{"id":30807,"date":"2024-05-24T20:51:33","date_gmt":"2024-05-25T01:51:33","guid":{"rendered":"https:\/\/law.marquette.edu\/facultyblog\/?p=30807"},"modified":"2024-06-03T17:51:12","modified_gmt":"2024-06-03T22:51:12","slug":"30807","status":"publish","type":"post","link":"https:\/\/law.marquette.edu\/facultyblog\/2024\/05\/30807\/","title":{"rendered":"Saving the Consumer Financial Protection Bureau (and the Constitution) from the Courts"},"content":{"rendered":"

[This piece is cross-posted and was originally published in the Yale J. on Reg.: Notice & Comment blog] Administrative law is almost certain to undergo monumental change during the Supreme Court\u2019s current Term.\u00a0 On May 16, 2024, the Court issued its first in a series of blockbuster administrative law decisions: Consumer Financial Protection Bureau v. Community Financial Services Ass\u2019n<\/em>. The Court\u2019s 7-2 decision declaring the Bureau\u2019s funding structure constitutional brings good news for the administrative state \u2014 Justice Thomas\u2019s majority opinion validated the ongoing regulatory activities of not just the Bureau but also similarly funded financial regulators such as the Federal Reserve. \u00a0The decision also brings good news for originalism. Justice Thomas\u2019s analysis centered on original public meaning and drew a strong majority of Justices, albeit in a case that may have been relatively easy once the Justices had the benefit of additional briefing on historical issues. \u00a0His opinion focused on the \u201cnarrow question whether\u201d the Bureau\u2019s standing and self-directed \u201cfunding mechanism complies with the Appropriations Clause.\u201d Slip op. at 1. At the same time, concurring opinions by Justices Kagan and Jackson and a dissenting opinion by Justice Alito suggested that the Justices might adopt differing analyses of text and history when faced with more challenging issues in the future.<\/p>\n

In the decision on appeal, the United States Court of Appeals for the Fifth Circuit found that the Bureau\u2019s funding structure was an unconstitutional \u201cabomination\u201d of which the \u201cFramers warned.\u201d Its decision was a classic case of originalism gone awry \u2014 selective law office history which did not withstand the comprehensive historical record presented in further briefing to the Supreme Court and scholarship such as my forthcoming Virginia Law Review Article, The Founders\u2019 Purse<\/em><\/a>.\u00a0 Had the Fifth Circuit invited further historical briefing on Appropriations Clause challenges (issues that the parties likely regarded as throwaway arguments for much of the litigation), one wonders if the Court of Appeals would have corrected its own mistakes without a trip to the Supreme Court. Even well-intentioned judges can go very far astray if they pluck select evidence from the historical record and forego a more comprehensive analysis. The time-intensive historical inquiries demanded by originalism pose challenges for district and court of appeals judges with many cases to decide.\u00a0 It seems, however, that lawyers and historians could step up to offer enhanced historical analyses in these cases. In Community Financial Services<\/em>, such enhanced historical analysis did not occur until the case reached the Supreme Court.<\/p>\n

At the Supreme Court, additional historical briefing and a brilliant oral argument by Solicitor General Elizabeth Prelogar clarified the inherent constitutionality of the Bureau\u2019s funding structure. Seven Justices found that the text and history of the Appropriations Clause favored the Bureau. Justice Thomas\u2019s majority opinion focused on the original public meaning of the Appropriations Clause. Concurring opinions by Justices Kagan and Jackson aligned with this result while offering important qualifications on the use of text and history. Justice Alito\u2019s dissent (which was joined by Justice Gorsuch) reached the exact opposite result and would have affirmed the Fifth Circuit\u2019s decision. His conclusion rested on an exceptionally narrow analysis of history and tradition.<\/p>\n

