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Collins v. Yellen
 | |
| Collins v. Yellen | |
| Term: 2020 | |
| Important Dates | |
| Argument: December 9, 2020 Decided: June 23, 2021 | |
| Outcome | |
| Fifth Circuit affirmed in part, reversed in part, vacated in part, and case remanded | |
| Vote | |
| 7-2 | |
| Majority | |
| Samuel Alito • Chief Justice John G. Roberts • Clarence Thomas • Elena Kagan • Neil Gorsuch • Brett Kavanaugh • Amy Coney Barrett | |
| Concurring | |
| Clarence Thomas • Neil Gorsuch • Elena Kagan | |
| Dissenting | |
| Sonia Sotomayor • Stephen Breyer | |
Collins v. Yellen is a U.S. Supreme Court case about the extent of the president’s removal powers and control of independent federal agencies. In a 7-2 decision, the court held that restrictions on the president's authority to remove the director of the Federal Housing Finance Agency violated the separation of powers. The court also rejected the argument that the FHFA exceeded its authority as conservator of Fannie Mae and Freddie Mac, the government-sponsored corporations that deal in mortgages.[1]
Justice Samuel Alito delivered the opinion of the court, writing that the Housing and Economic Recovery Act (HERA) blocks shareholders from challenging FHFA decisions in court since the FHFA acted within the bounds of its powers. However, he also wrote that "the Constitution prohibits even 'modest restrictions' on the President's power to remove the head of an agency with a single top officer." The end of the opinion says that FHFA officers were properly appointed but that lower courts should resolve whether the unconstitutional restriction on the president's removal power inflicted harm that gives the shareholders a right to request relief in federal court.[1]
Justice Clarence Thomas wrote a concurring opinion arguing that actions taken by federal officials are not necessarily unlawful just because a restriction on the president's removal power over them is unlawful in the abstract.[1]
Justice Neil Gorsuch wrote an opinion concurring in part in which he argued that the distinction between unconstitutionally appointed officials and unconstitutionally insulated officials should not prevent the court from finding that an official acted without constitutional authority.[1]
Justice Elena Kagan wrote an opinion concurring in part and concurring in the judgment and Justices Stephen Breyer and Sonia Sotomayor joined part II of her opinion. Kagan agreed with the majority that the FHFA did not exceed the limits of its powers, but she only agreed to hold the agency structure unconstitutional out of respect for precedent. Part II of her opinion agreed with the majority that rewinding the FHFA's actions would only be warranted if the president's inability to fire the director affected those actions.[1]
Justice Sonia Sotomayor wrote an opinion concurring in part and dissenting in part, joined by Justice Breyer. She argued that the court misapplied the precedent from Seila Law. Sotomayor agreed with the parts of the majority opinion upholding the FHFA's actions under the HERA and discussing potential remedies following remand of the case; however, she wrote, "The Court has proved far too eager in recent years to insert itself into questions of agency structure best left to Congress."[1]
The case was argued on December 9, 2020, during the court's October 2020-2021 term. It was consolidated with Yellen v. Collins.[2] The original U.S. Supreme Court case was called Collins v. Mnuchin and became Collins v. Yellen when Janet Yellen became secretary of the U.S. Department of the Treasury.
Click here to review the lower court's opinion.
Why it matters: The decision holding the structure of the FHFA unconstitutional articulated limits on the kinds of administrative agencies Congress may create and reaffirmed the court's decision in Seila Law v. Consumer Financial Protection Bureau.
Timeline
The following timeline details key events in this case:
- June 23, 2021: The U.S. Supreme Court affirmed in part, reversed in part, and vacated in part the decision from the Fifth Circuit and remanded the case for further proceedings.[1]
- December 9, 2020: The U.S. Supreme Court heard oral argument.
- July 9, 2020: The court agreed to hear the case.
- October 25, 2019: Treasury Secretary Steven Mnuchin, the petitioner in Mnuchin v. Collins, appealed to the U.S. Supreme Court.
- September 25, 2019: Patrick Collins, the petitioner in Collins v. Mnuchin, appealed to the U.S. Supreme Court.
