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Case number 15-1177, PHH Corporation and L Petitioners versus Consumer Financial Protection Bureau.

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Mr. Olson for the petitioners, Mr. Mopan for Amicus Curiae, United States of America, and Mr. DeMille Wagman for the respondent.

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Mr. Olson, good morning.

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Thank you, Your Honor.

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May it please the Court?

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The issue before the Court today was considered

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and decided by our founders on three separate occasions in 1787, 1788, and 1789 by a vote of seven states to three at the Constitutional Convention, again as a key part of the ratification debates the very next year,

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and yet again during the very first Congress.

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On each occasion, the founders voted for a single individual rather than a plurality in the presidency as the structure best calculated to ensure a strong, vigorous, and accountable executive.

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Article 2 could not be clearer.

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The president alone shall take care that the laws be faithfully executed.

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That obligation, according to James Madison and the Supreme Court just seven years ago in free enterprise fund, empowers the president to keep executive branch officers accountable by holding them and having the power to remove them from office.

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Mr. Olson, didn't that all change with Humphrey's executive?

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Pardon me?

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The case that I just quoted is Free Enterprise Fund.

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That is many years later than Humphrey's Executive.

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And what Free Enterprise Fund did is make it clear

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that there have been exceptions which the court determined not to revisit in free enterprise fund, but that there have been exceptions under certain narrow circumstances.

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Humphrey's executor is one of them.

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The Morrison versus Olsen case is another, but that experiments by Congress in taking power away from the president, diminishing powers of the presidency,

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are limited to those exceptions.

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And what's the power of the presidency that is uniquely diminished in this instance?

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Humphrey's executor recognized a significant diminishment in power by injecting the four cause removal.

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How is this any worse than that?

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Humphrey's executor decided in 1935, examine an agency that was described by the Supreme Court in that case as having limited jurisdiction, exercising quasi-legislative and quasi-judicial powers.

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It didn't have the powers that the FCC subsequently had to enforce the law.

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But in Morrison, that was later described as an executive power.

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The distinction Humphrey's executive was making between quasi-legislative, quasi-judicial, there was executive power.

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There's very little distinction between the power exercised by the FTC and Humphrey's executive and the power being exercised here.

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They're both executive.

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Well, at the time the Supreme Court examined the FTC in 1935, it had limited powers.

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It's been given more powers subsequent to that, and you're right.

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In the Morrison case, that was clearly executive power, but it was an inferior officer with limited tenure, with a limited scope of jurisdiction, and what free enterprise

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fund says is that we are going to limit intrusions by the legislature on the principal exclusive power of the president to be accountable faithfully to execute the laws to those limited exceptions.

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What I'm asking is how is this different in terms of diminishing the power of the president?

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This agency goes further than anything Congress has ever attempted to do in history.

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That's speaking to the power of the agency.

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I'm speaking to the power of the president.

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How is the president's power any further diminished in this case than it was in Humphrey's executors?

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The same removal

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The Congress itself understood and recognized that it was going further than it was ever far than before.

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In limiting the President's power?

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In limiting the President's power in the following ways.

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First of all, the removal power is limited.

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It's a single person.

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It's all vested in one person, as opposed to being distributed to several people, some of which would be appointed by every president.

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That would seem to me to strengthen the president's power.

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If you only have to get rid of one person to reshape an agency, that seems to be strengthening the president's power.

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But what that debate in 1787 focuses us on is that when you concentrate power in one individual, you have

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the concentration of power.

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And Humphrey's executive recognized and this court recognized in the panel decision that you disperse the power among five individuals.

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The power in this bureau, the director of this bureau, can hold office

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for five years, he can't be replaced by the President without the permission of the Senate.

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A holdover, it stays there as long as possible.

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Congressional authority... That's different.

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That's different from how all the other independent agencies operate, right?

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Because they all have, I thought in your brief you say,

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They all have multiple members with staggered terms as well as the President's ability to designate a chair in most of those independent agencies.

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And so we have a real-time example.

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The FTC, the FCC, the SEC, the NLRB, the FERC, all within a week of the inauguration,

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the chair was re-designated.

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Well, that's absolutely right.

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I can't happen here.

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But it's important here, in answer to your question, Judge Griffith, and to put this agency in context, congressional power with respect to appropriations is removed.

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The power to appoint every single person in the agency without controlling, without dissent at involvement, is invested in the director.

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The director has restricted by statute from even communicating

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with the president with respect to- And those are all right, but I don't think it's answering my question.

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How does that further diminish the president's removal power, which was a- What I'm attempting to say is that all of these statutes, one of which takes the power of the president to control what the director says with respect to pending legislation, with respect to interpreting statutes, with respect to the power that's vested in OMB by the president,

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with respect to looking at the regulations and controlling what happens, the statute specifically says the exclusive power to interpret statutes to decide what to prosecute is in this director.

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How about, how would you address the, I thought the major argument had to do with the number of the directors that somehow

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that there's a constitutional flaw here because we only have one director who can be removed as opposed to three.

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With respect, Judge Griffith, that is not at all the compact that was created by Congress with respect to this agency.

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It gave this director one individual, and that goes to your point, but that's not the only thing.

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This individual is given by a series of statutes, all of which were intended

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by Congress to make this agency completely independent of the president and completely unaccountable to the president so that the president, under free enterprise fund, the test is... That just doesn't make sense to me.

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First of all, Chief Justice Roberts said in free enterprise that the diffusion of power diffuses accountability, so having one person is more accountable

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that the director has to go every year before different committees and testify and

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the expenditures that are done.

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And I don't even understand what the role, the argument you're making about the budget source has to do with diminishing the President's power.

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It's the accumulation of power, Judge Millett.

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This agency does not have to go to... Most banking agencies do not have annually appropriated budgets, is that correct?

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Executive agencies have to deal with the Office of Management... Most banking regulatory agencies

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have annual appropriations, or do they have self-funding mechanisms?

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Each of them are different.

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Some of them, the Fed, for example, doesn't have to go, because it has a separate way of appropriating, so each one is different.

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This director is more accountable than, say, the Federal Reserve Board, or a number of other regulatory, or the comptroller.

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How is this director accountable to anyone?

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If the president wishes to say so, anything that this bureau does, if the president wishes to say so, don't look at me.

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So that's an attack on all independent agencies.

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If you say for cause removal gets you there, that means we have to, which we can't do.

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That is a serious problem.

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But assuming we can't do that, and I know you preserve your arguments for another forum, we can't do that, then

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isn't the fact that the president can replace this.

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With frequency, each president is going to be not 100%, but most presidents are going to get to replace this person when they've got only a five-year term.

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And four-cause can be found on this individual, and they can be removed.

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So that's no different than this.

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And what's worse in Humphrey's executive, when you have these multi-member ones,

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is even, many of them specify that there have to be so many people from each party.

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So isn't it a worse intrusion on presidential power to say that, okay, it's a rotating membership, you get to make an appointment, but you have to appoint somebody from the opposite party.

[00:10:17] Speaker 13:
You don't have that here.

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When the bureau director slot comes open, as it will next year, the president has more authority and more discretion than the FTC, right?

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if this term ends next year with respect to this director, but unless the Senate decides to approve the presidential appointment, this director can serve another 10 or 15 years.

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The panel decision in this case talked about the various ways in which a multi-person body, such as the Federal Trade Commission and the other commissions that we all know about,

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have to diffuse powder because they have to talk to one another.

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There are individual staggered appointments over time.

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So the president has input over a period of time.

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There's power with respect to selecting the chairman.

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There's responsibility for individuals to talk to one another before making decisions.

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And that's a constitutional rule?

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I understand the principle that restricting the president's removal power is a very serious intrusion on Article II power.

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We object to that.

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We would make that point here, except that, as you point out, this court can't change Humphrey's executor.

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But we wish it could.

[00:11:32] Speaker 10:
We also, Mr. Olson, can't change Morrison versus Olson.

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And Morrison was a single for-cause official.

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Now, you say that it's different because the independent council's authority was limited and narrow, right?

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It was a limited scope of jurisdiction.

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But the court itself in Morrison analogized the independent counsel to administrative agencies like the FTC, which have civil enforcement power, just like this one.

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It said it was just like the FTC.

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And in terms of its power, I mean, what could be more powerful than an independent counsel who can indict the highest officials of the president's cabinet?

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That is correct.

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And that was executive power.

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And it was the jurisdiction of the Independent Council.

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It's much more powerful than the Bureau.

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It's much more powerful in terms of its ability, the Independent Council's ability to impair the power of the president, which is the critical question here, right?

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That's the question we have to ask.

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The Independent Council was much more threatening to the president of the United States than the FBI.

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than this Bureau.

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Well, Judge Tatel, we submit, we object to restricting the president's power faithfully to execute the laws.

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That was a problem in the independent counsel statute.

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It is a problem with the FTC.

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But what the Supreme Court said in free enterprise fund is whatever the flaws with respect to those or whatever the limitations with respect to those decisions, they're not before us because the parties did not ask us to look at them.

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But we're lower.

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We're an appeals court, and we're bound by Supreme Court precedent, including Morrison versus Olson.

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And I have not seen an argument in your brief, even if I agreed with you, that there's a serious risk from the fore-cause removal provision for this director.

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Even if I agreed with you, I don't see how, as a judge on an appeals court bound by Morrison and Humphreys, that I can go there.

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I just don't see where this court gets

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That's right.

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And so I understand the point and I understand the restriction that we're faced with because this is an intermediate appellate court.

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So what it comes down to is unless you say this decision is dictated,

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by Humphrey's executor and Morrison in the Morrison case.

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And everything that this director is given, this agency is given, all this power is subsumed and just like and no further than Humphrey's executor or Morrison, then we're bound by that.

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It'll have to be decided by the Supreme Court.

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But what we submit, excuse me, I haven't heard from you yet.

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an argument for how I can conclude that we're not bound by that.

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The only thing I've seen in your brief is that the independent counsel was limited and tenure, tenure limited and a focus power.

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And was an inferior officer, an inferior officer of the United States.

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Right.

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And had a limited tenure with respect to one investigation.

[00:15:01] Speaker 10:
Yeah, but that investigation was, but it began.

[00:15:04] Speaker 10:
The question is, we have to ask the question, to what extent does it impair the power of the president to see that the laws are faithfully executed?

[00:15:15] Speaker 10:
That's the question.

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It doesn't make any difference how long the tenure is, but in that case, the independent counsel had the ability to indict and prosecute the highest officials of the president's

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I mean, I can't imagine anything that would more significantly impair the power of the president than that.

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Yet the court said that was okay.

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I submit to you that the limitation of the narrow limitation with respect to the powers of that independent council, and I understand the power to indict is a serious power, which the CFPB doesn't have, although the CFPB does have the power to impose penalties of $10 million per violation

[00:16:01] Speaker 05:
And that is a serious problem.

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The powers that are given to the CFPB and this Bureau include criminal prosecutions.

[00:16:09] Speaker 10:
You keep saying it's serious, but the question isn't how serious it is.

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It's how seriously it limits the president's power.

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That's the question.

[00:16:17] Speaker 05:
I'll put it this way, because I think that you have to look at the broad powers that are given to this agency and decide whether they are only within the scope of Humphrey's executor or Morrison.

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The Supreme Court was very serious seven years ago.

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when it said, we're not going any further than that, and any further experimentation has to be looked at very carefully in the context of history, and this agency has more powers with respect to that.

[00:16:50] Speaker 06:
If we just confine ourselves to the... It looked at three things.

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I mean, we...

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here are analyzing, I think, correct me if I'm wrong, the contours of the Humphreys exception, as you would describe it, or the contours of Humphreys, don't even have to use the word exception, or the contours of Humphreys.

[00:17:07] Speaker 05:
And I wouldn't agree with you about an exception.

[00:17:08] Speaker 06:
And so the Free Enterprise Fund says, I think, look at history,

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What's the historical roots for something like this?

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Look at the effect on individuals who are regulated.

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We talked about that a lot in the panel decision.

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And look at, as Judge Tatel says, the effect on presidential power.

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In other words, is there a further diminishment of presidential power beyond that already effectuated by Humphrey's executor?

