PHH and DOJ file responses to CFPB’s petition for rehearing en banc

On December 22, PHH and the United States filed responses to the CFPB’s petition for rehearing en banc. Earlier this month, the DC Circuit invited the Solicitor General to file a response “expressing the views of the United States” and entered an order instructing the Solicitor General and PHH to file their responses no later than December 22.

On October 11, the DC Circuit ruled that the Bureau’s single-director leadership structure violates the Constitution’s separation of powers doctrine because the director can only be removed for cause. In its decision, the DC Circuit’s three-judge panel explained that the CFPB, which is led by Director Cordray, is unlike other independent federal agencies that are not accountable to the president because their leadership is comprised of multiple commissioners or board members. The panel remedied the constitutional defect by severing the removal-only-for-cause provision from the Dodd-Frank Act so that the CFPB Director would serve at the will of the president who may remove the Director at any time. The panel also rejected the Bureau’s novel interpretation of Section 8 of RESPA which departed from HUD’s prior interpretation. In addition, the court held that the Bureau’s attempt to apply its interpretation to PHH’s conduct that occurred before the Bureau ever issued its interpretation violated PHH’s due process rights.

The CFPB argued in its petition, that the three-judge panel’s ruling conflicts with US Supreme Court precedent and that the ruling should be reconsidered by the DC Circuit sitting en banc. The Bureau also questioned how the panel could conclude that an independent agency led by a multi-member commission is constitutional, but a single-director structure is not. Regarding the panel’s RESPA ruling, the Bureau argued that the court sitting en banc should review the decision but that the panel’s holding “is perhaps not worth of en banc review on its own.” It is worth noting that the Bureau did not ask the court to reconsider the panel’s ruling that statutes of limitations apply to CFPB administrative enforcement actions. We assume that by not challenging the panel’s decision, the Bureau has conceded the issue and will be subject to the same statute of limitations in administrative proceedings as would apply to the Bureau in a lawsuit filed in court.

PHH alleges in its response, that the panel’s separation of powers holding is “rooted firmly in existing Supreme Court precedent and does not warrant further review.” PHH also argues that the panel correctly interpreted RESPA and that the panel’s holding is “plainly correct irrespective of the separation-of-powers ruling, and it presents no conflict of authority.” Lastly, PHH asserts that the panel’s holding regarding the Bureau’s attempt to apply its new RESPA interpretation to PHH retroactively makes “review of the RESPA issues all the more unwarranted.”

The Department of Justice filed its response on behalf of the United States, presenting arguments in support of the CFPB’s petition for rehearing en banc. The DOJ does not address the panel’s RESPA rulings and instead focuses its attention solely on “the panel’s separation-of-powers holding.” According to the DOJ, the panel’s opinion was “premised on its view that an agency with a single head poses a greater threat to individual liberty than an agency headed by a multi-member body that exercises the same powers.” The DOJ argues that relevant Supreme Court precedent does not squarely address a structure like the CFPB’s and that “the panel’s approach to resolving its constitutionality departs from the approach the Supreme Court has applied in resolving such separation-of-powers questions.”

Further, the DOJ argues that the panel should not have considered the constitutionality question at all because courts traditionally decline to make constitutional rulings if they can dispose of the case without doing so. The DOJ points out that “PHH sought only one form of relief in its petition for review: vacatur of the Board’s order against it.” The DOJ reasons that it was unnecessary to render a decision on the constitutionality issue, because the panel was able to conclude that the Bureau’s order should be vacated on grounds unrelated to separation of powers.

In addition to filing its response, PHH has filed a motion for leave to file a supplemental response to the petition for rehearing en banc. PHH argues that “the United States argues that this Court should grant the CFPB’s petition for rehearing en banc on several grounds that were not pressed in the CFPB’s petition, and with which PHH strongly disagrees.” Further, PHH mentions that the “United States government has now had two rounds of briefing and taken two separate positions in this Court in support of rehearing,” and that PHH is requesting an opportunity to be heard “on the United States’ newly expressed views” and to “address fully the Government’s 30 total pages of internally inconsistent arguments supporting rehearing en banc.”

Tags: DC Circuit, DOJ, PHH, RESPA

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