- September 6, 2019: In an en banc opinion, the 5th Circuit reversed in part, affirmed in part, and remanded the case to the district court.
Background
Congress created the Federal Housing Finance Agency and protected director from presidential removal
- See also: Federal Housing Finance Agency
In 2008, Congress passed the Housing and Economic Recovery Act (HERA) of 2008, creating the Federal Housing Finance Agency (FHFA). The FHFA, an independent government agency, regulates Fannie Mae and Freddie Mac, the government-sponsored entities that deal in mortgages, and the Federal Home Loan Bank System.[4] According to its website, the FHFA aims to ensure "that the housing government sponsored enterprises operate in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing finance and community investment."[4]
HERA established the FHFA with a single agency director, appointed by the president and confirmed by the U.S. Senate for a five-year term. The statute also specified that the president could only remove the director for cause.[5]
A group of private Fannie Mae and Freddie Mac shareholders sued the FHFA over a 2012 dividend agreement between the FHFA and the U.S. Department of the Treasury that transferred to the federal government their economic interests in the mortgage companies.[5] The shareholders argued that the dividend agreement was an illegal action beyond the powers of the FHFA and the Treasury and that the structure of the FHFA violates the U.S. Constitution because it is headed by a single director who is only removable for cause and it does not depend on congressional appropriations.[6][7]
5th Circuit panel: Structure of FHFA is unconstitutional
On July 16, 2018, a panel of the U.S. Court of Appeals for the 5th Circuit held that the structure of the FHFA unconstitutionally violated the separation of powers because the agency’s director was too insulated from presidential control. The panel opinion stated that "Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable," which the court said violated precedent set by the U.S. Supreme Court.[6][7][5][8]
The court struck the language from HERA that only allowed the president to dismiss the FHFA director for good cause.[8] Though the panel found the FHFA structure unconstitutional, it upheld the statutory authority of FHFA and Treasury Department to enter into the dividend agreement.[6]
En banc 5th Circuit: Structure of FHFA is unconstitutional
Both the plaintiff shareholders and the FHFA filed petitions for rehearing 'en banc'—before the full Fifth Circuit—in August 2018.[9] Before the court issued its opinion, the FHFA asked the 5th Circuit to uphold the statute that requires the president to give cause before removing the director of the agency.[10] The agency’s interim director, Joseph Otting, had decided not to defend the structure of the agency, but its new director, Mark A. Calabria argued that the court should rule that the U.S. Constitution allows Congress to create agencies with single directors insulated from presidential control.[10] The FHFA told the court that Calabria had reconsidered the constitutionality of the agency’s structure.[10]
On September 6, 2019, the 5th Circuit ruled 9-7 that the structure of the FHFA was unconstitutional.[11] The court held that the FHFA for-cause removal structure “limits the President’s removal power and does not fit within the recognized exception for independent agencies.”[11] The U.S Supreme Court established that exception for agencies led by multi-member boards in the 1935 case Humphrey's Executor v. United States. The Fifth Circuit held that court precedent does not support removal protections for agencies led by single directors like the FHFA.[11]
The 5th Circuit cited the 2010 U.S. Supreme Court case Free Enterprise Fund v. PCAOB to support severing the FHFA's removal protections from the HERA and leaving the rest of the law in place.[11]
Appeal to the U.S. Supreme Court
The Fannie and Freddie shareholders appealed to the U.S. Supreme Court, arguing, "While the Fifth Circuit correctly held that FHFA’s insulation from at-will presidential removal power unconstitutionally dilutes the President’s Article II authority, the court failed to carry out the Article III responsibilities that follow from that finding."[5] The petition to the Supreme Court argued that the case "provides the Court with an opportunity to ensure adherence to the separation-of-powers principles at the heart of our system of Government. Indeed, this Court’s review is necessary to protect the integrity of all three branches of our tripartite Federal Government."[5]
The U.S. Supreme Court granted the petition for review on July 9, 2020.[12]
On August 17, 2020, the U.S. Supreme Court invited Aaron L. Nielson, an administrative law professor at Brigham Young University, to submit a brief defending the FHFA from claims that its structure violates the separation of powers.[12]
Questions presented
Collins v. Yellen
The petitioner presented the following questions to the court:[3]
Questions presented:
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Yellen v. Collins
The petitioner presented the following questions to the court:[14]
Questions presented:
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Oral argument
The U.S. Supreme Court heard oral argument on December 9, 2020.[15]
Audio
Transcript
Outcome
The court ruled unanimously that the shareholders' claim that the FHFA exceeded its authority under the Housing and Economic Recovery Act must be dismissed. It also ruled 7-2 that the Recovery Act's restriction on the power of the president to remove the FHFA director was unconstitutional. It affirmed in part, reversed in part, vacated in part the Fifth Circuit's ruling and remanded the case for further proceedings.[1]
Justice Samuel Alito delivered the opinion of the court. Justice Clarence Thomas wrote a concurring opinion. Justice Neil Gorsuch wrote an opinion concurring in part. Justice Elena Kagan wrote an opinion concurring in part and concurring in the judgment. Justice Sonia Sotomayor wrote an opinion concurring in part and dissenting in part.
