The Supreme Court has denied the petition for certiorari filed by State National Bank of Big Spring (“the Bank”) and two non-profit organizations challenging Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer Financial Protection Bureau.  The Petitioners argued that the CFPB violates the Constitution’s separation of powers clause for multiple reasons, including that is “an independent agency that exercises expansive executive authority over private citizens but is led by a single Director that the President cannot remove from office for policy reasons,” it is exempted from Congressional oversight, and it has no internal checks and balances.  Several foundations filed amicus curiae briefs echoing these arguments.  The Court’s order denying certiorari states that Justice Brett Kavanaugh, who heard the case on appeal to the Court of Appeals for the D.C. Circuit, “took no part in the consideration or decision of this petition.”

The appeal arises from a case brought by petitioners and eleven U.S. states against the CFPB, the Department of Treasury, and others in the U.S. District Court for the District of Columbia.  The district court initially dismissed the complaint due to lack of standing, concluding that the petitioners “had not suffered injury in fact from any actions of the Bureau or its Director.”  State Nat’l Bank v. Lew, et al., 958 F.Supp.2d 127, 147-165 (D.C. Cir. 2013).  The circuit court remanded the case back to the district after determining that the Bank had standing to challenge the constitutionality of the CFPB’s structure because it is regulated by it.  State Nat’l Bank v. Lew, at al., 795 F.3d 48 (D.C. Cir. 2015).

On remand, the district court deferred ruling on cross-motions for summary judgment pending the decision by the D.C. Circuit Court in PHH Corp. v. CFPB, 881 F.3d 75 (2018).  In PHH, the circuit court upheld the constitutionality of the CFPB, reasoning that the Supreme Court had previously “sustained the constitutionality of the independent Federal Trade Commission, a consumer-protection financial regulator with powers analogous to those of the CFPB” and “[i]n doing so, the Supreme Court approved the very means of independence Congress used here: protection of agency leadership from at-will removal by the President.” Id., 881 F.3d at 77.  After the en banc circuit court decision in PHH was entered, the parties stipulated to a judgment by the district court against the petitioners, and the D.C. Circuit Court summarily affirmed on the parties’ joint request.

In its response to the petition for certiorari, the Department of Justice, on behalf of the United States, argued in part that this case “would be a poor vehicle for considering the constitutionality of the Bureau’s structure because it is unlikely that the question would be considered by the full Court,” given Justice Kavanaugh’s participation in the case while he was a judge on the D.C. Circuit.  The DOJ further argued that because two of the petitioners are not banks and are not regulated by the CFPB, a significant jurisdictional question would need to be resolved before the Court could reach the merits of the case.

Troutman Sanders will continue to monitor and report on developments involving the CFPB.