This is from the 3 Judge Appealate Panel that decided the CFPB, on obtaining a meaningful remedy for the Plaintiff, instead of another Phyrric victory:
3.
That leaves the question of remedy. Though Collins is not precisely
on point, we follow its framework because, though that case involved an
unconstitutional removal provision, we read its analysis as instructive for
separation-of-powers cases more generally. See Collins, 141 S. Ct. at 1787–
88; cf. All Am. Check Cashing, 33 F.4th at 241 (Jones, J., concurring) (finding
Collins “inapt” for determining a remedy for the Bureau’s “budgetary
independence”).
Collins clarified a dichotomy between agency actions that involve “a
Government actor’s exercise of power that the actor did not lawfully
possess” and those that do not. 141 S. Ct. at 1787–88. Examples of the
former include actions taken by an unlawfully appointed official, see Lucia v.
SEC, 138 S. Ct. 2044, 2055 (2018); a legislative officer’s exercise of executive
power, see Bowsher v. Synar, 478 U.S. 714, 727–36 (1986); and the President’s
exercise of legislative power, see Clinton v. City of New York, 524 U.S. 417,
438 (1998). The remedy in those cases, invalidation of the unlawful actions,
flows “directly from the government actor’s lack of authority to take the
challenged action in the first place.” All Am. Check Cashing, 33 F.4th at 241
(Jones, J., concurring).
In contrast, the Court found the separation of powers problem posed
by an official’s unlawful insulation from removal to be different. Collins, 141
S. Ct. 1787–88. Unlike the above examples, such a provision “does not strip”
a lawfully appointed government actor “of the power to undertake the other
responsibilities of his office.” Id. at 1788. Thus, as discussed supra in II.B.,
to obtain a remedy, a plaintiff must prove more than the existence of an
unconstitutional provision; she must prove that the challenged action
actually “inflicted harm.” Id. at 1789.
Into which category does the Bureau’s promulgation of the Payday
Lending Rule fall, given the agency’s unconstitutional self-funding scheme?
The answer turns on the distinction between the Bureau’s power to take the
challenged action and the funding that would enable the exercise of that
power. Put differently, Congress plainly (and properly) authorized the
Bureau to promulgate the Payday Lending Rule, see 12 U.S.C. §§ 5511(a),
5512(b), as discussed supra in II.A–C. But the agency lacked the
wherewithal to exercise that power via constitutionally appropriated funds.
Framed that way, the Bureau’s unconstitutional funding mechanism “[did]
not strip the [Director] of the power to undertake the other responsibilities of his office,” Collins, 141 S. Ct. at 1788 & n.23, but it deprived the Bureau of
the lawful money necessary to fulfill those responsibilities. This is a
distinction with more than a semantical difference, as it leads us to conclude
that, consistent with Collins, the Plaintiffs are not entitled to per se
invalidation of the Payday Lending Rule, but rather must show that “the
unconstitutional . . . [funding] provision inflicted harm.” Id. at 1788–89.
However, making that showing is straightforward in this case.
Because the funding employed by the Bureau to promulgate the Payday
Lending Rule was wholly drawn through the agency’s unconstitutional
funding scheme,17 there is a linear nexus between the infirm provision (the
Bureau’s funding mechanism) and the challenged action (promulgation of
the rule). In other words, without its unconstitutional funding, the Bureau
lacked any other means to promulgate the rule. Plaintiffs were thus harmed
by the Bureau’s improper use of unappropriated funds to engage in the
rulemaking at issue. Indeed, the Bureau’s unconstitutional funding structure
not only “affected the complained-of decision,” id. at 1801 (Kagan, J.,
concurring in part), it literally effected the promulgation of the rule. Plaintiffs
are therefore entitled to “a rewinding of [the Bureau’s] action.” Id.
In considering other violations of the Constitution’s separation of
powers, the Supreme Court has rewound the unlawful action by granting a
new hearing, see Lucia v. SEC, 138 S. Ct. 2044, 2055 (2018), or invalidating an order, see NLRB v. Noel Canning, 573 U.S. 513, 521, 557 (2014); see also 5
U.S.C. § 706(2)(A) (providing that, under the APA, a “reviewing court
shall . . . hold unlawful and set aside agency action . . . found to be . . . not in
accordance with law”). In like manner, we conclude that the district court
erred in granting summary judgment to the Bureau and in denying the
Plaintiffs a summary judgment “holding unlawful, enjoining and setting
aside” the challenged rule. Accordingly, we render judgment in favor of the
Plaintiffs on this claim and vacate the Payday Lending Rule as the product of
the Bureau’s unconstitutional funding scheme.
III.
The Bureau did not exceed its authority under either the Act or the
APA in promulgating its 2017 Payday Lending Rule. The issuing Director’s
unconstitutional insulation from removal does not in itself invalidate the rule,
and the Plaintiffs fail to demonstrate cognizable harm from that injury. Nor
does the Bureau’s rulemaking authority transgress the nondelegation
doctrine. We therefore AFFIRM the district court’s entry of summary
judgment in favor of the Bureau in part.
But Congress’s cession of its power of the purse to the Bureau violates
the Appropriations Clause and the Constitution’s underlying structural
separation of powers. The district court accordingly erred in granting
summary judgment in favor of the Bureau and denying judgment in favor of
the Plaintiffs.
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