Opinions
Opinion of the court
Justice Samuel Alito delivered the opinion of the court, which dismissed the claim that the Federal Housing Finance Agency (FHFA) exceeded its powers as a conservator under the Housing and Economic Recovery Act of 2008 (HERA) but held that the structure of the FHFA was unconstitutional.[1]
U.S. Supreme Court rejects challenge to FHFA actions
Alito argued that the HERA gave the FHFA broad powers to act in the best interests of Fannie Mae and Freddie Mac or its own best interest. According to the court, the HERA blocks shareholders from challenging FHFA decisions in court since the FHFA acted within the bounds of its powers.[1]
U.S. Supreme Court holds FHFA structure unconstitutional
The court also held that the HERA's restrictions on the power of the president to remove the director of the FHFA were unconstitutional. Alito argued that restricting the president's authority to remove the director of the FHFA to cases where the president can cite a cause violates the separation of powers. He applied precedent from Seila Law v. Consumer Financial Protection Bureau (2020) and said the FHFA, like the CFPB structure at issue in Seila, "is an agency led by a single Director, and the Recovery Act (like the Dodd-Frank Act) restricts the President’s removal power." The court held that "the Constitution prohibits even 'modest restrictions' on the President's power to remove the head of an agency with a single top officer."[1]
Alito argued that the shareholders had standing to challenge the structure of the FHFA in court even if they lacked legal authority to seek judicial review of specific actions the FHFA took. He also argued no other factors in the case prevented the U.S. Supreme Court from addressing whether the structure of the FHFA violated the U.S. Constitution.[1]
The court rejected the shareholders' request to have the money they paid under the challenged agreement returned to them because the officials who implemented the agreement allegedly lacked constitutional authority. Alito wrote that FHFA officers were properly appointed but that lower courts should resolve whether the unconstitutional restriction on the president's removal power inflicted harm that entitled the shareholders to relief.[1]
How the justices voted
The justices joined different parts of the majority opinion. They ruled unanimously to dismiss the shareholder's claim that the FHFA exceeded its authority under the HERA. They ruled 7-2 that the HERA's restriction on the power of the president to remove the FHFA director was unconstitutional.[1]
Chief Justice John Roberts and Justices Clarence Thomas, Brett Kavanaugh, and Amy Coney Barrett joined Justice Alito's opinion in full.[1]
Justices Elena Kagan and Stephen Breyer joined all of Alito's opinion except part III-B.[1]
Justice Neil Gorsuch joined all of Alito's opinion except part III-C.[1]
Justice Sonia Sotomayor joined parts I, II, and III-C of Alito's opinion.[1]
Concurring opinions
Justice Clarence Thomas wrote a concurring opinion arguing that actions taken by federal officials are not necessarily unlawful just because a restriction on the president's removal power over them is unlawful in the abstract.[1]
Justice Neil Gorsuch wrote an opinion concurring in part in which he argued that the distinction between unconstitutionally appointed officials and unconstitutionally insulated officials should not prevent the court from finding that an official acted without constitutional authority.[1]
Justice Elena Kagan wrote an opinion concurring in part and concurring in the judgment and Justices Stephen Breyer and Sonia Sotomayor joined part II of her opinion. Kagan agreed with the majority that the FHFA did not exceed the limits of its powers, but she only agreed to hold the agency structure unconstitutional out of respect for precedent. Part II of her opinion agreed with the majority that rewinding the FHFA's actions would only be warranted if the president's inability to fire the director affected those actions.[1]
Justice Sonia Sotomayor wrote an opinion concurring in part and dissenting in part, joined by Justice Breyer. She argued that the court misapplied the precedent from Seila Law because the CFPB wielded significantly more authority than the FHFA, making the constitutional case against the FHFA director's removal protections weaker. Sotomayor agreed with the parts of the majority opinion upholding the FHFA's actions under the HERA and discussing potential remedies following remand of the case; however, she wrote, "The Court has proved far too eager in recent years to insert itself into questions of agency structure best left to Congress."[1]
Text of the opinion
Read the full opinion here.
