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A Fight Over Presidential Power Is Working Its Way Towards The US Supreme Court

A federal appeals court heard arguments on Wednesday in a constitutional challenge to the Consumer Financial Protection Bureau. If the bureau wins the court fight — which could be headed to the US Supreme Court — President Trump wouldn’t get to replace the current, Obama-nominated director until at least 2018.

Posted on May 24, 2017, at 3:21 p.m. ET

Consumer Financial Protection Bureau Director Richard Cordray
Pete Marovich / Getty Images

Consumer Financial Protection Bureau Director Richard Cordray

A fight over presidential power is working its way towards the US Supreme Court, and it doesn’t have anything to do with something that President Trump did.

A federal appeals court in Washington, DC, heard arguments on Wednesday in a challenge to the constitutionality of the Consumer Financial Protection Bureau, an independent agency created as part of the 2010 Dodd-Frank financial reform package. The bureau is led by a single director, who serves a five-year term and can only be removed by the president “for cause.”

Opponents of the bureau — a target of Republican ire since its inception — argue that it has too much power, and that the single-director structure is unlike most other multi-member independent agencies and leaves the bureau unaccountable.

Under the current setup, Trump won’t be able to remove the current, Obama-nominated director, Richard Cordray, until 2018, unless he determines Corday must be removed “for cause” — that is, because of "inefficiency, neglect of duty, or malfeasance in office.”

A private company that challenged the constitutionality of the agency scored a win last year, when a three-judge panel of the US Court of Appeals for the DC Circuit found in a 2-1 decision that having a single director who could only be removed “for cause” was unconstitutional. The court didn’t go as far as to say the agency in its entirety was unconstitutional, but the ruling would still lead to a big change in the relationship between the director and the president.

The full DC Circuit agreed to take up the case, and heard arguments on Wednesday morning. The questioning this time seemed to lean in favor of the bureau, with more judges expressing skepticism at the challengers’ argument that the scope of the director’s authority and the structure of the bureau diminished the president’s authority.

But regardless of what the DC Circuit decides, there were several nods on Wednesday to the fact that this case is likely headed to the Supreme Court. The bureau is arguing that past Supreme Court cases settled the constitutionality of independent agencies with members removable only “for cause.” The challengers have expressed an interest in revisiting that precedent, which is something only the Supreme Court can do.

The challenger is PHH Corporation, a mortgage lender that was the subject of a multi-million dollar enforcement action by the consumer protection bureau. PHH went to court to challenge not just the underlying order against the company, but also the constitutionality of the bureau as a whole.

Ted Olson, a prominent Supreme Court litigator who argued Bush v. Gore, argued for PHH in the DC Circuit — another sign that the case could be headed for a high court showdown. Although the three-judge DC Circuit panel limited its ruling last year to getting rid of the “for-cause” removal provision, PHH has continued to push the argument that the bureau as a whole wields too much power and is unconstitutional.

“This agency goes farther than anything Congress has attempted to do in history,” Olson told the judges on Wednesday.

Judge Thomas Griffith went back and forth with Olson about how exactly the president’s power was diminished by the bureau’s setup. Olson said the restrictions on the president’s ability to remove the director and the concentration of power in one person undercut the president’s constitutional duty to ensure that laws were “faithfully executed.” Griffith countered that a single director structure would seem to strengthen the president, since he would only need to replace one person to reshape the agency.

Olson replied that if Congress failed to approve Trump’s nominee to replace Cordray, Cordray could continue to serve indefinitely. A lawyer for the bureau later told the judges that once a director’s term expired, the president could remove him or her at will.

Judge Cornelia Pillard said there seemed to be a pattern among the financial regulatory agencies of limits on the president’s ability to remove officials because of political differences. Was it “out of bounds” for Congress to adopt an agency structure aimed at avoiding “financial cronyism,” Pillard asked. Olson said that it was out of bounds because it undercut the president’s authority as laid out in the constitution.

Judge Brett Kavanaugh, who wrote the majority opinion last year striking the “for-cause” removal provision, focused on the difference between the bureau and other independent agencies where there was traditionally political turnover when a new administration took office. He said that it didn’t seem to make sense that some future president who campaigned on a consumer protection platform might have to wait until their fourth year in office to replace the director of the consumer protection bureau.

Bureau attorney Lawrence DeMille-Wagman replied that there were agencies where the president wasn’t guaranteed an opportunity to appoint a favorable political majority within a given term in office. Federal officials must be “sufficiently accountable,” DeMille-Wagman said, but there could be limits on the president’s removal authority.

The case was heard by 10 of the court’s 11 active judges; Chief Judge Merrick Garland has not participated in the case. Senior judges normally don’t hear cases when they go before the full court, but in this case Senior Judge A. Raymond Randolph joined his active judge colleagues in hearing the case because he was on the original three-judge panel.

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