Consumer Financial Protection v. Seila Law LLC , 923 F.3d 680 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CONSUMER FINANCIAL PROTECTION No. 17-56324
BUREAU,
Petitioner-Appellee, D.C. No.
8:17-cv-01081-
v. JLS-JEM
SEILA LAW LLC,
Respondent-Appellant. OPINION
Appeal from the United States District Court
for the Central District of California
Josephine L. Staton, District Judge, Presiding
Argued and Submitted January 8, 2019
Pasadena, California
Filed May 6, 2019
Before: Susan P. Graber and Paul J. Watford, Circuit
Judges, and Jack Zouhary, * District Judge.
Opinion by Judge Watford
*
The Honorable Jack Zouhary, United States District Judge for the
Northern District of Ohio, sitting by designation.
2 CFPB V. SEILA LAW
SUMMARY **
Consumer Financial Protection Bureau
The panel affirmed the district court’s order granting the
petition of the Consumer Financial Protection Bureau
(“CFPB”) to enforce Seila Law LLC’s compliance with the
CFPB’s civil investigative demand to respond to seven
interrogatories and four requests for documents.
The CFPB is headed by a single Director who exercises
substantial executive power but can be removed by the
President only for cause.
The panel held that the CFPB’s structure is
constitutionally permissible. The panel held that the
Supreme Court’s separation-of-powers decisions in
Humphrey’s Executor v. United States, 295 U.S. 602 (1935),
and Morrison v. Olson, 487 U.S. 654 (1988), were
controlling. Those cases indicate that the for-cause removal
restriction protecting the CFPB’s Director does not “impede
the President’s ability to perform his constitutional duty” to
ensure that the laws are faithfully executed. Morrison, 487
U.S. at 691.
The panel rejected Seila Law’s contention that the civil
investigative demand violated the Consumer Financial
Protection Act’s practice-of-law exclusion, which provides
that the CFPB may not exercise “authority with respect to an
activity engaged in by an attorney as part of the practice of
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
CFPB V. SEILA LAW 3
law under the laws of a State in which the attorney is licensed
to practice law.” 12 U.S.C. § 5517(e)(1). The panel held that
one of the exceptions to the practice-of-law exclusion
applied - Section 5517(e)(3) – which empowered the CFPB
to investigate whether Seila Law was violating the
Telemarketing Sales Rule, 75 Fed,. Reg. 48,458-01, 48,467-
69 (Aug. 10, 2010).
The panel also rejected Seila Law’s contention that the
civil investigative demand violated 12 U.S.C. § 5562(c)(2)
because the demand provided information sufficient to put
Seila Law on notice of the nature of the conduct the CFPB
was investigating, and was not so general as to raise
vagueness or overbreadth concerns.
COUNSEL
Anthony Bisconti (argued) and Thomas H. Bienert Jr.,
Bienert Miller & Katzman PLC, San Clemente, California,
for Respondent-Appellant.
Kevin E. Friedl (argued) and Christopher J. Deal, Attorneys;
Steven Y. Bressler, Assistant General Counsel; John R.
Coleman, Deputy General Counsel; Mary McLeod, General
Counsel; Consumer Financial Protection Bureau,
Washington, D.C.; for Petitioner-Appellee.
4 CFPB V. SEILA LAW
OPINION
WATFORD, Circuit Judge:
The Consumer Financial Protection Bureau (CFPB) is
investigating Seila Law LLC, a law firm that provides a wide
range of legal services to its clients, including debt-relief
services. The CFPB is seeking to determine whether Seila
Law violated the Telemarketing Sales Rule, 16 C.F.R. pt.
310, in the course of providing debt-relief services to
consumers. As part of its investigation, the CFPB issued a
civil investigative demand (CID) to Seila Law that requires
the firm to respond to seven interrogatories and four requests
for documents. See 12 U.S.C. § 5562(c)(1). After Seila Law
refused to comply with the CID, the CFPB filed a petition in
the district court to enforce compliance. See § 5562(e)(1).
The district court granted the petition and ordered Seila Law
to comply with the CID, subject to one modification that the
CFPB does not contest. Seila Law challenges the district
court’s order on two grounds, both of which we reject.
I
Seila Law’s main argument is that the CFPB is
unconstitutionally structured, thereby rendering the CID
(and everything else the agency has done) unlawful.
Specifically, Seila Law argues that the CFPB’s structure
violates the Constitution’s separation of powers because the
agency is headed by a single Director who exercises
substantial executive power but can be removed by the
President only for cause. The arguments for and against that
view have been thoroughly canvassed in the majority,
concurring, and dissenting opinions in PHH Corp. v. CFPB,
881 F.3d 75 (D.C. Cir. 2018) (en banc). We see no need to
re-plow the same ground here. After providing a summary
CFPB V. SEILA LAW 5
of the CFPB’s structure, we explain in brief why we agree
with the conclusion reached by the PHH Corp. majority.
