U.S. Supreme Court Rules That President Has Authority to Remove CFPB Director

Paul, Weiss represented Seila Law LLC in the landmark decision by the Supreme Court in Seila Law v. Consumer Financial Protection Bureau.

In a win for our client, the Court held in a 5-4 decision that the president has the authority to fire at will the director of the CFPB. The Court remedied that constitutional violation by striking the provision barring the president from removing the sole director except for cause, while leaving intact the rest of the statute that created the agency.

Our client, a California law firm that provides debt-related legal services, filed suit in 2017 challenging the Bureau’s structure after it was investigated by the CFPB for misleading financial practices. Unlike traditional independent agencies headed by multi-member boards or commissions, the CFPB is led by a single director, appointed by the president with the advice and consent of the Senate. Paul, Weiss was retained by Seila Law for the Supreme Court appeal after it lost its appeal at the Ninth Circuit.

In its brief, the Paul, Weiss team argued that the leadership by a single individual removable only for cause violates the separation of powers, noting that precedents upholding limits on presidential power to remove officials on multimember commissions and independent counsel were not controlling and that the Court “has never upheld the constitutionality of an independent agency that exercises significant executive authority and is headed by a single person.” Kannon Shanmugam presented oral argument on March 3.

In his opinion for the majority, Chief Justice John Roberts echoed many of our arguments, writing that “while we need not and do not revisit our prior decisions allowing certain limitations on the President’s removal power, there are compelling reasons not to extend those precedents to the novel context of an independent agency led by a single Director. Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control.”

The decision is widely viewed as among the most important separation-of-powers decisions in recent years, with the outcome potentially having significant implications for the CFPB and other independent agencies, as well as for fundamental separation-of-powers principles.

The Paul, Weiss team included litigation partner Kannon Shanmugam.