Historical Overview: Delegation of Legislative Power

Separation of Powers

The Constitution’s framers designed a government with three separate branches: executive, legislative, and judicial. The branches were meant to serve different roles and carry out distinct tasks. Each branch was supposed to act independently of the others and to “check” and “balance” the powers of the other two branches. Why, then, are executive branch agencies empowered to make regulations with the force of legislation and to adjudicate orders with binding legal consequences? Agencies’ activities seem to violate separation of powers principles.

These days, the Supreme Court does not rigidly enforce separation of powers principles. For instance, the Court allows Congress to delegate legislative authority to agencies. But the Court has not always treated Congress’s delegation of legislative authority to agencies so permissively. In phases where the Court strictly enforces the separation of powers (for instance, when the Supreme Court struck down President Truman’s order directing the Secretary of Commercise to seize and operate the nations’ steel mills), the Court applies the Constitution’s separation of powers wording literally, considering the framers’ text over the practicalities of the moment. 

In phases where the Court is not so strict about separating the branches’ powers, the Court focuses more on the facts of the matters, relying on “common sense” and pragmatic problem solving and less on theoretical Constitutional textualism concepts. Under this “functional approach” the Court looks to see whether one branch has overstepped or commingles powers in violation of the Constitution by using a “core function” test. The “core function” test allows for some commingling of powers, so long as one branch does not jeopardize a “core function” of another branch. 

Delegating Legislative Powers

The Supreme Court’s treatment of Congress’s delegation of power to agencies has changed over time. The Supreme Court’s first ever case about delegation was the Brig Aurora case in 1813. The court decided that Congress could authorize the President to lift a trade embargo against France and England when the countries stopped violating the “natural commerce” of the U.S. The Court explained that the statute did not violate nondelegation requirements because Congress developed the policy and requirements, and merely authorized the executive to act only when a specific “named contingency” happened. 

In 1928, the Supreme Court heard J.W. Hampton, Jr. & Co. v. United States, a case where Congress authorized the President to revise specific tariffs, but only when the revision was necessary to equalize production costs in the U.S. and a competing country. The Court replaced the “named contingency” test with an “intelligible principle” test. It decided that the delegation of authority was permissible because Congress established an intelligible principle that guided the executive branch, limiting and guiding its authority.

The Court changed its approach to legislative delegation in the 1930’s, reacting to President Franklin Roosevelt’s sweeping New Deal. Roosevelt’s New Deal directed Congress to delegate authority to a slew of agencies developed to stimulate the economy and workforce after the 1929 stock market crash. The New Deal is considered the starting point of the modern federal administrative system. The New Deal legislative agenda led to a proliferation of federal agencies and programs. In response to the sweeping use of Congressional delegation, the Court began to take a more restrictive approach, applying stricter nondelegation principles. In 1935 the Court struck down parts of the National Industrial Recovery Act, a statute authorizing the President to regulate industry wages and prices, as unconstitutional in Panama Refining Co. v. Ryan and A.L.A. Schechter Poultry Corp. v. United States. 

The Court’s decisions threatened to stymie the ambitious New Deal legislative agenda, so President Franklin Roosevelt proposed a Court Packing Plan. He threatened to add an additional justice to the Court for each justice over seventy years old to alter the Court’s composition and influence its decisions. The plan was never enacted, but the Court did change its stance on nondelegation, adopting a more accepting stance on legislative delegations of power. Since the 1930’s, the Court has found that all of the legislation under its review complies with the nondelegation doctrine. Whitman v. American Trucking Associations, Inc. illustrates this current take on legislative delegations of power.

Whitman v. American Trucking Associations, Inc.

531 U.S. 457 (2001)

Justice Scalia, delivered the opinion of the Court.

These cases present the following [question:] Whether § 109(b)(1) of the Clean Air Act (CAA) delegates legislative power to the Administrator of the Environmental Protection Agency (EPA). 

Section 109(a) of the CAA requires the Administrator of the EPA to promulgate [National Ambient Air Quality Standards] NAAQS for [certain air pollutants]. Once a NAAQS has been promulgated, the Administrator must review the standard (and the criteria on which it is based) “at five-year intervals” and make “such revisions . . . as may be appropriate.” These cases arose when, on July 18, 1997, the Administrator [Whitman] revised the NAAQS for particulate matter and ozone. American Trucking Associations, Inc. [...] challenged the new standards [...]

The District of Columbia Circuit [...] agreed with the respondents that § 109(b)(1) delegated legislative power to the Administrator in contravention of the United States Constitution, Art. I, § 1, because it found that the EPA had interpreted the statute to provide no “intelligible principle” to guide the agency’s exercise of authority. The court thought, however, that the EPA could perhaps avoid the unconstitutional delegation by adopting a restrictive construction of § 109(b)(1), so instead of declaring the section unconstitutional the court remanded the NAAQS to the agency [...]

Section 109(b)(1) of the CAA instructs the EPA to set “ambient air quality standards the attainment and maintenance of which in the judgment of the Administrator, based on [the] criteria [documents of § 108] and allowing an adequate margin of safety, are requisite to protect the public health.” The Court of Appeals held that this section as interpreted by the Administrator did not provide an “intelligible principle” to guide the EPA’s exercise of authority in setting NAAQS. “[The] EPA,” it said, “lack[ed] any determinate criteria for drawing lines. It has failed to state intelligibly how much is too much.” The court hence found that the EPA’s interpretation (but not the statute itself) violated the nondelegation doctrine. We disagree.

In a delegation challenge, the constitutional question is whether the statute has delegated legislative power to the agency. Article I, § 1, of the Constitution vests “[a]ll legislative Powers herein granted . . . in a Congress of the United States.” This text permits no delegation of those powers, and so we repeatedly have said that when Congress confers decisionmaking authority upon agencies Congress must “lay down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform.” J. W. Hampton, Jr., & Co. v. United States, 276 U. S. 394, 409 (1928). We have never suggested that an agency can cure an unlawful delegation of legislative power by adopting in its discretion a limiting construction of the statute [...] The idea that an agency can cure an unconstitutionally standardless delegation of power by declining to exercise some of that power seems to us internally contradictory. The very choice of which portion of the power to exercise—that is to say, the prescription of the standard that Congress had omitted—would itself be an exercise of the forbidden legislative authority. Whether the statute delegates legislative power is a question for the courts, and an agency’s voluntary self denial has no bearing upon the answer.

We agree with the Solicitor General that the text of § 109(b)(1) of the CAA at a minimum requires that “[f]or a discrete set of pollutants and based on published air quality criteria that reflect the latest scientific knowledge, [the] EPA must establish uniform national standards at a level that is requisite to protect public health from the adverse effects of the pollutant in the ambient air.” Requisite, in turn, “mean[s] sufficient, but not more than necessary.” These limits on the EPA’s discretion are strikingly similar to the ones we approved in Touby v. United States, 500 U. S. 160 (1991), which permitted the Attorney General to designate a drug as a controlled substance for purposes of criminal drug enforcement if doing so was “‘necessary to avoid an imminent hazard to the public safety.’” They also resemble the Occupational Safety and Health Act of 1970 provision requiring the agency to “‘set the standard which most adequately assures, to the extent feasible, on the basis of the best available evidence, that no employee will suffer any impairment of health’”—which the Court upheld in Industrial Union Dept., AFL—CIO v. American Petroleum Institute, 448 U. S. 607, 646 (1980) [...]

The scope of discretion § 109(b)(1) allows is in fact well within the outer limits of our nondelegation precedents. In the history of the Court we have found the requisite “intelligible principle” lacking in only two statutes, one of which provided literally no guidance for the exercise of discretion, and the other of which conferred authority to regulate the entire economy on the basis of no more precise a standard than stimulating the economy by assuring “fair competition.” See Panama Refining Co. v. Ryan, 293 U. S. 388 (1935); A. L. A. Schechter Poultry Corp. v. United States, 295 U. S. 495 (1935). We have, on the other hand, upheld the validity of § 11(b)(2) of the Public Utility Holding Company Act of 1935, which gave the Securities and Exchange Commission authority to modify the structure of holding company systems so as to ensure that they are not “unduly or unnecessarily complicate[d]” and do not “unfairly or inequitably distribute voting power among security holders.” American Power & Light Co. v. SEC, 329 U. S. 90, 104 (1946). We have approved the wartime conferral of agency power to fix the prices of commodities at a level that “‘will be generally fair and equitable and will effectuate the [in some respects conflicting] purposes of th[e] Act.’” Yakus v. United States, 321 U. S. 414, 420, 423-426 (1944). And we have found an "intelligible principle" in various statutes authorizing regulation in the “public interest.” See, e. g., National Broadcasting Co. v. United States, 319 U. S. 190, 225-226 (1943) (Federal Communications Commission’s power to regulate airwaves); New York Central Securities Corp. v. United States, 287 U. S. 12, 24-25 (1932) (Interstate Commerce Commission’s power to approve railroad consolidations). In short, we have “almost never felt qualified to second-guess Congress regarding the permissible degree of policy judgment that can be left to those executing or applying the law.” Mistretta v. United States, 488 U. S. 361, 416 (1989) (majority opinion).

It is true enough that the degree of agency discretion that is acceptable varies according to the scope of the power congressionally conferred. While Congress need not provide any direction to the EPA regarding the manner in which it is to define “country elevators,” which are to be exempt from newstationary-source regulations governing grain elevators, see 42 U.S.C. § 7411(i), it must provide substantial guidance on setting air standards that affect the entire national economy. But even in sweeping regulatory schemes we have never demanded, as the Court of Appeals did here, that statutes provide a “determinate criterion” for saying “how much [of the regulated harm] is too much.” In Touby, for example, we did not require the statute to decree how “imminent” was too imminent, or how “necessary” was necessary enough, or even—most relevant here—how “hazardous” was too hazardous. Similarly, the statute at issue in Lichter authorized agencies to recoup “excess profits” paid under wartime Government contracts, yet we did not insist that Congress specify how much profit was too much. It is therefore not conclusive for delegation purposes that, as respondents argue, ozone and particulate matter are “nonthreshold” pollutants that inflict a continuum of adverse health effects at any airborne concentration greater than zero, and hence require the EPA to make judgments of degree. “[A] certain degree of discretion, and thus of lawmaking, inheres in most executive or judicial action.” Mistretta v. United States, supra. Section 109(b)(1) of the CAA, which to repeat we interpret as requiring the EPA to set air quality standards at the level that is “requisite”—that is, not lower or higher than is necessary—to protect the public health with an adequate margin of safety, fits comfortably within the scope of discretion permitted by our precedent.