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And free enterprise funds said, yeah, it's maybe arithmetic, maybe it's minor, but it's further diminishment of presidential power than Humphrey's executor alone.

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And here the question seems to me is, what's the further diminishment of presidential power that Judge Tatel is asking?

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What's the further diminishment?

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And this is more a comment, and you can respond to it than a question.

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But it seems we have to compare to how the multi-member agencies operate.

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And on presidential control in the multi-member agencies, they turn over quickly with a new president.

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So the president gets to designate the chair.

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We've seen that with all the independent agencies.

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The multi-members, multiple members, meet staggered terms.

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And this does not turn over quickly.

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And the question is, does that matter?

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I think that the question, Judge Taylor, does matter.

[00:18:20] Speaker 03:
Thank you for answering my question.

[00:18:22] Speaker 06:
I'm trying to.

[00:18:24] Speaker 05:
And that does answer the question as far as it goes.

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But the statute went further than that.

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It limited the president's ability to control or have anything to do with communications with Congress.

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It took away any power with respect to the budget and the process of appropriation.

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It took away power from the president to have anything to do with the intelligence.

[00:18:49] Speaker 06:
I'm focused on something more specific.

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If you look at the FCC today,

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That's the issue we're describing here is not going on with the FCC or the FTC or the FERC or the SEC or the NLRB.

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You go down the list.

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And why is that?

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It's because the way Congress has historically structured these independent agencies, these multi-member independent agencies, is that there's, as all the studies and all the academics have shown, there's quick turnover

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at a new administration.

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This one will not.

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In fact, after this next appointment, it will go to the third year of the next president.

[00:19:24] Speaker 06:
And if there's an appointment in 2023, it's going to go to the fourth year of the next president.

[00:19:28] Speaker 06:
With that president who might have run on a platform of consumer protection,

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having to live with President Trump's appointee as a consumer.

[00:19:37] Speaker 06:
That's precisely the point.

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And here's the question.

[00:19:41] Speaker 06:
Does that matter?

[00:19:42] Speaker 06:
Does the kind of dead hand of the past president in controlling the agency, which we don't have with FCC, FTC, does that matter?

[00:19:50] Speaker 05:
It does matter.

[00:19:51] Speaker 05:
It's both here and now.

[00:19:53] Speaker 05:
the restriction and diminishment of the president's power and its diminishment of the president's power in the future.

[00:20:00] Speaker 05:
The points that you're making are absolutely correct.

[00:20:02] Speaker 03:
Mr. Olson, does that suggest that staggered terms are constitutionally required then?

[00:20:07] Speaker 05:
What the court, I think, is saying in free enterprise fund is if it is not narrowly constrained to Humphrey's executor and Morrison, that is

[00:20:18] Speaker 07:
But it seems like it has to be narrowly constrained in a way that matters with respect to the diminishment of presidential power.

[00:20:25] Speaker 07:
And on that question, I'm not quite sure I understand the distinction between a situation in which you can remove – where the president can remove 100 percent of the principal officers, i.e.

[00:20:35] Speaker 07:
the one person.

[00:20:36] Speaker 07:
Well, he can't remove that.

[00:20:39] Speaker 07:
But some president can.

[00:20:40] Speaker 07:
I get that it's five years, so there's an 80% chance, if I'm doing the math right, that one president will have the opportunity.

[00:20:45] Speaker 07:
I don't know.

[00:20:45] Speaker 07:
My dad was a math professor.

[00:20:46] Speaker 05:
Unless he decides not to leave.

[00:20:48] Speaker 07:
But my question is this, that if you have a fairly robust authority to remove the one person there, not every president's going to get to do it.

[00:20:56] Speaker 07:
I grant you that.

[00:20:58] Speaker 07:
But some presidents are.

[00:20:59] Speaker 07:
And you compare it to a situation in which there's multiple members.

[00:21:03] Speaker 07:
and there's a greater likelihood that each president can remove one, but perhaps, depending on the terms, a lesser likelihood that each president can remove a majority, then aren't we at kind of a wash?

[00:21:14] Speaker 07:
If you hold everything else constant, if you hold everything else constant, and I think I could construct the mathematical formula in a way that would do this, and the only difference is you remove one person and that's everybody, or you remove one to two and that may or may not be a majority,

[00:21:31] Speaker 07:
Is there really a difference there?

[00:21:33] Speaker 05:
I believe that what the Supreme Court said in free enterprise fund is that the baseline

[00:21:40] Speaker 05:
What was decided in 1787, 88, and 89 is the baseline, is the president can't be accountable if he doesn't have the power to remove.

[00:21:50] Speaker 05:
Congress has decided to restrict the power to remove, has created an individual that a president can appoint for five years.

[00:21:57] Speaker 14:
So Mr. Olson, the Federal Reserve Board goes down under your view?

[00:22:01] Speaker 14:
the federal reserve board because they're 14-year terms and I guess there's seven members so no president has the authority to appoint a majority therefore to control and therefore to have his policy preferences reflected.

[00:22:13] Speaker 05:
The chairman is not does not I understand that all right

[00:22:17] Speaker 14:
But the number of the board, I mean, you don't have presidential control.

[00:22:21] Speaker 14:
And my understanding, because there's a pattern in the financial regulatory agencies of actually wanting to have some amount of separation.

[00:22:30] Speaker 14:
And as I take it, it's consistent with the Constitution and with the executive's authority to take care that the laws be faithfully executed to have those people removable for inefficiency, for malfeasance in office, neglect of duty.

[00:22:46] Speaker 14:
But not have them removable because the president disagrees as a policy matter.

[00:22:52] Speaker 14:
So it's trying to avoid financial cronyism in favor of faithful execution of the laws.

[00:22:58] Speaker 14:
And you're saying that that's out of bounds.

[00:23:01] Speaker 05:
That is out of bounds.

[00:23:02] Speaker 05:
We elected a unitary president.

[00:23:05] Speaker 05:
I went back through the debates between June 1 and June 4, 1787.

[00:23:10] Speaker 05:
This was debated then.

[00:23:12] Speaker 05:
And the vote was 7 to 3 because

[00:23:15] Speaker 05:
Execution of the laws isn't just enforcement of the laws, inviting someone.

[00:23:20] Speaker 05:
It is policy decisions with respect to how those laws are enforced.

[00:23:24] Speaker 13:
Judge Cavanaugh makes the point.

[00:23:26] Speaker 13:
It's July 2018, and the president has the ability to replace the director of this bureau with anyone he wants for a nomination.

[00:23:38] Speaker 13:
Has the ability to do that.

[00:23:39] Speaker 13:
Yes, there's Senate confirmation.

[00:23:41] Speaker 13:
That happens often.

[00:23:43] Speaker 13:
And let's imagine that a Democratic seat opens up on the FTC Commission.

[00:23:49] Speaker 13:
And the president gets to fill that one, but by statute has to appoint someone that's from the Democratic Party.

[00:23:58] Speaker 13:
That's in the statute that was upheld in Hepburn's executive.

[00:24:00] Speaker 13:
My question to you is which is the greater intrusion on presidential power, the replacement of someone of your choice for the bureau or forcing a president to appoint someone of another party for the commission?

[00:24:15] Speaker 05:
In the first place, on that date that you referred to, the president may or may not be able to appoint a new director of this bureau.

[00:24:24] Speaker 05:
If he does not leave, if the Senate does not give permission to the person that he decides to nominate, that person may be there for another several years.

[00:24:32] Speaker 13:
That's the same for the Federal Reserve Board and a number of other agencies, but I do want to get back to my question, which is, put all that aside, I'm just asking you, when the president's making this, exercising this power of appointment,

[00:24:43] Speaker 13:
Which is the greater intrusion, appointing the bureau director for anyone he chooses or appointing someone from another party?

[00:24:53] Speaker 05:
You take as the word the decisions that were made that while we're talking about and the decisions that were reaffirmed seven years ago by the United States Supreme Court.

[00:25:02] Speaker 05:
Yes, the power of appointment is extremely important, but the court goes on to say that it is the power that can remove the court said earlier in the power to remove is the same for the FTC commissioners and the.

[00:25:15] Speaker 13:
and the Director of the Bureau.

[00:25:17] Speaker 13:
So I guess I'm wondering if you're not answering my question.

[00:25:20] Speaker 13:
I'll try a more leading question.

[00:25:23] Speaker 13:
Would you agree that the President has more of the essential appointment power in replacing the Director of the Bureau?

[00:25:30] Speaker 13:
than replacing a member of the commission who has to be by statute from another party.

[00:25:35] Speaker 05:
A particular president at a particular point in time under the right circumstances may have more power with respect to that individual.

[00:25:43] Speaker 05:
The next president may not because that president goes over for five years.

[00:25:47] Speaker 05:
That power may not be there.

[00:25:48] Speaker 05:
what I, and I'd like to reserve the remainder of my time.

[00:25:52] Speaker 10:
I have just one quick question to return to my perspective from the perch of a lowly appeals court judge.

[00:25:59] Speaker 10:
This debate about the difference between multi-member agencies and a single member is fascinating, but

[00:26:08] Speaker 10:
I don't understand how we can take account of that given that Morrison not only upheld a forecast provision for a single headed agency, but said it exercises powers analogous to the FTC.

[00:26:24] Speaker 10:
In other words, you know, you need to go back to the Supreme Court, I think, and say, wait a minute, you need to take a more careful look at this.

[00:26:33] Speaker 10:
These single-headed agencies are very, very different, but from where we sit, Mr. Olson, I just don't see how we can go beyond what the Court has now said.

[00:26:44] Speaker 05:
What I would say to this, I would say, well, I can only answer if you feel, if you conclude that this goes no further than Humphrey's executor and Morrison versus Olson, then the next step is the Supreme Court.

[00:26:59] Speaker 05:
But I submit, this agency, given its collective powers, one individual who can appoint everybody, doesn't have to go to the president for subordinate officers, can hire and fire people that is a power that is nowhere else in the federal government or very, very limited places.

[00:27:14] Speaker 05:
If you take this, answer it this way, Judge Tatel, if the powers that are given to the EPA and to the Treasury Department

[00:27:22] Speaker 05:
and to the antitrust agencies and so forth, all are vested in one individual.

[00:27:28] Speaker 05:
This director, why not?

[00:27:30] Speaker 05:
If it can be done with him, it can be done with other people, and then what is left of the executive power?

[00:27:36] Speaker 05:
And I'd like to reserve the balance of my time.

[00:27:38] Speaker 05:
Thank you.

[00:27:47] Speaker 09:
May it please the court.

[00:27:48] Speaker 09:
Judge Griffith, your observation at the outset of the argument that the functions that the FTC performed are executive in nature is a critical observation.

[00:27:57] Speaker 09:
Because what it tells us is that the rationale of Humphrey's executor cannot be based on the functions of the FTC.

[00:28:03] Speaker 09:
It must be based on something else.

[00:28:05] Speaker 09:
And we would submit that what that something else is, is the structural features of the FTC.

[00:28:10] Speaker 09:
And that is because

[00:28:12] Speaker 09:
What the court was concerned about was that multi-member bodies.

[00:28:18] Speaker 03:
But the court never framed its analysis in those terms, right?

[00:28:21] Speaker 03:
This is we're going back trying to read into it.

[00:28:24] Speaker 03:
But they never made these arguments about the distinction between multi-member and single.

[00:28:29] Speaker 09:
I don't think that's a fair reading of the entire opinion, Your Honor.

[00:28:32] Speaker 09:
I think if you read the entire opinion, not just the section that discusses the constitutional analysis, but the section that talks about why Congress made this entity the way it was, the Court did emphasize that it was a multi-member body.

[00:28:44] Speaker 10:
Well, why wouldn't the Court have discussed that in the constitutional section if it was relevant?

[00:28:48] Speaker 10:
I mean, it's not there.

[00:28:49] Speaker 09:
Well, it is there, Your Honor.

[00:28:51] Speaker 09:
In the constitutional section?

[00:28:53] Speaker 09:
In two senses, it is.

[00:28:54] Speaker 09:
The first sense is that that part of the opinion starts by saying it's an administrative body that has the certain functions.

[00:29:02] Speaker 09:
And we think that when they're talking about it being an administrative body, part of what they're getting at is that is a multi-member deliberative body.

