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2 Ways for President Trump to Leave His CFPB Director
The D.C. Circuit’s decision to hear the PHH case en banc has prolonged the ambiguity as to whether President Trump can fire the CFPB Director without cause. However, that doesn’t mean the Trump administration can’t or won’t act. The path they choose, however, may impact the results of those actions.
The ongoing saga of the CFPB and its embattled director Richard Cordray took another turn on February 16th when the United States Court of Appeals for the D.C. Circuit agreed to hear the PHH v. CFPB case en banc. This means that the previous ruling by a panel of D.C. Circuit judges, which held the CFPB’s structure (a sole director who can only be fired for cause) to be unconstitutional and that the director needed to be removable at the president’s will, has been vacated. The full D.C. Circuit will need to rule on whether the CFPB’s enforcement action against PHH is permitted by law, and potentially whether the CFPB’s structure is constitutional, though it is possible the D.C. Circuit will avoid this constitutional issue altogether.
This decision is seen by defenders of the status quo CFPB as a significant victory that will ensure Director Cordray serves out his full term. The Trump administration, by contrast, has reacted by supporting the initial D.C. Circuit decision and calling the CFPB “unaccountable”. Strong feelings aside, the impact of the rehearing on the CFPB and Director Cordray’s fate is unclear.
Some legal scholars, most prominently UVA Law’s Aditya Bamzai, argue that the president has an independent ability and obligation to assess the constitutionality of a statute (such as the one creating the CFPB.) In this view, if the president determines the statute is unconstitutional, he is not obligated to enforce it. Others, such as the Constitutional Accountability Center’s Brianne Gorod argue that the president cannot make such a determination independently under these circumstances.
While the ability of the president to fire the CFPB Director at will is ambiguous, the ability to fire for cause is not. Dodd-Frank explicitly empowers the president to remove a CFPB Director for “inefficiency, neglect of duty, or malfeasance in office.” The exact scope of the president’s power and whether President Trump could exercise it to remove Director Cordray in this case are unsettled. There is little to no direct precedent defining what inefficiency, neglect of duty, or malfeasance would mean in this context. Professors Bamzai and John Duffy (also of UVA Law (Wahoowa!)) argue that existing case law indicates that the president’s determination of whether specific conduct (or lack of conduct) meet the standard should control, at least within a broad scope of reasonableness.
This makes sense. Inefficiency, neglect, and malfeasance are not purely objective metrics, and empowering a political actor like the president to make those determinations implies that the president’s judgment should control. A court second-guessing a president’s decision that isn’t arbitrary or capricious would violate the intent of the statute to vest that power in an elected official accountable to the whole citizenry.
To avoid being arbitrary or capricious, the president would likely need to follow certain steps to prevail in the inevitable court challenge. First, the president is going to need to spell out what actions of the Director give rise to the cause and why. As Brianne Gorod points out, previous presidents who have tried to remove officials with for cause protections without providing a justification have found themselves ensnared in litigation. As such, if President Trump wants to fire Director Cordray, he would be wise to explain his reasons and how they tie to the statutory requirements. Bamzai and Duffy also argue that President Trump may need to provide Director Cordray with notice and some sort of hearing. This may not need to be a full in-person hearing, but some opportunity to dispute the charges would be wise.
Why Does the Method Matter?
If President Trump decides to fire Director Cordray what difference would going the for-cause or constitutional route make? One potentially large difference is the likelihood that Cordray could get an injunction preventing his removal. Traditionally the remedy for officials improperly removed is back pay, but in this case it appears clear that Cordray would want to remain in his position so he could continue to set the Bureau’s policy. As such, the important thing is whether Cordray is able to get an injunction and remain in his position or whether the firing occurs and Cordray remains outside looking in as the case progresses.
Predicting what a court will do is difficult, but it seems likely that going the for-cause route would provide the administration with its best shot of avoiding an injunction. To obtain an injunction Cordray would need to show, among other things, that he is likely to ultimately win his case. This is where the for-cause/at-will distinction matters the most.
It is unclear whether the president has the authority to fire the CFPB Director at will. The answer to that question is bound up in the constitutional question surrounding the CFPB’s structure that has not yet been fully litigated (and may not be, if the en ban court opts to decide the case on other grounds). If President Trump were to fire Cordray at will in the meantime, Cordray could argue that he will ultimately win because the president cannot do what he seeks to do. If Director Cordray gets the injunction, it is unlikely that the Trump administration would be able to remove him before Director Cordray’s term ends in 2018 anyway. So he may effectively win before the case is fully decided.
Conversely, in the for-cause context there is no question the president can remove the CFPB Director for cause. This would force Director Cordray to argue that there was either some required piece of due process (like a hearing) that he was not provided, or that the president’s reasons are inadequate. This is why it is important for the administration to follow proper procedure and explicitly tie the grounds to the statutory requirements. President Trump simply saying “You’re fired” (ed: I’m so so sorry) could help Director Cordray get an injunction. Trump saying “you’re fired because you did X which was a neglect of your duty to Y” would create a much higher bar for Cordray to clear. If Director Cordray isn’t able to get an injunction President Trump can begin the process of replacing him. At that point Director Cordray would need to decide if it is worth continuing to fight or if he would be better served by moving on to the next thing.
How will this all play out? Unclear. But what is clear is that this saga is not yet over (which means you can expect/dread more CFPB content on FinRegRag)!