Trump Picks D.C. Circuit Court of Appeals Judge Kavanaugh for Seat on the Top Court
Kavanaugh ruled the consumer-financial watchdog’s structure was unconstitutional in landmark 2016 case.
7/11/2018 7:00 AM
The appointment of U.S. Court of Appeals for the D.C. Circuit Judge Brett Kavanaugh to serve on the U.S. Supreme Court could have significant implications for the accounts receivable management industry given his previous opinion on the constitutionality of the Bureau of Consumer Financial Protection’s structure in the landmark PHH Corp. v. CFPB case.
President Donald Trump nominated Kavanaugh July 10 to fill the vacancy on the Supreme Court following the retirement of Justice Anthony Kennedy.
Kavanaugh’s appointment, if confirmed by the U.S. Senate, would increase the number of appointees from Republican presidents. Notably, Kavanaugh authored the D.C. Circuit Court of Appeals majority panel opinion in 2016 declaring the bureau unconstitutional in PHH Corp v. CFPB. The New York Times reports this opinion is one of Kavanaugh’s most well-known among the more than 300 opinions he has contributed to since his appointment to the D.C. Circuit Court of Appeals in 2006.
“My judicial philosophy is straightforward, a judge must be independent and must interpret the law, not make the law,” Kavanaugh said following his nomination. “A judge must interpret statutes as written and a judge must inform the Constitution as written.” He said he would start meeting with members of the Senate July 10, an essential part of the process.
“With President Donald Trump’s nomination of D.C. Circuit Court of Appeals Judge Brett Kavanaugh to the U.S. Supreme Court, the accounts receivable management industry is reminded to keep focus on an often-overlooked but extremely important branch of the government―the federal judiciary,” said ACA International’s Vice President and Senior Counsel Karen Scheibe Eliason. “Beyond President Trump’s picks for the top court with Justice Neil Gorsuch last year and Judge Kavanaugh now, the overwhelming majority of Trump’s judicial appointments have been and will continue to be to the lower federal courts ―in particular, the district courts and circuit courts of appeal.”
On Oct. 16, 2016, the D.C. Circuit Court of Appeals held in the PHH Corp. case that in light of the Supreme Court’s separation of powers precedents, the BCFP is unconstitutionally structured because it is headed by a single director who can be removed by the president only for cause rather than at will. The court, under Kavanaugh’s opinion, then severed the unconstitutional for-cause removal provision from the rest of the Dodd-Frank Act, ruling that going forward the president could remove the director at will, ACA International previously reported.
Later the same year, the bureau appealed Kavanaugh’s ruling, asking the entire D.C. Circuit Court of Appeals to decide the case from scratch rather than the three-judge panel that ruled on the case in October 2016. During oral arguments held in the en banc rehearing of the PHH Corp. case, Kavanaugh posed several questions focused on the structure of the bureau and the nomination of a new director in July 2018, which has since moved forward with the announcement of Kathy Kraninger as President Trump’s pick for the leader of the BCFP in his administration.
“However, if the 2020 presidential election produces a new president from a different party, that new president could be stuck with a CFPB director who could potentially be at odds with his or her platform for three years. Judge Kavanaugh [during the 2017 oral arguments (held before the full slate of judges on the federal appeals court for the D.C. Circuit) described this result as ‘crazy’ in terms of history, constitutional structure, presidential power and common sense,” ACA International previously reported.
In 2017, the full bench of the D.C. Circuit Court overturned Kavanaugh’s 2016 opinion in PHH Corp., saying the bureau’s single-director structure is indeed constitutional and that its director can only be fired by the president for “inefficiency, neglect of duty, or malfeasance in office.” In the lengthy 73-page dissent that followed, Kavanaugh argued that combining the bureau’s vast collection of powers with protections that insulate its director from presidential oversight threatens principles of both executive power and individual liberty. “In short, when measured in terms of unilateral power, the director of the CFPB is the single most powerful official in the entire U.S. Government, other than the president,” Kavanaugh wrote. “Indeed, within his jurisdiction, the director of the CFPB is even more powerful than the president. The director’s view of consumer protection law and policy prevails over all others. In essence, the director of the CFPB is the president of consumer finance.”