[00:29:10] Speaker 09:
And at the end of that analysis, it ends by saying officers of this type, officers of this character.

[00:29:16] Speaker 09:
And what that has to be getting at

[00:29:18] Speaker 09:
is what the court's rationale was, was that these are sort of different.

[00:29:22] Speaker 03:
Well, there's a more elegant explanation, that is, that's the body they were dealing with.

[00:29:27] Speaker 03:
They happen to have in front of them a multi-member body.

[00:29:30] Speaker 09:
That's exactly right, Your Honor, and I think we should read the Supreme Court's cases based on the facts that were before them, and not just blithely assume that those facts aren't relevant.

[00:29:38] Speaker 03:
What is the constitutional provision at stake here?

[00:29:41] Speaker 03:
What provision of the Constitution are we looking at?

[00:29:44] Speaker 09:
article to your honor and the point is that the executive removal power right yes the general rule is that principal executive officers must be removal by the president at will humphreys executive recognized a narrow exception to that as free enterprise fund emphasized and the the rationale of that exception

[00:30:02] Speaker 09:
has to be based on the structural.

[00:30:05] Speaker 04:
But how is your rule even correct under free enterprise?

[00:30:09] Speaker 04:
Because in free enterprise, the Supreme Court assumed for the sake of the argument that SEC commissioners were protected by the Humphreys executor good cause provisions.

[00:30:22] Speaker 04:
The Supreme Court also held that that was sufficient control of the president over SEC commissioners, who indirectly then gave the president insufficient control over the PCOB.

[00:30:37] Speaker 04:
So if there was an exception that was created,

[00:30:43] Speaker 04:
It wasn't just for, I mean, it was at least recognized again in free enterprise.

[00:30:54] Speaker 09:
The SEC, like the FTC, is a multi-member body, and so the rationale of it being limited to the sort of deliberative bodies that could credibly be characterized, at least by the Supreme Court in 1935, as quasi-legislative, we're not taking issue with that in this court, and this court of course can't revisit Humphreys.

[00:31:13] Speaker 09:
But what we are suggesting is if you don't...

[00:31:15] Speaker 09:
adhere to that structural feature, there is no limiting principle to Humphreys.

[00:31:20] Speaker 09:
As Judge Griffith noted, these functions, the functions that the FTC had and the functions that the CFPB have, are the exact same functions that the Secretary of the Treasury has.

[00:31:29] Speaker 09:
But SEC commissioners are principal officers, right?

[00:31:33] Speaker 10:
What do we do with Morrison versus Olson as an inferior court?

[00:31:36] Speaker 10:
We're bound by Morrison, correct?

[00:31:38] Speaker 10:
So I think the answer is you agree we're bound by Morrison?

[00:31:40] Speaker 09:
Yes you are your honor and the key to Morrison versus Olson is that that case did not involve principal officers involved inferior officers and when you look at free enterprise fund that is exactly how free enterprise fund described the cases it starts by talking about the general rule under article two in Myers it says that

[00:31:57] Speaker 09:
print humphreys executors is the an exception for principal officers and then it turns to inferior officers and talks about perkins and morrison humphreys uh... pre-enterprise fund precludes reading morrison as a freeze sweeping exception that would apply since law officers and again your honor

[00:32:13] Speaker 09:
If it were otherwise, the logic of the CFPB's position necessarily suggests that there could be a four-cause restriction for the Secretary of the Treasury, or the Secretary of the Labor Department, or the Secretary of Health and Human Services, because all of them perform the exact same types of functions.

[00:32:30] Speaker 09:
And I just don't think anyone has ever read Humphrey's executive.

[00:32:33] Speaker 04:
Is the SEC Commissioner a principal officer?

[00:32:37] Speaker 04:
I'm sorry?

[00:32:37] Speaker 04:
Is an SEC Commissioner a principal officer?

[00:32:39] Speaker 09:
Yes, they are, Your Honor.

[00:32:42] Speaker 04:
So Free Enterprise Fund recognized that Humphrey's executive protections could apply to principal officers there?

[00:32:50] Speaker 09:
Yeah.

[00:32:51] Speaker 09:
The sole exception that the Supreme Court has ever recognized for a four-cause restriction for a principal officer is the Humphrey's executive exception.

[00:32:59] Speaker 09:
And the key we submit to that exception is that it is a multi-member regulatory.

[00:33:04] Speaker 07:
Just want to understand the government's position.

[00:33:05] Speaker 07:
So if you're focusing on the multi-member composition of the agency,

[00:33:10] Speaker 07:
So your view is that the switch between multi-member and single-director does all the work.

[00:33:15] Speaker 07:
And it does all the work in the sense that the switch from a multi-member agency to a single-director agency diminishes presidential power.

[00:33:22] Speaker 07:
It has to, right?

[00:33:23] Speaker 07:
Under your view?

[00:33:24] Speaker 09:
Two points, Your Honor.

[00:33:26] Speaker 09:
Yes, it does, but also it doesn't matter.

[00:33:29] Speaker 09:
And there are flip sides of the same coin.

[00:33:31] Speaker 09:
The key is that Humphrey's executor is already a significant intrusion on presidential power, but it had a rationale.

[00:33:37] Speaker 09:
The rationale we submit had to be because it was quasi-legislative because of its structure.

[00:33:42] Speaker 09:
If that structure is not there, then the rationale for the exception doesn't obtain, and therefore the intrusion that Humphrey's executive already justified is not justified here.

[00:33:54] Speaker 09:
Suppose we don't agree with that.

[00:33:56] Speaker 10:
Suppose we don't think the multi-headed agency was critical in Humphrey.

[00:34:01] Speaker 10:
Then what?

[00:34:02] Speaker 10:
Then do you lose?

[00:34:03] Speaker 09:
Well, that is the basis.

[00:34:05] Speaker 09:
Our submission is based on the critical difference between the multi-member.

[00:34:10] Speaker 10:
OK.

[00:34:10] Speaker 10:
But if we don't agree, then do you have a backup argument?

[00:34:13] Speaker 09:
We have not submitted a backup argument in this case, Your Honor.

[00:34:15] Speaker 09:
But if I could get back to the second half of my answer to Judge Trinivasan, it's that the switch between multi-member and single entity agencies actually does diminish the president's power.

[00:34:26] Speaker 07:
And the reason is... So in this respect, do you disagree with the panel opinion?

[00:34:30] Speaker 06:
That's not right.

[00:34:32] Speaker 06:
The panel said this at 58.

[00:34:33] Speaker 09:
I didn't read the panel opinion to be taking a position one way or the other on the question.

[00:34:38] Speaker 09:
It did.

[00:34:39] Speaker 09:
On page 58 it said it diminished the president.

[00:34:42] Speaker 09:
I stand corrected, Your Honor.

[00:34:43] Speaker 09:
But the question misdescribed it.

[00:34:46] Speaker 09:
If I could explain why we think that there is a greater intrusion on the president's power from having a single entity.

[00:34:55] Speaker 09:
The quintessential hallmark of executive power is the ability to act with vigor and dispatch.

[00:34:59] Speaker 09:
The founders made that very clear repeatedly, and that's why they invested in a unitary executive.

[00:35:04] Speaker 09:
When you have a principal officer who can act with that vigor and dispatch, who can unilaterally make executive decisions across a whole swath of the economy, but then you remove the accountability, that is a critical intrusion on the president's power.

[00:35:19] Speaker 09:
And you could view it when you instead, on the other hand, have a deliberative body, a multi-member body.

[00:35:25] Speaker 09:
It might, to be sure, Judge Malat, it's less accountable, in a sense.

[00:35:30] Speaker 09:
But you could view it as less of an intrusion on the president's power, because it's not the quintessential nature of vigor and dispatch that characterizes executive action.

[00:35:38] Speaker 13:
Well, it's less appointable.

[00:35:40] Speaker 13:
It's less removable.

[00:35:42] Speaker 13:
And as you say, it's less accountable, less removable, and less appointable.

[00:35:47] Speaker 13:
And so that seems to me a problem then to say that this thing is, you have to say this is worse than that.

[00:35:54] Speaker 09:
Well, so again, we have two different points.

[00:35:56] Speaker 09:
The first point is that the rationale for Humphreys just doesn't obtain here.

[00:36:00] Speaker 09:
So even if it's the same level of intrusion on the president's power, if the justification that was put forward in Humphreys doesn't obtain here, then that level of intrusion is not valid in this circumstance.

[00:36:10] Speaker 13:
And what happens to the Social Security Administrator?

[00:36:12] Speaker 09:
Your Honor, we haven't taken a position on that.

[00:36:14] Speaker 13:
That's a single head of a body that controls 24 percent of the national budget and probably a half to three quarters of the American population.

[00:36:24] Speaker 09:
And so what I will say is that our position suggests that, our position dictates that the Humphreys executive exception itself does not apply to the Social Security Administration, but that does not necessarily answer the question whether there might be some other exception which justifies them.

[00:36:39] Speaker 09:
much as in free enterprise fund the Supreme Court recognized that the double for cause there was a problem but it didn't purport to say it was adopting a rule for every double for cause it noted of many other agencies that have or officers that have double for cause and despite justice justice priors objection that the court wasn't weighing in on each and every one of those the court said it would take them one at a time as the cases came how would we write an opinion here

[00:37:04] Speaker 13:
that would say that the director of the Bureau is constitutionally impermissible under Humphrey's executor, but in doing so would adopt a rule that would protect independent councils, social security administrators, and any other single heads.

[00:37:25] Speaker 09:
So the key would be the first step of the analysis would be say that the Humphreys executive rationale itself doesn't obtain because it's a single-headed agency.

[00:37:33] Speaker 09:
And at that point, I think the next step would be to say nothing about the CFPB militates in favor and exception because on every other metric, it is a quintessential executive agency.

[00:37:45] Speaker 09:
It operates with a wide swath of jurisdiction in engaging enforcement actions against private parties.

[00:37:52] Speaker 09:
some of those factors are not implicated by Social Security, the Office of Special Counsel, and the others.

[00:37:58] Speaker 09:
We're not necessarily suggesting those decisions ultimately matter.

[00:38:01] Speaker 09:
We haven't taken a position on that, and they should be decided in a future case.

[00:38:04] Speaker 09:
But the decision in this case will not resolve that.

[00:38:07] Speaker 09:
All you need to do in this case is to recognize that once you take

[00:38:12] Speaker 09:
from a multi-member to a single entity, the CFPB director is just not distinguishable from the secretary of the treasury and the secretary of labor.

[00:38:20] Speaker 09:
And unless this court is prepared to say that Humphrey's executor means that a four-cause restriction is permissible for cabinet secretaries, a position that I don't think any fair reading of free enterprise fund or Morrison would lead to.

[00:38:33] Speaker 04:
But that's not in any statute.

[00:38:36] Speaker 04:
I'm sorry?

[00:38:37] Speaker 04:
No statute says that cabinet secretaries

[00:38:40] Speaker 13:
have the humphreys executive right honor but if the cfpb's position present this case it would be a green light for congress to do that tomorrow so the postmaster general used to be a member of the cabinet and then congress change that and is now removable under for cause standard

[00:38:57] Speaker 09:
I'm sorry, I didn't hear which agent.

[00:38:59] Speaker 13:
The postmaster general used to be a member of the cabinet, and then Congress changed its status.

[00:39:03] Speaker 13:
So it can't just be that you look and say this looks like something a cabinet member might do, and therefore you can't do it.

[00:39:09] Speaker 13:
Can you, or are you not defending that either?

[00:39:11] Speaker 09:
I'm not sure about the current structure of the Postmaster General, Your Honor, but I would say that I don't think any fair reading of free enterprise fund or even Morrison would suggest that a four-cause restriction on the Secretary of the Treasury is consistent with Article II or Myers.

[00:39:26] Speaker 09:
Certainly Humphrey's executive didn't suggest that, and no one has ever understood it to be that way.

[00:39:31] Speaker 06:
On the history, one of the... The history would... So on history generally, one of the things we have to take account of free enterprise fund tells us is the history.

[00:39:39] Speaker 06:
And obviously that's one of the things we focused on at the panel level.