Text.<\/strong> The language of Article I, Section 9, clause 7 is simple: \u201cNo money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.\u201d\u00a0 Justice Thomas\u2019s majority opinion focused on the original public meaning of the term \u201cappropriation\u201d and drew from Founding-era dictionary definitions of this term. Slip op. at 7.\u00a0 He concluded that, in \u201cordinary usage,\u201d an appropriation imposed fairly simple requirements: it demanded only \u201ca law authorizing the expenditure of particular funds for specified ends.\u201d Id<\/em>. Justice Thomas\u2019s approach emphasized public<\/em> meaning and did not incorporate additional, corroborating evidence such as Alexander Hamilton\u2019s observation that appropriations laws must ascertain the \u201cpurpose\u201d and the \u201cfund\u201d for an expenditure. See<\/em> The Founders\u2019 Purse<\/em> at 18.<\/p>\n

In his dissent, Justice Alito also focused on the term \u201cappropriation.\u201d\u00a0 He chided the majority for \u201cconsulting a few old dictionaries\u201d to determine the meaning of \u201ca term of art\u201d whose meaning ought to be \u201cinterpreted in light of legal tradition and . . . centuries of practice.\u201d Slip op. at 6-7 (Alito, J. dissenting) (cleaned up). According to Justice Alito, collapsing text into a legal and traditional understanding of appropriations \u201cdemand[ed]\u201d heightened \u201clegislative control over the source and disposition of the money used to finance\u201d the Bureau\u2019s operations.\u00a0 Id<\/em>. at 17. \u00a0As the majority noted, however, Justice Alito did not translate this understanding into a competing definition of the word \u201cappropriation.\u201d\u00a0 Slip op. at 19.<\/p>\n

Further, both Justice Thomas\u2019s and Justice Alito\u2019s initial focus on the meaning of the term \u201cappropriation\u201d detracted from other significant textual evidence of temporal limits on spending.\u00a0 When the Framers wanted to impose a time limit on spending they did so expressly, such as the two-year time limit for army appropriations in Article I, Section 8, clause 12. The lack of similar language in Article I, Section 9, Clause 7\u2019s Appropriations Clause strongly suggests that there was no time limit for general appropriations.\u00a0 Justice Thomas emphasized this point only in rebuttal, and Justice Alito did not address it.<\/p>\n

Perhaps because of these divergent analyses of a relatively simple clause, Justice Jackson\u2019s concurrence emphasized the proper role of judges in constitutional interpretation. As she noted, \u201c[w]hen the Constitution\u2019s text does not provide a limit to a coordinate branch\u2019s power, we should not lightly assume that Article III implicitly directs the Judiciary to find one.\u201d Slip op. at 1 (Jackson, J., concurring). \u00a0While Justice Jackson\u2019s concerns about courts finding \u201cunstated limits in the Constitution\u2019s text\u201d and \u201cundercut[ing] considered judgements of a coordinate branch\u201d (id<\/em>. at 3) were easy for the majority to avoid here, they will be important in future cases. \u00a0In the Court\u2019s upcoming decisions in SEC v. Jarkesy<\/em> and Trump v. United States<\/em>, litigants have also asked the Court to find presidential removal powers and immunities that lack an explicit basis in the Constitution\u2019s text. \u00a0Justice Jackson\u2019s concurrence reiterates the importance of judicial modesty when deciding these separation-of-powers issues. \u00a0The removal issues in Jarkesy<\/em> may tee up an additional set of related interpretive concerns \u2013 whether judges who emphasize unrepresentative statements from Framers like James Madison have erroneously read removal powers into Article II. See<\/em> Jed Handelsman Shugerman, The Indecisions of 1789: Inconstant Originalism and Strategic Ambiguity<\/em><\/a>, 171 U. PA. L. REV. 753 (2023); Lorianne Updike Toler, Un-fathering Executive Removal<\/em><\/a>, 57 CONN. L. REV. (forthcoming 2025); Brief Amicus Curiae of Jed H. Shugerman, SEC v. Jarkesy (2023) (No. 22-859). (For additional historical perspectives on Jarkesy<\/em> see Brief Amicus Curiae of Professor Ilan Wurman, SEC v. Jarkesy (2023) (No. 22-859); Brief Amici Curiae of Constitutional Originalists Edwin Meese III, Steven G. Calabresi, and Gary S. Lawson.)<\/p>\n

