Consumer Financial Protection Bureau building in Washington, D.C., on June 4, 2013. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL

The U.S. Supreme Court on Monday turned away a challenge to the constitutionality of the Consumer Financial Protection Bureau.

Even though the Trump administration agreed with the challengers that the bureau's director has too much authority, the government had urged the justices not to take the case. The Justice Department pointed to the likely recusal of Justice Brett Kavanaugh, who would not have taken part in ruling on the merits.

“Justice Kavanaugh previously participated in this case while a judge on the D.C. Circuit, authoring the court of appeals' decision addressing petitioners' standing to challenge the constitutionality of the Bureau's structure,” then-acting Solicitor General Jeffrey Wall wrote in the government's response to the petition. “Particularly for a question of this magnitude, the court may wish to wait for a vehicle in which all nine Justices are likely to participate.”

The justices, without comment, denied review in State National Bank of Big Spring v. Mnuchin, and Kavanaugh, as expected, did not participate in that action.

Other challenges to the consumer bureau are pending in federal appeals courts, giving the Supreme Court a chance—more likely next term—to weigh the constitutionality of the bureau's single-director scheme. Gibson, Dunn & Crutcher's Ted Olson is lead counsel for one challenge in the Fifth Circuit.

Kavanaugh was the author of the panel decision in the U.S. Court of Appeals for the District of Columbia Circuit, where he had been a judge since 2006. His recusal would have left an eight-justice court to decide the case, with the potential for a deadlocked 4-4 ruling.

Texas-based State National Bank, represented by Gregory Jacob, a partner at O'Melveny & Myers, argued the single director structure of the CFPB, with limits on the president's removal power, violated the Constitution's separation of powers.

“In the history of the United States, no individual has ever wielded such expansive executive enforcement authority over an entire sector of private economic activity, devoid of the checks and balances the Constitution's separation of powers requires,” Jacob wrote in his petition.

Wall, however, urged the court to wait for a more appropriate case, one lacking some of the jurisdiction obstacles presented by State National Bank.

A team from the Competitive Enterprise Institute was co-counsel with O'Melveny for State National Bank.

“We are disappointed by the Supreme Court's decision to turn down the case,” Sam Kazman, general counsel to CEI, said in a statement Monday, according to Compliance Week. “The case raised constitutional issues of major importance regarding the CFPB, an agency that wields massive power over the economic activities of the public and sets a dangerous precedent for unaccountable federal bureaucracy. But there are other pending lawsuits that raise these same issues, and we are hopeful the court will have another opportunity to review them.”

Kavanaugh's critical views on the consumer bureau are well-known from his time on the D.C. Circuit. He was the author of a major decision in 2016—PHH v. CFPB—that held the “massive, unchecked power” of the CFPB violated separation of powers. The president, Kavanaugh wrote, should have the power to fire the CFPB director at will, not just for cause.

The en banc D.C. Circuit later overturned the panel ruling, and PHH did not further ask the Supreme Court to review the case.

 

Read more:

Justice Dept. Frets About Kavanaugh Recusal in Challenge to CFPB's Power

CFPB Suffers Another Appeals Court Loss Over Investigative Authority

Gibson Dunn's Ted Olson Puts New Squeeze on Consumer Bureau

Ohio Law Firm, Defended by Jones Day, Beats CFPB's Deception Claims

D.C. Circuit's Brett Kavanaugh Doubles Down on Criticism of CFPB