Congress created the CFPB in 2010 when it enacted the
Consumer Financial Protection Act, 12 U.S.C. §§ 5481–
5603. The Act confers upon the CFPB a broad array of
powers to implement and enforce federal consumer financial
laws, with the overarching goals of “ensuring 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.” 12 U.S.C. § 5511(a). The agency’s powers
include, among other things, the authority to promulgate
rules (§ 5512), conduct investigations (§ 5562), adjudicate
administrative enforcement proceedings (§ 5563), and file
civil actions in federal court (§ 5564). Congress classified
the CFPB as “an Executive agency” and chose to house it
within the Federal Reserve System. § 5491(a).
The CFPB is led by a single Director appointed by the
President with the advice and consent of the Senate.
§ 5491(b). The Director serves for a term of five years that
may be extended until a successor has been appointed and
confirmed. § 5491(c)(1)–(2). The Director may be removed
by the President only for “inefficiency, neglect of duty, or
malfeasance in office.” § 5491(c)(3). A provision of this
sort is commonly referred to as a “for cause” restriction on
the President’s removal authority.
Seila Law contends that an agency with the CFPB’s
broad law-enforcement powers may not be headed by a
single Director removable by the President only for cause.
That argument is not without force. The Director exercises
substantial executive power similar to the power exercised
by heads of Executive Branch departments, at least some of
whom, it has long been assumed, must be removable by the
6 CFPB V. SEILA LAW
President at will. The Supreme Court’s separation-of-
powers decisions, in particular Humphrey’s Executor v.
United States, 295 U.S. 602 (1935), and Morrison v. Olson,
487 U.S. 654 (1988), nonetheless lead us to conclude that the
CFPB’s structure is constitutionally permissible.
In Humphrey’s Executor, the Court rejected a separation-
of-powers challenge to the structure of the Federal Trade
Commission (FTC), an agency similar in character to the
CFPB. The petitioner in that case argued that the FTC’s
structure violates Article II of the Constitution because the
agency’s five Commissioners, although appointed by the
President with the advice and consent of the Senate, may be
removed by the President only for cause. The Court rejected
that argument, relying heavily on its determination that the
agency exercised mostly quasi-legislative and quasi-judicial
powers, rather than purely executive powers. 295 U.S. at
628, 631–32. The Court reasoned that it was permissible for
Congress to decide, “in creating quasi-legislative or quasi-
judicial agencies, to require them to act in discharge of their
duties independently of executive control.” Id. at 629. The
for-cause removal restriction at issue there, the Court
concluded, was a permissible means of ensuring that the
FTC’s Commissioners would “maintain an attitude of
independence” from the President’s control. Id.This reasoning, it seems to us, applies equally to the
CFPB, whose Director is subject to the same for-cause
removal restriction at issue in Humphrey’s Executor. Like
the FTC, the CFPB exercises quasi-legislative and quasi-
judicial powers, and Congress could therefore seek to ensure
that the agency discharges those responsibilities
independently of the President’s will. In addition, as the
PHH Corp. majority noted, the CFPB acts in part as a
financial regulator, a role that has historically been viewed
CFPB V. SEILA LAW 7
as calling for a measure of independence from Executive
Branch control. 881 F.3d at 91–92.
To be sure, there are differences between the CFPB and
the FTC as it existed when Humphrey’s Executor was
decided in 1935. The Court’s subsequent decision in
Morrison v. Olson, however, precludes us from relying on
those differences as a basis for distinguishing Humphrey’s
Executor.
The most prominent difference between the two agencies
is that, while both exercise quasi-legislative and quasi-
judicial powers, the CFPB possesses substantially more
executive power than the FTC did back in 1935. But
Congress has since conferred executive functions of similar
scope upon the FTC, and the Court in Morrison suggested
that this change in the mix of agency powers has not
undermined the constitutionality of the FTC. See Morrison,
487 U.S. at 692 n.31. Indeed, in Morrison the Court upheld
the constitutionality of a for-cause removal restriction for an
official exercising one of the most significant forms of
executive authority: the power to investigate and prosecute
criminal wrongdoing. And more recently, in Free
Enterprise Fund v. Public Company Accounting Oversight
Board, 561 U.S. 477 (2010), the Court left undisturbed a for-
cause removal restriction for Commissioners of the
Securities and Exchange Commission, who are charged with
overseeing a board that exercises “significant executive
power.” Id. at 514.
