The constitutionality of the Consumer Financial Protection Bureau (CFPB) was the focus of all three branches of government March 3 as the U.S. Supreme Court heard oral argument in the matter of Seila Law v. Consumer Financial Protection Bureau. The petitioner, Seila Law, asked the Supreme Court to strike down the legislation authorizing the CFPB as unconstitutionally insulating the director of the CFPB from removal from office by the president during her five-year term except for "inefficiency, neglect of duty or malfeasance in office." Seila Law argued that the Dodd-Frank Act granted impermissible executive power to an individual who does not answer to the president as the Constitution empowers the president to keep principal executive officers accountable by removing them at will.

The case originated from the issuance of a civil investigative demand (CID) from the CFPB to Seila Law as part of the CFPB's enforcement power. Seila Law challenged the validity of the CID by arguing that the bureau's constitutional infirmity caused the CID to be void. The U.S. Court of Appeals for the Ninth Circuit upheld the CID and the constitutional structure of the agency in a decision last year.

During a 75-minute oral argument, the justices grappled with Congress' intention to provide political independence to the CFPB by preventing the president from removing the director at-will and by funding the bureau outside of the traditional congressional budget process. In an unusual turn of events, the Trump administration, instead of defending the bureau, reversed course from the government's position at the Ninth Circuit and agreed with Seila Law that the removal provision was unconstitutional. The Supreme Court had appointed a special amicus curiae to argue in support of the judgment below and was joined by counsel for the U.S. House of Representatives, which also sought to uphold the statute in its entirety.

The oral argument went in many different directions and it was unclear if there was any consensus among the justices. Seila Law contended that the unconstitutionality of the Dodd-Frank Act was fatal to the CID and the only remedy available to the Supreme Court was to strike down the CFPB leaving Congress with the responsibility to re-establish a viable agency if it so wished. The Trump administration, while arguing against the provision, requested, instead, that the provision itself simply be severed from the Dodd-Frank Act allowing the director to be removed at-will and leaving the CFPB otherwise in place. The amici both argued that the enabling legislation was constitutional and needed to be upheld. Counsel for the House of Representatives made a compelling argument that elimination of the CFPB was fraught with peril as its powers derived from seven different agencies, some of which are no longer in existence.

Seila Law began oral argument by emphasizing to the court that the structure of the CFPB was unprecedented and unconstitutional. "By significantly limiting the president's ability to remove the CFPB's director, Congress violated the core presidential prerogatives to exercise the executive power and to take care that the laws be faithfully executed." While the Supreme Court upheld similar restrictions years ago in Humphry's Executor v. United States, it was a narrow exception focused on a multi-member commission and, Seila Law explained, the court has distanced itself from the reasoning of that decision.

Justice Ruth Bader Ginsburg questioned whether the remedy sought by Seila Law was purely academic. She noted that the CID in question, while perhaps issued by a director subject to the provision in question, was subsequently ratified by the acting director, an individual who was subject to removal by the president at-will. If that was the case, Ginsburg posited, then the validity of this CID is not a live dispute.

Justice Sonia Sotomayor took issue with the petitioner's argument that the CFPB was unprecedented. She noted that both the Office of Special Counsel and the Social Security Administration are governed by single heads subject to limitation on removal. She also agreed with Ginsburg that perhaps Seila Law was not the appropriate entity to challenge the removal provision, "It seems to me that the person who should be complaining is the president, not your client."

Chief Justice John Roberts initially appeared sympathetic to the respondents, "I don't think we've done this in prior cases, but wouldn't the normal principles of constitutional avoidance suggest that we might want to scrutinize a little bit how rigorous a limitation that is before we get to the point of striking down the statute?" But, as argument progressed, he became more and more troubled with the existing standard for removal and having the court become embroiled in a political battle over the intent and reasoning of a president removing a director under the premise of what constitutes inefficiency, neglect of duty or malfeasance in office.

Justice Brett Kavanaugh, who, as a circuit court judge, had previously written a strongly worded dissent in an en banc decision by the U.S. Court of Appeals for the D.C. Circuit upholding the constitutionality of the CFPB, reflected that severability of the provision appeared to be the appropriate remedy. In taking a textual approach, Kavanaugh explained that Congress had specifically established a severability provision in the event any section was deemed unconstitutional. He did not feel the Supreme Court should ignore what Congress had written. He was also clearly uncomfortable with saddling a president with a director who was appointed by a predecessor and could last well into the new president's term, particularly when the existing removal language was ill-defined under the law.

But the justices were even more skeptical with the arguments presented by the court-appointed amicus counsel. Counsel contended that the existing standard could be interpreted as something more than an at-will appointment, but less than a stringent for-cause threshold. "It depends a little bit about what … inefficiency, neglect of duty, and malfeasance mean. … If that's something that basically means that you have to have a very high standard before you can remove somebody, then maybe there is more of a constraint in that situation. If it means something slightly less, there may be less of a constraint and you're not drawing on a blank slate in that regard."

Justice Neil Gorsuch invoked the post-Civil War era Tenure Of Office Act as a comparison on the unconstitutional reach of Congress in restricting a president's ability remove executive officers. "What if Congress tomorrow revived the Tenure Of Office Act … and said presidents can't remove without a whole bunch of conditions, not Senate approval, OK, but something else that looks a lot like that. … Wouldn't that be a problem with the Constitution? … How do we distinguish this case from that one?"

Justice Samuel Alito also had additional concerns about defining the "watered-down" interpretation of the existing language. He was concerned with just how far the court needed to go to define the language sufficiently in order to provide guidance for future presidents and courts while keeping it constitutional. Roberts joined in the peril this presented, "If then we're saying, well, the standard is more flexible, it sounds to me like that's a dispute that's going to be presented to the courts, which would be the worst of all possible scenarios."

Justice Elena Kagan went in a different direction during oral argument. She expressed the opinion that perhaps the conflict derived not from the removal of the director, but from the nature of the appointment and length of term. She suggested that it should be left to the political branches of government to decide on the structure of the bureau, not the court.

At no time did the Supreme Court seriously address striking the entire statute. The alignment of the justices seemed to forecast a narrow majority in favor of eliminating the restrictions on presidential removal, and to simply allow the CFPB continue with a director terminable at-will. It also appeared unlikely that Seila Law would get the result it wanted—the termination of the enforcement action against it.

Richard J. Perr is the co-managing partner of the Philadelphia office of Kaufman Dolowich & Voluck. He is the chair of the firm's consumer financial services practice group and a past president of ACA International, the Association of Credit and Collection Professionals.