On February 16, 2017, the D.C. Circuit vacated its decision in PHH Corp. v. CFPB, No. 15-1177, and ordered that the case be reheard en banc (meaning reheard by all 11 judges on the court).
The vacated opinion held that the structure of the Consumer Financial Protection Bureau was unconstitutional under the Appointments Clause of Article II of the Constitution because it permitted the President to remove the Director only “for cause.” Article II provides that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States, whose Appointments are not herein otherwise provided by, and which shall be established by Law; but the Congress may by Law vest the Appointment of inferior Officers, as they think proper, in the President alone . . . or in the Heads of Departments.”
Because the Director of the CFPB is appointed as an “Officer” subject to the advice and consent of the Senate, the Panel reasoned that the power to appoint implies the power to replace for any reason, including the fact that the President does not agree with the Director’s policies. The panel, therefore, held the “for cause” provision unconstitutional. The decision did not otherwise affect the operation of the CFPB.
On the same day, the D.C. Circuit vacated its decision in Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016) and ordered en banc review. There, the panel held that the SEC’s appointment of administrative law judges does not violate the Appointments Clause because they are merely “employees” of the SEC. The panel came to this conclusion, in part, because the decisions of ALJ’s are advisory only; their decisions have binding effect only where the Commissioners of the SEC, who are “Officers” appointed by the President with the advice and consent of the Senate, agree with and adopt the ALJ’s reasoning.
The court’s order vacating the panel decision in PHH Corp. v. CFPB directs the parties to address “if the en banc court . . . concludes in [Lucia] that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case [PHH Corp. v. CFPB].” Briefing will take place in March and early April, with oral argument scheduled for May 24th.
Regardless of the answer to that question, the court’s vacation of PHH Corp. v. CFPB provides Director Cordray with greater protection from being fired by the Trump Administration because, by vacating the panel’s decision, the “for cause” provision in the CFPB statute remains in effect—at least until the final decision of the full D.C. Circuit.