Appeals Court Rules Part of Obama’s Dodd-Frank Law Unconstitutional

WASHINGTON—A federal appeals court on Tuesday ruled a key part of Barack Obama’s Dodd-Frank law unconstitutional, calling it a “grave threat to individual liberty.” This tees up yet another case for an evenly divided Supreme Court, the balance of which will be decided by whether Donald Trump or Hillary Clinton is elected in November.

Dodd-Frank is a massive takeover of the U.S. financial system, just as the Affordable Care Act (“Obamacare”) was a takeover of the U.S. healthcare system. It was the brainchild of Sen. Elizabeth Warren, who was a professor at the time. A central part of Dodd-Frank creates the Consumer Financial Protection Bureau (CFPB), headed by a director nominated by the president and then confirmed by the Senate.

Companies on the receiving end of CFPB decisions have challenged its constitutionality. On Oct. 11, the U.S. Court of Appeals for the District of Columbia Circuit agreed with several of those challenges, striking down part of one of Obama’s signature laws, one strongly supported by Clinton.

Judge Brett Kavanaugh wrote for the three-judge panel in PHH Corporation v. CFPB:

This is a case about executive power and individual liberty. The U.S. Government’s executive power to enforce federal law against private citizens – for example, to bring criminal prosecutions and civil enforcement actions – is essential to societal order and progress, but simultaneously a grave threat to individual liberty.

The Framers understood that threat to individual liberty. When designing the executive power, the Framers first separated the executive power from the legislative and judicial powers. “The declared purpose of separating and dividing the powers of government, of course, was to ‘diffus[e] power the better to secure liberty.’” Bowsher v. Synar, 478 U.S. 714, 721 (1986) (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring)). To ensure accountability for the exercise of executive power, and help safeguard liberty, the Framers then lodged full responsibility for the executive power in the President of the United States, who is elected by and accountable to the people. The text of Article II provides quite simply: “The executive Power shall be vested in a President of the United States of America.” U.S. CONST. art. II, § 1. And Article II assigns the President alone the authority and responsibility to “take Care that the Laws be faithfully executed.” Id. § 3. As Justice Scalia explained: “The purpose of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom.” Morrison v. Olson, 487 U.S. 654, 727 (1988) (Scalia, J., dissenting).

Kavanaugh notes with alarm the vast powers of the “headless fourth branch of government” of agencies that are independent from presidential control, and thus not answerable to American voters. He continues, “Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.

Although he criticizes independent agencies, he acknowledged that the Supreme Court upheld the constitutionality of such agencies in 1935, when the Court started its massive lurch to the left, in that case overruling prior precedent from 1926, which had held that the president must always be able to remove executive officers.

What’s different about the CFPB—and leaves the D.C. Circuit free to make a ruling not dictated by the Supreme Court’s decisions in this area—is that all previous independent agencies were “headed by multiple commissioners,” making each one “at least accountable to and by their fellow commissioners or board members.”

Until the CFPB, which is “headed by a single person,” completely unaccountable to anyone.

The court expressed concern that “the CFPB possess enormous power over American business, American consumers, and the overall U.S. economy.” After surveying the contours of this power, the panel concluded, “That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case.”

Senior Judge Raymond Randolph joined Kavanaugh’s opinion, but wrote separately to make additional points, including that parts of the controlling precedent in this case might be changed by the Supreme Court.

Judge Karen LeCraft Henderson wrote separately to say that she agreed with the parts of the majority opinion rejecting on statutory grounds the CFPB’s arguments in this case, and as such did not believe the court should reach the constitutional issues in the case.

The Obama administration may petition the full D.C. Circuit to rehear the case en banc, where a liberal majority could reverse the panel decision. Either way, this case is likely to go to the U.S. Supreme Court in the next year.

The case’s outcome there could very easily turn on who is elected president on Nov. 8.

Ken Klukowski is senior legal editor for Breitbart News. Follow him on Twitter @kenklukowski.