[00:39:42] Speaker 06:
And the question I think that some of the questions raises is that history where Congress has always done it, multi-member with, you know, one or two exceptions for 100 years, was that an accident or was there a reason

[00:39:57] Speaker 06:
that Congress did it.

[00:39:59] Speaker 06:
And, you know, what do you think?

[00:40:02] Speaker 06:
Because you've gotten a lot of questions about there's really no difference, but why, if there's really no difference, why was this repeated over and over again?

[00:40:08] Speaker 09:
That's exactly right, Your Honor.

[00:40:09] Speaker 09:
I think the reason was... It's a why, a why, though.

[00:40:12] Speaker 09:
The reason why it was repeated over and over again is as some of the reports that we've cited in our brief and that the panel opinion cited, the notion of an independent agency was inextricably bound together with the idea that it was this permanent deliberative body.

[00:40:26] Speaker 09:
That is why again and again... Why do you think that was?

[00:40:32] Speaker 06:
Because it could be a permanent deliberative body of one.

[00:40:35] Speaker 09:
Well, I think, Your Honor, because a single individual can act with a sort of quintessential vigor and dispatch that characterizes executive agencies and principal officers.

[00:40:46] Speaker 09:
And the idea that that was permissible is a radically different notion than the idea that you could have a multi-member body that lacks the vigor and dispatch of the executive.

[00:40:55] Speaker 09:
Though the consultation requires.

[00:40:56] Speaker 03:
Is he going to dispatch the issue here?

[00:40:58] Speaker 03:
I thought that the problem here is that Congress took away from the president

[00:41:04] Speaker 03:
the authority to enforce a whole range of statutes, right?

[00:41:08] Speaker 03:
And put it in someone who could only be terminated for cause.

[00:41:13] Speaker 03:
That's the trenching upon the president's power, not whether the agency is run by one or five or 10.

[00:41:23] Speaker 03:
The crime, that's crime's not the right word, but the trenching occurred when Congress took away from the president the authority to enforce these statutes, right?

[00:41:32] Speaker 09:
I agree with Your Honor, but the question is why in Humphrey's executive, the Supreme Court upheld that limitation.

[00:41:38] Speaker 09:
And all I'm suggesting is that if you read the opinion as a whole, it cannot be based on the functions, because as Your Honor suggested, those functions are quintessentially executive.

[00:41:48] Speaker 09:
And so the only rationale that makes sense, and it is a rationale that's borne out if you read the opinion as a whole in terms of why Congress created this agency, is because it was a multi-member body that functioned in a deliberate fashion.

[00:42:01] Speaker 06:
That was based on a notion to pick up on Judge Tatel and Judge Griffith's questions.

[00:42:05] Speaker 06:
I think that was based on a notion, if you read Humphrey's, and it's an odd notion from today's perspective, but this idea that we're creating a quasi-legislature, kind of a mini-legislature, and also a mini-appellate court, all in, as well as having some law enforcement functions, right?

[00:42:21] Speaker 06:
So all in one, so when you think about a legislature, multiple people,

[00:42:24] Speaker 06:
But then Morrison drop kicks that rationale, and that's no longer the governing rationale.

[00:42:34] Speaker 06:
And the question is, does the vision, the Justice Sutherland's odd vision of the quasi-legislature, quasi-appellate court still carry through after Morrison, and why should it?

[00:42:45] Speaker 09:
Well, because Free Enterprise Fund says it does, Your Honor.

[00:42:47] Speaker 09:
If you read the way Free Enterprise Fund discusses the case law, when it discusses Humphrey, it revives the quasi-legislative, quasi-judicial distinction as the rationale of Humphrey's, and it relegates Morrison as a case about inferior officers.

[00:43:01] Speaker 09:
It does not suggest that Morrison is a free-floating test that says that even for principal officers... We wouldn't have a legislature of one that's

[00:43:11] Speaker 06:
unthinkable.

[00:43:12] Speaker 06:
We wouldn't have an appellate, we wouldn't have a Supreme Court, imagine a Supreme Court of one.

[00:43:17] Speaker 06:
I don't think anyone would want that, depending on who it is.

[00:43:21] Speaker 06:
That's what Humphreys thought they were creating.

[00:43:24] Speaker 06:
But I think the problem that Judge Tatel is raising is that that rationale seemed to have submerged.

[00:43:30] Speaker 06:
What you're saying is Free Enterprise Fund redrew that line.

[00:43:34] Speaker 09:
I'm saying two things.

[00:43:35] Speaker 09:
One is that Free Enterprise Fund did redraw that line.

[00:43:38] Speaker 09:
And the second is that if Free Enterprise Fund didn't draw that line,

[00:43:42] Speaker 09:
It would necessarily lead to the problem of, does this mean that Humphrey's executor, unknown to everyone until today, means that you can impose four clause restrictions on cabinet officers?

[00:43:53] Speaker 09:
Core executive function, even Morrison says that, even in the context of inferior officers, that there are certain officials who can't be subject to four clause restrictions, and I would have thought it would be

[00:44:04] Speaker 09:
inconceivable that, for example, the Treasury Secretary could be subject to four clause removal restriction.

[00:44:09] Speaker 09:
But CFPB has offered no limiting principle that wouldn't reach the Treasury Secretary, and its amici not only concede it would, they openly embrace the notion as well.

[00:44:17] Speaker 14:
But Mr. Muban, isn't the idea of the Cabinet Officers that the President's control over them is that he needs the Cabinet Officers so that he can take care that the law is faithfully executed and the Treasury Secretary

[00:44:31] Speaker 14:
is not an analog to the director of the CFPB to the extent that the treasury secretary is the person to whom the president turns for advice on trade policy, domestic policy, all kinds of things that the president constitutionally has to do, whereas here you have somebody whose charge is limited to carrying out anti-fraud statutes in the financial sector, and that's something where there's a charter, do these laws,

[00:44:57] Speaker 14:
do them impartially, carry them out effectively.

[00:44:59] Speaker 14:
If you're inefficient, if you fall down in that, I'm going to remove you, but go have at it.

[00:45:04] Speaker 14:
That's a very different kind of function, and it doesn't seem to me clear why that impinges on the take-care authority and responsibility of the executive.

[00:45:13] Speaker 09:
I don't think that's true for most cabinet secretaries, Your Honor.

[00:45:16] Speaker 09:
It might be true that certain cabinet secretaries implement the president's inherent Article II power, such as secretary of state or secretary of defense.

[00:45:24] Speaker 09:
But the labor secretary or the health and human service secretary are not implementing any inherent Article II power.

[00:45:30] Speaker 09:
They're implementing acts of Congress no different than the acts of Congress that the CFPB directors implement.

[00:45:36] Speaker 02:
Before you sit down, how does the exemption from the appropriations process play into your argument?

[00:45:44] Speaker 09:
We don't rely on that position, Your Honor.

[00:45:47] Speaker 09:
We think that the key here is that it's a multi-member agency, that it's not a multi-member agency, and therefore the rationale of Humphreys doesn't obtain, and there's a greater intrusion on the president's power because of that.

[00:45:59] Speaker 02:
Do you agree, would you not, that the exemption from the appropriations process, it doesn't deal with the executive, but it diminishes the constitutional function of Congress?

[00:46:11] Speaker 09:
I suppose that's right, Your Honor, but again, in terms of the article two analysis, we're not relying on the exemption from budgetary.

[00:46:18] Speaker 01:
Why does your analogy have to be cabinet secretaries?

[00:46:22] Speaker 01:
I mean, I can see the argument that those are not the same, but it seems to me that the logic of what's going on here is that if you can have

[00:46:31] Speaker 01:
this single director who is only removable for cause, who takes under his purview a huge part of what clearly used to be the business of executive agencies.

[00:46:49] Speaker 01:
Couldn't you just have four or five or six of those that take all of this thing by subject matter, right?

[00:46:56] Speaker 01:
And then you would end up with a nominal president

[00:47:00] Speaker 01:
and a bunch of single directors accountable to no one.

[00:47:04] Speaker 09:
That's exactly right, Your Honor.

[00:47:05] Speaker 09:
And let me just, with one final point, segue the point that Judge Tatel had made earlier, because it's tied to that, which is it's true that intrusions on the president's officers in cases like Morrison do wound the president, but it's important to remember that the powers of the president are vested in him, not just for his own sake, but for the people, to ensure accountability to the people.

[00:47:27] Speaker 09:
Wiping out the president's ability to control an agency that regulates vast swaths of the economy is a much more serious intrusion on the president's executive power than whether any individual cabinet member can be prosecuted.

[00:47:40] Speaker 09:
Individual cabinet members can be replaced.

[00:47:42] Speaker 09:
the ability to regulate the entire economy, that can't be changed.

[00:47:45] Speaker 09:
And that's what the court was talking about in Morrison when it said it was limited tenure and limited jurisdiction.

[00:47:51] Speaker 06:
The cabinet's not a statutory concept, correct?

[00:47:55] Speaker 09:
That's correct.

[00:47:56] Speaker 06:
That's just a custom.

[00:47:58] Speaker 09:
That's right, and I take Judge Brown's question.

[00:48:00] Speaker 06:
Individual presidents can put people in and out of the cabinet based on lots of things.

[00:48:07] Speaker 06:
But the point of Judge Brown's question is the entire domestic policy of the United States could be put, and enforcement of all laws that are domestic, at least carving out, say, defense and state, could be put under one or more independent agency heads.

[00:48:24] Speaker 09:
That's absolutely right, Your Honor.

[00:48:25] Speaker 09:
I wasn't using the cabinet in any sort of structural sense.

[00:48:28] Speaker 09:
It just is a list of very important agencies that it's inconceivable that Humphrey's executor justified imposing four clause restrictions for.

[00:48:35] Speaker 13:
I just wanted to clarify your point on that.

[00:48:37] Speaker 13:
Would your position be the same?

[00:48:40] Speaker 13:
if instead of making the head of HHS removable for cause, they replace the head of HHS with a three-member body removable for cause.

[00:48:52] Speaker 13:
That would be okay.

[00:48:52] Speaker 13:
Your concern here is replacement by single individuals.

[00:48:55] Speaker 09:
If Congress were to do that, it would fall within the rationale of Humphrey's executor, and I think then it would be much more likely that we would be heading to the Supreme Court to revisit Humphrey's executor.

[00:49:03] Speaker 09:
But I think it is no surprise that that is a hypothetical.

[00:49:09] Speaker 09:
Restructuring cabinet secretaries, especially the long-standing agencies, would be a dramatic step.

[00:49:16] Speaker 09:
Whereas slapping a four-cause restriction on those agencies would be a lot easier to do, and it is notable that no one has ever tried to do that in the 70 or 80 years since... What about making the Department of Justice an independent agency?

[00:49:29] Speaker 09:
I doubt that that could be done because I think the Department of Justice probably does implement at least some of the president's inherent Article 2 powers.

[00:49:37] Speaker 13:
But the problem there, I think you would say, is not that it's multi-member versus single.

[00:49:42] Speaker 13:
It's that there are just some things.

[00:49:45] Speaker 13:
like Myers said, that have to be removable at will.

[00:49:49] Speaker 13:
So when we talk about the cabinet members, the problem there is more function, which is a line you don't want to draw rather than, I think you'd object as much to the multi-members as single.

[00:49:59] Speaker 09:
So it's possible, Your Honor, that courts could try to draw those lines, but it would be very difficult to do so precisely because, as Judge Griff noted at the outset, those functions are executive in nature.

[00:50:10] Speaker 09:
So then you would have to draw some sort of line about which functions are too big and which functions are not.

[00:50:14] Speaker 09:
And that is not the sort of bright line and clear distinctions that the Supreme Court has made clear are very important in separation of powers disputes because they will be the only things that are judicially defensible in the heat of inter-branch conflict.

[00:50:28] Speaker 00:
Thank you very much.

[00:50:34] Speaker 08:
Judge Henderson, and may it please the court.

[00:50:37] Speaker 08:
Before I forget, I'd like to address one point that was raised by PHH here, and that deals with the holdover provision in the Consumer Financial Protection Act.

[00:50:47] Speaker 08:
The Consumer Financial Protection Act

[00:50:50] Speaker 08:
gives the director a five-year term, and it provides that after that five-year term, the director may hold over until a successor has been appointed and confirmed.