We therefore reverse the judgment of the Court of Appeals remanding for reinterpretation that would avoid a supposed delegation of legislative power [...]

Justice Stevens, with whom Justice Souter joins, concurring in part and concurring in the judgment.

Section 109(b)(1) delegates to the Administrator of the Environmental Protection Agency (EPA) the authority to promulgate national ambient air quality standards (NAAQS). In Part III of its opinion, the Court convincingly explains why the Court of Appeals erred when it concluded that § 109 effected “an unconstitutional delegation of legislative power.” I wholeheartedly endorse the Court’s result and endorse its explanation of its reasons, albeit with the following caveat.

The Court has two choices. We could choose to articulate our ultimate disposition of this issue by frankly acknowledging that the power delegated to the EPA is “legislative” but nevertheless conclude that the delegation is constitutional because adequately limited by the terms of the authorizing statute. Alternatively, we could pretend, as the Court does, that the authority delegated to the EPA is somehow not “legislative power.” Despite the fact that there is language in our opinions that supports the Court's articulation of our holding, I am persuaded that it would be both wiser and more faithful to what we have actually done in delegation cases to admit that agency rulemaking authority is “legislative power.” [...]

My view is not only more faithful to normal English usage, but is also fully consistent with the text of the Constitution. In Article I, the Framers vested “All legislative Powers” in the Congress, Art. I, § 1, just as in Article II they vested the “executive Power” in the President, Art. II, § 1. Those provisions do not purport to limit the authority of either recipient of power to delegate authority to others [...] Surely the authority granted to members of the Cabinet and federal law enforcement agents is properly characterized as “Executive” even though not exercised by the President. 

It seems clear that an executive agency’s exercise of rulemaking authority pursuant to a valid delegation from Congress is “legislative.” As long as the delegation provides a sufficiently intelligible principle, there is nothing inherently unconstitutional about it [...] I would hold that when Congress enacted § 109, it effected a constitutional delegation of legislative power to the EPA.

While Congress has a lot of leeway to delegate legislative authority to agencies, it has little ability to disapprove of agency decisions. Imagine if Congress could both delegate authority to agencies to make decisions, and then change the outcome of those decisions after they are made. That would be a huge amount of power for one branch of government (the legislature) to have.

Congress has passed some limited legislation granting itself the ability to review agency rulemaking. The Congressional Review Act of 1996 gives Congress a chance to disapprove of an agency’s final rule. Under this law, Congress can pass a joint resolution of disapproval within sixty days after Congress receives a final rule. Congress cannot suggest amendments to the rule, but it can strike down the rule if the resolution satisfies bicameralism and presentment requirements (if both houses pass the resolution and the President signs it). Because both houses of Congress and the President have to agree to overturn regulation through the Congressional Review Act, it will likely only be invoked successfully to overturn regulations finalized after elections that hails in a Congress controlled by the same party as a new President.

For instance, before 2017, the Congressional Review Act had only been invoked once to overturn an agency regulation. However, after Trump was elected in 2016, the Republican House and Congress swiftly passed fifteen joint resolutions to overturn Obama-era regulations. In the wake of those resolutions, several legislators tried to get rid of the Congressional Review Act, but did not succeed. 

While the Supreme Court has not assessed the constitutionality of the Congressional Review Act, the Supreme Court has declared legislative veto power (the ability for Congress to veto agency decisions) unconstitutional in Immigration and Naturalization Service v. Chadha.

Immigration and Naturalization Service v. Chadha

462 U.S. 919 (1983)

CHIEF JUSTICE BURGER delivered the opinion of the Court.

[This case] presents a challenge to the constitutionality of the provision in § 244(c)(2) of the Immigration and Nationality Act, authorizing one House of Congress, by resolution, to invalidate the decision of the Executive Branch, pursuant to authority delegated by Congress to the Attorney General of the United States, to allow a particular deportable [immigrant] to remain in the United States.

Chadha is an East Indian who was born in Kenya and holds a British passport. He was lawfully admitted to the United States in 1966 on a nonimmigrant student visa. His visa expired on June 30, 1972. On October 11, 1973, the District Director of the Immigration and Naturalization Service [“INS”] ordered Chadha to show cause why he should not be deported for having “remained in the United States for a longer time than permitted.” [A] deportation hearing was held before an Immigration Judge on January 11, 1974. Chadha conceded that he was deportable for overstaying his visa and the hearing was adjourned to enable him to file an application for suspension of deportation [The INS Immigration Judge ordered Chadha’s deportation to be suspended on June 25, 1974. The Immigration Judge found that Chadha met the requirements of § 244(a)(1): he had resided continuously in the United States for over seven years, was of good moral character, and would suffer "extreme hardship" if deported.]

On December 12, 1975, Representative Eilberg, Chairman of the Judiciary Subcommittee on Immigration, Citizenship, and International Law, introduced a resolution opposing “the granting of permanent residence in the United States to [six] aliens,” including Chadha [...] The resolution [passed] Since the House action was pursuant to § 244(c)(2), the resolution was not treated as an Art. I legislative act; it was not submitted to the Senate or presented to the President for his action. [On November 8, 1976, Chadha was ordered deported pursuant to the House action. After exhausting his administrative remedies, Chadha filed a petition for review of the deportation order in the United States Court of Appeals for the Ninth Circuit.]

Explicit and unambiguous provisions of the Constitution prescribe and define the respective functions of the Congress and of the Executive in the legislative process. Since the precise terms of those familiar provisions are critical to the resolution of these cases, we set them out verbatim. Article I provides:

“All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.” Art. I, § 1. (Emphasis added.)

“Every Bill which shall have passed the House of Representatives and the Senate, shall, before it becomes a law, be presented to the President of the United States . . . .” Art. I, § 7, cl. 2. (Emphasis added.)

“Every Order, Resolution, or Vote to which the Concurrence of the Senate and House of Representatives may be necessary (except on a question of Adjournment) 946*946 shall be presented to the President of the United States; and before the Same shall take Effect, shall be approved by him, or being disapproved by him, shall be repassed by two thirds of the Senate and House of Representatives, according to the Rules and Limitations prescribed in the Case of a Bill.” Art. I, § 7, cl. 3. (Emphasis added.) [...]

The Presentment Clauses

The records of the Constitutional Convention reveal that the requirement that all legislation be presented to the President before becoming law was uniformly accepted by the Framers. Presentment to the President and the Presidential veto were considered so imperative that the draftsmen took special pains to assure that these requirements could not be circumvented [...] 

The decision to provide the President with a limited and qualified power to nullify proposed legislation by veto was based on the profound conviction of the Framers that the powers conferred on Congress were the powers to be most carefully circumscribed. It is beyond doubt that lawmaking was a power to be shared by both Houses and the President [...] 

The President’s role in the lawmaking process also reflects the Framers’ careful efforts to check whatever propensity a particular Congress might have to enact oppressive, improvident, or ill-considered measures [...] 

Bicameralism

The bicameral requirement of Art. I, §§ 1, 7, was of scarcely less concern to the Framers than was the Presidential veto and indeed the two concepts are interdependent. By providing that no law could take effect without the concurrence of the prescribed majority of the Members of both Houses, the Framers reemphasized their belief, already remarked upon in connection with the Presentment Clauses, that legislation should not be enacted unless it has been carefully and fully considered by the Nation's elected officials [...] 

It emerges clearly that the prescription for legislative action in Art. I, §§ 1, 7, represents the Framers’ decision that the legislative power of the Federal Government be exercised in accord with a single, finely wrought and exhaustively considered, procedure [...]

Examination of the action taken here by one House pursuant to § 244(c)(2) reveals that it was essentially legislative in purpose and effect. In purporting to exercise power defined in Art. I, § 8, cl. 4, to “establish an uniform Rule of Naturalization,” the House took action that had the purpose and effect of altering the legal rights, duties, and relations of persons, including the Attorney General, Executive Branch officials and Chadha, all outside the Legislative Branch. Section 244(c)(2) purports to authorize one House of Congress to require the Attorney General to deport an individual alien whose deportation otherwise would be canceled under § 244. The one-House veto operated in these cases to overrule the Attorney General and mandate Chadha’s deportation; absent the House action, Chadha would remain in the United States. Congress has acted and its action has altered Chadha’s status [...]

The nature of the decision implemented by the one-House veto in these cases further manifests its legislative character. After long experience with the clumsy, time-consuming private bill procedure, Congress made a deliberate choice to delegate to the Executive Branch, and specifically to the Attorney General, the authority to allow deportable aliens to remain in this country in certain specified circumstances. It is not disputed that this choice to delegate authority is precisely the kind of decision that can be implemented only in accordance with the procedures set out in Art. I. Disagreement with the Attorney General’s decision on Chadha’s deportation — that is, Congress’ decision to deport Chadha — no less than Congress’ original choice to delegate to the Attorney General the authority to make that decision, involves determinations of policy that Congress can implement in only one way; bicameral passage followed by presentment to the President. Congress must abide by its delegation of authority until that delegation is legislatively altered or revoked [...]

Clearly, when the [Constitution’s] Draftsmen sought to confer special powers on one House, independent of the other House, or of the President, they did so in explicit, unambiguous terms. These carefully defined exceptions from presentment and bicameralism underscore the difference between the legislative functions of Congress and other unilateral but important and binding one-House acts provided for in the Constitution. These exceptions are narrow, explicit, and separately justified; none of them authorize the action challenged here. On the contrary, they provide further support for the conclusion that congressional authority is not to be implied and for the conclusion that the veto provided for in § 244(c)(2) is not authorized by the constitutional design of the powers of the Legislative Branch.

