Shareholders in Fannie Mae and Freddie Mac sued the Federal Housing Finance Agency (FHFA) and its Director as well as the Department of Treasury and its Secretary, alleging the agencies' agreement to hand over all of Fannie and Freddie's net worth to Treasury violates the Housing and Economic Recovery Act (HERA). They also contended that HERA violates constitutional separation of powers principles by creating an agency (FHFA) that

  1. Is headed by a single director removable by the President only for cause;
  2. Is not dependent on appropriations;
  3. Is the beneficiary of a statutory provision forbidding courts from granting any relief that "restrains or affects" its exercise of its broad statutory powers and functions.

Twelve of the Fifth Circuit's sixteen en banc judges held that (1) the Shareholders' statutory claim can proceed on remand and (2) FHFA's novel structure is unconstitutional. By a 9-7 vote, a different en banc majority held that the only remedy available for the constitutional claim was to sever HERA's for-cause removal provision and for that reason rejected the Shareholders' pleas that the Court set aside the FHFA-Treasury deal at issue. If you break it all down, four of the judges in the majority on the remedies issue (a decisive number on that issue) dissented from the separate majority opinion regarding the constitutional issue.

The opinions are well-worth reading in full. I've done my best to hit the highlights here. I have lots of thoughts on the various issues, but this post is already way too long (sorry!).

Background on HERA, FHFA, Fannie, and Freddie

Congress created Fannie in 1938 and the Freddie in 1970. They are “government sponsored entities” (GSEs)—publicly traded companies with private shareholder that operate under congressional charters. Both GSEs operate in the secondary mortgage market by buying home loans from private lenders, pooling some into mortgage-backed securities, guaranteeing timely payment on those securities, and selling those securities to private investors. These services help stabilize the mortgage market and promote access to mortgage credit.

When the U.S. housing market collapsed in 2007, Fannie and Freddie controlled combined mortgage portfolios valued at approximately $5 trillion—nearly half of the U.S. mortgage market. As a result, Fannie and Freddie lost billions ($108 billion in 2008 alone). Yet the GSEs remained solvent and continued to support the U.S. home mortgage system.

In 2008, Congress passed HERA. Through the Act, Congress created the FHFA to regulate Fannie and Freddie. 12 U.S.C. § 4511. FHFA is an “independent agency of the Federal Government” headed by a single director. Appointed by the President with the advice and consent of the Senate, the director serves a term of five years “unless removed before the end of such term for cause by the President.” Id.§ 4512(b)(2). FHFA funding comes from annual assessments collected from the GSEs, not public or appropriated money. Id. § 4516.

HERA provides that FHFA may, “at the discretion of the Director,” appoint itself as “conservator or receiver” for the GSEs “for the purpose of reorganizing, rehabilitating, or winding up the[ir] affairs.” 12 U.S.C. § 4617(a)(2). By appointing itself as conservator, FHFA obtains broad powers over the GSEs. 12 U.S.C. § 4617(b). It “immediately succeed[s] to … all rights, titles, powers, and privileges of the [enterprises] and of any stockholder, officer, or director of such [enterprises] with respect to the [enterprises] and the[ir] assets.” 12 U.S.C. § 4617(b)(2)(A). It may “take over the assets of and operate the [enterprises],” “conduct all business of the [enterprises],” and “transfer or sell any asset or liability of the [enterprises].” 12 U.S.C. § 4617(b)(2)(B)(i) and (G). The Act further provides that the “Agency may, as conservator, take such action as may be - (i) necessary to put the [enterprises] in a sound and solvent condition; and (ii) appropriate to carry on the business of the [enterprises] and preserve and conserve the assets and property of the [enterprises].” 12 U.S.C. § 4617(b)(2)(D). FHFA may act “in the best interests of the [enterprises] or the Agency.” 12 U.S.C. § 4617(b)(2)(J)(ii).

HERA separately grants the Department of the Treasury “temporary” authority to “purchase any obligations and other securities issued by” Fannie and Freddie - though only on terms that “protect the taxpayer” and “provide stability to the financial markets” - as well as the authority to “exercise any rights received in connection with such purchases.” 12 U.S.C. §§ 1455(Z)(1)(A), (2)(A), (D), and 1719(g)(1)(A)-(B) (capitalization and emphasis omitted).

Finally, HERA limits judicial review of FHFA's exercise of its powers. It provides that the GSEs may sue to challenge FHFA's initial decision to appoint itself as conservator or receiver (if they do so within 30 days of the appointment), and that a court may order FHFA to “remove itself as conservator or receiver.” 12 U.S.C. § 4617(a)(5)(A). The Act further provides that, “[e]xcept as otherwise provided in [Section 4617] or at the request of the Director, no court may take any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or a receiver.” 12 U.S.C. 4617(f).

