At its conference this Friday, January 10, the U.S. Supreme Court is expected to consider the petition for a writ of certiorari filed by the plaintiffs in Collins v. Mnuchin and the petition filed by the FHFA and Treasury Department. The case dockets indicate that briefing on the petitions was submitted for Friday’s conference.
In its en banc decision in Collins, the Fifth Circuit held the FHFA’s structure is unconstitutional. The FHFA was created by the Housing and Economic Recovery Act of 2008 (HERA) to oversee two of the housing government services enterprises (GSEs). Like the CFPB, the FHFA was established as an “independent agency” led by a single Director appointed by the President subject to Senate confirmation for a five-year term and who can only be removed by the President “for cause.” The parties who challenged the FHFA’s constitutionality were shareholders of the GSEs seeking to invalidate an amendment (Third Amendment) to a preferred stock agreement between the Treasury Department and the FHFA as conservator for the GSEs that required the GSEs to pay quarterly dividends to the Treasury equal to the GSEs’ excess net worth after accounting for prescribed capital reserves.
While ruling that the FHFA’s structure is unconstitutional, the en banc Fifth Circuit concluded that the appropriate remedy for the constitutional violation was to sever HERA’s for-cause removal provision but not to invalidate the Third Amendment. The Fifth Circuit also reversed the district court’s dismissal of the shareholders’ statutory claim against the FHFA that the Third Amendment exceeded the FHFA’s conservatorship authority but affirmed the district court’s dismissal of the shareholders’ statutory claim against the Treasury.
In their cert petition, the plaintiff shareholders challenge the Fifth Circuit’s severance analysis and refusal to invalidate the Third Amendment based on the FHFA’s unconstitutionality. In their cert petition, the FHFA and Treasury challenge the Fifth Circuit’s reversal of the district court’s dismissal of the plaintiffs’ statutory claim against the FHFA and argue that the issue of the shareholders’ ability to assert a statutory claim to challenge the Third Amendment merits review apart from the constitutionality issues. The plaintiffs and the FHFA/Treasury opposed each other’s cert petition. (In the Fifth Circuit, the FHFA defended its constitutionality while the Treasury agreed with the plaintiffs that the FHFA’s structure is unconstitutional. In opposing the plaintiffs’ cert petition, the FHFA and Treasury argued that it was unnecessary for the Supreme Court to grant the petition to decide the constitutionality issue because that issue was already before the Court in Seila Law.)
Having already granted the certiorari petition in Seila Law to decide the question of the CFPB’s constitutionality and the question of whether severance of the Dodd-Frank Act’s for-cause removal provision would be the appropriate remedy for a constitutional violation, and since the Third Amendment’s validity could be impacted by the resolution of those questions, a possible result would be for the Supreme Court to grant the petitions and hold them pending its ruling in Seila Law.