Since it is clear that the action by the House under § 244(c)(2) was not within any of the express constitutional exceptions authorizing one House to act alone, and equally clear that it was an exercise of legislative power, that action was subject to the standards prescribed in Art. I [...] 

We hold that the congressional veto provision in § 244(c)(2) is severable from the Act and that it is unconstitutional.

The executive branch has several methods for overseeing and managing its agencies. Presidential directives instructing agencies on how to carry out their work are called Executive Orders. Executive orders are management instructions to agency administrators, similar to instructions bosses give their employees in private companies. Like other employees, agency administrators follow Executive Orders to avoid being fired. Executive Orders generally persist until another President issues a new Order to replace the old one.

A 1981 Executive Order from President Reagan directed executive agencies to assess the benefits and costs of “major” rules. Reagan directed the Office of Information and Regulatory Affairs (“OIRA”) to oversee agency compliance with the Order. OIRA was created by Congress as part of the Office of Management and Budget (“OMB”) in the Paperwork Reduction Act of 1980. The OMB and OIRA are in the Executive Office of the President and considered closely connected to the policies of the President. OIRA was created to assess agencies’ proposed information collection schemes to ensure that regulated parties don’t get mired in paperwork. In 1993, President Bill Clinton ordered OIRA to focus on reviewing “economically significant” agency rules in Executive Order 12866. Clinton told OIRA to follow certain principles in its regulatory assessment, like ensuring agencies 1) considered economic incentive schemes as alternatives to direct regulation, 2) designed regulations in the most cost-effective manner to achieve its objectives, and 3) assessed both the costs and the benefits of the regulation and determined that the benefits of the justify the costs. 

To comply with OIRA requriements, agencies were required to submit proposed rules to OIRA before they were published for notice and comment in the Federal Register and again before they publish a final rule. In the article below, Lisa Heinzerling, an EPA administrator from the Obama Administration, describes her experiences with OIRA review.

Lisa Heinzerling, Inside EPA: A Former Insider’s Reflections on the Relationship Between the Obama EPA and the Obama White House

The Nineteenth Annual Lloyd K. Garrison Lecture

31 Pace Envtl. L. Rev. 325 (2014)

I will be discussing the relationship between the Environmental Protection Agency (“EPA”) and the White House. I will focus specifically on the role that the Office of Information and Regulatory Affairs (“OIRA”), within the Office of Management and Budget (“OMB”), plays in reviewing the EPA’s regulatory output.

As I will explain, OIRA’s actual practice in reviewing agency rules departs considerably from the structure created by the executive order governing OIRA’s process of regulatory review. The distribution of decision-making authority is ad hoc and chaotic rather than predictable and ordered; the rules reviewed are mostly not economically significant but rather, in many cases, are merely of special interest to OIRA staffers; rules fail OIRA review for a variety of reasons, some extra-legal and some simply mysterious; there are no longer any meaningful deadlines for OIRA review; and OIRA does not follow - or allow agencies to follow - most of the transparency requirements of the relevant executive order.

Describing the OIRA process as it actually operates today goes a long way toward previewing the substantive problems with it. The process is utterly opaque. It rests on assertions of decision-making authority that are inconsistent with the statutes the agencies administer. The process diffuses power to such an extent - acceding, depending on the situation, to the views of other Cabinet officers, career staff in other agencies, White House economic offices, members of Congress, the White House Chief of Staff, OIRA career staff, and many more - that at the end of the day, no one is accountable for the results it demands (or blocks, in the case of the many rules stalled during the OIRA process). And, through it all, environmental rules take a particular beating, from the number of such rules reviewed to the scrutiny they receive to the changes they suffer in the course of the process [...]

Misunderstandings of the OIRA process abound. Too often these misunderstandings are perpetuated by, or not contradicted by, the very personnel who have been involved in the process. Indeed, after I finished a stint as the head of the EPA office responsible for acting as the primary EPA liaison to OIRA, I did not write at any length about my experiences with OIRA review. Partly out of continuing loyalty to the administration that had made my time in government possible, partly out of respect for the sensitivity of interactions between high-level government officers, and partly out of a sense of sheer futility, I had resolved to move on to other topics. But when accounts of OIRA’s role in the Obama administration began to emerge from other quarters, and when these accounts, in many respects, did not jibe with my own experience, I decided to resurface and to describe the OIRA process from my perspective. Hence the account that follows.

I. THE HISTORY OF WHITE HOUSE REVIEW

It will be useful first to give a brief history of White House review of agencies’ regulatory actions. Some form of centralized review of agency action has been with us for decades. Such review took place episodically in the Nixon, Ford, and Carter administrations. But, it was during the presidency of Ronald Reagan that the practice of regulatory review began to take on the shape it has today.

A. Executive Order 12,291

In one of his earliest acts as President, Ronald Reagan issued an executive order - Executive Order 12,291- that gave centralized review more systematized form in two respects, First, Executive Order (“EO”) 12,291 put a specific office - OMB - in charge of reviewing agency actions. Second, it adopted cost-benefit analysis as the governing framework for this review [...]

[The] order’s legality rested on the premise that the centralized reviewers (OMB and a newly created Task Force on Regulatory Relief) would only supervise, and not displace, the exercise of discretion given to the agencies by statute. Office of Legal Counsel [legal advisor to the President] wrote: “[T]he fact that the President has both constitutional and implied statutory authority to supervise decision-making by executive agencies . . . suggest[s] . . . that supervision is more readily justified when it does not purport wholly to displace, but only to guide and limit, discretion which Congress has allocated to a particular subordinate official. A wholesale displacement might be held inconsistent with the statute vesting authority in the relevant official. . . The order does not empower the [OMB] Director or the Task Force to displace the relevant agencies in discharging their statutory functions or in assessing and weighing the costs and benefits of proposed actions.”

OLC’s opinion does not state that an order displacing the agencies’ discretion would certainly be illegal. But it does interpret EO 12,291 not to permit such displacement and it does suggest a potential legal problem with such displacement. Reading only EO 12,291 and the OLC’s opinion on it, one would conclude that agencies retained the decision-making discretion they were given by the statutes they are charged with administering.

In practice, though, it was not that simple. During the Reagan years, critics charged that OIRA did indeed displace - and not merely supervise - agencies’ decision-making discretion. In addition, OIRA’s process of review frequently delayed agency rules for extended periods. The process also at times degenerated into one in which OIRA served as a conduit for the views of industry on particular regulatory actions. This feature of the process was especially troubling insofar as the process was opaque. Only in 1986 did OIRA begin to make public the documents shared by outside parties with OIRA during its review. Even so, the bulk of the process - which agency actions went to OIRA, what happened to them while they were there, who made the decisions - was closed off to the public. Moreover, the cost-benefit lens through which OIRA viewed agency rules proved to skew against some kinds of rules, in particular environmental rules, since so many of the benefits of environmental rules are difficult or impossible to quantify and monetize, and since so many of these benefits occur in the future while the settled practice of cost-benefit analysis is to steeply discount future consequences.

Such critiques dogged the OIRA review process under EO 12,291 through the Reagan years and into the presidency of George H.W. Bush. By the time Bill Clinton came into office in 1993, many were hoping for change. Within months of taking office, President Clinton responded with a new executive order on regulatory review, EO 12,866.

B. Executive Order 12,866

Although EO 12,866 preserved the status quo in that it continued to require centralized White House review of agency actions under a cost-benefit framework, it also reformed several specific features of this review that had proved troublesome. Taking on the issue of displacement, an early passage in EO 12,866 “reaffirm[ed] the primacy of Federal agencies in the regulatory decision-making process.” At the same time, however, the order for the first time explicitly stated that if a conflict arose between OIRA and an agency over a particular matter that could not be resolved by the OMB Director and the agency head, it would be the President (or the Vice-President acting on the President’s behalf) who would settle the dispute - and make the “decision with respect to the matter.” [...] 

C. Executive Order 13,563

In January 2011, a new executive order on regulatory review finally emerged. The single most notable fact about the new order, EO 13,563, is how not-new it was; much of the order simply repeats, verbatim, the language of EO 12,866.

Another striking fact about the order is how weakly responsive it is to President Obama’s own directives in his presidential memorandum of January 2009: EO 13,563 does not say a word about “the relationship between OIRA and the agencies” or “methods of ensuring that regulatory review does not produce undue delay.” On “disclosure and transparency,” the order says nothing about disclosure and transparency related to OIRA, but focuses only on the agencies and here simply advises them to place materials online and in an open format wherever possible [...]

II. THE COMMON LAW OF EXECUTIVE ORDER 13,563

The common law of EO 13,563 determines the most important features of the current process of regulatory review: who is the decision maker, what is reviewed, why particular actions fail regulatory review, when actions emerge from review, and what is disclosed about the process. If one has read EOs 12,866 and 13,563, which in theory govern this process, surprises are in store once we look at the way the process actually operates.

A. Who Decides?

[...] EO 12,866 puts OIRA initially in charge of the process of regulatory review. But if, according to EO 12,866, a dispute arises between OIRA and the action agency, the dispute is to be resolved through a highly specified process that involves recommendations from the Vice-President and an ultimate decision by the President or by the Vice-President acting on his behalf.

This is not how regulatory review works today. In my two years at EPA, I do not recall ever hearing of Vice-Presidential involvement in a regulatory matter. Moreover, the OIRA process in the Obama administration was not structured to funnel disputes between OIRA and the agencies to Vice-President Biden for his recommendations. It was far messier and more ill-defined than that. From my perspective, it was often hard to tell who exactly was in charge of making the ultimate decision on an important regulatory matter.