Commentary about the case
Pre-decision commentary
The Constitutional Accountability Center, a 501(c)(3) nonprofit organization that, according to its website, argues "that the Constitution is, in its most vital respects, a progressive document," filed an amicus brief in the case arguing that the structure of the FHFA was consistent with the U.S. Constitution.[16] The brief made the following three points:[17]
- "Congress has broad authority to shape the structure of the federal government and to confer on certain officers a degree of independence from the president"
- "Responding to the devastating housing crisis of 2008, Congress determined it was necessary to establish the FHFA as a regulator with some degree of independence"
- "Congress acted within its constitutional authority in conferring on the FHFA director some degree of independence from the president"
The Pacific Legal Foundation, a 501(c)(3) nonprofit organization that, according to its website, "defends the individual liberty and constitutional rights of Americans threatened by government overreach and abuse," filed an amicus brief arguing that the structure of the FHFA violates separation of powers principles.[18] The brief made the following points:[19]
- "The structure of the Federal Housing Finance Agency violates constitutional separation of powers"
- "'Independent agencies' that exercise executive power may not be insulated from presidential control"
- "The court should overturn Humphrey's Executor to ensure agencies are not insulated from presidential control"
- "The Administrative Procedure Act directs courts to vacate unconstitutional agency action"
- "The Fifth Circuit's Remedy is inconsistent with the nature of the judicial power under the Constitution"
After oral argument, Amy Howe of SCOTUSblog wrote:[20]
| “ | After nearly two hours of debate, the justices did not seem inclined to strike down the agreement [at issue in the case] on the ground that the restrictions on the president’s ability to remove the FHFA director violate the Constitution. The justices appeared slightly more receptive to the shareholders’ claim that the FHFA and the Treasury Department did not have the authority to enter into the 2012 agreement, but they spent relatively little time on that issue, so it wasn’t clear whether there were five votes in favor of the claim.[13] | ” |
Post-decision commentary
This section contains arguments about the case made after the U.S. Supreme Court issued its final decision.
