PHH and the United States have filed responses with the D.C. Circuit to the CFPB’s petition for rehearing en banc.  The D.C. Circuit invited the Solicitor General to file a response expressing the views of the United States and entered an order requiring both PHH and the SG to file their responses by December 22.

In PHH, the D.C. Circuit ruled that that the CFPB’s single-director-removable-only-for-cause structure violates the U.S. Constitution’s separation of powers.  To remedy the constitutional defect, it severed the removal-only-for-cause provision from the Dodd-Frank Act so that the President “now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.”  It also rejected the CFPB’s interpretation of RESPA, which departed from HUD’s prior interpretation, to prohibit captive mortgage re-insurance arrangements such as the one at issue in PHH.  The court also held that even if the CFPB’s interpretation was correct, the CFPB’s attempt to retroactively apply its new interpretation violated due process.

In its petition, the CFPB argued that the panel’s constitutionality ruling conflicts with U.S. Supreme Court precedent and should therefore be reconsidered by the court sitting en banc.  It also argued that panel’s RESPA ruling should be reviewed by the court sitting en banc but observed that the panel’s retroactivity holding “is perhaps not worthy of en banc review on its own.”  The CFPB also did not seek en banc reconsideration of the panel’s ruling that CFPB administrative enforcement actions are subject to the same statute of limitations as would apply to a CFPB lawsuit filed in court.

In its response, PHH asserts that the panel’s constitutionality ruling is fully consistent with Supreme Court precedent “and more than two centuries of separation-of-powers jurisprudence.”  As a result, PHH contends the panel’s “correct application of settled constitutional principles warrants no further review.”  PHH argues that further review of the panel’s RESPA interpretation is also not warranted because it “is plainly correct irrespective of the separation-of-powers ruling, and it presents no conflicting authority.”  PHH asserts that “[o]n the contrary, the CFPB would ask the en banc Court to create a circuit split with every other court to have considered the proper scope of RESPA.” (emphasis supplied.)  In addition, PHH contends that the panel’s retroactivity holding “provides another independent basis for vacating the $109 million penalty against PHH.”

The United States, in its response filed by the Department of Justice, does not address the D.C. Circuit’s RESPA rulings and instead “addresses only the panel’s separation-of-powers holding.”  The United States argues that “the panel’s approach to resolving [the CFPB’s] constitutionality departs from the approach the Supreme Court has applied in resolving such separation-of-powers questions.”  According to the United States, 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 United States contends that, under relevant Supreme Court precedent, the proper inquiry is whether a removal restriction is an “impermissible intrusion on Presidential power or on the functioning of the Executive Branch,” and although a removal restriction’s effect on individual liberty “may shed light on whether it constitutes [such] an impermissible intrusion…the possible impact on individual liberty has not been an independent inquiry.”

PHH has filed a motion for leave to file a supplemental response to the petition for rehearing en banc.  In the motion, PHH asserts that “the United States [in its response] 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 asserting that “[t]he United States government has now had two rounds of briefing and taken two separate positions in this Court in support of rehearing,” PHH seeks an opportunity to be heard “on the United States’ newly expressed views.”