Collins v. Yellen
594 U. S. ____ (2021) (2021)
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Rule of Law:
A statutory provision restricting the President's power to remove the single head of an independent executive agency to removal only 'for cause' violates the separation of powers.
Facts:
- In response to the 2008 housing crisis, Congress enacted the Housing and Economic Recovery Act, creating the Federal Housing Finance Agency (FHFA) to regulate mortgage companies Fannie Mae and Freddie Mac.
- The FHFA placed Fannie Mae and Freddie Mac into conservatorship due to significant financial losses.
- The FHFA, acting as conservator, and the Department of Treasury entered into agreements where Treasury provided over $187 billion in capital to the companies.
- In exchange for the capital, the companies issued senior preferred stock to Treasury and were required to pay a 10% annual cash dividend.
- Because the companies often had to draw on Treasury's capital to make their dividend payments, the parties executed a 'third amendment' in August 2012.
- This amendment replaced the fixed-rate dividend with a variable one, requiring the companies to pay their entire net worth to Treasury each quarter, less a small capital reserve (the 'net worth sweep').
- As a result of the 'net worth sweep,' the companies transferred approximately $200 billion to Treasury, preventing them from accumulating capital or paying dividends to private shareholders, including Patrick J. Collins.
- The Recovery Act stipulated that the single Director of the FHFA serves a five-year term and may be removed by the President only 'for cause'.
Procedural Posture:
- Patrick J. Collins and other shareholders of Fannie Mae and Freddie Mac sued the FHFA and its Director in the U.S. District Court for the Southern District of Texas.
- The District Court dismissed the shareholders' statutory claim and granted summary judgment to the FHFA on the constitutional claim.
- The shareholders, as appellants, appealed to the U.S. Court of Appeals for the Fifth Circuit.
- The Fifth Circuit, hearing the case en banc, reversed the District Court, holding that the statutory claim could proceed and that the FHFA's structure was unconstitutional.
- The en banc court held that the proper remedy was to sever the removal restriction but not to invalidate the third amendment.
- Both the shareholders (Collins et al.) and the federal parties (Yellen et al.) petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does the statutory provision in the Housing and Economic Recovery Act of 2008 that restricts the President's power to remove the Director of the Federal Housing Finance Agency (FHFA) only 'for cause' violate the separation of powers?
Opinions:
Majority - Alito, J.
Yes, the for-cause removal restriction for the single Director of the FHFA is unconstitutional because it violates the separation of powers. First, the shareholders' statutory claim that the FHFA exceeded its authority is barred by the Recovery Act's anti-injunction clause, as the Agency was permitted to act in its own best interests to stabilize the mortgage market, not just in the best interests of the companies. On the constitutional claim, the Court's decision in Seila Law LLC v. Consumer Financial Protection Bureau is all but dispositive. The FHFA is an independent agency led by a single Director insulated from presidential control by a for-cause removal provision. This structure unconstitutionally concentrates executive power in a single actor who is not accountable to the President. Distinctions between the FHFA and the CFPB are immaterial; the President's removal power is essential for executive accountability regardless of the specific scope of an agency's authority. However, the third amendment is not void ab initio because the Director was properly appointed. The case is remanded for the lower courts to determine if the shareholders suffered any compensable harm that was directly caused by the unconstitutional removal restriction itself.
Concurring - Thomas, J.
Joined the majority opinion in full but wrote separately to argue that government action is not necessarily unlawful even if a removal restriction is unconstitutional. Because the Constitution automatically displaces any conflicting statute, the President always possessed the legal power to remove the Director, regardless of the 'for cause' provision. Therefore, unless a President was actually prevented from removing a Director, it is difficult to see how the mere existence of the unconstitutional provision renders the Director's actions unlawful.
Concurring - Kagan, J.
Concurred in the judgment that the removal provision is unconstitutional based on the doctrine of stare decisis from Seila Law, but dissented from that original decision and disagreed with the majority's political theory and its unnecessary expansion of Seila Law's holding. Joined the majority's remedial analysis, noting that it correctly limits retroactive relief to situations where the removal restriction actually caused harm, thereby mitigating the damage of the Court's removal jurisprudence.
Concurring - Gorsuch, J.
Joined the majority's conclusion that the removal restriction is unconstitutional but dissented from the remedy. Argued that actions taken by an unconstitutionally insulated officer should be considered void. The majority's remedial test, which requires speculating about what the President might have done, is a 'novel and feeble substitute' for the traditional remedy of setting aside the unlawful action.
Dissenting - Sotomayor, J.
Dissented from the constitutional holding, arguing that the majority improperly extended Seila Law. Seila Law was limited to agencies with 'significant executive power' that regulate private citizens, like the CFPB. The FHFA, in contrast, lacks such broad power and primarily regulates quasi-governmental entities, making its for-cause removal protection constitutional under existing precedent.
Analysis:
This decision solidifies and expands the 'presidentialist' view of executive power articulated in Seila Law, confirming that the rule against for-cause removal protections for single-headed independent agencies is broad. The Court made clear that the specific scope of an agency's power is not a dispositive factor, making many other similarly structured agencies potentially vulnerable. The most significant development, however, is the Court's remedial holding. By refusing to automatically void actions taken by an unconstitutionally insulated officer and instead requiring plaintiffs to prove that the removal restriction itself caused their harm, the Court created a very high bar for obtaining retrospective relief, thereby limiting the practical impact of finding a separation-of-powers violation.
