On May 6, a Ninth Circuit panel held that the Consumer Financial Protection Bureau’s single-director structure does not violate the Constitution, rejecting a California law firm’s argument that it should not be required to comply with a civil investigative demand issued by the agency.

The CFPB issued the CID to Seila Law as part of its investigation of whether the firm violated the Telemarketing Sales Rule in the course of providing debt-relief services to consumers.

Seila Law refused to comply with the CID, however, arguing that the CFPB’s single-director structure violates the Constitution and thus renders all of the agency’s activities unlawful. Specifically, Siela Law argued that the CFPB’s structure violates the separation-of-powers doctrine because the agency is headed by a single director who exercises substantial executive powers but can be removed by the President only for cause.

The Ninth Circuit panel rejected that argument. The panel held that the Supreme Court’s decisions in Humphrey’s Executor v. United States and Morrison v. Olson were controlling, and that those decisions indicate that the CFPB’s single-director, for-cause removal structure does not impede the President’s ability to perform his constitutional duties.

According to the panel, Humphrey’s Executor and Morrison dictate that Congress may insulate agencies that exercise quasi-legislative and quasi-judicial powers from the President’s control, even if those agencies also exercise substantial executive powers.

In upholding the CFPB’s single-director structure, the Ninth Circuit panel followed the D.C. Circuit’s en banc decision in PHH Corp. v. Consumer Financial Protection Bureau. But, as those that follow this blog know, the D.C. Circuit’s PHH Corp. decision drew a sharp dissent from then-Judge and now-Justice Brett Kavanaugh, who argued that the CFPB’s structure presents “an overwhelming case of unconstitutionality.”

Despite the Ninth Circuit panel’s decision, the targets of CFPB investigations should still consider challenging the constitutionality of the CFPB’s single-director structure. As Justice Kavanaugh’s PHH Corp. dissent confirms, there are strong arguments that the CFPB’s single-director structure violates the Constitution, and many judges (and some justices) who will embrace those arguments.

The full text of the Ninth Circuit’s decision is available here.