History. <\/strong>Justice Thomas\u2019s majority opinion set forth a lengthy Founding-era history that the Fifth Circuit missed. He began with pre-constitutional history in England, the colonies, and the states and concluded that \u201cearly legislative bodies exercised a wide range of discretion\u201d whether or not to impose temporal limits or specific parameters on spending. Slip op. at 8-12; see generally<\/em> Josh Chafetz, Congress\u2019s Constitution: Legislative Authority and the Separation of Powers (2017). Another important body of evidence missed by the Fifth Circuit involved post-ratification spending laws that operated outside of annual appropriations.\u00a0 As I note in The Founders\u2019 Purse<\/em> (pp. 31-36), one of the most generous early spending laws granted the Sinking Fund Commission indefinite authorization to self-direct spending from an initial sum that in today\u2019s terms would exceed $400 billion.\u00a0 Many other laws afforded field officers standing, self-directed funding based on fees for their services.\u00a0 Id<\/em>. at 36-44. Justice Thomas relied on some of these post-ratification practices including statutes in which early congresses authorized expenditures of \u201csums not exceeding\u201d capped amounts and extended pre-constitutional practices of funding customs and postal officers through indefinite and independently determined fees. Slip op.<\/em> at 12-15; see generally<\/em> Nicholas Parrillo, Against the Profit Motive: The Salary Revolution in American Government 1780\u20131940 (2013). \u00a0\u00a0He found that \u201cearly appropriations displayed significant variety in their structure,\u201d and that the \u201cBureau\u2019s funding mechanism fits comfortably within the First Congress\u2019s appropriations practice.\u201d Slip op. at 15.<\/p>\n

Justice Alito\u2019s dissent relied on largely the same history to reach the opposite conclusion.\u00a0 He found that key historical funding practices, such as fee-based funding for customs officers, were not sufficiently analogous to the Bureau\u2019s funding structure.\u00a0 For example, Justice Alito noted that customs officers had to return excess funding while the Bureau could retain unspent funds. Slip op. at 20 (Alito, J., dissenting). But he did not explain why this distinction crossed a constitutional line. His description of more recent precedent suffered from the same flaw.\u00a0 When describing the Federal Reserve Board as \u201ca unique institution with a unique historical background\u201d (id<\/em>. at n. 16), Justice Alito never clarified a constitutional sense in which the Bureau\u2019s funding differed from the near-identical funding structure for the Fed.<\/p>\n

The majority criticized Justice Alito\u2019s dissent for adopting a selective historical approach. \u00a0\u201cThe dissent [did] not meaningfully grapple with the many parliamentary appropriations laws that preserved a broad range of fiscal discretion for the King,\u201d including \u201c\u2019sums not exceeding\u2019 appropriations.\u201d\u00a0 Slip op. at 20 (cleaned up).\u00a0 While the dissent \u201cengage[d]\u201d with post-ratification history, the majority found it \u201cunclear why\u201d the \u201cdifferences\u201d Justice Alito identified would \u201cmatter under the dissent\u2019s theory.\u201d Id<\/em>. at 21. \u00a0One wonders whether Justice Alito\u2019s objections to the Bureau\u2019s \u201cnovel,\u201d \u201cunprecedented,\u201d and \u201cnever before seen\u201d funding structure (slip op. at 1, 3, 22 (Alito, J., dissenting)) are so strong that they exceed Bruen<\/em>\u2019s originalist requirement that the government supply \u201ca well-established and representative historical analogue\u201d but \u201cnot a historical twin.\u201d \u00a0New York State Rifle & Pistol Ass\u2019n v. Bruen<\/em>, 142 S.\u00a0 Ct. 2111, 2133 (2022).<\/p>\n

