Supreme Court to hear 9th Circuit appeals on authority of immigration, securities, consumer protection agencies

The Supreme Court has added to its March argument session a trio of cases from the U.S. 9th Circuit Court of Appeals, each bearing significantly on the authority and even viability of executive agencies that oversee immigration, securities law and consumer protection.

The three matters implicate the Department of Homeland Security's discretion to deport asylum seekers, the Security and Exchange Commission's authority to claw back ill-gotten gains from enforcement defendants, and the Consumer Financial Protection Bureau's very structure, which challengers claim violates the Constitution by insulating the agency's head from presidential removal.

The latter appeal received a certiorari grant first, in October, five months after the 9th Circuit found permissible Congress' post-financial crash design of an executive body meant to guard consumers against predatory lenders and operate with some measure of independence from presidents perhaps influenced by banking industry donors. Consumer Financial Protection Bureau v. Seila Law, 2019 DJDAR 3532 (9th Cir. May 6, 2019).

Under 2010's Dodd-Frank Act, the CFPB's director, once appointed by a president for a five-year term, may not be displaced except for "inefficiency, neglect of duty, or malfeasance in office." The agency withstood an earlier challenge in the D.C. Circuit when an en banc panel majority analogized it to another financial regulator, the Federal Trade Commission, whose antitrust-enforcing directors likewise serve unless removed for cause. The CFPB's measure of independence was "wholly ordinary," and "fully consonant with the Constitution," the court decided. PHH Corporation v. Consumer Financial Protection Bureau, 15-1177 (D.C. Cir. Jan. 31, 2018).

But a dissenter to that ruling has since joined the Supreme Court, where his vote could tip its balance against the bureau. In the circuit decision then-Judge Brett Kavanaugh described independent executive agencies collectively as "a headless fourth branch of the U.S. Government," and worried particularly that the CFPB's lone director -- unlike an FTC commissioner sitting on a multi-member board -- wielded "more unilateral authority than any other official in any of the three branches."

The government's briefing in the pending appeal cites, and essentially adopts, Kavanaugh's aversion to the agency's quasi-independence, conceding, "The statutory restriction on the president's authority to remove the director violates the Constitution's separation of powers."

The parties disagree on whether that unconstitutional design defect renders the agency -- and its billions of dollars worth of enforcement actions taken since its creation -- invalid. The government will argue the "for cause" firing provision can be severed and struck from the Dodd-Frank Act, leaving a CFPB both still extant and more tractable. Seila Law LLC v. Consumer Financial Protection Bureau, 19-7.

The high court invited former Solicitor General Paul D. Clement to present, as amicus curiae, argument supporting the 9th Circuit's ruling approving the agency's present, insulated structure.

In the immigration matter, the court will weigh whether the 9th Circuit correctly determined that an asylum seeker from Sri Lanka was constitutionally entitled to appeal an administrative judge's decision that he lacked credible fear of being returned to his home country. U.S. District Judge Anthony J. Battaglia held a section of the immigration code prevented Article III courts from reviewing such decisions, but the 9th Circuit in March found that statute violated the Constitution's suspension clause, and that some judicial review of credible fear decisions must be allowed to ensure proper procedures and standards aren't ignored in the course of expedited deportations.

Citing a Supreme Court decision that allowed into federal court habeas claims from Guantanamo Bay detainees, the 9th Circuit reasoned the asylum seeker was constitutionally entitled to "a meaningful opportunity to demonstrate that he is being held pursuant to an erroneous application or interpretation of relevant law." Thuraissigiam v. Department of Homeland Security, 2019 DJDAR 1898 (9th Cir. Mar. 7, 2019).

The department argued in its cert petition that the statute at issue provides "streamlined rules and procedures ... while ensuring that there is no danger that an alien with a genuine asylum claim will be returned to persecution."

The securities law appeal will put into question whether the Securities and Exchange Commission may continue using a common remedy traditionally considered within its enforcement authority: disgorgement. Petitioners in the case -- who bilked Chinese investors of $27 million promising U.S. visas, and met with an equal disgorgement penalty on top of millions in statutory damages -- claim a 2017 high court decision essentially stripped the equitable remedy from the SEC's enforcement tool kit. The government describes that decision -- Kokesh v. SEC, 137 S. Ct. 1635 -- as more limited, defining the agency's disgorgement-ordering power only within a particular statute of limitations. Liu v. Securities and Exchange Commission, 18-1501

Tuesday's court announcement indicated the aslyum challenge arguments will come on Monday, March 2, while the other two appeals will be considered back to back on Tuesday, March 3.