[00:51:00] Speaker 08:
But this court explained in Swan v. Clinton, 1996 decision, 100 Fed Third, 973,

[00:51:08] Speaker 08:
that where a statute permits an official to hold over, this court will not infer that for cause removal protection applies during the holdover period unless the statute makes specific provision for that.

[00:51:22] Speaker 08:
And there is no provision for that in the consumer financial protection.

[00:51:25] Speaker 06:
That's the position the agency is removable at will when the term expires?

[00:51:29] Speaker 08:
That is our position, Your Honor, yes.

[00:51:30] Speaker 08:
So after his five-year term expires in July of next year, yes, he is removable at will by the president.

[00:51:39] Speaker 08:
Now, Judge Srinivasan, you raised the point about that the president may have more control over

[00:51:50] Speaker 08:
the head of the Bureau than he does over the five members of the Federal Trade Commission.

[00:51:55] Speaker 08:
And in fact, we have done the math there.

[00:51:59] Speaker 08:
The Bureau, as you said, with respect to the Bureau, the president has an 80% chance, four-fifth chance, to have an opportunity, to be guaranteed an opportunity to replace the Bureau's director.

[00:52:12] Speaker 08:
With respect to the five members of the Federal Trade Commission who serve staggered seven-year terms,

[00:52:19] Speaker 08:
It's a four-seventh chance that he is guaranteed an opportunity to replace a majority of the board.

[00:52:26] Speaker 08:
That's 58%.

[00:52:28] Speaker 06:
But the history and tradition and culture and law of independent agencies, and you know this very well, obviously, is that they turn over to control by the president's party either immediately, as happened when President Trump came in with almost all the independent agencies, or pretty quickly.

[00:52:46] Speaker 06:
And that is in part because of the staggered terms, in part because of the chair designation.

[00:52:52] Speaker 06:
So the FTC, like I said, the FCC, all of those have turned over and are now controlled by the party of the president.

[00:53:00] Speaker 06:
And that's been the practice, as I understand it.

[00:53:03] Speaker 06:
going way back.

[00:53:05] Speaker 06:
And that doesn't happen with this agency.

[00:53:07] Speaker 06:
And the question I guess I have is, doesn't that matter?

[00:53:13] Speaker 06:
Doesn't that matter?

[00:53:13] Speaker 06:
In other words, that there's a turnover in the others and not here.

[00:53:17] Speaker 08:
Turnover isn't guaranteed and I'd like to point out that with respect to the FTC, at the time of Humphrey's executor, the president could not... I understand that.

[00:53:25] Speaker 06:
This came into being in the late 40s as a practice, as I understand it, and the turnover and the chair designation provisions.

[00:53:33] Speaker 06:
But since then, as I understand it,

[00:53:36] Speaker 06:
There's been a tradition, and that's why all of those independent agencies quickly became headed by Trump-designated chairs within a week of the inauguration.

[00:53:45] Speaker 06:
That has not happened and cannot happen with the CFPB.

[00:53:49] Speaker 06:
And to my mind, that seems like if the question boils down to, okay, we have the history and we have the effect on liberty, but is there a real effect on the president?

[00:53:59] Speaker 06:
That seems like a further diminution of presidential authority, in other words, preventing that process that takes place at the other agencies.

[00:54:08] Speaker 06:
But I want your response to that, because I know there are answers to that.

[00:54:11] Speaker 08:
My understanding, Your Honor, is that the president has no automatic authority to change the chairman of the Board of Governors of the Federal Reserve System.

[00:54:19] Speaker 08:
That term expires next February, and the agency that controls the monetary policy of the United States.

[00:54:28] Speaker 08:
And back to the mathematics, Judge Sreenivasan, with respect to the Board of Governors of the Federal Reserve System, and as Judge Pillard noted,

[00:54:37] Speaker 08:
because there are seven members who serve staggered 14-year terms, the president is never guaranteed an opportunity, never guaranteed an opportunity to appoint a controlling majority.

[00:54:49] Speaker 08:
It's true that on occasion that positions may turn over and there may be vacancies, but that's not... In the agencies, I agree the Fed is an interesting hybrid.

[00:54:59] Speaker 06:
In the agencies that are analogous to this one, there is historically

[00:55:03] Speaker 06:
the immediate turnover.

[00:55:04] Speaker 06:
And here's the problem.

[00:55:05] Speaker 06:
I think the end of the last seven pages of Morrison v. Olson dissent are very instructive on this, because Justice Scalia there didn't just analyze all the history.

[00:55:15] Speaker 06:
And he said, and here's what's going to happen.

[00:55:19] Speaker 06:
Here's what's going to happen.

[00:55:19] Speaker 06:
And he laid it out.

[00:55:20] Speaker 06:
And then the next 10 years, it was like he had written the script for what was going to happen.

[00:55:24] Speaker 06:
Then everyone realized, oh,

[00:55:26] Speaker 06:
This is a problem.

[00:55:27] Speaker 06:
So here's what I want to try to put myself in those shoes and try to figure out what's going to happen.

[00:55:31] Speaker 06:
So President Trump will appoint someone in 2018, July 2018.

[00:55:35] Speaker 06:
That person serves to July of 2023.

[00:55:38] Speaker 06:
The new president might be the different party, might have run on a platform of consumer protection, might be the person who created the Consumer Protection Agency.

[00:55:48] Speaker 06:
And we'll not have the authority to do anything about that for three years, contra how he or she would be able to handle all these other independent agencies.

[00:56:00] Speaker 06:
And that's a reality.

[00:56:01] Speaker 06:
Now, let's say he goes two terms, then it goes to 2028.

[00:56:03] Speaker 06:
And so the president comes in in 2024.

[00:56:06] Speaker 06:
can't, and might have run on a platform of consumer protection and all these, can't do it for four years until right before the 2028 election.

[00:56:14] Speaker 06:
And so I look at that reality and I say, that sounds crazy as a matter of constitutional text, history, structure, and common sense, frankly.

[00:56:23] Speaker 06:
And so why would we buy into a concept that's going to lead to this oddity that we've never had before?

[00:56:30] Speaker 06:
That's where the history plays into my thinking about this, too.

[00:56:32] Speaker 06:
We've never had this before, and boy,

[00:56:34] Speaker 06:
This seems to affect liberty, at least I think it does.

[00:56:37] Speaker 06:
It seems to diminish presidential power.

[00:56:38] Speaker 06:
But it leads to this bizarre situation where a key element of the president's platform, the president can't do anything about it.

[00:56:45] Speaker 08:
But that's no different with respect to other agencies where the president doesn't get an opportunity to appoint a controlling majority of those boards.

[00:56:53] Speaker 08:
It may be that with respect to the Federal Trade Commission.

[00:56:56] Speaker 06:
It may be, but the real, what we're living through, this is why this argument is timely as compared to a year ago, we just lived through a real-time example of how this works.

[00:57:05] Speaker 06:
with the other agencies.

[00:57:06] Speaker 06:
And I've got the charts of all, you know, they've all almost all turned over or will turn over, almost all of them did right in the first week of the presidency.

[00:57:14] Speaker 06:
And so that just gives me pause about the ramifications of this, because I think a lot of the amicus when we're here in 2022 are going to say, oh, wait, we want that CFPB director who was appointed by President Trump, we want that person out.

[00:57:29] Speaker 06:
And all the positions are going to be like this.

[00:57:32] Speaker 06:
And that was Justice Scalia's wisdom in Morrison to see how it would impact or have an effect in the future.

[00:57:39] Speaker 06:
And I think we need to think about those consequences.

[00:57:42] Speaker 08:
Your Honor, Humphrey's executor and Morrison v. Solson, the point they make is that what's crucial for the president is that the officials be sufficiently accountable.

[00:57:55] Speaker 08:
The president's removal authority is not illimitable.

[00:58:01] Speaker 06:
Let me give you a couple questions on hypos just to see where this is going, besides the hypo I just gave, which is problematic, I think.

[00:58:12] Speaker 06:
Could Congress pass a statute saying the majority of the commissioners of an independent agency, a multi-member one, must be of the opposite party from the president?

[00:58:21] Speaker 08:
I don't know, Your Honor.

[00:58:23] Speaker 08:
I don't know whether the President could do that.

[00:58:26] Speaker 06:
The Congress.

[00:58:27] Speaker 06:
Could the Congress do that?

[00:58:28] Speaker 06:
Pass a statute saying a majority of the members of the Independent Agency must be the opposite party from the President.

[00:58:33] Speaker 08:
I don't know, Your Honor.

[00:58:34] Speaker 08:
That issue has not been raised here.

[00:58:36] Speaker 06:
That's de facto what's happened here.

[00:58:38] Speaker 11:
The other thing I think we have to be careful about, don't we, is history versus what statutes provide.

[00:58:45] Speaker 11:
A lot of people resign before their terms are up.

[00:58:48] Speaker 11:
And the theory was to have these six-year terms in most of these agencies so you wouldn't get this automatic turnover.

[00:58:54] Speaker 11:
And at least during my lifetime, I've seen a lot of people resign early.

[00:58:59] Speaker 11:
So I don't think that history is quite as solid as is suggested in terms of

[00:59:07] Speaker 11:
the diminution of presidential power.

[00:59:11] Speaker 11:
And that's the issue here, isn't it?

[00:59:13] Speaker 14:
Let me ask you a different, oh, I'm sorry, if you wanted to respond to that.

[00:59:16] Speaker 14:
Do you have a response?

[00:59:17] Speaker 08:
Yes, Judge Rogers, I think the key here is whether, and the issue that's been raised is whether, just as a matter of what it says in the Consumer Financial Protection Act, whether that act, the structure created by the act, not in terms of what happens, the Bureau's director could

[00:59:35] Speaker 08:
resign, but whether the act in and of itself is unconstitutional because of the way it structures it.

[00:59:41] Speaker 08:
Yes, it may be.

[00:59:42] Speaker 14:
Mr. DeMille Wegman, what is your response to the United States' assertion that if your position is correct, then Congress could choose to make the Secretary of the Treasury removable only for cause?

[00:59:56] Speaker 08:
Your Honor, I don't have an answer to that question, and I don't think this court in this case needs to answer that question.

[01:00:04] Speaker 08:
For 130 years, Congress has created a wide variety of administrative agencies structured somewhat differently, headed by sometimes three, sometimes five, sometimes seven or 11 officials.

[01:00:15] Speaker 03:
But they've never done anything quite like this.

[01:00:17] Speaker 03:
Let me get you to react from one sentence from the blue brief at 26.

[01:00:21] Speaker 03:
And see if you agree with this.

[01:00:23] Speaker 03:
Never before has so much federal power been concentrated in the hands of one person so thoroughly shielded from constitutional accountability.

[01:00:33] Speaker 03:
React to that.

[01:00:34] Speaker 03:
Is that true or not?

[01:00:35] Speaker 03:
And does it make a difference?

[01:00:37] Speaker 08:
It doesn't make a difference, Your Honor, because that's not the basis.

[01:00:40] Speaker 03:
Is it true?

[01:00:42] Speaker 08:
Is it true in terms of how much power the Bureau has?

[01:00:45] Speaker 03:
The Bureau, as I said, there's... No, it's not just the Bureau, the directors of the Bureau.

[01:00:52] Speaker 03:
Is it true that never before has so much federal power been concentrated in the hands of one person so thoroughly shielded from constitutional accountability?

[01:00:59] Speaker 08:
I don't know, Your Honor, and I wouldn't like to speculate as to the power of the chairman of the Federal Reserve Board, which is a very powerful position.

[01:01:07] Speaker 06:
How about if Congress passes a statute before the next appointment of the CFPB director and says that the next CFPB director will have a 30-year term?

[01:01:16] Speaker 06:
Is that constitutional?

[01:01:17] Speaker 08:
Your Honor, in the Shirtleff case, the 1903 decision of the Supreme Court, the court had to deal with a situation where there was no tenure limit whatsoever.

[01:01:27] Speaker 08:
And the court held that that was problematic, that the president therefore could remove that official.

[01:01:32] Speaker 08:
It was an appraiser at will.

[01:01:34] Speaker 06:
That's no tenure limit.

[01:01:34] Speaker 06:
I'm talking about a term, and shorten it to 20 if that makes it better.