A recent account of the OIRA process by former OIRA Administrator Cass Sunstein helps to explain this confusion as to some regulatory matters, but leaves a puzzle as to others. Sunstein states that OIRA’s primary role in the regulatory process is as an “information-aggregator” - compiling information from many actors in the executive branch and using that information to help get at the right regulatory result [...] Beyond the White House, Sunstein asserts that agencies other than the agency proposing a particular regulatory action also have a large influence on regulatory policy. Sometimes it is another Cabinet secretary who might have such influence; often, Sunstein says, it is career staff at another agency. Sometimes it is the Chief of Staff of the White House who plays the major role; sometimes it is a member of Congress. Sunstein extols the virtues of this system, arguing that the aggregation of input from all of these different sources produces better regulatory results [...] 

Sunstein’s account of the OIRA process at least helps me to understand why we were all so confused about exactly what the process was.

B. What Is Reviewed?

One domain in which OIRA’s powerful role is quite clear, however, is in the decisions about which regulatory actions OIRA will review. EO 12,866 states that OIRA may review not only economically significant actions, but also actions with a significant potential for interagency conflict or inconsistency and actions that raise “novel legal or policy issues.” In fact, most of the rules OIRA reviews are not economically significant. In the Obama administration so far, some 80 percent of the EPA rules that have been reviewed were not economically significant. Moreover, many of the rules under review lack any obvious interagency dimension. So how does OIRA come to review them?

While I was at EPA, we had a routinized process for determining what went to OIRA. Every three months or so, the Assistant Administrators of the program offices (air, water, solid waste and emergency response, chemical safety and pollution prevention) and I met with representatives from OIRA to go over the regulatory actions EPA planned to announce in the coming months. We offered our own opinion as to whether any given item warranted OIRA review. But the bottom line was that it was not our decision to make. If OIRA wanted to review something, OIRA reviewed it [...] 

C. Why Do Rules Fail?

One of the most vexing questions concerning regulatory review has to do with the basis on which regulatory actions fail this review. When a regulatory action goes to OIRA for review, it goes fully formed, reflecting the agency’s best judgment about the proper path in the relevant circumstances. EPA rules go to OIRA after an extensive period of internal development and review. In many cases, the rules have been under development for years, with dozens or more agency personnel working on them. In the case of the most significant rules, they have gone to the Administrator herself for initial selection of options and later for final review. It is a matter of some consequence, then, when OIRA does not allow such rules to issue, or requires substantial changes before they may issue.

One reason why OIRA might disapprove of an agency’s planned action is that it disagrees with the agency’s interpretation of the statute the agency is charged with administering. Notably, neither EO 12,866 nor EO 13,563 gives OIRA the authority to second-guess agencies’ interpretations of the statutes they administer. Indeed, both executive orders explicitly state that nothing in them permits a departure from existing law. Yet, in a post-Chevron world, that disclaimer means less than it seems. If a statute is ambiguous - or if OIRA believes that a statute is ambiguous - then perhaps OIRA has room to press an agency to change its interpretation of a statute it administers, without running afoul of the EOs’ injunction to follow existing law [...] 

I have argued elsewhere that agencies should not get deference under Chevron when an interpretation is foist upon them by OIRA; OIRA is not charged by Congress with interpreting the statutes the agencies administer, and OIRA does not have the expertise of the relevant agencies. But whatever one thinks about the legal consequences of an OIRA-driven agency interpretation, one must take note of the large degree of influence wielded by OIRA when one of the powers it asserts is to embed cost-benefit default principles into the regulatory process.

Another way rules can fail the OIRA review process is to fail cost-benefit analysis [...] 

If EPA [proposes] a rule that has much higher costs than benefits, that rule may not make it past OIRA. Among environmental rules, non-air rules fare the worst in a cost-benefit framework. Rules governing air pollution often produce relatively (or even very) high benefits in relation to costs on account of reductions in particulate matter. Indeed, according to OMB, in the last decade clean air rules have produced a majority of the total monetized benefits conferred by all of the major regulations in the federal government. Rules on water pollution, toxics, and hazardous waste contamination do not have a single category of benefits - like reductions in human mortality due to reductions in particulate matter - that makes it possible for them to clear the cost-benefit hurdle. These programs fare poorly in OIRA’s process of review. EPA’s proposal to regulate coal ash changed markedly while at OIRA, and has not seen the light of day since it was proposed. EPA initiatives on toxics have stalled at OIRA for years [...] 

D. When Does Review End (and Begin)?

The common law of 13,563 also determines the timelines under which OIRA operates. As discussed above, EO 13,563 explicitly reaffirms EO 12,866, which is the executive order that sets forth timelines for OIRA review: 10 days for pre-rule actions, 45 days for final rules on subjects already reviewed and little changed, 90 days for everything else [...] 

This is not the way the OIRA process now works. Many, many rules linger at OIRA long past the 90- or 120-day deadline. Many pre-rule actions stay long past 10 days. Some rules have been at OIRA for years [...]

To sum up, on the matter of deadlines, OIRA has broken entirely free from the constraints of EO 12,866. The 10-day, 45-day, and 90-day time limits on OIRA review perhaps survive as benchmarks, but nothing more. To maintain the fiction that deadlines still exist, OIRA extends review indefinitely at the “request” of agency heads - but these requests, in my experience, often are instigated by OIRA itself. To make matters worse, OIRA has fudged its own failure to meet the deadlines imposed by EO 12,866 by simply not “receiving” some regulatory packages until long after they are sent.

E. What Are We Told?

The last facet of the common law of EO 13,563 compounds the problems created by OIRA’s other innovations to the regulatory review process prescribed in EO 12,866: OIRA follows, and allows the agencies to follow, almost none of the disclosure requirements of EO 12,866 [...] 

OIRA does not explain in writing to agencies that items on their regulatory agenda do not fit with the President’s agenda. OIRA does not keep a publicly available log explaining when and by whom disputes between OIRA and the agencies were elevated. Indeed, when the first elevation of an EPA rule occurred in President Obama’s first term, I drafted a brief memo for the EPA’s docket explaining that elevation had occurred and noting the outcome. OIRA told me in no uncertain terms that the memo must not be made public. Moreover, except in one instance - President Obama’s direction to then-EPA Administrator Lisa Jackson to withdraw the final rule setting a new air quality standard for ozone - OIRA has not returned rules to agencies with a written explanation about why they have not passed OIRA review. Instead, as discussed above, OIRA simply hangs onto the rules indefinitely, and they wither quietly on the vine. This is how it comes to pass that a list of chemicals of concern or a workplace rule on crystalline silica lingers at OIRA for years.

Some agencies do post “before” and “after” versions of rules that have gone to OIRA. These redlined documents often feature hundreds of changes. There is nothing here like the “complete, clear, and simple manner” of disclosure contemplated by the Executive Order. There is also often no document that explains which changes were made at OIRA’s behest. Where, as Sunstein explains, changes might come from OIRA, from another White House office, from another Cabinet head, or from a career staffer in a separate agency, the failure to follow the Executive Order’s rules on transparency means that no one is ultimately accountable for the changes that occur. Who is responsible, for example, for the hundreds of technical changes made to the EPA’s scientific analyses of air quality rules? We simply do not know.

Appointment Powers 

The President is responsible for appointing Officers of the United States. Article II of the U.S. Constitution distinguishes “Officers of the United States” from “inferior Officers.” In this class, we will see how courts differentiate between Officers of the United States, which must be nominated by the President and confirmed by the Senate, and inferior Officers, who can be appointed by the President, Courts, or Department Heads, depending on what Congress decides. Article II, Section 2 of the U.S. Constitution defines the two categories of Officers this way:

-Officers of the United States: The President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges, of the Supreme Court, and all other Officers of the United States, whose appointments are not herein otherwise provided for, and which shall be established by law.”

-Inferior Officers: “Congress may by Law vest the appointment of such inferior Officers, as they think proper, in the President alone, and in the Courts of Law, or in the Heads of Departments.”

Lucia v. Securities and Exchange Commission demonstrates how the Supreme Court differentiates between Officers of the United States and inferior Officers to determine whether agency officers’ appointments violate the constitution.

Removal Powers

While the Constitution explicitly assigns appointment powers, it is silent about the power to remove Officers of the United States (“executive officers”) and inferior Officers. The Supreme Court has interpreted Article II, Section 2 to imply that the President has more power to remove officers without the advice and consent of Congress than to appoint them. While executive officers must be appointed with the advice and consent of the Senate, Congress “may not involve itself in the removal of officials performing executive functions.” However, the President’s removal power is not unlimited, and Congress can limit the President’s removal power by statute when there is good cause to do so.

Two cases in the early 1900’s grappled with the President’s removal powers. (These cases lay the groundwork for the cases we will read today.): 

Myers v. United States (1926) determined whether President Wilson could dismiss a postmaster without the Senate’s concurrence despite language in a federal law that provided that psotmasters could only be removed with “the advice and consent of the Senate.” The Court decided that the law unconstitutionally limited the President’s removal power, and that a postmaster could be dismissed without the advice and consent of the Senate. In its opinion, the Court reasoned that “the power to prevent the removal of an officer who has served under the President is different from the authority to consent or reject his appointment. When a nomination is made, it may be presumed that the Senate is, or may become, as well advised to the fitness of the nominee as the President, but in the nature of things the defects in ability or intelligence or loyalty in the administration of the laws of one who has served as an officer under the President are facts as to which the President, or his trusted subordinates, must be better informed than the Senate [...]” 

Myers seemed to grant unlimited removal power to the President. The Supreme Court Limited this power in Humphrey’s Executor v. United States (1935).   When President Franklin Roosevelt removed Commissioner William Humphrey of the Federal Trade Commission who had been appointed by the previous President, the Commissioner’s estate sued for back pay, alleging that Humphrey’s dismissal was illegal. 

In Humphrey’s Executor, the Court limited Roosevelt’s removal power, holding that he’d acted beyond his constitutional powers. President Roosevelt dismissed Humphrey because their views about trade diverged, and the President felt “the work of the Commission [could] be carried out most effectively” with personnel that he chose himself. However, the statute said that a Commissioner could only be removed for “inefficiency, neglect of duty or malfeasance in office.” 

