On May 24, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in the case of PHH vs. CFPB. The case, arising out of a CFPB enforcement action under the Real Estate Settlement Procedures Act (RESPA), also addresses the fundamental issue of whether the CFPB’s leadership structure is permissible under the Constitution.   

The en banc consideration of the case followed the opinion of a three-judge panel of the D.C. Circuit that found the Bureau’s structure unconstitutional because it features a single director who is not removable at will by the President. While other federal agencies are led by a single person—including a fellow financial regulator, the Office of the Comptroller of the Currency (OCC)—the court dismissed the similarity in a footnote, distinguishing the OCC structure in noting that the authorizing statutory language is not identical. 

The en banc hearing focused on the Constitutional issue. The hearing also was unusual for at least one reason—it featured two agencies of the federal government making opposing arguments in the case. The U.S. Department of Justice (DOJ), which under President Obama originally had supported the CFPB’s position in PHH, switched sides in connection with the change in Administration, and thus appeared at oral argument as amicus curiae arguing against the CFPB. Having two governmental entities representing conflicting views in the same case is not unprecedented, but also not common.

Attempting to predict the outcome of a case based on the performance of the advocates, and the questions and reactions of judges, in oral argument is both a popular legal parlor game and, often, a fool’s errand. In any event, the opinion of the D.C. Circuit is unlikely to be the last word; the case seems headed toward the U.S. Supreme Court.

If so, the CFPB once again might find itself opposed there not only by PHH but by a fellow federal agency. The DOJ, represented in the Supreme Court by its Office of the Solicitor General, could again oppose the CFPB’s position.

And it is unclear whether the CFPB would appear representing itself. The CFPB has statutory authority to represent itself in the Supreme Court, which is unusual among federal agencies (many federal agencies are represented by the DOJ in litigation rather than by their own lawyers; even those with general authority to represent themselves in the lower courts typically would be represented in the Supreme Court by the Solicitor General). However, that authority is subject to the approval or non-objection of the Attorney General, the head of the DOJ. Therefore, it seems possible that the Solicitor General may be representing two warring sides of the same matter, or may decline to support the CFPB. This provides one of the most interesting aspects to watch as the PHH case proceeds toward its ultimate conclusion.