[01:01:38] Speaker 06:
a 20-year term for the next CFPB director, whom the president will appoint in July of 2018, if Congress passes that, is that, I think the logic of your position is, that's fine, anything goes.

[01:01:50] Speaker 08:
No, I wouldn't say that's the logic of my position.

[01:01:51] Speaker 06:
I don't know it.

[01:01:52] Speaker 06:
OK, then what is the limit we could draw that would say a 20-year is too much?

[01:01:56] Speaker 06:
What would that be based on?

[01:01:57] Speaker 06:
History?

[01:01:57] Speaker 06:
Well, you don't like to look at history.

[01:01:59] Speaker 08:
This court, this court, I do like to look at history.

[01:02:02] Speaker 08:
I'm trying to draw in the history here if I can finish this.

[01:02:04] Speaker 06:
I meant that, that sounded worse than I meant it.

[01:02:06] Speaker 06:
OK.

[01:02:06] Speaker 08:
Oh, no, no.

[01:02:08] Speaker 08:
What this court has to deal with here is a director who has a five-year term.

[01:02:13] Speaker 08:
Federal trade commissioners serve seven-year terms.

[01:02:15] Speaker 08:
I'm not going to speculate as to whether if it were a 10-year term or if it were a 15-year term.

[01:02:20] Speaker 08:
You can draw me out on hypotheticals and make a trigger.

[01:02:22] Speaker 06:
My point is simply I think there's no limit if you don't look at historical practice as at least some kind of an anchor here.

[01:02:29] Speaker 06:
And whose ox is going to get gored?

[01:02:33] Speaker 06:
That's going to shift.

[01:02:34] Speaker 08:
No, Your Honor.

[01:02:35] Speaker 08:
The anchor here is that with all these agencies, all are different.

[01:02:40] Speaker 08:
No two are exactly the same.

[01:02:41] Speaker 07:
Can I ask you this question on the example of one person for 20 years?

[01:02:45] Speaker 07:
Do you think, if that's a problem, do you think it's a meaningfully different problem than another statute which says two persons for 20 years, non-staggered?

[01:02:53] Speaker 08:
I think it could be a different issue.

[01:02:56] Speaker 08:
Again, I don't know.

[01:02:57] Speaker 08:
We have one person here for five years.

[01:03:00] Speaker 08:
These two agencies, with all the agencies that the government has created, it's hard to see that two agencies are more similar than the Bureau

[01:03:09] Speaker 08:
And the Federal Trade Commission's for-cause removal provision, which is virtually identical to the for-cause removal provision in the Consumer Financial Protection Act, was upheld in the Humphreys executor case.

[01:03:23] Speaker 08:
What the court has looked to is accountability and whether the president can take care that the laws be faithfully executed.

[01:03:31] Speaker 08:
And the court held that so long as the president could remove the official

[01:03:37] Speaker 08:
At least for good cause, the president has sufficient.

[01:03:41] Speaker 03:
But the courts also warned us about novelty in this area, hasn't it?

[01:03:46] Speaker 03:
We're suspicious of significant changes.

[01:03:49] Speaker 03:
And this is a significant change, right?

[01:03:51] Speaker 03:
There's nothing quite like this.

[01:03:52] Speaker 08:
No two agencies are exactly alike.

[01:03:54] Speaker 08:
And the one versus five, one versus multi-member, was never a consideration in any of the Supreme Court cases discussing for possible.

[01:04:05] Speaker 03:
Because we haven't had a one before.

[01:04:06] Speaker 08:
This is the first one, right?

[01:04:07] Speaker 08:
But there's nothing the Humphreys executor case focused on the functions of the Federal Trade Commission with respect to its analysis of the constitutionality of for-cause removal, not the agency structure.

[01:04:21] Speaker 08:
And there's no reason to believe that the president has less accountability over an agency with

[01:04:33] Speaker 08:
that's headed by a single director as opposed to a multi-member commission.

[01:04:35] Speaker 06:
That's where the terms used in Humphrey's executive may be a clue about the structure.

[01:04:40] Speaker 06:
So they referred to it as quasi-legislative and quasi-judicial.

[01:04:46] Speaker 06:
And you look at the history, where did those terms come from?

[01:04:49] Speaker 06:
What were they thinking?

[01:04:50] Speaker 06:
They were thinking about independent agencies as essentially a combination of functions and would recreate in one group a legislature and a court, among other things.

[01:05:02] Speaker 06:
And the model, the reason I believe they had the multiple members is because legislatures have multiple members, appellate courts have multiple members, the idea of the deliberation and recreating that.

[01:05:12] Speaker 06:
And when you divorce, and so when you say Humphrey's executive didn't say anything about it, I think it said a lot about it when it used the terms quasi-legislative and quasi-executive.

[01:05:20] Speaker 06:
And you go to the members of Congress, why does Senator Nuland's focus so heavily on, I want a multi-member agency if it's single-member,

[01:05:28] Speaker 06:
that has to be executive.

[01:05:30] Speaker 06:
It's because they were recreating this deliberative body.

[01:05:33] Speaker 06:
And that's gone when you just have one person.

[01:05:36] Speaker 06:
And they also were trying to get bipartisan bodies.

[01:05:40] Speaker 06:
And that's been the tradition as well.

[01:05:42] Speaker 06:
One person can't simultaneously be both parties most of the time.

[01:05:46] Speaker 08:
Actually, it's not bipartisan.

[01:05:48] Speaker 08:
It's not even bipartisan at the Federal Trade Commission.

[01:05:50] Speaker 08:
Federal Trade Commission says no more than three members of one political party.

[01:05:55] Speaker 08:
And in fact, during the Reagan administration, when President Reagan had a vacancy and three Republicans already on the commission, he appointed an independent and that his next appointment was

[01:06:06] Speaker 08:
someone who is described as a Reagan Democrat.

[01:06:10] Speaker 08:
So in fact, it's not a matter of bipartisan commissions, and the Board of Governors of the Federal Reserve System has no partisanship qualification.

[01:06:18] Speaker 08:
It's in fact a geographic qualification.

[01:06:22] Speaker 08:
Members of the Board of Governors have to come from different Federal Reserve Districts.

[01:06:28] Speaker 10:
When I asked Mr. Olson why this case wasn't controlled by Morrison, his answer was that the director, that there's more than just limitations on removal.

[01:06:46] Speaker 10:
that, unlike the independent counsel, the statute removes from the president any authority over budget, appropriations, communications with Congress.

[01:06:56] Speaker 10:
There's all these other aspects of the structure of the Bureau that, when combined with the removal power, distinguish it from Morrison and make it unconstitutional.

[01:07:08] Speaker 10:
What's your answer to that?

[01:07:09] Speaker 08:
Your Honor, with respect to the funding, the Bureau is funded much like other financial regulatory agencies, much like two-thirds of the government outside the annual appropriations process.

[01:07:20] Speaker 10:
But those other agencies don't have for-movement restrictions.

[01:07:23] Speaker 10:
Have what?

[01:07:24] Speaker 10:
For-cause restrictions.

[01:07:25] Speaker 10:
This one does.

[01:07:26] Speaker 10:
No, they do, Your Honor.

[01:07:27] Speaker 10:
Well, go ahead then.

[01:07:28] Speaker 08:
They do.

[01:07:29] Speaker 08:
And in fact, the public company accounting oversight board in free enterprise was funded outside of the annual appropriations process.

[01:07:37] Speaker 08:
That puts no restriction whatsoever on the president.

[01:07:40] Speaker 08:
The president is always free in his budget to propose anything he wants to with respect to the Bureau.

[01:07:47] Speaker 08:
And in fact, it puts no restriction on Congress either because Congress

[01:07:51] Speaker 08:
as the panel in this case recognized, Congress is free at any time to change the source of the Bureau's funding or even to eliminate the Bureau's funding altogether.

[01:08:00] Speaker 08:
I got that.

[01:08:00] Speaker 10:
But his point was is that maybe each of these individually isn't enough.

[01:08:04] Speaker 10:
But when you combine them all, the restriction on removal, the five-year term, which means a president might not be able to appoint someone at all, and all the budget limitations and the other restrictions, that those all add up.

[01:08:20] Speaker 10:
to distinguishing this case.

[01:08:22] Speaker 10:
I'm not asking you about the merits.

[01:08:23] Speaker 10:
I'm just asking you the question about whether or not Morrison controls this case and why Mr. Olson's answer isn't a pretty good reason why it doesn't.

[01:08:32] Speaker 10:
Because when you add all of these up, all the differences from Olson, it's a different institution, which is with a greater threat to the ability of the president to execute the laws.

[01:08:43] Speaker 10:
That's his argument.

[01:08:44] Speaker 08:
Morrison does control this case, Your Honor.

[01:08:47] Speaker 08:
And if you look at each of those other restrictions, none of them restricts.

[01:08:51] Speaker 08:
We could go through one by one, but none of them restricts the president whatsoever.

[01:08:55] Speaker 08:
The fact that when we went through the budgeting authority and with respect to whether certain committees in Congress can oversee the Bureau's budget, that has no effect on the president's authority

[01:09:11] Speaker 08:
What the court held in Morrison is that if the president can remove an official, at least for cause, the president has sufficient authority.

[01:09:25] Speaker 08:
The PHH has also made some arguments that the Bureau is somehow more powerful than the Federal Trade Commission was in 1935.

[01:09:35] Speaker 08:
I would draw this Court's attention to this Court's decision in national petroleum refiners versus FTC.

[01:09:44] Speaker 08:
It's cited in PHH's reply brief at page 6.

[01:09:49] Speaker 08:
The case is at, I believe it's at

[01:09:53] Speaker 08:
483, Fed, second, 672.

[01:09:59] Speaker 08:
The issue in that case is whether the Federal Trade Commission had the authority to issue substantive rules.

[01:10:05] Speaker 08:
And substantive rules is one of PHH's focus.

[01:10:08] Speaker 08:
They say Federal Trade Commission couldn't issue rules in 1935, but the Bureau issues substantive rules.

[01:10:16] Speaker 08:
what this court held, and this court was asked to consider whether the Federal Trade Commission, based upon basically the original FTC statute as it was enacted in 1914, whether the Federal Trade Commission had rulemaking authority.

[01:10:30] Speaker 08:
Ultimately, this court in 1973 concluded that it did.

[01:10:34] Speaker 08:
But before reaching that conclusion, this court observed that, and to use this court's words,

[01:10:40] Speaker 08:
It was but a quibble to distinguish the pervasiveness of the FTC's authority, even assuming it didn't have rulemaking authority.

[01:10:48] Speaker 08:
It was but a quibble to distinguish the pervasiveness of that authority from that of other regulatory agencies that could engage in substantive rulemaking.

[01:10:58] Speaker 08:
And the court also noted there on the same page, I think it's at page 685, the court noted that

[01:11:06] Speaker 08:
the Federal Trade Commission, based solely on its authority to pursue administrative adjudication resulting in cease and desist orders, based solely on that authority, the Federal Trade Commission exerted what this court referred to as a powerfully regulatory effect over business practices subject to its authority.

[01:11:29] Speaker 08:
And note that in 1935,

[01:11:31] Speaker 08:
And still today, the Federal Trade Commission has authority over virtually the entire economy, whereas the Bureau has authority over consumer financial products and services.

[01:11:42] Speaker 11:
Can I ask you a question and something Judge Millett mentioned earlier?

[01:11:48] Speaker 08:
Yes, Your Honor.

[01:11:48] Speaker 11:
In response to the BlueBerry's point about taking all of these things together,

[01:11:55] Speaker 11:
Your response in part is, well, Congress could always change the statute.

[01:12:01] Speaker 11:
And I appreciate that.

[01:12:02] Speaker 11:
You say, you know, the president isn't limiting the appropriations process, but he is.

[01:12:07] Speaker 11:
All right, there's an independent source of funding.

[01:12:09] Speaker 11:
So is part of the response here that it is true there's an accumulation here

[01:12:16] Speaker 11:
But Congress put this Bureau, or made it part of the Federal Reserve system, and that system in itself is unique in a number of different ways.

[01:12:29] Speaker 11:
So while we can compare the powers of individual agencies, look at the power, sort of the central bank concept and the power of the Federal Reserve in that area,

[01:12:41] Speaker 11:
At least so far, it's been different.