The Humphrey Court distinguished this case from Myers, explaining that a postmaster is solely an executive office, where an FTC Commissioner has duties and powers related to legislative and judicial powers. The FTC was “created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specific duties as a legislative or as a judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the executive. It’s duties [...] must be free from executive control.” The Court reasoned that, in this case, the Commissioner’s role was both quasi-legislative and quasi-judicial. The Court must consider the “nature of the office” and limit the President’s removal powers when an office is performing duties that are legislative or judicial in nature.

We will read two cases, Morrison v. Olson and Seila Law v. Consumer Financial Protection Bureau, that demonstrate the limitations on the President’s removal powers.

Lucia v. Securities and Exchange Commission

138 S.Ct. 2044 (2018)

Justice KAGAN delivered the opinion of the Court.

[The Securities and Exchange Commission (“SEC” or “Commission”) has statutory authority to enforce the nation’s securities laws. One way it can do so is by instituting an administrative proceeding against an alleged wrongdoer. Typically, the Commission delegates the task of presiding over such a proceeding to an administrative law judge (ALJ). The SEC currently has five ALJs. Other staff members, rather than the Commission proper, selected them all. An ALJ assigned to hear an SEC enforcement action has the “authority to do all things necessary and appropriate” to ensure a “fair and orderly” adversarial proceeding. After a hearing ends, the ALJ issues an initial decision. The Commission can review that decision, but if it opts against review, it issues an order that the initial decision has become final. 

The SEC charged Raymond Lucia with violating certain securities laws and assigned ALJ Cameron Elliot to adjudicate the case. Following a hearing, Judge Elliot issued an initial decision concluding that Lucia had violated the law and imposing sanctions. On appeal to the SEC, Lucia argued that the administrative proceeding was invalid because Judge Elliot had not been constitutionally appointed. According to Lucia, SEC ALJs are “Officers of the United States” and thus subject to the Appointments Clause. Under that Clause, only the President, Courts of Law, or Heads of Departments can appoint such “Officers.” But none of those actors had made Judge Elliot an ALJ. The SEC and the Court of Appeals for the D.C. Circuit rejected Lucia's argument, holding that SEC ALJs are not “Officers of the United States,” but are instead mere employees—officials who are not subject to the Appointments Clause.]

The Appointments Clause of the Constitution lays out the permissible methods of appointing “Officers of the United States,” a class of government officials distinct from mere employees. Art. II, § 2, cl. 2. This case requires us to decide whether administrative law judges (ALJs) of the Securities and Exchange Commission (SEC or Commission) qualify as such “Officers.” In keeping with Freytag v. Commissioner, 501 U.S. 868 (1991), we hold that they do.

The SEC has statutory authority to enforce the nation’s securities laws. One way it can do so is by instituting an administrative proceeding against an alleged wrongdoer. By law, the Commission may itself preside over such a proceeding. But the Commission also may, and typically does, delegate that task to an ALJ. The SEC currently has five ALJs. Other staff members, rather than the Commission proper, selected them all. 

An ALJ assigned to hear an SEC enforcement action has extensive powers— the “authority to do all things necessary and appropriate to discharge his or her duties” and ensure a “fair and orderly” adversarial proceeding. Those powers “include, but are not limited to,” supervising discovery; issuing, revoking, or modifying subpoenas; deciding motions; ruling on the admissibility of evidence; administering oaths; hearing and examining witnesses; generally “[r]egulating the course of" the proceeding and the “conduct of the parties and their counsel”; and imposing sanctions for “[c]ontemptuous conduct” or violations of procedural requirements. As that list suggests, an SEC ALJ exercises authority “comparable to” that of a federal district judge conducting a bench trial. 

After a hearing ends, the ALJ issues an “initial decision.” That decision must set out “findings and conclusions” about all “material issues of fact [and] law”; it also must include the “appropriate order, sanction, relief, or denial thereof.” The Commission can then review the ALJ’s decision, either upon request or sua sponte. But if it opts against review, the Commission “issue[s] an order that the [ALJ's] decision has become final.” At that point, the initial decision is “deemed the action of the Commission.”

This case began when the SEC instituted an administrative proceeding against petitioner Raymond Lucia and his investment company. Lucia marketed a retirement savings strategy called “Buckets of Money.” In the SEC’s view, Lucia used misleading slideshow presentations to deceive prospective clients. The SEC charged Lucia under the Investment Advisers Act and assigned ALJ Cameron Elliot to adjudicate the case. After nine days of testimony and argument, Judge Elliot issued an initial decision concluding that Lucia had violated the Act and imposing sanctions, including civil penalties of $300,000 and a lifetime bar from the investment industry. In his decision, Judge Elliot made factual findings about only one of the four ways the SEC thought Lucia's slideshow misled investors. The Commission thus remanded for factfinding on the other three claims, explaining that an ALJ’s “personal experience with the witnesses” places him “in the best position to make findings of fact” and “resolve any conflicts in the evidence.” Judge Elliot then made additional findings of deception and issued a revised initial decision, with the same sanctions. 

On appeal to the SEC, Lucia argued that the administrative proceeding was invalid because Judge Elliot had not been constitutionally appointed. According to Lucia, the Commission's ALJs are “Officers of the United States” and thus subject to the Appointments Clause. Under that Clause, Lucia noted, only the President, “Courts of Law,” or “Heads of Departments” can appoint “Officers.” And none of those actors had made Judge Elliot an ALJ. To be sure, the Commission itself counts as a “Head[ ] of Department[ ].” But the Commission had left the task of appointing ALJs, including Judge Elliot, to SEC staff members. As a result, Lucia contended, Judge Elliot lacked constitutional authority to do his job.

The Commission rejected Lucia’s argument. It held that the SEC’s ALJs are not “Officers of the United States.” Instead, they are “mere employees”—officials with lesser responsibilities who fall outside the Appointments Clause’s ambit. The Commission reasoned that its ALJs do not “exercise significant authority independent of [its own] supervision.” Because that is so (said the SEC), they need no special, high-level appointment. 

Lucia’s claim fared no better in the Court of Appeals for the D.C. Circuit. A panel of that court seconded the Commission’s view that SEC ALJs are employees rather than officers, and so are not subject to the Appointments Clause [...] That decision conflicted with one from the Court of Appeals for the Tenth Circuit. 

Lucia asked us to resolve the split by deciding whether the Commission’s ALJs are “Officers of the United States within the meaning of the Appointments Clause.” Up to that point, the Federal Government (as represented by the Department of Justice) had defended the Commission’s position that SEC ALJs are employees, not officers […] We now reverse.

II

The sole question here is whether the Commission’s ALJs are “Officers of the United States” or simply employees of the Federal Government. The Appointments Clause prescribes the exclusive means of appointing “Officers.” Only the President, a court of law, or a head of department can do so [...] 

Two decisions set out this Court’s basic framework for distinguishing between officers and employees. Germaine held that “civil surgeons” (doctors hired to perform various physical exams) were mere employees because their duties were “occasional or temporary” rather than “continuing and permanent.” Stressing “ideas of tenure [and] duration,” the Court there made clear that an individual must occupy a “continuing” position established by law to qualify as an officer. Buckley then set out another requirement, central to this case. It determined that members of a federal commission were officers only after finding that they “exercis[ed] significant authority pursuant to the laws of the United States.” The inquiry thus focused on the extent of power an individual wields in carrying out his assigned functions.

[…] In Freytag v. Commissioner, 501 U.S. 868 (1991), we applied the unadorned “significant authority” test to adjudicative officials who are near-carbon copies of the Commission’s ALJs. As we now explain, our analysis there (sans any more detailed legal criteria) necessarily decides this case.

The officials at issue in Freytag were the “special trial judges” (STJs) of the United States Tax Court. The authority of those judges depended on the significance of the tax dispute before them. In “comparatively narrow and minor matters,” they could both hear and definitively resolve a case for the Tax Court. In more major matters, they could preside over the hearing, but could not issue the final decision; instead, they were to “prepare proposed findings and an opinion” for a regular Tax Court judge to consider. The proceeding challenged in Freytag was a major one, involving $1.5 billion in alleged tax deficiencies. After conducting a 14-week trial, the STJ drafted a proposed decision in favor of the Government. A regular judge then adopted the STJ's work as the opinion of the Tax Court. The losing parties argued on appeal that the STJ was not constitutionally appointed.

This Court held that the Tax Court’s STJs are officers, not mere employees. Citing Germaine, the Court first found that STJs hold a continuing office established by law. They serve on an ongoing, rather than a “temporary [or] episodic[,] basis”; and their “duties, salary, and means of appointment” are all specified in the Tax Code. The Court then considered, as Buckley demands, the “significance” of the “authority” STJs wield. In addressing that issue, the Government had argued that STJs are employees, rather than officers, in all cases (like the one at issue) in which they could not “enter a final decision.” But the Court thought the Government’s focus on finality “ignore[d] the significance of the duties and discretion that [STJs] possess.” Describing the responsibilities involved in presiding over adversarial hearings, the Court said: STJs “take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders.” And the Court observed that “[i]n the course of carrying out these important functions, the [STJs] exercise significant discretion.” That fact meant they were officers, even when their decisions were not final.

Freytag says everything necessary to decide this case. To begin, the Commission’s ALJs, like the Tax Court’s STJs, hold a continuing office established by law. Indeed, everyone here—Lucia, the Government, and the amicus—agrees on that point. Far from serving temporarily or episodically, SEC ALJs “receive[ ] a career appointment.” And that appointment is to a position created by statute, down to its “duties, salary, and means of appointment.” 

