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Supreme Court Casts Doubt on Future of Independent-Agency Heads

June 30, 2020, 9:45 AM

The U.S. Supreme Court’s decision allowing the president to fire at will the head of the Consumer Financial Protection Bureau opens the door to future challenges against leaders of other independent federal agencies, especially if the court becomes more conservative, legal scholars said.

The court’s decision in Seila Law v. CFPB limited but didn’t overturn its 1935 ruling in Humphrey’s Executor, giving cover to bipartisan, independent agencies such as the Securities and Exchange Commission, National Labor Relations Board, Federal Communications Commission, and the Federal Energy Regulatory Commission. The majority opinion of the divided court drew a crucial distinction between the CFPB’s single-director structure and independent agencies that have multi-person leadership panels with members from both political parties.

The ruling, a 5-4 decision with the court’s liberal justices dissenting, said the president’s removal power did not extend to independent agencies with multi-person boards where members wield quasi-legislative or judicial functions but not significant executive power.

Conservative legal scholars have long attacked the court’s Humphrey’s Executor ruling, which only allows the president to fire the head of an independent agency for cause such as inefficiency, neglect, or malfeasance, arguing it’s flawed and out of tune with the modern administrative state.

“Today’s decision certainly would make it easier for the Court in the future to overturn Humphrey’s Executor,” said Cary Coglianese, law and political science professor at the University of Pennsylvania Law School. “It doesn’t compel the Court to do so, but it plants seeds that, in the right soil, could take root to undo independent agencies across the board.”

The Constitution vests the power of the executive branch solely in the president without any limitation on his ability to remove leaders of executive agencies, White House press secretary Kayleigh McEnany said in a statement.

"[U]nity in the executive branch is essential for providing the President with the authority needed for the effective administration of government and to make the President fully accountable to the electorate every four years for the management of the executive branch, which inherently includes the appointment and removal of government officials,” McEnany said.

Risk in ‘Executive Power’

The risk for leaders of other independent agencies may lie in the definition of what constitutes the exercise of substantial executive power.

In its Seila decision, the court’s majority said the exemption in Humphrey’s Executor that allows the president to fire the leaders of an independent agency only for cause still applies to “multimember expert agencies that do not wield substantial executive power,” and to “inferior officers with limited duties and no policymaking or administrative authority.”

The majority opinion, written by Chief Justice John Roberts, said Congress overstepped its power when creating the CFPB a decade ago by trying to shield the agency’s director from removal for political reasons.

“Literally every aspect of the ‘unconstitutional’ powers the majority cites for CFPB here is true of FERC/FCC, except for the single Director vs Commission structure,” Gabe Tabak, federal regulatory affairs counsel at the American Wind Energy Association, said in a tweet.

But due to that distinction, the decision likely won’t affect multi-member commissions, such as the quasi-independent Equal Employment Opportunity Commission, according to Amit Narang, regulatory policy advocate at Public Citizen, a non-profit consumer advocacy organization.

The high court distinguished between the constitutionality of the president’s “for cause” removal power for commissioners at multi-member agencies versus agencies with a single leader, he said, therefore sparing EEOC and other independent agencies with a similar structure.

The decision also doesn’t appear to impact the NLRB, which has a five-member leadership panel, said Sharon Block, a former board member who is executive director of the Labor and Worklife Program at Harvard Law School. The court seemed to focus on the unique circumstances of the CFPB and refused to apply legal precedent that allows limits on the president’s removal powers for multi-member boards, she said.

Although the decision discusses Humphrey’s Executor, it clearly mentions all the ways that the CFPB is different from essentially all other independent agencies, said Vaishali Rao, a partner at Hinshaw & Culbertson LLP. “It really looks hard at that and it finds a myriad of unique and complicating factors that I don’t think they’re going to find anywhere else,” she said.

No ‘Line’ Provided

The opinion “opens the door” to questioning for-cause removal provisions for commissioners and board members at independent agencies, said Graham Steele, director of the Corporations and Society Initiative at Stanford Graduate School of Business and a former minority chief counsel at the Senate Banking Committee.

While the majority opinion lays out some of the ways the court found the CFBP problematic on constitutional grounds, it didn’t say what is acceptable at other agencies, Steele said. “It doesn’t sort of say, ‘Here’s where we see the line,’” he said.

The majority’s decision to leave intact Humphrey’s Executor, which generally affirms the constitutionality of independent agencies, offers some immediate relief for other agencies, Coglianese said.

“They could have gone much farther, and it would have thrown agencies like FERC into the dust bins, quite frankly,” he said.

Monday’s ruling “drew a dotted boundary line” protecting legacy forms of agency independence, said George Mason University law professor Adam White, who challenged the constitutionality of the CFPB in his previous role as a lawyer at Boyden Gray & Associates.

Though some conservatives have long questioned the legitimacy of all independent agencies, White said he’d be surprised if the Supreme Court’s ruling launches a wave of new lawsuits. “The fairest way to read the opinion is that it’s preserving old forms of independence but just not allowing new ones to be created,” he said.

At the same time, the opinion offers plenty of fodder for litigants who want to target legacy independent agencies.

That’s especially likely if the Supreme Court shifts further to the right, said Bob Percival, who heads the environmental law program at the University of Maryland School of Law. “So there is no immediate threat, though the addition of a few more fierce conservatives to the court might in the future lead to abolition of independent agencies,” he said.

With assistance from Paige Smith.

To contact the reporters on this story: Cheryl Bolen in Washington at cbolen@bgov.com; Ellen M. Gilmer in Washington at egilmer@bloombergindustry.com; Robert Iafolla in Washington at riafolla@bloomberglaw.com; Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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