Law

Watchdog's Future Is More Fraught Under Trump

Courts will be unable to avoid today's politics in deciding whether the president can fire the head of an independent agency.

Independent.

Photographer: Andrew Harrer/Bloomberg

Can the president fire the director of the Consumer Financial Protection Bureau? That question, considered Wednesday by the full U.S. Court of Appeals for the D.C. Circuit, would be of fundamental constitutional importance under any circumstances. But these aren’t just any circumstances.

The case, PHH Corp. v. CFPB, involves the watchdog agency created in response to the 2008 financial crisis. As established by the Dodd-Frank Act, the CFPB has an unusual independent leadership structure, with the president severely restricted in his ability to fire the director. One of the questions raised by mortgage lender PHH in its case challenging an insurance kickback fine is whether the CFPB setup violates the constitutional separation of powers.

The D.C. Circuit’s answer will reflect on the president’s authority to fire other officials such as acting Attorney General Sally Yates, FBI Director James Comey -- and even special counsel Robert Mueller.

In the more innocent days of October, a three-judge panel of the D.C. Circuit held that it was unconstitutional for Congress to make the director of the CFPB fireable only for good cause. The panel was composed of three Republican appointees, and the decision was written by conservative stalwart Brett Kavanaugh.

It’s been well-established that Congress may create independent agencies -- like the Federal Communications Commission or the  Securities and Exchange Commission -- whose members are insulated from being fired at will by the president.

The core of Kavanaugh’s argument was that the CFPB is different. It is run by a single director, not a group of commissioners, like the other independent agencies. And that director has the “vast power,” to use the court’s phrase, to bring charges against violators of 19 different consumer protection laws, charges that can lead to major financial consequences.

Kavanaugh reasoned that the CFPB director’s independence was completely unprecedented, and a good reason to subject the director to immediate presidential control.

The only problem with this reasoning is that there is, in fact, a constitutional precedent for an officer created by Congress who was not answerable to the president and exercised vast discretionary prosecutorial power. That’s the independent prosecutor, a role legislated after Watergate and allowed to expire in 1999. Its constitutionality was upheld 7-1 by the U.S. Supreme Court in the landmark 1988 decision, Morrison v. Olson, with Justice Antonin Scalia as the sole vote in dissent.

Under this precedent, Kenneth Starr investigated President Bill Clinton and ultimately gave Congress the material for Clinton’s impeachment. Kavanaugh knows all about it: He was one of Starr’s deputies in the independent counsel’s office.

Kavanaugh’s CFPB opinion dealt with this uncomfortable truth in two ways. First, he distinguished the independent counsel by saying that office wasn’t an agency and that its jurisdiction was “limited” to “particular investigations.” These are very weak legal distinctions, because independence isn’t necessarily tied to the agency’s form and because Starr’s jurisdiction was in fact tremendously broad.

Kavanaugh’s second response to the Supreme Court’s precedent was to suggest that the court had it wrong. “The independent counsel experiment,” he wrote, “ended with nearly universal consensus that … Scalia had been right back in 1988 to view [it] as an unconstitutional departure from historical practice and a serious threat to individual liberty.” Nearly all the citations to the Morrison case in Kavanaugh’s opinion are to Scalia’s dissent, which Kavanaugh treated almost as if it were the court’s opinion.

Lots of observers do think Starr’s investigation went too far and that Scalia may have been right. Those were reasons for allowing the independent counsel law to lapse. But the constitutionality of the independent prosecutor remains on the books. And since the Kavanaugh opinion was written, Donald Trump’s presidency has led to a serious resurgence in that precedent’s value.

The firings of Yates and especially Comey demonstrated that the presidential authority to fire executive officers -- including those investigating him -- carries serious structural risks to the rule of law.

What if Trump were to order the firing of special counsel Robert Mueller, as he’s allowed to do? Short of impeachment, there would be no remedy available. That’s exactly the situation in which an independent prosecutor would be needed. Congress might well then re-enact a law like the one that was allowed to lapse after the Starr investigation.

All this is in the mix as the full D.C. Circuit considers the appeal of the CFPB case. The judges know that if they strike down the director’s independence, the Supreme Court will almost certainly take the case.

In this new political environment, the D.C. Circuit with its majority of six Democratic appointees won’t want to invite the justices to reverse or minimize the precedent of the independent counsel ruling.

The lower court also won’t want to issue an opinion that emphasizes Trump’s power to fire anyone he wants. The optics and timing for such a decision would be terrible, potentially sending Trump the message that he has courts on his side as he fires law enforcement officials for self-serving reasons.

To make matters even more serious, Trump’s Justice Department weighed in to tell the court that the president must have the power to fire CFPB director. That would make a ruling to that effect into a further victory for Trump, one the court will be loath to give him.

One solution for the D.C. Circuit is to try to duck the issue. One of the judges on the panel, Karen LeCraft Henderson, wrote a separate concurrence to Kavanaugh's opinion saying that the panel shouldn’t have reached the issue of the CFPB director’s independence. In her view, the court could have decided the case in favor of the petitioner, PHH Corp., on different grounds, essentially that the CFPB misapplied the law that it used to go after the corporation, without going into the constitutional issue.

If the full D.C. Circuit were to decide the case for PHH on these grounds, the case might well disappear. PHH wouldn’t appeal, because it would have won. And the CFPB might choose strategically not to ask the Supreme Court for review, lest the court decide against the agency on the issue of independence.

That would put the Trump administration in the position of ordering the CFPB to appeal. But Trump wouldn’t be able to fire the director for refusing. Which is kind of the point of independence in the first place.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Noah Feldman at nfeldman7@bloomberg.net

    To contact the editor responsible for this story:
    Stacey Shick at sshick@bloomberg.net

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