SAN FRANCISCO – A California law firm is asking the U.S. Ninth Circuit Court of Appeals to allow the company to eschew responding to a subpoena from the Consumer Financial Protection Bureau.
In the case, on appeal from the U.S. District Court Central District of California, Seila Law LLC maintains the CFPB’s organization is unconstitutional because it is led by a sole director who has a great amount of discretion in how the agency is operated.
Seila noted that the director doesn’t report to either the president or Congress, in direct contradiction of the separation of powers.
Citing Free Enterprise Fund, v. Public Company Accounting Oversight Board, the law firm alleges the U.S. Supreme Court has found the Constitution generally opposes limiting the president’s ability to hold directors accountable by the threat of removal from office.
Similarly, Seila said the CFPB is in a similar position, with a director that serves a five-year term that can be extended indefinitely if Congress fails to confirm a replacement named by the president.
“Because the CFPB is unconstitutionally structured, the civil investigative demand [CID] it issued cannot be enforced,” the firm noted in the appeal. “As the Free Enterprise Fund Court held, where an agency found to be unconstitutional was investigating a business, that business is entitled to relief ‘sufficient to ensure that the reporting requirements and auditing standards to which they are subject will be enforced only by a constitutional agency accountable to the executive.’”
Moreover, Seila maintains the case has been riddled with errors by the CFPB, which it says are to be expected from an “unaccountable agency headed by a single director wielding vast, unrestrained federal power.”
Seila also stated in its complaint that in October 2016, the D.C. Circuit — to date the only appellate court to reach the issue — opined that “the CFPB is unconstitutionally structured because it is an independent agency headed by a single director.”
Seila also maintained that U.S. district court was the proper venue for the case, since it had entered a final order Aug. 25 granting the CFPB’s petition.
“For the foregoing reasons, the court should reverse and vacate the district court’s order enforcing the CID,” Seila said.