CFPB defender offers Supreme Court an exit from Constitutional issues

(Reuters) – In the most dramatic moment in Tuesday’s oral arguments at the U.S. Supreme Court over the fate of the Consumer Financial Protection Bureau, Justice Neil Gorsuch seemed to rebuke the famed Supreme Court advocate Paul Clement of Kirkland & Ellis for an aside about U.S. Solicitor General Noel Francisco. Clement, who was appointed by the Supreme Court to defend the constitutionality of the CFPB’s structure after the Justice Department concluded that statutory protection for the CFPB’s lone director violates separation of powers doctrine, was answering a question from Justice Gorsuch on what restrictions Congress can impose upon the president’s power to remove executive-branch officials.

“I offer you two limiting principles, which I think is two more than the Solicitor General’s offered you,” Clement said, according to a transcript of the oral argument.

Gorsuch fired back: “If we could avoid disparaging our colleagues and just answer my question, I would be grateful.” (Clement proceeded to answer the question and clarify that he did not mean to disparage Francisco.)

The moment itself was unusually fractious by Supreme Court standards – but it’s important to look at the equally unusual colloquy between Clement and Gorsuch that preceded the justice’s snappish remark. The CFPB case, Seila Law v. CFPB, presents two questions: Does the Consumer Financial Protection Act, which is part of the Dodd-Frank financial reform statute, unconstitutionally shield the CFPB director from accountability to the president by prohibiting the director’s removal without good cause; and, if the removal provision is unconstitutional, can it be severed from the rest of law? Both the Justice Department and the CFPB target that brought the case to the Supreme Court – the California debt restructuring firm Seila Law – argued that the removal provision is unconstitutional under Supreme Court precedent, although, as I’ve reported, they disagree about whether the justices can cure the defect by severing that clause.

At Tuesday’s oral argument, according to my Reuters colleagues Lawrence Hurley and Andrew Chung, the Supreme Court’s conservatives seemed sympathetic to arguments by SG Francisco and Seila counsel Kannon Shunmugam of Paul Weiss Rifkind Wharton & Garrison, though (like Seila and DOJ), the justices offered no consensus on how to resolve the problem.

Clement, on the other hand, led off his presentation by offering the Supreme Court a way to avoid entirely the difficult constitutional and remedial questions posed in the Seila case. Echoing arguments from his brief defending the CFPB, Clement said that there is really no dispute before the court because both the CFPB and Seila, the target of a CFPB investigation, agree on the constitutional question. Technically, he said, the Justice Department takes the position that the civil investigative demand it issued to Seila should still be enforced because it was ratified by an acting CFPB director who was subject to removal by the president and thus not unconstitutionally appointed. But ultimately, Clement said, the government is not asking the Supreme Court to resolve a live dispute. Instead, he said, DOJ wants the justices to issue an advisory opinion on the matter of the constitutionality of the CFPB’s structure. “And this court,” Clement said, “lacks jurisdiction to issue it.”

Justice Gorsuch asked, rather incredulously, if Clement was arguing that the Supreme Court should dismiss the case as improvidently granted. “That’s your first argument?” Gorsuch said.

Clement responded that he believed the court should write an opinion explaining why it had concluded that it did not have jurisdiction. “It’s a jurisdictional opinion, and it says adverseness is vitally important to Article III, and it’s vitally important especially when the lack of adverseness could cause this court to unnecessarily decide a constitutional question,” he said.

To which Gorsuch replied, “Boy – boy, that sounds a lot like a DIG, but, okay, fine.” That testy exchange was soon followed by Gorsuch’s rebuke about Clement disparaging Francisco.

So was Clement’s jurisdictional argument a flop?

I’ll insert here the standard argument that only a fool would presume to predict the outcome of a Supreme Court case from the justices’ comments at oral argument. And Justice Ruth Ginsburg, the court’s doyenne of civil procedure, was intrigued enough by the jurisdictional issue to make it the focus of the very first question to Shanmugam, Seila Law’s counsel. Justice Ginsburg asked Shanmugam why the constitutionality of the CFPB director’s appointment even mattered to the outcome of the case, given that the CFPB intends to enforce the civil investigative demand against Seila Law regardless of the answer to the constitutional question. Shanmugam, who was clearly primed for a question about constitutional avoidance, said there was still a live dispute between his client and the government. “There is no mootness here,” he said. “And we plainly have standing, including standing to appeal, because our injury is the fact that my client is subject today to a Civil Investigative Demand that even today the government is seeking still to enforce.”

Justice Sonia Sotomayor and Chief Justice John Roberts hinted in the course of oral argument that the court might indeed want to avoid the issue of the CFPB’s constitutionality. Justice Sotomayor picked up on an argument from an amicus brief by University of Virginia law professor John Harrison, who posited that the justices look first at whether the provision restricting the president’s power to remove the CFPB director can be severed from the rest of the law. If the provision can be severed, Harrison had said, Seila can’t obtain the relief it seeks, a quash of the CFPB’s investigative demand, so the case must end on the grounds of “prudential ripeness.” (Shanmugam told Justice Sotomayor that even if the provision is severable, Seila is entitled to a ruling that a civil investigative demand issued by an unconstitutionally appointed CFPB director is invalid.)

Chief Justice Roberts’ question about constitutional avoidance came during a discussion with Shanmugam about whether the CFPB’s text, which allows the president to remove the CFPB director on for inefficiency, malfeasance or neglect of duty, is a sufficiently modest check on the president’s power to pass constitutional muster. “Wouldn’t the normal principles of constitutional avoidance suggest that we might want to scrutinize a little bit how rigorous a limitation that is before we get to the point of striking down the statute?” the chief justice asked. (Shanmugam said that if the court “were to somehow convert that (CFPB) standard into” presidential power to remove the director at will, the justices would in effect be overriding their own precedent shielding commissioners of independent executive agencies from being fired at the president’s whim.)

I didn’t detect any indications that other justices were looking for a way to duck a decision on the CFPB’s constitutionality, let alone that they were thinking of dismissing the case on jurisdictional grounds. Even Douglas Letter, who argued Tuesday for the U.S. House of Representatives, urged the court not to dismiss the case, as Clement had suggested, but instead to affirm the holding of the 9th U.S. Circuit Court of Appeals that the CFPB statute is constitutional. SG Francisco told the justices that the way forward is easy – they need only sever the clause insulating the CFPB director, leaving the rest of the law intact and the CFPB up and running.

But the court seemed preoccupied by how to define the limits on congressional power to restrict the president’s removal authority – or even whether it’s the Supreme Court’s job to provide that definition. Who knows? If the justices can’t find another way out, they may take Clement’s exit after all.

CFPB v NY State Department of Financial Services (DFS) and Leandra English

‘Dark Money’ Swaying High Court

A high-stakes case over the Consumer Financial Protection Bureau is an example of “dark money” influencing outcomes at the U.S. Supreme Court, Sen. Sheldon Whitehouse, D-R.I., said in Law360’s The Term podcast.https://t.co/JJ765SU9BD pic.twitter.com/en0h8LifhI

— LawsInTexas (@lawsintexasusa) February 14, 2020

Federal Court in NY joins the Stay with 2nd (also now agreed to stay) and 9th Circuits re CFPB v Selia Law Case Before the US Supreme Court (19-7) resulting in the 5th Cir. and 11th Cir. as the only Circuits causing a split. @SCOTUSblog #lawtwitter #CFPBhttps://t.co/NEuJ8xNYSt pic.twitter.com/ZmXwAFv7dO

— LawsInTexas (@lawsintexasusa) November 7, 2019