[01:12:44] Speaker 11:
So the combination doesn't have necessarily the same impact on impairing the president's power that it might outside of the Federal Reserve system.

[01:12:55] Speaker 11:
Or is that a flawed analysis as well?

[01:12:58] Speaker 08:
I think, Your Honor, my answer would be that it's not that Congress can change these provisions.

[01:13:05] Speaker 08:
It is that these other provisions that they point to have no impact whatsoever on the power of Congress or on the power of the president.

[01:13:15] Speaker 08:
So they have no impact on the separation of powers issue.

[01:13:18] Speaker 11:
Do you reject the combination argument?

[01:13:23] Speaker 08:
I do, because each of those things analyzed separately, analyzed point.

[01:13:28] Speaker 08:
You know, each one analyzes.

[01:13:29] Speaker 11:
I'll separate them out.

[01:13:30] Speaker 11:
But viewed in their totality, it's just too much.

[01:13:35] Speaker 11:
And so the response I'm trying to get from you is whether, because it's part of the Federal Reserve system, that is sort of an exception that historically has been recognized in our governmental system.

[01:13:51] Speaker 08:
No, I don't think I would say that, Your Honor.

[01:13:53] Speaker 08:
What I would say is that the way the combination issue is resolved is that each of the things separately is a zero with respect to the for-cause removal argument.

[01:14:04] Speaker 08:
So when you add them all together, you're adding zero plus zero plus zero plus zero.

[01:14:09] Speaker 08:
And at the end of the day, when you add all those zeros together, you're still there with zero.

[01:14:14] Speaker 08:
And the four-cause removal provision, the Supreme Court has explained in Humphrey's executor and Morrison versus Olson, that that does not unduly impinge on the president's authority to take care that the laws be faithfully executed.

[01:14:31] Speaker 02:
I wanted to ask you a question a little off the constitutional subject, because it's a subject that is argued back and forth in the brief.

[01:14:39] Speaker 02:
Is it still the Bureau's position that no statute of limitations applies to it, that it can bring cases such as this 10 years, 20 years, 30 years after the cause of action accrued?

[01:14:54] Speaker 08:
No, Your Honor, and I think we had some discussion about this during the panel discussion.

[01:14:58] Speaker 08:
We had not fully briefed that out.

[01:15:00] Speaker 08:
We've discussed this a little more now.

[01:15:02] Speaker 08:
Their argument is that with respect to RESPA, RESPA's three-year statute of limitations applies.

[01:15:08] Speaker 08:
Now, if you look in the statutory addendum that PHH provided... I know.

[01:15:13] Speaker 02:
Your position, that only applies to actions in court.

[01:15:16] Speaker 02:
But I'm asking you for the administrative proceedings, is it still the Bureau's position that no statute of limitation applies?

[01:15:24] Speaker 08:
Yes, there is a statute of limitation.

[01:15:26] Speaker 08:
It's the statute of limitation in the judicial code 28 USC 2462.

[01:15:31] Speaker 02:
Do you say that applies in this case?

[01:15:35] Speaker 08:
It applies, but it has no effect, because the Bureau did not challenge any conduct.

[01:15:40] Speaker 08:
That's a five-year statute of limitations.

[01:15:42] Speaker 08:
The Bureau did not challenge any conduct that occurred more than five years before the tolling agreement that PHA signed in 2012.

[01:15:49] Speaker 02:
No, no, no.

[01:15:50] Speaker 02:
The reason I raise that is there is a case pending in the Supreme Court involving that very statute.

[01:15:56] Speaker 02:
Correct.

[01:15:56] Speaker 02:
And the question is whether it applies to disgorgement cases.

[01:16:00] Speaker 02:
And this is a disgorgement case.

[01:16:02] Speaker 08:
That's right, Your Honor.

[01:16:02] Speaker 02:
So you're taking a position that it does apply?

[01:16:05] Speaker 02:
So your position is there's no statute of limitations?

[01:16:09] Speaker 08:
No.

[01:16:10] Speaker 08:
The five-year statute of limitations applies, and with respect to other injunctive relief.

[01:16:15] Speaker 08:
If the Bureau is seeking disgorgement, if the Supreme Court determines in the Kokesh case that disgorgement is

[01:16:24] Speaker 08:
disclosure, particularly that goes to the Treasury, is covered by the statute of limitations in the judicial code.

[01:16:32] Speaker 08:
That would apply, although we meet that we're within the five-year statute of limitations, with respect... Keep going.

[01:16:38] Speaker 08:
Keep going.

[01:16:39] Speaker 08:
With respect to other equitable relief we might seek, such as an injunction or perhaps consumer redress, that's equitable relief and equitable provisions would apply.

[01:16:51] Speaker 08:
If the Bureau attempted to challenge conduct that occurred 20 years ago and had ceased 20 years ago, equitable provisions would limit the Bureau's authority.

[01:17:01] Speaker 08:
But if the conduct

[01:17:02] Speaker 08:
is ongoing or likely to recur.

[01:17:05] Speaker 08:
And there was a finding here in the director's decision that PHH's conduct was likely to recur.

[01:17:11] Speaker 08:
The Bureau is entitled to get injunctive relief for that.

[01:17:14] Speaker 14:
Mr. DeMille Wegman, there's also a notice issue in the statutory part of this case.

[01:17:19] Speaker 14:
What is your position that the PHH was on notice that this kind of captive reinsurance was unlawful?

[01:17:28] Speaker 08:
They base that argument primarily on this 1997 letter.

[01:17:33] Speaker 14:
I'm asking you really a slightly different question, which is what is the affirmative source of if I'm an actor in this market and I'm trying to figure out, can I do this?

[01:17:44] Speaker 14:
What would be your reading of what would you say to me?

[01:17:47] Speaker 14:
No.

[01:17:48] Speaker 08:
What would say do you know?

[01:17:50] Speaker 08:
The statute, Your Honor, the statute itself, Section 8A of RESPA, and it's in that statutory addendum that PHH provided.

[01:17:57] Speaker 08:
It's on page three.

[01:17:59] Speaker 08:
If you look in the left-hand column at the bottom, Section 8A is 12 USC 2607A.

[01:18:06] Speaker 08:
It says that no person shall give, no person shall accept the fee, kickback, or thing of value for referrals of real estate settlements.

[01:18:14] Speaker 08:
They point to 8C2.

[01:18:17] Speaker 08:
Section 8C2 says that nothing in this section, section 8, shall be construed as prohibiting the payment to any person of a bona fide salary, compensation, or other payment for

[01:18:36] Speaker 08:
among other things, services actually performed here.

[01:18:39] Speaker 08:
So there are two requirements there.

[01:18:41] Speaker 08:
They could read that from the statute.

[01:18:43] Speaker 08:
Services actually performed means that you can't have a huge payment for token services.

[01:18:50] Speaker 08:
The price paid must be commensurate with the value of the services.

[01:18:55] Speaker 08:
And then there's another requirement, and that requirement is bona fide.

[01:18:58] Speaker 08:
What does bona fide mean?

[01:18:59] Speaker 08:
It means in good faith.

[01:19:02] Speaker 08:
And as the Supreme Court explained in McDonald versus Thompson,

[01:19:05] Speaker 08:
We discussed that in our brief at page 38 of our red brief before this court.

[01:19:13] Speaker 08:
What the Supreme Court explained was that in a remedial statute like this one, bona fide means, in good faith, not for purposes of evasion.

[01:19:22] Speaker 08:
But that's exactly what PHH was doing when it set up its reinsurance operation.

[01:19:31] Speaker 06:
Can I ask another question on your 0 plus 0 plus 0?

[01:19:34] Speaker 06:
which I was intrigued by.

[01:19:36] Speaker 06:
So if the SEC, if Congress decides to combine the SEC and the FTC and the FCC and the CFPB into one single agency, for example,

[01:19:48] Speaker 06:
Zero plus zero plus zero plus zero, that's fine as an independent agency.

[01:19:52] Speaker 08:
The issue there, again, with respect to each agency is what functions the agency performs.

[01:19:57] Speaker 08:
And note that during the Humphreys executor case, while that case was moving forward, Congress, in fact, assigned regulation of securities to the Federal Trade Commission for a period of time.

[01:20:09] Speaker 08:
That may have been one of the reasons that Roosevelt wanted to get rid of Humphreys is that he wanted- If you have an answer, that would be okay.

[01:20:16] Speaker 08:
No, you'd have to look at the functions of the agency.

[01:20:19] Speaker 08:
The functions of an agency that combined what the FTC does, what the SEC does, and what other agencies do all combined together would be very different.

[01:20:28] Speaker 08:
And so you'd have to look at the functions that the agency performs.

[01:20:31] Speaker 08:
But here, the Bureau performs functions that are remarkably similar to what the Federal Trade Commission does.

[01:20:38] Speaker 08:
So this court need go no further than Humphrey's executor and Morrison versus Olson, and those cases

[01:20:45] Speaker 08:
Those cases decide, decide this case.

[01:20:50] Speaker 01:
were added to a discussion about for-cause removal.

[01:20:54] Speaker 01:
And you were arguing, or at least perhaps you were just relying on precedent that says there's no problem with for-cause removal, right?

[01:21:02] Speaker 01:
That does not diminish the president's ability to hold officials accountable.

[01:21:11] Speaker 01:
Can you give me any example where an agency head has been actually successfully removed for-cause?

[01:21:20] Speaker 08:
I cannot, Your Honor.

[01:21:21] Speaker 08:
It's my understanding.

[01:21:23] Speaker 08:
I cannot.

[01:21:23] Speaker 08:
But my understanding is that what happens in a situation like that is that when the president begins to pursue for cause removal, the official simply resigns.

[01:21:34] Speaker 08:
But I cannot do that.

[01:21:35] Speaker 08:
And that's not what happened to Humphrey.

[01:21:36] Speaker 08:
Take a pardon?

[01:21:37] Speaker 08:
That didn't happen to Humphrey.

[01:21:38] Speaker 08:
Humphrey actually did leave the agency.

[01:21:41] Speaker 08:
And what he was trying to do- Not when he got the letter from President Roosevelt, he didn't leave.

[01:21:46] Speaker 08:
He actually- I asked you to depart your office.

[01:21:49] Speaker 06:
He didn't leave.

[01:21:50] Speaker 08:
And he did.

[01:21:52] Speaker 08:
And so what happened in this case was he was suing for back pay.

[01:21:55] Speaker 08:
So he was gone.

[01:21:57] Speaker 01:
I ask this question because there was a letter that was reportedly sent to President-elect Trump and from some Congress people who said, since the founding of our republic, no president has ever removed an independent agency head for cause.

[01:22:14] Speaker 01:
and warning him that for-cause removal is an extraordinary remedy whose use must be subjected to enhanced congressional, judicial, and public scrutiny.

[01:22:24] Speaker 01:
Now I don't know if they were right about that, but it seems to me if for-cause removal is in effect something that is never used successfully, arguably it does diminish presidential authority.

[01:22:40] Speaker 08:
Your Honor, the issue is not diminution of presidential authority.

[01:22:44] Speaker 08:
It's whether the president retains sufficient authority to make sure that the laws are faithfully executed.

[01:22:51] Speaker 01:
However you want to say it, if you can't remove them, then it has some effect.

[01:22:58] Speaker 08:
I note that those congressmen may have said that it's something that the president can't use.

[01:23:05] Speaker 06:
But I would note that- You said, I think in response to my question, Humphrey leaving soon thereafter, that actually they do have to leave

[01:23:15] Speaker 06:
if a president removes you for cause, regardless of whether you disagree and you're only entitled to back pay, not an injunction.

[01:23:23] Speaker 06:
Is that your position?

[01:23:24] Speaker 08:
The president didn't remove Humphrey for cause, right?

[01:23:27] Speaker 08:
He removed Humphrey because he said... Put aside Humphrey.

[01:23:30] Speaker 06:
But is your position that if you're removed for cause, you can get an injunction or only can get back pay?

[01:23:36] Speaker 08:
I don't know, Your Honor, what procedures could apply.

[01:23:39] Speaker 08:
I think some agencies specify certain procedures.