ACA International filed an amicus (friend of the court) brief on March 10, 2017, in the PHH Corp. case to share with Kavanaugh and the rest of the appellate court its unique and direct perspective on why it believes the bureau’s powers must be reined in within constitutional bounds to ensure accountability and transparency. In its brief, ACA argued that “[t]he bureau’s structure and function—wielding power over a broad swath of Americans’ lives, concentrating power in the hands of a single director, insulated from democratic accountability—is ripe for the arbitrary and unrestrained exercise of power in disregard for due process, and for the constitutional rights of the objects upon whom that power is exercised.”
And, just last month, the U.S. District Court for the Southern District of New York ruled in Consumer Financial Protection Bureau and NY Attorney General v. RD Legal Funding, LLC, et al., No. 17-00890 (S.D.N.Y, filed Feb. 7, 2017) that the bureau’s structure is unconstitutional and the agency should be completely dissolved.
Issuing a 108-page opinion in response to RD Legal Funding’s motion to dismiss, the federal district court in New York ruled that “because the CFPB’s structure is unconstitutional, it lacks authority to bring claims under the CFPA.” Consequently, the district court terminated the bureau as a party to the case.
It remains to be seen whether the bureau will appeal the district court’s decision to the Second Circuit Court of Appeals. At this point, however, it cannot do so as a matter of right because there are still open and unresolved claims that must be decided by the district court. Yet, the bureau could ask the district court and the Second Circuit to certify the decision for an interlocutory (interim or intermediate) appeal before a final judgment is issued in the district court case, ACA International previously reported.
If the bureau ultimately appeals the New York federal district court’s decision in RD Legal Funding, LLC, it could continue the debate on the constitutionality of the agency’s structure creating a path for resolution by the U.S. Supreme Court, Joann Needleman, Jane Luxton and Thomas Brooks from Clark Hill wrote in a June blog post.
“In April, the acting director urged Congress to make the bureau more accountable to the American people. If the bureau appeals the RD Legal decision, and in the interim a new director is confirmed by the Senate, the bureau will be forced into the political quagmire of advocating for one unaccountable director,” they write in the blog. “On the other hand, the court’s holding adds further questions to the bureau’s authority, and enforcement targets are likely to continue challenging the bureau’s authority outside the D.C. Circuit, based on constitutional arguments. The continued uncertainty of the bureau’s structure will likely reinforce calls for bringing a bipartisan commission to this controversial agency.”
Notwithstanding the significance of Kavanaugh’s panel opinion and subsequent dissenting opinion in the PHH Corp. case in words that will long be quoted by the bureau’s critics, Judge Kavanaugh has also authored a handful of other opinions and dissents while on the D.C. Circuit Court of Appeals directly impacting the accounts receivable management industry. Between 2015 and 2017, Kavanaugh authored one majority opinion and two dissenting opinions all holding that the opposing parties in the cases had standing to challenge the constitutionality of the bureau. And in 2016, Kavanaugh joined the majority panel opinion in Jones v. Dufek, Sr. and CACH, LLC, ruling that a demand letter sent by a debt collection agency and the law firm it retained did not violate the Fair Debt Collection Practices Act.
According to the U.S. Courts’ website, the U.S. Senate has confirmed 42 Article III judges nominated by President Trump, including 1 Associate Justice of the Supreme Court of the United States, 21 judges for the U.S. Courts of Appeals, and 20 judges for the U.S. District Courts as of July 1, 2018. There are currently 92 nominations to Article III courts awaiting Senate action, including 1 for the Supreme Court, 13 for the Courts of Appeals, 76 for the District Courts, and 2 for the Court of International Trade.
“It is in these lower federal courts where the bulk of the judicial business of the United States is done with the judges appointed to these courts deciding over 90 percent of all cases involving the federal statutes and regulations that shape the industry,” Scheibe Eliason said. “Therefore, it’s hard to overstate the importance of appointments to those lower federal courts because the impact of their decisions are felt daily by every single participant in the industry. And unlike legislation and regulations, federal judge lifetime appointments are not reversible. Undoubtedly, President Trump’s greatest triumph and his most defining legacy will be his impact on the federal court system.”
ACA International will continue to provide updates on Kavanaugh’s nomination as they become available.
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