Still more, the Commission’s ALJs exercise the same “significant discretion” when carrying out the same “important functions” as STJs do. Both sets of officials have all the authority needed to ensure fair and orderly adversarial hearings—indeed, nearly all the tools of federal trial judges. Consider in order the four specific (if overlapping) powers Freytag mentioned. First, the Commission's ALJs (like the Tax Court's STJs) “take testimony.” More precisely, they “[r]eceiv[e] evidence” and “[e]xamine witnesses” at hearings, and may also take pre-hearing depositions. Second, the ALJs (like STJs) “conduct trials.” As detailed earlier, they administer oaths, rule on motions, and generally “regulat[e] the course of” a hearing, as well as the conduct of parties and counsel. Third, the ALJs (like STJs) “rule on the admissibility of evidence.” They thus critically shape the administrative record (as they also do when issuing document subpoenas). And fourth, the ALJs (like STJs) “have the power to enforce compliance with discovery orders.” In particular, they may punish all “[c]ontemptuous conduct,” including violations of those orders, by means as severe as excluding the offender from the hearing. So point for point— straight from Freytag’s list—the Commission’s ALJs have equivalent duties and powers as STJs in conducting adversarial inquiries.

And at the close of those proceedings, ALJs issue decisions much like that in Freytag—except with potentially more independent effect. As the Freytag Court recounted, STJs “prepare proposed findings and an opinion” adjudicating charges and assessing tax liabilities. Similarly, the Commission’s ALJs issue decisions containing factual findings, legal conclusions, and appropriate remedies. And what happens next reveals that the ALJ can play the more autonomous role. In a major case like Freytag, a regular Tax Court judge must always review an STJ’s opinion. And that opinion counts for nothing unless the regular judge adopts it as his own. By contrast, the SEC can decide against reviewing an ALJ decision at all. And when the SEC declines review (and issues an order saying so), the ALJ’s decision itself “becomes final” and is “deemed the action of the Commission.” That last-word capacity makes this an a fortiori case: If the Tax Court’s STJs are officers, as Freytag held, then the Commission’s ALJs must be too. […]

The only issue left is remedial. For all the reasons we have given, and all those Freytag gave before, the Commission’s ALJs are “Officers of the United States,” subject to the Appointments Clause. And as noted earlier, Judge Elliot heard and decided Lucia’s case without the kind of appointment the Clause requires. This Court has held that “one who makes a timely challenge to the constitutional validity of the appointment of an officer who adjudicates his case” is entitled to relief. Lucia made just such a timely challenge: He contested the validity of Judge Elliot’s appointment before the Commission, and continued pressing that claim in the Court of Appeals and this Court. So what relief follows? This Court has also held that the “appropriate” remedy for an adjudication tainted with an appointments violation is a new “hearing before a properly appointed” official. And we add today one thing more. That official cannot be Judge Elliot, even if he has by now received (or receives sometime in the future) a constitutional appointment. Judge Elliot has already both heard Lucia’s case and issued an initial decision on the merits. He cannot be expected to consider the matter as though he had not adjudicated it before. To cure the constitutional error, another ALJ (or the Commission itself) must hold the new hearing to which Lucia is entitled. 

We accordingly reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.

Morrison v. Olson

487 U.S. 654 (1988)

CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.

[The Ethics in Government Act allows for the appointment of an “independent counsel” to investigate and, if appropriate, prosecute certain high-ranking Government officials for violations of federal criminal laws. The Act requires the Attorney General to investigate any person covered by the Act, when there is sufficient reason to do so. The Attorney General must conduct a preliminary investigation. When the Attorney General has completed this investigation, or 90 days has elapsed, they must report their findings to a special court (the Special Division) created by the Act “for the purpose of appointing independent counsels.” 

If the Attorney General finds that there are “reasonable grounds to believe that further investigation or prosecution is warranted,” then they “shall apply to the division of the court for the appointment of an independent counsel.” Upon receiving this application, the Special Division “shall appoint an appropriate independent counsel and shall define that independent counsel’s prosecutorial jurisdiction.” The independent counsel has “full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice, the Attorney General, and any other officer or employee of the Department of Justice.”]  

In 1982, two Subcommittees of the House of Representatives issued subpoenas directing the Environmental Protection Agency (EPA) to produce certain documents relating to the efforts of the EPA and the Land and Natural Resources Division of the Justice Department to enforce the “Superfund Law.” At that time, Olson was the Assistant Attorney General for the Office of Legal Counsel (OLC) [...] Acting on the advice of the Justice Department, the President ordered the Administrator of EPA to invoke executive privilege to withhold certain documents on the ground that they contained “enforcement sensitive information.” The Administrator obeyed this order and withheld the documents. In response, the House voted to hold the Administrator in contempt, after which the Administrator and the United States together filed a lawsuit against the House. The conflict abated in March 1983, when the administration agreed to give the House Subcommittees limited access to the documents.

The following year, the House Judiciary Committee began an investigation into the Justice Department’s role in the controversy over the EPA documents. During this investigation, appellee Olson testified before a House Subcommittee on March 10, 1983 [...] In 1985, the majority members of the Judiciary Committee published a lengthy report on the Committee’s investigation. The report [...] suggested that appellee Olson had given false and misleading testimony to the Subcommittee on March 10, 1983 [...] thus obstructing the Committee’s investigation. The Chairman of the Judiciary Committee forwarded a copy of the report to the Attorney General with a request that he seek the appointment of an independent counsel to investigate the allegations against Olson [...]

On April 23, 1986, the Special Division appointed James C. McKay as independent counsel [...] McKay later resigned as independent counsel, and on May 29, 1986, the Division appointed appellant Morrison as his replacement, with the same jurisdiction.

[Morrison] caused a grand jury to issue and serve subpoenas ad testificandum and duces tecum on [Olson]. [Olson] moved to quash the subpoenas, claiming, among other things, that the independent counsel provisions of the Act were unconstitutional and that appellant accordingly had no authority to proceed [...] 

V.

We now turn to consider whether [...] provision of the Act restricting the Attorney General’s power to remove the independent counsel to only those instances in which he can show “good cause,” taken by itself, impermissibly interferes with the President’s exercise of his constitutionally appointed functions [...]

Two Terms ago we had occasion to consider whether it was consistent with the separation of powers for Congress to pass a statute that authorized a Government official who is removable only by Congress to participate in what we found to be “executive powers.” Bowsher v. Synar, 478 U. S. 714, 730 (1986). We held in Bowsher that “Congress cannot reserve for itself the power of removal of an officer charged with the execution of the laws except by impeachment.” A primary antecedent for this ruling was our 1926 decision in Myers v. United States, 272 U. S. 52. Myers had considered the propriety of a federal statute by which certain postmasters of the United States could be removed by the President only “by and with the advice and consent of the Senate.” There too, Congress’ attempt to involve itself in the removal of an executive official was found to be sufficient grounds to render the statute invalid. As we observed in Bowsher, the essence of the decision in Myers was the judgment that the Constitution prevents Congress from “draw[ing] to itself . . . the power to remove or the right to participate in the exercise of that power. To do this would be to go beyond the words and implications of the [Appointments Clause] and to infringe the constitutional principle of the separation of governmental powers.”

Unlike both Bowsher and Myers, this case does not involve an attempt by Congress itself to gain a role in the removal of executive officials other than its established powers of impeachment and conviction. The Act instead puts the removal power squarely in the hands of the Executive Branch; an independent counsel may be removed from office, “only by the personal action of the Attorney General, and only for good cause.” There is no requirement of congressional approval of the Attorney General’s removal decision, though the decision is subject to judicial review. In our view, the removal provisions of the Act make this case more analogous to Humphrey’s Executor v. United States, 295 U. S. 602 (1935) [...] than to Myers or Bowsher.

In Humphrey’s Executor, the issue was whether a statute restricting the President’s power to remove the Commissioners of the Federal Trade Commission (FTC) only for “inefficiency, neglect of duty, or malfeasance in office” was consistent with the Constitution. We stated that whether Congress can “condition the [President’s power of removal] by fixing a definite term and precluding a removal except for cause, will depend upon the character of the office.” Contrary to the implication of some dicta in Myers, the President’s power to remove Government officials simply was not “all-inclusive in respect of civil officers with the exception of the judiciary provided for by the Constitution.” At least in regard to “quasi-legislative” and “quasi-judicial” agencies such as the FTC, “[t]he authority of Congress, in creating [such] agencies, to require them to act in discharge of their duties independently of executive control . . . includes, as an appropriate incident, power to fix the period during which they shall continue in office, and to forbid their removal except for cause in the meantime.” In Humphrey’s Executor, we found it “plain” that the Constitution did not give the President “illimitable power of removal” over the officers of independent agencies [...]

[Olson contends] that Humphrey’s Executor are distinguishable from this case because it did not involve officials who performed a “core executive function.” [Olson argues] that our decision in Humphrey’s Executor rests on a distinction between “purely executive” officials and officials who exercise “quasi-legislative” and “quasi-judicial” powers. In their view, when a “purely executive” official is involved, the governing precedent is Myers, not Humphrey’s Executor. And, under Myers, the President must have absolute discretion to discharge “purely” executive officials at will. 

We undoubtedly did rely on the terms “quasi-legislative” and “quasi-judicial” to distinguish the officials involved in Humphrey’s Executor and Wiener from those in Myers, but our present considered view is that the determination of whether the Constitution allows Congress to impose a “good cause”-type restriction on the President’s power to remove an official cannot be made to turn on whether or not that official is classified as “purely executive.” The analysis contained in our removal cases is designed not to define rigid categories of those officials who may or may not be removed at will by the President, but to ensure that Congress does not interfere with the President’s exercise of the “executive power” and his constitutionally appointed duty to “take care that the laws be faithfully executed” under Article II. Myers was undoubtedly correct in its holding, and in its broader suggestion that there are some “purely executive” officials who must be removable by the President at will if he is to be able to accomplish his constitutional role [...]

Considering for the moment the “good cause” removal provision in isolation from the other parts of the Act at issue in this case, we cannot say that the imposition of a “good cause” standard for removal by itself unduly trammels on executive authority. There is no real dispute that the functions performed by the independent counsel are “executive” in the sense that they are law enforcement functions that typically have been undertaken by officials within the Executive Branch. As we noted above, however, the independent counsel is an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority. Although the counsel exercises no small amount of discretion and judgment in deciding how to carry out his or her duties under the Act, we simply do not see how the President’s need to control the exercise of that discretion is so central to the functioning of the Executive Branch as to require as a matter of constitutional law that the counsel be terminable at will by the President.

