(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Alison Frankel
NEW YORK Oct 11 Judge Brett Kavanaugh, author of
the District of Columbia U.S. Circuit Court of Appeals' majority
opinion Wednesday in PHH Corporation v. Consumer Financial
Protection Bureau, is a compelling writer. His tour-de-force
13-page summary at the beginning of the court's 2-1 ruling
declares the CFPB unconstitutional in words that will long be
quoted by the agency's critics.
"The director of the CFPB possesses more unilateral
authority - that is, authority to take action on one's own,
subject to no check - than any single commissioner or board
member in any other independent agency in the U.S. government,"
wrote Judge Kavanaugh.
"The CFPB's concentration of enormous executive power in a
single, unaccountable, unchecked director not only departs from
settled historical practice, but also poses a far greater risk
of arbitrary decision-making and abuse of power, and a far
greater threat to individual liberty, than does a multi-member
Over about 50 additional pages, Judge Kavanaugh elaborates
his theme that the CFPB's single-director structure violates the
constitution's separation-of-powers doctrine because it rests
nearly boundless regulatory power in an official wholly
accountable to no one else - not fellow commissioners, not
Congress, not the judiciary and not even the president.
The judge's discussion of the history and judicial
application of the constitutional principle of separation of
powers, written on behalf of himself and Senior Judge Raymond
Randolph, reads like an exceptionally well-crafted treatise on
constitutional legal history, spiked with proclamations about
the unprecedented angers of the CFPB's anomalous structure.
Separation of powers is one of Judge Kavanaugh's
specialties, and his scholarship shows. His solution for the
CFPB's constitutional infirmity is relatively clean and simple.
The mortgage lender PHH, represented by the appellate
masters at Gibson Dunn & Crutcher, argued that because Congress
created the CFPB as part of the Dodd-Frank financial reforms of
2010, the whole law - or, at least the provisions authorizing
the consumer protection bureau - must be struck down. PHH called
for the entire CFPB to be dismantled.
But the majority, following the road plowed by the U.S.
Supreme Court in recent challenges to the Public Company
Accounting Oversight Board and to recess appointments to the
National Labor Relations Board, said the court need only remove
the law's strictures on the president's ability to remove the
Allowing the president to get rid of the director at will,
according to Judges Kavanaugh and Randolph, would make the CFPB
akin to an executive agency, like the Department of Justice or
Treasury, with a single head accountable directly to the
That fix, Judge Kavanaugh emphasized, would leave the CFPB
to continue operating as usual, albeit with its director subject
to dismissal at the president's will. Presumably, that change
could shorten the CFPB director's statutory five-year term if,
for instance, a new president with a different consumer agenda
took office before a CFPB director's term expired.
Otherwise, the D.C. Circuit's ruling on the agency
constitutionality won't have much practical impact. The
decision's influence will be due to the political power of Judge
Kavanaugh's description of the CFPB director's unbridled,
ahistorical, unconstitutional power.
JUDICIAL ABDICATION OR RESTRAINT?
Here's the interesting thing, though: According to Judge
Karen Henderson, writing in partial dissent, Judge Kavanaugh did
not need to engage in his constitutional analysis at all - and,
in fact, under the doctrine of constitutional avoidance, should
not have reached a conclusion about the constitutionality of the
That's because the D.C. Circuit also overturned the CFPB's
interpretation of the real estate laws underlying Director
Richard Cordray's $109 million disgorgement decision against
PHH, which the CFPB accused of violating anti-kickback
regulations via a captive mortgage reinsurance company.
The appeals court vacated the ruling and remanded the case
to the CFPB for reconsideration in light of the D.C. Circuit's
rejection of the agency's view of the law (and the statute of
Judge Henderson, who agreed with that section of Judge
Kavanaugh's opinion, said that statutory interpretation should
have been the beginning and the end of the appellate court's
consideration of PHH's case.
"We recognize 'a well established principle governing the
prudent exercise of this court's jurisdiction that normally the
court will not decide a constitutional question if there is some
other ground upon which to dispose of the case,'" she wrote. "I
believe prudential considerations counsel against our reaching
out to invalidate the for cause removal provision."
The majority opinion addressed Judge Henderson's
constitutional avoidance argument, asserting that because PHH
called for dismantling the CFPB as unconstitutional, the relief
it sought was broader than what the court's statutory ruling
"For that reason, we have no choice but to address the
constitutional issue," Judge Kavanaugh wrote. "In our view,
failing to decide the constitutional issue here would be
impermissible judicial abdication, not judicial restraint." (The
majority said it was showing judicial restraint by not insisting
the CFPB be converted into a multi-commissioner independent
agency, which would require the CFPB to shut down temporarily
while the court created new offices and lawmakers filled them.
"All of that 'editorial freedom' would take us far beyond our
judicial capacity," the opinion said.)
The D.C. Circuit, as Judge Henderson's dissent noted, was
bound to get a case sooner or later that required it to consider
the CFPB's constitutionality. Not every D.C. Circuit panel,
though, would have included Judge Kavanaugh - a noted
conservative as well as a separation of powers buff.
It's hard to imagine this judge passing up the opportunity
to opine on the shaky constitutionality of an agency deplored by
the business lobby. However marginal the opinion's operating
effect on the CFPB, Kavanaugh's words will warm its opponents.
(Reporting by Alison Frankel. Editing by Alessandra Rafferty.)