Justices Will Hear Challenge to Consumer Watchdog Agency

WASHINGTON (CN) – Taking up a case that will give its conservative majority another opportunity to press their vision of administrative agency power, the Supreme Court agreed Friday to hear an existential challenge to the Consumer Financial Protection Bureau.

A subdivision of the Federal Reserve since 2010, the bureau must defend its creation under the Dodd-Frank Act as part of a court case with Seila Law, a Kansas-based firm that has been bucking the bureau’s investigative requests.

Seila, which represents consumers facing debt, says it did not have to comply with the requests because the bureau’s structure is unconstitutional.

When a three-judge panel of the Ninth Circuit disagreed in May, Seila petitioned the Supreme Court for a writ of certiorari. The justices granted that writ Friday, without comment, as is their custom.

The CFPB, as the bureau is more commonly known, was the brainchild of Senator Elizabeth Warren, who at the time was a professor at Harvard.

Responsible for regulating banks, debt collectors and other financial institutions, it is an interdependent organization within the federal government, led by a single director who is appointed by the president and confirmed by the Senate.

That director can only be fired for “inefficiency, neglect of duty, or malfeasance in office,” making the official more difficult to remove than other agency heads.

This structure has long led conservative groups to argue the bureau is unconstitutional, vesting more authority in one person than the Constitution allows. Unlike the CFPB, other independent federal agencies like the Federal Communications Commission are led by multiple members, reducing any one member’s power.

In its initial filing with the court, the CFPB signed onto this view of its structure and urged the court to take up the case. This spurred the Democrat-controlled House to file its own brief defending the bureau’s structure.

The D.C. Circuit found the structure unconstitutional, with then-Judge Brett Kavanaugh writing an opinion for a fractured majority, when it heard a similar challenge in 2016. The full court agreed to rehear the case and reversed the three-judge panel’s decision in 2018.

In addition to considering the initial question of whether the bureau’s structure is constitutional, the court also asked the parties to address whether the provision allowing the president to remove the director only for cause can be severed from the Dodd-Frank Act.

Saikrishna Prakash, a professor at the University of Virginia School of Law, said the case fits in with a pattern of the justices showing a willingness to take a closer look at some of the court’s administrative law precedents.

“There obviously are a certain number of justices who find existing doctrines mistaken, unsatisfactory, problematic, et cetera,” Prakash said.

Prakash called it likely that the court will rule the bureau’s structure unconstitutional, but noted there is a wide range of ways that it could do so that would have vastly different ramifications for administrative law going forward.

“I think they’re going to strike it down, I don’t know what kind of an opinion they’ll write, it really just depends on whether they believe they should take baby steps or take a larger step,” Prakash said.   

A spokeswoman for the Department of Justice declined to comment on the court’s decision.

Seila Law is represented by Kannon Shanmugam, an attorney with the firm Paul, Weiss, Rifkind, Wharton & Garrison. Shanmugam did not immediately return a request for comment on the court’s decision to hear the case.

Speaker of the House Nancy Pelosi also did not return a request for comment.

The CFPB case is one of four the court took up Friday.

From the 10th Circuit, the justice agreed to decide the conditions under which people in prison are prevented from filing lawsuits in court without paying fees. As it stands today, prisoners cannot have their fees waived if they have already had three prior civil actions or appeals dismissed as “frivolous, malicious, or fails to state a claim upon which relief may be granted.”

Arthur Lomax, who is incarcerated in the Limon Correctional Facility in Colorado, tried to file a lawsuit after he was kicked out of a sex-offender treatment and monitoring program at his prison. He argues he should be able to file the suit because the three previous cases he filed were dismissed without prejudice and therefore should not count against his limit.

The court also took up a case from the 11th Circuit involving a Lebanese citizen who has been ordered deported from the United States after he pleaded guilty to two counts of receiving stolen property in interstate commerce.

In February, the federal appeals court agreed that Nidal Khalid Nasrallah’s crime was one “involving moral turpitude” and therefore required him to be removed from the country.

The fourth case to win certiorari on Friday comes from the Ninth Circuit, where the federal appeals court revived a habeas petition from a Sri Lankan man who was denied U.S. asylum.

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