Decision was "mostly bad news for shareholders" of Fannie Mae and Freddie Mac
The justices rejected the argument that the FHFA and U.S. Treasury Department lacked the authority to change the payment arrangement between shareholders and the Treasury. Even though it ruled the FHFA's structure unconstitutional, "the court stopped short of ordering that the money be returned to the shareholders as a result of that constitutional defect," according to Amy Howe, writing for SCOTUSblog.[21]
SCOTUS rejects congressional efforts to limit presidential removal powers twice in one year
According to Amy Howe, writing for SCOTUSblog, "Beyond the shareholders’ lawsuit, the decision is the second time in the past year that the court has rejected congressional efforts to limit the president’s ability to remove the heads of federal agencies."[21]
Shareholder lawsuit "handed Joe Biden tighter control over the mortgage industry"
Mark Joseph Stern, a staff writer for Slate, argued that the lawsuit in Collins was a plan "to force a settlement that would enrich shareholders by transferring billions of dollars back to the mortgage giants and release them from government control."[22]
According to Stern, "It is difficult to overstate how badly this scheme backfired. On Wednesday, the Supreme Court affirmed the investors’ constitutional theory—then rejected their effort to claw back billions while deregulating the mortgage industry. In the process, they allowed President Joe Biden to appoint a new head of the FHFA, a progressive who will keep Fannie Mae and Freddie Mac funneling money to the government (instead of shareholders) indefinitely. The plaintiffs, in other words, did not just lose this case. They inadvertently defeated their ultimate objective, entrenching the very system they tried to topple."[22]
Impact
Within hours of the U.S. Supreme Court decision in Collins, President Joe Biden (D) removed Mark Calabria as head of the Federal Housing Finance Agency and appointed Sandra Thompson to replace him. Thompson had served as a deputy director of the agency since 2013.[23]
See also
External links
- Search Google News for this topic
- U.S. Supreme Court docket file - Collins v. Yellen (petitions, motions, briefs, opinions, and attorneys)
- SCOTUSblog case file for Collins v. Yellen
- U.S. Supreme Court docket file - Yellen v. Collins (petitions, motions, briefs, opinions, and attorneys)
- SCOTUSblog case file for Yellen v. Collins
Footnotes
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22 U.S. Supreme Court, "Collins v. Yellen, Opinion of the Court," accessed June 23, 2021
- ↑ Yellen v. Collins also came on a writ of certiorari to the United States Court of Appeals for the 5th Circuit. The docket number was 19-563.
- ↑ 3.0 3.1 Supreme Court of the United States, Collins v. Mnuchin, "Questions presented," accessed July 13, 2020
- ↑ 4.0 4.1 Federal Housing Finance Agency, "About FHFA," accessed January 19, 2017
- ↑ 5.0 5.1 5.2 5.3 5.4 Supreme Court of the United States, Collins v. Mnuchin, "Petition for a writ of certiorari," accessed July 13, 2020
- ↑ 6.0 6.1 6.2 Law.com, "Federal Housing Finance Agency, 'Not Accountable to the President,' Deemed Unconstitutionally Structured," July 17, 2018
- ↑ 7.0 7.1 Reason, "Federal Court Holds FHFA Unconstitutional," July 16, 2018
- ↑ 8.0 8.1 United States Court of Appeals for the 5th Circuit, "Collins v. Mnuchin," July 16, 2018
- ↑ The National Law Review, "Petitions for Rehearing En Banc Filed in Fifth Circuit Decision Finding FHFA Is Unconstitutionally Structured," September 6, 2018
- ↑ 10.0 10.1 10.2 Federal Housing Finance Agency, "Letter Re: Collins et al. v. Mnuchin et al., No. 17-20364 (en banc oral argument held January 23, 2019)," July 9, 2019
- ↑ 11.0 11.1 11.2 11.3 United States Court of Appeals for the Fifth Circuit, "Collins v. Mnuchin," September 6, 2019
- ↑ 12.0 12.1 SCOTUSblog, "Collins v. Mnuchin," accessed July 15, 2020
- ↑ 13.0 13.1 13.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Supreme Court of the United States, Mnuchin v. Collins, "Questions presented," accessed July 13, 2020
- ↑ U.S. Supreme Court, "Collins v. Mnuchin, Oral Argument - Audio," December 9, 2020
- ↑ Constitutional Accountability Center, "About Us," accessed November 24, 2020
- ↑ U.S. Supreme Court, "Brief of Constitutional Accountability Center as Amicus Curiae," October 30, 2020
- ↑ Pacific Legal Foundation, "About Us," accessed November 24, 2020
- ↑ U.S. Supreme Court, "Brief Amicus Curiae of Pacific Legal Foundation in Support of Collines, et al.," September 2020
- ↑ SCOTUSblog, "Argument analysis: “Very hard questions” in dispute over Fannie Mae, Freddie Mac shareholder suit," December 9, 2020
- ↑ 21.0 21.1 SCOTUSblog, "Despite constitutional violation, court rejects broad relief for shareholders of mortgage giants," June 23, 2021
- ↑ 22.0 22.1 Slate, "A Scheme to Blow Up the Housing Market Backfired Spectacularly at the Supreme Court," June 24, 2021
- ↑ POLITICO, "Biden removes FHFA director after Supreme Court ruling," June 23, 2021