[01:23:42] Speaker 06:
Judge Brown's point, I think it's not happened, right?

[01:23:46] Speaker 08:
It has not happened.

[01:23:48] Speaker 08:
I don't know that it has happened.

[01:23:50] Speaker 08:
However, I would note that in the panel's decision cites the Cushman volume on independent regulatory agencies.

[01:23:58] Speaker 08:
And Cushman, at least when he was doing his analysis of independent regulatory agencies,

[01:24:02] Speaker 08:
Thought that for cause removal did amount to something.

[01:24:05] Speaker 08:
I believe it's at pages 646 44 and 645 of his of his manner to some kind I missed your word mounted to some kind of

[01:24:14] Speaker 08:
It's not a nothing, Your Honor.

[01:24:17] Speaker 08:
It's a power that the president does have to make sure that officials are operating honestly, are operating competently, and so on.

[01:24:27] Speaker 08:
I agree, Judge Brown.

[01:24:28] Speaker 08:
However, I am aware of no instance where a president has actually exercised that power.

[01:24:34] Speaker 04:
It seems, you know, I'm trying to figure out how this cuts, this follow-up on Judge Brown's question, because I thought about this.

[01:24:44] Speaker 04:
I mean, I've seen law review articles and other commentary that say that even though there is the for-cause protection under Humphrey's executor, basically the only remedy that's available is back pay.

[01:24:59] Speaker 04:
And they're saying that there's never been a case where a court has enjoined a president

[01:25:10] Speaker 04:
I think that's a good point.

[01:25:16] Speaker 04:
I think that's a good point.

[01:25:27] Speaker 04:
Does that mean that really this is kind of a toothless protection, or does that mean that, well, how does it cut?

[01:25:39] Speaker 04:
How should we think about that?

[01:25:41] Speaker 08:
I don't think it's toothless.

[01:25:43] Speaker 08:
I think that with respect to the analysis of the separation of powers issue, the court has held that as long as the president can remove an official, at least for cause,

[01:25:56] Speaker 08:
he can assure that that official is performing his or her duties in a manner in accordance with a statute.

[01:26:04] Speaker 08:
He may not be able to remove the official simply for policy disagreements.

[01:26:09] Speaker 07:
That's what... Didn't the majority opinion in Morrison say that?

[01:26:14] Speaker 07:
That the majority opinion in Morrison relied on the president's ability to remove for cause as a meaningful

[01:26:21] Speaker 08:
Yes.

[01:26:21] Speaker 08:
Yes, Your Honor.

[01:26:22] Speaker 08:
Yes, it did.

[01:26:23] Speaker 08:
And I think that both Humphrey's executor, and I believe also Morrison, indicated that he cannot.

[01:26:30] Speaker 08:
The one thing that the Court has decided is you can't remove them just for policy reasons.

[01:26:35] Speaker 06:
Is policy disagreement cause?

[01:26:39] Speaker 08:
Well, Your Honor, I think that that was what happened in Humphrey's executor, and the court said no there.

[01:26:44] Speaker 08:
I believe that Roosevelt's letter said something like, I would like to have a man there who sees eye to eye with me, I think, is what he said.

[01:26:56] Speaker 06:
The Free Enterprise Fund reaffirmed that understanding, I believe.

[01:27:00] Speaker 08:
I believe that's correct.

[01:27:01] Speaker 04:
But I guess my point is that even though that's what the court held in Humphrey's executor now, it was Humphrey's executor because Humphrey died.

[01:27:11] Speaker 04:
But let's suppose he was still alive when the court made its decision.

[01:27:16] Speaker 04:
He wasn't going to get his job back.

[01:27:19] Speaker 04:
So I guess what I'm saying is as long as the president's willing to cut a check for pay for the rest of the term,

[01:27:28] Speaker 04:
even if a court disagrees with him later, he can still get rid of the person, even with Humphrey's executive protection, right?

[01:27:38] Speaker 08:
That may be, Your Honor.

[01:27:38] Speaker 08:
I just don't know how that would play out, were that to ever happen.

[01:27:41] Speaker 08:
And of course, that's not the issue here, because here we're just looking at the, not at a situation as applied, but just at the statute on its face.

[01:27:52] Speaker 08:
Are there any more questions?

[01:27:53] Speaker 00:
Thank you, Mr. DeVille-Wygman.

[01:27:54] Speaker 00:
How much time does Mr. Olson have?

[01:28:04] Speaker 05:
There has never been an agency like this.

[01:28:08] Speaker 05:
The zero plus zero plus zero, all of those things that Congress carefully put in the statute to ensure the independence of this agency are not zeros.

[01:28:20] Speaker 05:
They are significant in each and every respect, and the sum total of that

[01:28:27] Speaker 05:
bequest authority to this agency creates the most powerful agency.

[01:28:33] Speaker 05:
This agency is given the power to enforce 19 separate consumer financial statutes that come from all different agencies when this act was created.

[01:28:44] Speaker 05:
This is a very powerful agency.

[01:28:46] Speaker 05:
Now, does the president under free enterprise fund have the authority

[01:28:52] Speaker 05:
to be accountable to how those decisions with respect to those 19 statutes are made.

[01:28:58] Speaker 05:
The president has none to use the words of the panel decision in this court

[01:29:03] Speaker 05:
and the Supreme Court and free enterprise fund, the buck stops somewhere else.

[01:29:09] Speaker 05:
The president can say, I can't do anything about that unless he steals money or does something like that, I cannot remove him.

[01:29:17] Speaker 05:
Now we start with the proposition that what the president, what this agency is doing

[01:29:24] Speaker 05:
is performing executive functions.

[01:29:26] Speaker 05:
There's no question about very broad executive functions.

[01:29:30] Speaker 05:
There is no stopping point.

[01:29:32] Speaker 05:
It could be the Treasury Department, it could be the Environmental Protection Agency, it could be any other agency of the federal government, and we could have the same arguments that we're having here.

[01:29:42] Speaker 02:
In fact, it already is part of HUD.

[01:29:47] Speaker 05:
HUD was a... Part of HUD was taken and given to this agency and a bunch of other agencies too.

[01:29:55] Speaker 05:
And what the Supreme Court said in Stern versus Marshall.

[01:29:59] Speaker 05:
said that illegitimate and unconstitutional practices get their first footing by silent approaches and slight deviations from the legal modes of procedure.

[01:30:08] Speaker 05:
That's what the Supreme Court said.

[01:30:10] Speaker 05:
Now I submit this is neither silent nor slight.

[01:30:15] Speaker 05:
As Justice Scalia would have said, you're anticipating what I'm about to say, this wolf comes as a wolf.

[01:30:22] Speaker 05:
the principle that the CFPB advances would allow the entire executive branch to be swallowed up by, quote, independent agencies.

[01:30:32] Speaker 05:
Congress will do this.

[01:30:34] Speaker 05:
What was said in the Federalist Papers about the impetuous vortex, Congress will do this all the time.

[01:30:42] Speaker 03:
Those are all great arguments against Humphrey's executor.

[01:30:45] Speaker 05:
Yes, and so free enterprise fund looked at Humphrey's executor, looked at the context of Humphrey's executor, said this is going to be a body of experts exercising quasi-judicial and quasi-legislative functions and it had at that time in 1935... But to be clear, they said that they would acquire the expertise during their tenure.

[01:31:08] Speaker 13:
They weren't to be

[01:31:09] Speaker 13:
They didn't have to be chosen based on expertise.

[01:31:14] Speaker 05:
I didn't quite hear that question.

[01:31:16] Speaker 13:
They don't get hired based on expertise.

[01:31:19] Speaker 13:
It was that the rationale the Supreme Court said is that they would acquire expertise because of the length of tenure.

[01:31:23] Speaker 13:
But my quick question to you is just to be clear, putting aside your objections to Humphrey Executor, which you have definitely reserved, and you also agree we can't decide.

[01:31:32] Speaker 13:
So if we assume Humphrey's Executor remains good law, would the CFPB

[01:31:39] Speaker 13:
would you still have a constitutional argument if it were headed by two or three people instead of one?

[01:31:44] Speaker 05:
We're accepting the outcome in Humphrey's executor.

[01:31:47] Speaker 05:
This agency goes vastly further than that.

[01:31:50] Speaker 13:
Congress intended it to... If it were headed by two or three, would you still say if it were headed by a multi-member?

[01:31:55] Speaker 05:
In my judgment, it makes no difference.

[01:31:58] Speaker 05:
The fact is, I do agree with the panel decision that when you disperse the power to several different individuals, stagger the terms, it has effects that limit the authority of any individual.

[01:32:13] Speaker 05:
This is different.

[01:32:14] Speaker 05:
I would go further, as you can tell from our briefs, much further than what the panel decision was willing to do.

[01:32:22] Speaker 05:
Because of all of these other authorities, severing just the removal provision does not take out all these zeros, which are not zeros, that are given to the agency.

[01:32:32] Speaker 05:
There is no doubt

[01:32:34] Speaker 05:
that this is executive functions.

[01:32:37] Speaker 05:
The founders of our country in 1787, 1788, 1789 made the same decision over and over again.

[01:32:45] Speaker 05:
We will not have a plural executive.

[01:32:47] Speaker 05:
What we have in the CFPB is a plurality of the executive, and there is no stopping point.

[01:32:53] Speaker 05:
Now, I understand that we're bound, as we stand here today, by Humphrey's executive and Morrison versus Olson, but when the Supreme Court

[01:33:04] Speaker 05:
Analyze that in free enterprise fund it made it very clear those issues aren't before us because we weren't asked to do it But it was very skeptical about those intrusions into the executive authority because there's no stopping point and the Supreme Court instructed that That is as far as is going to go and our submission is

[01:33:25] Speaker 05:
is that this agency, this director, this individual who can hire and fire at will, there's no Senate participation in the officers beneath him.

[01:33:36] Speaker 05:
He has authority that is in no other agency.

[01:33:39] Speaker 05:
Hire and fire people and pay them basically whatever he wants to do.

[01:33:44] Speaker 05:
He doesn't have to communicate with the White House with respect to pending legislation.

[01:33:48] Speaker 05:
He can bring enforcement actions without checking with anybody.

[01:33:52] Speaker 05:
He has broad litigation authority.

[01:33:55] Speaker 05:
Now each of one of those things, if you could try to unpack those, I understand why my opponent would like to take them one at a time and say it's no big deal, no big deal.

[01:34:04] Speaker 05:
And each of those things are a big deal.

[01:34:07] Speaker 05:
But when you put them all together, it is a very big deal.

[01:34:11] Speaker 05:
And there is no stopping point.

[01:34:13] Speaker 05:
And this court, I submit, is bound by the limitations prescribed in free enterprise fund.

[01:34:19] Speaker 05:
Don't go any further unless you can fit it within the narrow confines of Humphrey's executor and Morrison, which is an inferior officer.

[01:34:29] Speaker 05:
It is nothing like what we have here today.

[01:34:31] Speaker 05:
So we submit.

[01:34:33] Speaker 05:
that this agency is manifestly on Constitution, squarely inconsistent with Article 2 of the Constitution.

[01:34:39] Speaker 05:
I have to say one more thing, is that because there are very, very important interpretations of the statute that were articulated in the panel opinion, which are basically not

[01:34:52] Speaker 05:
challenge here, I heard a little bit about that, but not very much.

[01:34:56] Speaker 05:
It's very, very important that whatever happens, that the decisions on those issues be reinstated and the issue that was mentioned in footnote 30 on page 100 be resolved as well, if that's possible.

[01:35:08] Speaker 05:
Because those decisions with respect to the statute that were manifestly incorrect, not a close case according to what the unanimous part of the panel decision said,

[01:35:21] Speaker 05:
need to be reinstated because they're very important to an industry.

[01:35:26] Speaker 05:
This is people that have to understand what the rule of law is.

[01:35:31] Speaker 05:
But at the bottom, those violations of statutes, those violations of due process requirements, those eliminations of the statute of limitations, all the other errors that were made that are articulated in that panel opinion are the product

[01:35:49] Speaker 05:
of an unconstitutional agency, when you create those kind of agencies, this is what happens.

[01:35:54] Speaker 05:
Because no one is accountable for them, and that has to change.