The case of a body camera company that sued the Securities and Exchange Commission v. Cochran: a federal court ruling that the CFPB is not constitutionally funded
The first case deals with a firm that makes body cameras for law enforcement, being investigated by the F.T.C. as part of a merger review. Rather than waiting for the proceedings to come to an end, the company tried to bring a lawsuit in federal court, arguing that the agency was unconstitutional and had no power to review the merger.
The Securities and Exchange Commission v. Cochran deals with an accountant accused of misfeasance by the S.E.C. The accountant, Michelle Cochran, sought to challenge the agency’s structure in federal court before administrative procedures were completed. The Fifth Circuit agreed that she should be able to bring her claims, creating the sort of conflict between federal appeals courts that often prompts Supreme Court review.
On Nov. 8, the justices will consider whether states can require corporations to agree to be sued in that state’s courts as a condition of doing business in the state.
A panel of three appointees from the Fifth Circuit Court of Appeals ruled last fall that the funding of the agency is unconstitutional due to it receiving money from the Federal Reserve, which in turn is funded by bank fees.
Chris, a law professor at the University of Utah, says that three judges appointed by President Trump have decided to take away the funding that Congress had voted for.
The bureau was created by the Obama administration and Congress to help protect Americans from being cheated by financial firms as a result of the financial crisis and Great Recession. It has returned billions of dollars to consumers who it deemed have been treated unfairly.
The judges wrote that the Bureau did not depend on annual appropriations for funding, unlike the majority of executive agencies. This unprecedented arrangement crosses any line between a constitutionally and unconstitutionally funded agency.
Peterson says the CFPB is not unique as an agency that does not receive its annual funding determined by Congress — the Federal Reserve and the Federal Deposit Insurance Corporation both are funded in other ways.
“The CFPB is likely to ask for a stay while it seeks an appeal to the entire 5th Circuit… and then likely the United States Supreme Court after that,” says Peterson.
“There’s going to be a lot of confusion about whether or not rules associated with mortgage loans, debt collection, credit cards, are still even viable rules anymore down in the Fifth Circuit.”
In its brief to the Supreme Court, the Biden administration noted that even programs like Social Security and Medicare are paid for by mandatory spending, not annual appropriations.
“This marks the first time in our nation’s history that any court has held that Congress violated the Appropriations Clause by enacting a law authorizing spending,” wrote the Biden administration’s Solicitor General Elizabeth Prelogar.
Conservatives who have long opposed the modern administrative state have previously challenged laws that declared heads of agencies can only be fired for cause. In recent years, the Supreme Court has agreed and struck down many of those provisions. The court said the president must be able to fire at- will and not just for cause because administrative agencies are essentially creatures of the Executive Branch.
The CFPB was the brainchild of then White House aide, and now U.S. Senator Elizabeth Warren. She pointed out that lower courts had previously and repeatedly upheld the constitutionality of the CFPB.
“If the Supreme Court follows more than a century of law and historical precedent,” she said, “it will strike down the Fifth Circuit’s decision before it throws our financial market and economy into chaos.”