Nor do we think that the “good cause” removal provision at issue here impermissibly burdens the President's power to control or supervise the independent counsel, as an executive official, in the execution of his or her duties under the Act. This is not a case in which the power to remove an executive official has been completely stripped from the President, thus providing no means for the President to ensure the “faithful execution” of the laws. Rather, because the independent counsel may be terminated for “good cause,” the Executive, through the Attorney General, retains ample authority to assure that the counsel is competently performing his or her statutory responsibilities in a manner that comports with the provisions of the Act [...] 

In sum, we conclude today that it does not violate the Appointments Clause for Congress to vest the appointment of independent counsel in the Special Division [...] The decision of the Court of Appeals is therefore Reversed.

JUSTICE SCALIA, dissenting.

[...] The Court concedes that “[t]here is no real dispute that the functions performed by the independent counsel are ‘executive’,” though it qualifies that concession by adding “in the sense that they are law enforcement functions that typically have been undertaken by officials within the Executive Branch.” The qualifier adds nothing but atmosphere [...] 

The utter incompatibility of the Court's approach with our constitutional traditions can be made more clear, perhaps, by applying it to the powers of the other two branches. Is it conceivable that if Congress passed a statute depriving itself of less than full and entire control over some insignificant area of legislation, we would inquire whether the matter was “so central to the functioning of the Legislative Branch” as really to require complete control, or whether the statute gives Congress “sufficient control over the surrogate legislator to ensure that Congress is able to perform its constitutionally assigned duties”? Of course we would have none of that. Once we determined that a purely legislative power was at issue we would require it to be exercised, wholly and entirely, by Congress [...] 

Is it unthinkable that the President should have such exclusive power, even when alleged crimes by him or his close associates are at issue? No more so than that Congress should have the exclusive power of legislation, even when what is at issue is its own exemption from the burdens of certain laws. No more so than that this Court should have the exclusive power to pronounce the final decision on justiciable cases and controversies, even those pertaining to the constitutionality of a statute reducing the salaries of the Justices. A system of separate and coordinate powers necessarily involves an acceptance of exclusive power that can theoretically be abused. As we reiterate this very day, “[i]t is a truism that constitutional protections have costs.” While the separation of powers may prevent us from righting every wrong, it does so in order to ensure that we do not lose liberty. The checks against any branch’s abuse of its exclusive powers are twofold: First, retaliation by one of the other branch’s use of its exclusive powers: Congress, for example, can impeach the executive who willfully fails to enforce the laws; the executive can decline to prosecute under unconstitutional statutes and the courts can dismiss malicious prosecutions. Second, and ultimately, there is the political check that the people will replace those in the political branches who are guilty of abuse. Political pressures produced special prosecutors — for Teapot Dome and for Watergate, for example — long before this statute created the independent counsel. 

The Court has, nonetheless, replaced the clear constitutional prescription that the executive power belongs to the President with a “balancing test.” What are the standards to determine how the balance is to be struck, that is, how much removal of Presidential power is too much? Many countries of the world get along with an executive that is much weaker than ours — in fact, entirely dependent upon the continued support of the legislature. Once we depart from the text of the Constitution, just where short of that do we stop? The most amazing feature of the Court’s opinion is that it does not even purport to give an answer. It simply announces, with no analysis, that the ability to control the decision whether to investigate and prosecute the President’s closest advisers, and indeed the President himself, is not “so central to the functioning of the Executive Branch” as to be constitutionally required to be within the President’s control. Apparently that is so because we say it is so. Having abandoned as the basis for our decisionmaking the text of Article II that “the executive Power” must be vested in the President, the Court does not even attempt to craft a substitute criterion — a “justiciable standard,” however remote from the Constitution — that today governs, and in the future will govern, the decision of such questions. Evidently, the governing standard is to be what might be called the unfettered wisdom of a majority of this Court, revealed to an obedient people on a case-by-case basis. This is not only not the government of laws that the Constitution established; it is not a government of laws at all [...]

Seila Law v. Consumer Financial Protection Bureau

140 S. Ct. 991 (2020)

Chief Justice ROBERTS delivered the opinion of the Court with respect to Parts I, II, and III.

Under our Constitution, the “executive Power”—all of it—is “vested in a President,” who must “take Care that the Laws be faithfully executed.” Because no single person could fulfill that responsibility alone, the Framers expected that the President would rely on subordinate officers for assistance. Ten years ago, in Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477 (2010), we reiterated that, “as a general matter,” the Constitution gives the President “the authority to remove those who assist him in carrying out his duties.” “Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else.”

[...] Our precedents have recognized only two exceptions to the President’s unrestricted removal power. In Humphrey’s Executor v. United States, we held that Congress could create expert agencies led by a group of principal officers removable by the President only for good cause. And in Morrison v. Olson, 487 U. S. 654 (1988), we held that Congress could provide tenure protections to certain inferior officers with narrowly defined duties.

We are now asked to extend these precedents to a new configuration: an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met. We decline to take that step [...] 

I

In the summer of 2007, then-Professor Elizabeth Warren called for the creation of a new, independent federal agency focused on regulating consumer financial products. Warren, Unsafe at Any Rate, Democracy (Summer 2007). Professor Warren believed the financial products marketed to ordinary American households—credit cards, student loans, mortgages, and the like—had grown increasingly unsafe due to a “regulatory jumble” that paid too much attention to banks and too little to consumers. To remedy the lack of “coherent, consumer-oriented” financial regulation, she proposed “concentrat[ing] the review of financial products in a single location”—an independent agency modeled after the multimember Consumer Product Safety Commission [...]

In 2010, Congress acted on these proposals and created the CFPB as an independent financial regulator within the Federal Reserve System. Congress tasked the CFPB with “implement[ing]” and “enforc[ing]” a large body of financial consumer protection laws to “ensur[e] that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.” [...] The CFPB’s rulemaking and enforcement powers are coupled with extensive adjudicatory authority [...] 

Congress’s design for the CFPB differed from the proposals of Professor Warren and the Obama administration in one critical respect. Rather than create a traditional independent agency headed by a multimember board or commission, Congress elected to place the CFPB under the leadership of a single Director. The CFPB Director is appointed by the President with the advice and consent of the Senate. The Director serves for a term of five years, during which the President may remove the Director from office only for “inefficiency, neglect of duty, or malfeasance in office.”

Seila Law LLC is a California-based law firm that provides debt-related legal services to clients. In 2017, the CFPB issued a civil investigative demand to Seila Law to determine whether the firm had “engag[ed] in unlawful acts or practices in the advertising, marketing, or sale of debt relief services.” The demand (essentially a subpoena) directed Seila Law to produce information and documents related to its business practices.

Seila Law asked the CFPB to set aside the demand, objecting that the agency’s leadership by a single Director removable only for cause violated the separation of powers. The CFPB declined to address that claim and directed Seila Law to comply with the demand.

When Seila Law refused, the CFPB filed a petition to enforce the demand in the District Court. In response, Seila Law renewed its defense that the demand was invalid and must be set aside because the CFPB's structure violated the Constitution [...]

We granted certiorari to address the constitutionality of the CFPB’s structure [...] 

III

We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers.

Article II provides that “[t]he executive Power shall be vested in a President,” who must “take Care that the Laws be faithfully executed.” The entire “executive Power” belongs to the President alone. But because it would be “impossib[le]” for “one man” to “perform all the great business of the State,” the Constitution assumes that lesser executive officers will “assist the supreme Magistrate in discharging the duties of his trust.” 

These lesser officers must remain accountable to the President, whose authority they wield. As Madison explained, “[I]f any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” That power, in turn, generally includes the ability to remove executive officials, for it is “only the authority that can remove” such officials that they “must fear and, in the performance of [their] functions, obey.” Bowsher, 478 U. S., at 726. 

[...] We recently reiterated the President’s general removal power in Free Enterprise Fund. “Since 1789,” we recapped, “the Constitution has been understood to empower the President to keep these officers accountable—by removing them from office, if necessary.” Although we had previously sustained congressional limits on that power in certain circumstances, we declined to extend those limits to “a new situation not yet encountered by the Court”—an official insulated by two layers of for-cause removal protection. In the face of that novel impediment to the President’s oversight of the Executive Branch, we adhered to the general rule that the President possesses “the authority to remove those who assist him in carrying out his duties.” 

Free Enterprise Fund left in place two exceptions to the President’s unrestricted removal power. First, in Humphrey’s Executor, decided less than a decade after Myers, the Court upheld a statute that protected the Commissioners of the FTC from removal except for “inefficiency, neglect of duty, or malfeasance in office.” In reaching that conclusion, the Court stressed that Congress’s ability to impose such removal restrictions “will depend upon the character of the office.” [...] 

In short, Humphrey’s Executor permitted Congress to give for-cause removal protections to a multimember body of experts, balanced along partisan lines, that performed legislative and judicial functions and was said not to exercise any executive power. Consistent with that understanding, the Court later applied “[t]he philosophy of Humphrey’s Executor” to uphold for-cause removal protections for the members of the War Claims Commission—a three-member “adjudicatory body” tasked with resolving claims for compensation arising from World War II. Wiener v. United States, 357 U. S. 349, 356 (1958).

While recognizing an exception for multimember bodies with “quasi-judicial” or “quasi-legislative” functions, Humphrey’s Executor reaffirmed the core holding of Myers that the President has “unrestrictable power . . . to remove purely executive officers.” The Court acknowledged that between purely executive officers on the one hand, and officers that closely resembled the FTC Commissioners on the other, there existed “a field of doubt” that the Court left “for future consideration.”