The other notable difference between the two agencies is
that the CFPB is headed by a single Director whereas the
FTC is headed by five Commissioners. Some have found
this structural difference dispositive for separation-of-
powers purposes. See PHH Corp., 881 F.3d at 165–66
(Kavanaugh, J., dissenting). But as the PHH Corp. majority
8 CFPB V. SEILA LAW
noted, see id. at 98–99, the Supreme Court’s decision in
Humphrey’s Executor did not appear to turn on the fact that
the FTC was headed by five Commissioners rather than a
single individual. The Court made no mention of the
agency’s multi-member leadership structure when analyzing
the constitutional validity of the for-cause removal
restriction at issue. See Humphrey’s Executor, 295 U.S. at626–31. And the Court’s subsequent decision in Morrison
seems to preclude drawing a constitutional distinction
between multi-member and single-individual leadership
structures, since the Court in that case upheld a for-cause
removal restriction for a prosecutorial entity headed by a
single independent counsel. 487 U.S. at 696–97; see PHH
Corp., 881 F.3d at 113 (Tatel, J., concurring). As the PHH
Corp. majority noted, if an agency’s leadership is protected
by a for-cause removal restriction, the President can
arguably exert more effective control over the agency if it is
headed by a single individual rather than a multi-member
body. See 881 F.3d at 97–98.
In short, we view Humphrey’s Executor and Morrison as
controlling here. Those cases indicate that the for-cause
removal restriction protecting the CFPB’s Director does not
“impede the President’s ability to perform his constitutional
duty” to ensure that the laws are faithfully executed.
Morrison, 487 U.S. at 691. The Supreme Court is of course
free to revisit those precedents, but we are not.
II
Seila Law next argues that the CFPB lacked statutory
authority to issue the CID. It asserts two separate grounds
in support of this argument.
First, Seila Law contends that the CID violates the
Consumer Financial Protection Act’s practice-of-law
CFPB V. SEILA LAW 9
exclusion. That exclusion provides, with important
exceptions, that the CFPB “may not exercise any
supervisory or enforcement authority with respect to an
activity engaged in by an attorney as part of the practice of
law under the laws of a State in which the attorney is licensed
to practice law.” 12 U.S.C. § 5517(e)(1). Seila Law argues
that the CID is invalid because it requests information
related to Seila Law’s activities in providing legal services
to its clients. Specifically, the CID seeks information
relevant to determining whether Seila Law has violated the
Telemarketing Sales Rule “in the advertising, marketing, or
sale of debt relief services or products, including but not
limited to debt negotiation, debt elimination, debt
settlement, and credit counseling.”
The district court correctly held that one of the
exceptions to § 5517(e)(1)’s practice-of-law exclusion
applies here. Section 5517(e)(3) states: “Paragraph (1) shall
not be construed so as to limit the authority of the Bureau
with respect to any attorney, to the extent that such attorney
is otherwise subject to any of the enumerated consumer laws
or the authorities transferred under subtitle F or H.” Subtitle
H empowers the CFPB to enforce the Telemarketing Sales
Rule, 16 C.F.R. pt. 310, a consumer law that does not exempt
attorneys from its coverage even when they are engaged in
providing legal services. See 15 U.S.C. § 6102;
Telemarketing Sales Rule, 75 Fed. Reg. 48,458-01, 48,467–
69 (Aug. 10, 2010). The CFPB thus has the authority to
investigate whether Seila Law is violating the Telemarketing
Sales Rule, without regard to the general practice-of-law
exclusion stated in § 5517(e)(1).
Second, Seila Law contends that the CID violates
12 U.S.C. § 5562(c)(2), which provides that “[e]ach civil
investigative demand shall state the nature of the conduct
10 CFPB V. SEILA LAW
constituting the alleged violation which is under
investigation and the provision of law applicable to such
violation.” The CID at issue here fully complies with this
provision. It identifies the allegedly illegal conduct under
investigation as follows: “whether debt relief providers, lead
generators, or other unnamed persons are engaging in
unlawful acts or practices in the advertising, marketing, or
sale of debt relief services or products, including but not
limited to debt negotiation, debt elimination, debt
settlement, and credit counseling.” The CID also identifies
the provision of law applicable to the alleged violation as
“Sections 1031 and 1036 of the Consumer Financial
Protection Act of 2010, 12 U.S.C. §§ 5531, 5536; 12 U.S.C.
§ 5481 et seq., the Telemarketing Sales Rule, 16 C.F.R.
§ 310.1 et seq., or any other Federal consumer financial
law.” That information suffices to put Seila Law on notice
of the nature of the conduct the CFPB is investigating, and it
is not so general as to raise vagueness or overbreadth
concerns. See United States v. Morton Salt Co., 338 U.S.
632, 652 (1950).
AFFIRMED.