Adventures in administrative law

I wrote about the problem of the administrative state in “A new old regime,” my review of Philip Hamburger’s audaciously great book Is Administrative Law Unlawful? (Plot spoiler: the answer is yes.) Even with a lot of help from my friends at the Claremont Institute, it took me a long time to understand the problem. Professor Hamburger expedited the process. The problem is the unconstitutionality, unwisdom, unaccountability, and lawlessness inherent in the administrative regime. For more resources on the problem of administrative law, see the links and videos in my post “Understanding the administrative state.”

The Consumer Financial Protection Bureau represents the reductio ad absurdum or ne plus ultra of the administrative regime. It is a constitutional monstrosity. Its funding is insulated from Congress. Its director is to wield virtually dictatorial powers to promulgate law. The legal structure of the CFPP is designed precisely to insulate it from political accountability. It is a design better suited for a government of unlimited powers conducive to tyranny rather than to a government of limited powers conducive to freedom. One wonders if the Supreme Court will ever return to first principles or set some limits on how far the agencies can be removed from political accountability. That would be a beginning. The decisions of the Supreme Court beginning in the New Deal era and continuing to date require us to find our way to a new beginning.

PHH Corporation challenged the statutory provision establishing the CBPB Director’s one-man rule subject to the president limited removal power after Richard Cordray imposed a $103 million increase on a $6 million penalty imposed for violation of the Real Estate Settlement Practices Act. Framed by the constraints of precedent, the case raised a narrow constitutional issue. Can a single agency officer exercising the unilateral power of the CFPB Director be insulated from removal by the president pursuant to a statutory for-cause removal requirement? Other administrative agencies wielding power exercise it through bodies of commissioners or board members.

In the 2016 D.C. Circuit panel opinion, Judge Brett Kavanaugh observed that, prior to the CFPB, “no independent agency exercising substantial executive authority ha[d] ever been headed by a single person” (emphasis in original). The panel ruled in favor of PHH on all issues, constitutional and statutory, and sent the case back to the CFPB for further proceedings consistent with the opinion. Judge Randolph wrote a separate concurring opinion; Judge Henderson concurred in part and dissented in part (on the court’s reaching the constitutional issue). Housingwire posted a useful if slightly oversimplified summary. Judge Kavanaugh apologized for the length of his opinion for the panel, but it is worth a look to understand what is going on here.

President Obama and Harry Reid did not pack the D.C. Circuit for no good reason. They packed it to deal with cases like this one. The Obama administration sought rehearing of the case by the full court and rehearing was granted. Please note, however, that the Trump administration switched sides. The Trump administration filed an amicus brief resisting the CFPB in the case.

The full court reversed the panel’s holding on the unconstitutionality of the CFPB’s one-man rule in a 7-3 decision on January 31. The court’s opinions after rehearing run to 250 pages and are posted here. George Leef noted the result in his Forbes column on the case. No one who doesn’t have to read these opinions would want to do so.

Even after rehearing, however, PHH prevailed in wiping out the penalty assessed by Cordray. The en banc court left that part of the panel’s opinion undisturbed. As ACA News noted:

Although the D.C. Circuit Court upheld the CFPB’s structure, it more importantly tossed out a $109 million penalty that the CFPB had issued to PHH Corp. and returned the case to the CFPB for further proceedings based on the appellate court’s legal guidance. In doing so, the full circuit court left intact the panel’s holding that retroactive applyi[cation] of a new Real Estate Settlement Procedures Act interpretation violated PHH’s due process rights and the bureau is bound by statutes of limitation regardless of whether the CFPB is enforcing consumer financial laws through a civil action or administrative proceeding. Moving forward, if this holding survives a possible appeal in the U.S. Supreme Court by the White House or from PHH Corp., this decision will likely have major implications for government enforcement agencies and anyone that is targeted in an enforcement action.

I’m glad PHH prevailed in vacating the penalty assessed by Cordray on statutory grounds. To those of us on the outside looking in, however, the constitutional issue is more important than the statutory question. Moreover, the en banc court’s failure to disturb this element of the panel opinion complicates possible review of the constitutional question by the Supreme Court.

As Evan Weinberger observed in Law360’s article on the case (behind a subscription wall), “the picture of how this case moves forward [to the Supreme Court] is fuzzy at best.” Even if PHH can raise the issue in a petition for Supreme Court review, the procedural posture of the case (summarized here) makes it extremely unlikely that the Supreme Court would take the case at this point. My guess is that this is precisely what Judge Pillard and her colleagues in the en banc majority had in mind in resolving the case as they did.

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