We have recognized a second exception for inferior officers in Morrison v. Olson. [In] Morrison, we upheld a provision granting good-cause tenure protection to an independent counsel appointed to investigate and prosecute particular alleged crimes by high-ranking Government officials. Backing away from the reliance in Humphrey’s Executor on the concepts of “quasi-legislative” and “quasi-judicial” power, we viewed the ultimate question as whether a removal restriction is of “such a nature that [it] impede[s] the President’s ability to perform his constitutional duty.” Although the independent counsel was a single person and performed “law enforcement functions that typically have been undertaken by officials within the Executive Branch,” we concluded that the removal protections did not unduly interfere with the functioning of the Executive Branch because “the independent counsel [was] an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority.”

These two exceptions—one for multimember expert agencies that do not wield substantial executive power, and one for inferior officers with limited duties and no policymaking or administrative authority—”represent what up to now have been the outermost constitutional limits of permissible congressional restrictions on the President’s removal power.” 

Neither Humphrey’s Executor nor Morrison resolves whether the CFPB Director’s insulation from removal is constitutional. Start with Humphrey’s Executor. Unlike the New Deal-era FTC upheld there, the CFPB is led by a single Director who cannot be described as a “body of experts” and cannot be considered “non-partisan” in the same sense as a group of officials drawn from both sides of the aisle. Moreover, while the staggered terms of the FTC Commissioners prevented complete turnovers in agency leadership and guaranteed that there would always be some Commissioners who had accrued significant expertise, the CFPB’s single-Director structure and five-year term guarantee abrupt shifts in agency leadership and with it the loss of accumulated expertise.

In addition, the CFPB Director is hardly a mere legislative or judicial aid. Instead of making reports and recommendations to Congress, as the 1935 FTC did, the Director possesses the authority to promulgate binding rules fleshing out 19 federal statutes, including a broad prohibition on unfair and deceptive practices in a major segment of the U. S. economy. And instead of submitting recommended dispositions to an Article III court, the Director may unilaterally issue final decisions awarding legal and equitable relief in administrative adjudications. Finally, the Director's enforcement authority includes the power to seek daunting monetary penalties against private parties on behalf of the United States in federal court—a quintessentially executive power not considered in Humphrey’s Executor.

The logic of Morrison also does not apply. Everyone agrees the CFPB Director is not an inferior officer, and her duties are far from limited. Unlike the independent counsel, who lacked policymaking or administrative authority, the Director has the sole responsibility to administer 19 separate consumer-protection statutes that cover everything from credit cards and car payments to mortgages and student loans. It is true that the independent counsel in Morrison was empowered to initiate criminal investigations and prosecutions, and in that respect wielded core executive power. But that power, while significant, was trained inward to high-ranking Governmental actors identified by others, and was confined to a specified matter in which the Department of Justice had a potential conflict of interest. By contrast, the CFPB Director has the authority to bring the coercive power of the state to bear on millions of private citizens and businesses, imposing even billion-dollar penalties through administrative adjudications and civil actions.

In light of these differences, the constitutionality of the CFPB Director’s insulation from removal cannot be settled by Humphrey’s Executor or Morrison alone.

The question instead is whether to extend those precedents to the “new situation” before us, namely an independent agency led by a single Director and vested with significant executive power. We decline to do so [...]

“The Framers recognized that, in the long term, structural protections against abuse of power were critical to preserving liberty.” Bowsher, 478 U. S., at 730. Their solution to governmental power and its perils was simple: divide it. To prevent the “gradual concentration” of power in the same hands, they enabled “[a]mbition . . . to counteract ambition” at every turn. At the highest level, they “split the atom of sovereignty” itself into one Federal Government and the States. They then divided the “powers of the new Federal Government into three defined categories, Legislative, Executive, and Judicial.” Chadha, 462 U. S., at 951.

They did not stop there. Most prominently, the Framers bifurcated the federal legislative power into two Chambers: the House of Representatives and the Senate, each composed of multiple Members and Senators. Art. I, §§2, 3.

The Executive Branch is a stark departure from all this division. The Framers viewed the legislative power as a special threat to individual liberty, so they divided that power to ensure that “differences of opinion” and the “jarrings of parties” would “promote deliberation and circumspection” and “check excesses in the majority.” By contrast, the Framers thought it necessary to secure the authority of the Executive so that he could carry out his unique responsibilities. As Madison put it, while “the weight of the legislative authority requires that it should be . . . divided, the weakness of the executive may require, on the other hand, that it should be fortified.” [...]

The Framers [...] gave the Executive the “[d]ecision, activity, secrecy, and dispatch” that “characterise the proceedings of one man.”

To justify and check that authority—unique in our constitutional structure—the Framers made the President the most democratic and politically accountable official in Government. Only the President (along with the Vice President) is elected by the entire Nation [...]

The CFPB’s single-Director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one. The Director is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is. The Director does not even depend on Congress for annual appropriations. Yet the Director may unilaterally, without meaningful supervision, issue final regulations, oversee adjudications, set enforcement priorities, initiate prosecutions, and determine what penalties to impose on private parties. With no colleagues to persuade, and no boss or electorate looking over her shoulder, the Director may dictate and enforce policy for a vital segment of the economy affecting millions of Americans [...]

Because the CFPB is headed by a single Director with a five-year term, some Presidents may not have any opportunity to shape its leadership and thereb y influence its activities. A President elected in 2020 would likely not appoint a CFPB Director until 2023, and a President elected in 2028 may never appoint one. That means an unlucky President might get elected on a consumer-protection platform and enter office only to find herself saddled with a holdover Director from a competing political party who is dead set against that agenda. To make matters worse, the agency’s single-Director structure means the President will not have the opportunity to appoint any other leaders—such as a chair or fellow members of a Commission or Board—who can serve as a check on the Director’s authority and help bring the agency in line with the President’s preferred policies [...]

Because we find the Director’s removal protection severable from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified [...]

Justice KAGAN, with whom JUSTICE GINSBURG, JUSTICE BREYER, and JUSTICE SOTOMAYOR join, concurring in the judgment with respect to severability and dissenting in part.

[...] The text of the Constitution, the history of the country, the precedents of this Court, and the need for sound and adaptable governance—all stand against the majority’s opinion. They point not to the majority’s “general rule” of “unrestricted removal power” with two grudgingly applied “exceptions.” Rather, they bestow discretion on the legislature to structure administrative institutions as the times demand, so long as the President retains the ability to carry out his constitutional duties. And most relevant here, they give Congress wide leeway to limit the President’s removal power in the interest of enhancing independence from politics in regulatory bodies like the CFPB.

What does the Constitution say about the separation of powers—and particularly about the President’s removal authority? (Spoiler alert: about the latter, nothing at all.)

The majority offers the civics class version of separation of powers—call it the Schoolhouse Rock definition of the phrase. See Schoolhouse Rock! Three Ring Government (Mar. 13, 1979), http://www.youtube.com/watch?v=pKSGyiT-o3o (“Ring one, Executive. Two is Legislative, that's Congress. Ring three, Judiciary”). The Constitution’s first three articles, the majority recounts, “split the atom of sovereignty” among Congress, the President, and the courts. 

[The majority fails to] recognize that the separation of powers is, by design, neither rigid nor complete. Blackstone, whose work influenced the Framers on this subject as on others, observed that “every branch” of government “supports and is supported, regulates and is regulated, by the rest.” So as James Madison stated, the creation of distinct branches “did not mean that these departments ought to have no partial agency in, or no controul over the acts of each other.” To the contrary, Madison explained, the drafters of the Constitution—like those of then-existing state constitutions—opted against keeping the branches of government “absolutely separate and distinct.” [...]

The majority relies for its contrary vision on Article II’s Vesting Clause, but the provision can’t carry all that weight. Or as Chief Justice Rehnquist wrote of a similar claim in Morrison v. Olson, 487 U. S. 654 (1988), “extrapolat[ing]” an unrestricted removal power from such “general constitutional language”—which says only that “[t]he executive Power shall be vested in a President”—is “more than the text will bear.” [...] Historical understandings thus belie the majority’s “general rule.” [...]

As the majority explains, the CFPB emerged out of disaster. The collapse of the subprime mortgage market “precipitat[ed] a financial crisis that wiped out over $10 trillion in American household wealth and cost millions of Americans their jobs, their retirements, and their homes.” In that moment of economic ruin, the President proposed and Congress enacted legislation to address the causes of the collapse and prevent a recurrence. An important part of that statute created an agency to protect consumers from exploitative financial practices. The agency would take over enforcement of almost 20 existing federal laws. And it would administer a new prohibition on “unfair, deceptive, or abusive act[s] or practice[s]” in the consumer-finance sector. 

No one had a doubt that the new agency should be independent. As explained already, Congress has historically given—with this Court's permission—a measure of independence to financial regulators like the Federal Reserve Board and the FTC. And agencies of that kind had administered most of the legislation whose enforcement the new statute transferred to the CFPB. The law thus included an ordinary for-cause provision—once again, that the President could fire the CFPB’s Director only for “inefficiency, neglect of duty, or malfeasance in office.” That standard would allow the President to discharge the Director for a failure to “faithfully execute[ ]” the law, as well as for basic incompetence. But it would not permit removal for policy differences.

[...] In the midst of the Great Recession, Congress and the President came together to create an agency with an important mission. It would protect consumers from the reckless financial practices that had caused the then-ongoing economic collapse. Not only Congress but also the President thought that the new agency, to fulfill its mandate, needed a measure of independence. So the two political branches, acting together, gave the CFPB Director the same job protection that innumerable other agency heads possess. All in all, those branches must have thought, they had done a good day’s work. Relying on their experience and knowledge of administration, they had built an agency in the way best suited to carry out its functions. They had protected the public from financial chicanery and crisis. They had governed.

And now consider how the dispute ends—with five unelected judges rejecting the result of that democratic process. The outcome today will not shut down the CFPB: A different majority of this Court, including all those who join this opinion, believes that if the agency’s removal provision is unconstitutional, it should be severed. But the majority on constitutionality jettisons a measure Congress and the President viewed as integral to the way the agency should operate. The majority does so even though the Constitution grants to Congress, acting with the President’s approval, the authority to create and shape administrative bodies. And even though those branches, as compared to courts, have far greater understanding of political control mechanisms and agency design [...]