As Professor Leah Litman has aptly explained, anti-novelty arguments of the sort made by Justice Alito can be quite problematic when assessing the constitutionality of legislatively established structures. \u00a0\u201c[G]iven the sheer number of policies that [Congress] could conceivably pursue, Congress may not have tried out all forms of constitutionally permissible regulation.\u201d Leah M. Litman, Debunking Antinovelty<\/em><\/a>, 66 DUKE L.J. 1407, 1444 (2017). And yet Justice Alito seemed to expect this type of legislative precedent when he demanded that the Bureau show a precise historical analogue for its funding structure. \u00a0While Professor Litman did not offer an originalist analysis, her points align with prominent originalists\u2019 related concerns about reducing constitutional meaning to a narrow and potentially unrepresentative or factual erroneous subset of original applications or \u201cconstitutional references.\u201d See<\/em> Lawrence B. Solum, Original Public Meaning<\/em><\/a>, 2023 MICH. STATE L. REV. 807, 841-43; Christopher R. Green, Originalism and the Sense-Reference Distinction<\/em><\/a>, 50 ST. LOUIS U. L. J. 555, 591 (2006). Justice Alito seemed to offer an even more fraught variant of an original applications problem \u2014 he suggested that a funding structure must have a preceding, original identical<\/em> application (and perhaps one that is grounded in centuries of practice) before it can be considered constitutional. \u00a0Justice Alito\u2019s apparent requirement is novel, narrow, and has so little to do with constitutional meaning that it should not be considered originalist.<\/p>\n

Justice Kagan\u2019s concurrence offered a far more accommodative approach to history and was joined by Justices Sotomayor, Kavanaugh, and Barrett.\u00a0 Justice Kagan agreed with the majority that the Bureau\u2019s funding scheme \u201cwould have fit right in\u201d during the late-18th<\/sup> century. Slip. Op. at 1 (Kagan, J., concurring).\u00a0 In addition, she endorsed the consideration of an extended historical timeline and an \u201cunbroken congressional practice\u201d showing significant variety in appropriations practices that continued \u201cfor more than \u00a0two centuries.\u201d\u00a0 Id<\/em>. at 5. \u00a0\u00a0She further emphasized the need to ease up on the level of specificity required of historical evidence. As Justice Kagan pointed out, \u201c[w]hether or not the CFPB\u2019s mechanism has an exact replica, its essentials are nothing new.\u201d\u00a0 Id.<\/em>\u00a0 In contrast to Justice Alito\u2019s strict anti-novelty test, Justice Kagan\u2019s more general approach makes it easier for judges to ground modern regulatory structures in history.\u00a0 The Justices\u2019 differing approaches to the use of history will likely loom large in upcoming decisions ranging from the Second Amendment issues presented by United States v. Rahimi<\/em> to separation-of-powers concerns presented by SEC v. Jarkesy.<\/em><\/p>\n

* * * * *<\/p>\n

Once the Court had the benefit of a more complete historical record, Consumer Financial Protection Bureau v. Community Financial Services Ass\u2019n<\/em> became a relatively easy decision for Justices across the ideological spectrum.\u00a0 While seven Justices signed on to Justice Thomas\u2019s analysis of original public meaning, a closer examination of the Justices\u2019 opinions reveals methodological pluralism even within the relatively narrow originalist modalities of text and history.\u00a0 Only time will tell how the Justices will sort out their underlying methodological concerns in future separation-of-powers cases. \u00a0Consumer Financial Protection Bureau v. Community Financial Services Ass\u2019n<\/em> has set the stage for the Court to decide what may well become some of the most important decisions ever in the areas of administrative law and separation of powers.<\/p>\n","protected":false},"excerpt":{"rendered":"

[This piece is cross-posted and was originally published in the Yale J. on Reg.: Notice & Comment blog] Administrative law is almost certain to undergo monumental change during the Supreme Court\u2019s current Term.\u00a0 On May 16, 2024, the Court issued its first in a series of blockbuster administrative law decisions: Consumer Financial Protection Bureau v. 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