Justices reopen major dispute on presidential power

For more than 80 years, a strict limit on the power of Presidents to maintain control over some of the most powerful agencies of the federal government has remained settled by the Supreme Court, yet has continued to be debated intensely among constitutional lawyers, scholars, and political theorists. On Friday, the Supreme Court reopened the issue in a dramatic and potentially historic way.

In a new order, the Justices agreed to decide whether Congress acted unconstitutionally nine years ago when it created the federal Consumer Financial Protection Bureau to deal with some of the financial abuses that had contributed to the near-collapse of the American economy in 2008. The bureau was the idea of Harvard professor Elizabeth Warren, now a current Democratic presidential candidate and U.S. Senator. Its creation with the support of the Obama Administration was a key part of the sweeping law passed by Congress to reform Wall Street, the Dodd-Frank Act.

In agreeing to hear a constitutional challenge to the bureau’s structure, headed by a single director, the Court not only will seek to settle whether that official can be fired by the President for any reason or even for no reason at all, but it also will consider whether to strike down the entire Dodd-Frank law if the bureau’s existing structure is ruled invalid.

The Trump Administration argues that the single-director scheme should be struck down, but that the bureau itself should be left intact to continue its work. Presumably, that would leave the remainder of the entire Dodd-Frank law in place.

While the Court’s review will focus on the bureau, the fact that the Justices are reexamining the core constitutional power of Presidents to fire government officials offers a chance to reconsider – if there is a majority to do so – a 1935 decision that still stands as a significant restriction on that power. That sturdy precedent was the Court’s decision in the case of Humphrey’s Executor v. United States.

In that unanimous ruling, the Justices ruled that President Franklin Roosevelt did not have the power to fire a member of the Federal Trade Commission when Roosevelt’s only reason was that the commissioner was not following the President’s “New Deal” policies. Such officials, the Court declared, could only be dismissed “for cause” – that is, for some significant failing in the performance of their duties.

Ever since that time, defenders of a strong presidency have lamented that ruling. In more recent years, with the rise among conservative theorists of the idea of a “unitary Executive,” with sweeping authority over every part of the Executive Branch held personally and solely by the occupant of the White House, the 1935 precedent has been roundly criticized.

Among its sharpest critics has been Brett M. Kavanaugh, the newest Justice on the Supreme Court who, as a federal appeals court judge, suggested the Humphrey’s Executor precedent may need to be reconsidered and perhaps overruled. Kavanaugh also has written a widely-noticed legal article promoting broad presidential power, and that view was an issue when his nomination was before the Senate last year.

Kavanaugh, though on record as a critic of the consumer bureau’s structure, does not have to disqualify himself from taking part in the Court’s review of the new case. That case is separate from the one in which he expressed his views earlier on a federal appeals court.

The same argument about the possible virtue in overturning the 84-year-old precedent is being made in the new case that the Court on Friday agreed to hear. That case is Seila Law LLC v. Consumer Financial Protection Bureau. Selia Law, based in Orange, Calif., is a consumer advocacy firm that specializes in debt relief. 

When that firm received a demand for documents from the bureau, in an investigation of its marketing of debt-relief services, it countered that the agency could not enforce that demand because its entire structure was unconstitutional. Its challenge was rejected by a federal appeals court, and it then took the dispute to the Supreme Court.

The bureau is unlike most federal administrative agencies since its leadership is confined to a single director, who holds office for a five-year term. Most such agencies, considered independent although they generally exist within the Executive Branch, are headed by multi-member commissions.

The director can be removed by the President, but only “for cause.” That is a technical legal term that means that dismissal cannot be accomplished on a whim or on a policy disagreement, but only for a failure to carry out the duties of the office. Critics argue, regarding the bureau’s single director, that that officer is accountable to no one, and certainly not to the President as the constitutionally-designated head of the Executive Branch. Since the Constitution requires the President to “faithfully execute” federal laws, the critics argue, the Chief Executive must have authority to keep the agencies in check, even though Congress intended them to have significant independence. The Constitution only allows three branches, not four, the critics say.

In appealing its case to the Supreme Court, the California law firm raised the single issue of whether the creation of a single director as head of the bureau is an unconstitutional violation. But it also argued that, if the 1935 precedent and later similar rulings by the Supreme Court are found to support that arrangement, then those precedents were wrong and should be either overruled or at least limited in scope. Other advocacy groups taking part in the case as friends-of-the-Court are arguing more directly against those precedents.

The Trump Administration is representing the bureau in the case, even though the Administration’s position is that the single director arrangement is unconstitutional.

Because the Administration argued that, even if that arrangement is invalid, the bureau itself should be left in operation, the Justices added to their planned review the separate question of whether that issue can be separated from the validity of the overall Dodd-Frank Act.

If the Court were to rule that the single director form is invalid, and then rule that Congress would not have created the bureau at all if it could not have that arrangement, then the entire act would fall – a major blow to government regulation of consumer finance and of Wall Street.
Presumably, with the California law firm and the Trump Administration on the same side in challenging the bureau structure, the Court is likely to name a lawyer outside of this controversy to defend that structure.

The Democratic-controlled U.S. House of Representatives has been allowed by the Court to take part in the case to defend the constitutionality of the bureau, but it will not be a direct party in the case and will not act as the lawyer for upholding the structure.

The case presumably will come up sometime next year for a hearing, with a decision by next summer.

Lyle Denniston has been writing about the Supreme Court since 1958. His work has appeared here since mid-2011.