In December 2020, after the U.S. Supreme Court ruled that the CFPB’s structure was unconstitutional and remanded the case for further consideration, a unanimous panel of the U.S. Court of Appeals for the Ninth Circuit ruled that the civil investigative demand (CID) issued to Seila Law was validly ratified by former Director Kraninger and affirmed the district court’s decision granting the CFPB’s petition to enforce the CID.
Following a sua sponte request from a Ninth Circuit judge for a vote on whether to rehear the case en banc, a vote was taken and a majority of the non-recused Ninth Circuit active judges did not vote in favor of en banc reconsideration. Accordingly, rehearing en banc was denied. However, four judges joined in an opinion dissenting from the denial. Two of the dissenting judges were appointed by President George W. Bush and two were appointed by President Trump.
In its June 2020 decision, the Supreme Court held that the CFPB’s structure was unconstitutional because its Director could only be removed by the President “for cause.” It remanded the case to the Ninth Circuit to consider the CFPB’s argument that former Acting Director Mulvaney’s ratification of the CID issued to Seila Law cured any constitutional deficiency. On remand, the Ninth Circuit panel determined that former Director Kraninger’s ratification made it unnecessary for the panel to decide whether the CID was validly ratified by former Acting Director Mulvaney. The panel concluded that former Director Kraninger’s ratification remedied any constitutional injury that Seila Law may have suffered due to the defect in the Bureau’s structure.
In ruling that the ratification was valid, the panel rejected Seila Law’s argument that until the Supreme Court invalidated the for-cause removal provision, the CFPB was exercising its powers unlawfully, which in turn rendered all of the agency’s prior actions void at the time they were taken and therefore incapable of being ratified. In the panel’s view, the constitutional infirmity at issue in Seila Law related to the Director alone, not to the legality of the CFPB itself. Therefore, since the CFPB as an agency had the authority to issue the CID in 2017, the CID was not void and could be validly ratified by former Director Kraninger.
In their opinion, the dissenters call the case “a little like the story of David and Goliath: except here, the Ninth Circuit resurrects Goliath on the battlefield so that he can defeat David.” According to the dissenters, “like David, the one-man firm seemingly defeated the giant CFPB [when the Supreme Court ruled that the CFPB’s structure was unconstitutional]” but “[o]n remand, a panel of our court resuscitated the giant, holding that the CFPB’s post-severance ratification cured any defect in the agency’s past actions.” As a result, the CFPB was permitted to continue its investigation of Seila Law.
The dissenters assert that the Ninth Circuit’s decision to deny rehearing en banc “effectively means that Seila Law is entitled to no relief from the harms inflicted by an unaccountable and unchecked federal agency.” They assert further:
Thus, while David slayed the giant, Goliath still wins. But that is not the law. As the panel recognized, Supreme Court precedent conditions effective ratification on the principal having the power to do the act ratified at the time of the act—not just at the time of ratification. (emphasis included, citations omitted). And as the Court held, the Director’s insulation from presidential control rendered the whole agency unconstitutional. With no agency empowered to enforce the laws at the time of the CFPB’s prior actions, no ratification is permissible.
The dissent is cited by Seila Law in support of a motion asking the Ninth Circuit for a stay of the mandate pending the filing of a petition for a writ of certiorari in the Supreme Court. Seila Law states that it plans to file a petition “presenting the exceptionally important question of whether ratification of the CFPB’s civil investigative demand is an appropriate remedy for the separation-of-powers violation identified by the Supreme Court.” It also asserts that for the reasons set forth in the dissent, “there is a reasonable chance that the Supreme Court will grant certiorari in this case.”