. Shelton, 535 U.S. 654, 673 (2002). But here the lower court proceedings may be brief indeed. As I read the opinion below, the Court of Appeals already considered and decided the issue remanded today. The court noted that all of the FHFA’s policies were jointly “created [by] the FHFA and Treasury” and that the Secretary of the Treasury is “subject to at will removal by the President.” Collins v. Mnuchin, 938 F.3d 553, 594 (CA5 2019). For that reason, the court concluded, “we need not speculate about whether appropriate presidential oversight would have stopped” the FHFA’s actions. Ibid. “We know that the President, acting through the Secretary of the Treasury, could have stopped [them] but did not.” Ibid; see ibid., n.6 (noting that the plaintiffs’ “allegations show that the President had oversight of the action”). That reasoning seems sufficient to answer the question the Court kicks back, and nothing prevents the Fifth Circuit from reiterating its analysis. So I join the Court’s opinion on the understanding that this litigation could speedily come to a close.
One final note on the remedy (and the decision): Justice Thomas says he joins Alito’s opinion in full, but suggests everyone may have overlooked a key issue that goes to the merits (and thus the remedy): “I write separately because I worry that the Court and the parties have glossed over a fundamental problem with removal-restriction cases such as these: The Government does not necessarily act unlawfully even if a removal restriction is unlawful in the abstract.”
In other words, Thomas has serious doubts that the FHFA committed any unlawful acts that harmed plaintiffs here. Here’s a taste of the argument (footnote omitted):
This suit provides a good example. The shareholders largely neglect the issue of lawfulness to focus on remedy, but their briefing appears premised on several theories of unlawfulness. First, that the removal restriction renders all Agency actions void because the Directors serve in violation of the Constitution’s structural provisions, similar to Appointments Clause cases, see Lucia v. SEC, 585 U. S. , (2018) (slip op., at 12) (holding that an Administrative Law Judge was unlawfully appointed), and other separation-of-powers cases, e.g., Bowsher v. Synar, 478 U. S. 714, 727–736 (1986) (holding that the Comptroller General was not an executive officer and could not exercise executive power granted to him by statute). Second, that even if the Director is in the Executive Branch and the removal restriction is just unenforceable, the mere existence of the law somehow taints all of the Director’s actions. Third, that “when FHFA’s single Director exercises Executive Power without meaningful oversight from the President, he exercises authority that was never properly his.” Brief for Collins et al. 64. Fourth, that the statutory provision that gave the Director the power to adopt and implement the Third Amendments must fall if the statutory removal restriction is unlawful. §4617(b)(2)(J)(ii).
As the Court’s reasoning makes clear, however, all these theories appear to fail on the merits.
[6/24 UPDATE: At the end of the first footnote of Sotomayor’s separate opinion, she expresses interest in further exploring Thomas’s theory: “Finally, I note that JUSTICE THOMAS’ arguments that an improper removal restriction does not necessarily render agency action unlawful warrant further consideration in an appropriate case.” Breyer joins Sotomayor’s separate opinion, but I’m not sure he joins this footnote and expression of interest. As noted above, earlier in the footnote it makes clear that Sotomayor doesn’t join the acting Director part of Alito’s opinion (Part III.A), yet Breyer is listed in the syllabus as joining it.]
In sum, in Collins v. Yellen, the Supreme Court concludes that Seila Law controls the outcome here. Just like at the CFPB in Seila Law, it violates the separation of powers for Congress to impose removal restrictions on the single-head Director at the FHFA. But, unlike in Seila Law, the FHFA Director who took the first, major action here was an acting director, which the Court holds the President can remove at will under the statute. This holding substantially limits the remedy on remand. So does the Court’s watered-down approach to determining harm under its new remedial standard, as Gorsuch criticizes in his separate opinion. Indeed, Kagan asserts that the Fifth Circuit, under the Court’s remedial approach, has already determined plaintiffs are entitled to no relief. It will be interesting to see what the lower courts do on remand in light of the Supreme Court’s decision today.
The bottom line, as Kagan observes, is that Collins expands the Seila Law prohibition on removal restrictions, at least at single-director independent agencies (and maybe beyond). The next frontiers after Collins concern the agencies and officials amicus (we) raised in the brief and Alito ignored in footnote 21 of his opinion: the Social Security Administration, the Office of Special Counsel, the Comptroller, multi-member agencies for which the chair is nominated by the President and confirmed by the Senate to a fixed term, and the Civil Service.
At the same time, however, the Collins Court waters down the remedy, at least when it comes to retrospective relief. In particular, plaintiffs must show compensable harm from the constitutional violation. To meet that standard, the Court suggests, plaintiffs must demonstrate that, but for the statutory removal protection, the President would have removed the officer to prevent her from finalizing the agency action.
Good luck finding that smoking gun in disputes predating Collins. But perhaps future Presidents will make such declarations (or even firings) in response to Collins to further control the administrative state. Or perhaps not.