On September 6, 2008, FHFA appointed itself as conservator of both GSEs. One day later, FHFA, in its capacity as conservator, entered into agreements with Treasury under which Treasury committed to buy up to $100 billion in stock in each GSE. In return, Treasury received various forms of compensation - including priority over other stockholders in getting its investment back if the enterprises were later liquidated, periodic fees, and dividends at a fixed rate.

Treasury's initial commitment proved to be inadequate. So, in May 2009, FHFA and Treasury amended the Agreements to increase Treasury's investment to $200 billion for each GSE. Then, in December 2009, FHFA and Treasury amended the agreements again to make the investment commitment unlimited through the end of 2012, at which point the size of the commitment would become fixed.

In August 2012, Treasury and FHFA amended the Agreements a third time. The Third Amendment replaced the previous fixed dividend (tied to the size of Treasury's investment) with a variable dividend equal to nearly the entire net worth of each GSE. This “net worth sweep” transferred a fortune from Fannie and Freddie to Treasury.

The Shareholders' Lawsuit

In October 2016, the Shareholders challenged the Third Amendment in federal district court, raising three statutory claims:

1.      that FHFA had exceeded its authority under 12 U.S.C. § 4617(f) as conservator;

2.     that Treasury had exceeded its authority under 12 U.S.C. § 1455(l) to buy securities; and

3.     that Treasury had acted arbitrarily and capriciously in violation of the APA, 5 U.S.C. 702.

The shareholders also claimed that FHFA's structure violates the Constitution.

The district court dismissed the statutory claims, granted the government's motion for summary judgment on the constitutional claim, and denied the Shareholders' cross-motion for summary judgment on the constitutional claim. The court first held that HERA's anti-injunction clause barred the statutory claims, reasoning that the “adoption of the Third Amendment falls within FHFA's statutory conservatorship powers.” The court also rejected the Shareholders' constitutional claims, reasoning that “a ‘for cause’ removal provision” complies with the Constitution even where the provision protects “a single director” rather than “a multimember board.”

A fractured panel of the Fifth Circuit affirmed in part and reversed in part. In a per curiam opinion, the Court first affirmed the district court's dismissal of the Shareholders' statutory claims. The Court explained that “the D.C., Sixth, and Seventh Circuits ha[d] all rejected” statutory challenges to the Third Amendment and adopted “the same well-reasoned basis common to those courts' opinions.”

Turning to the constitutional claim, the Court concluded that HERA violated the Constitution by making FHFA's single Director removable only for cause, but that the proper remedy for that violation was to declare unconstitutional the statutory provision addressing removal, not to invalidate the Third Amendment.

Judge Haynes joined the panel's opinion in full. Then-Chief Judge Stewart joined the panel's statutory holding but dissented from its constitutional holding. Judge Willett joined the panel's constitutional holding, but dissented from its statutory holding. The Court subsequently granted rehearing en banc.

Before rehearing en banc, both FHFA and Treasury admitted FHFA’s structure violates the separation of powers. Several months later, however, FHFA reversed its position and argued that FHFA’s structure is constitutional. Treasury remained committed to its view that the agency's structure violates the Constitution.

Merits Issues

The Fifth Circuit, rehearing the case en banc, affirmed in part and reversed in part. A majority of the en banc Court reversed the dismissal of the statutory claim against FHFA, while affirming the dismissal of the statutory claims against Treasury. A different majority held that FHFA's structure violated the Constitution. A third majority held that the appropriate remedy for the constitutional violation was to declare HERA’s for-cause removal provision unconstitutional, not to invalidate the Third Amendment as the Shareholders had requested.

The Court addressed the Shareholders' statutory claims by a vote of 9-7, in an opinion by Judge Willett, joined by Judges Jones, Smith, Owen, Elrod, Ho, Duncan, Engelhardt, and Oldham. It reversed the dismissal of the Shareholders' statutory claim against FHFA, remanding the case for the district court to determine “if fact issues require trial or if summary judgment should be granted.” At the same time, the Court affirmed the district court's dismissal of the Shareholders' statutory claims against Treasury. Id.

The Court first rejected the government's contention that HERA’s anti-injunction clause—which forbids a court from taking “any action to restrain or affect the exercise of powers or functions of the Agency as a conservator or receiver,” 12 U.S.C. § 4617(f)—forecloses the Shareholders' statutory claims. The Court reasoned that the clause “distinguishes improperly exercising a power (not restrainable) from exercising one that was never authorized (restrainable),” and concluded that “whether the anti-injunction provision bars relief … depends entirely on whether the [Third Amendment] exceeded FHFA's statutory conservatorship powers.”

Turning to that question, the Court that the Shareholders “stated a plausible claim that the Third Amendment exceeded statutory authority.” The Court reasoned that FHFA had effectively liquidated the GSEs, something that, in the Court’s view, the agency could do only in its capacity as receiver. Relying on the Shareholders' allegations, the Court concluded that, in adopting the Third Amendment, FHFA improperly “abandoned rehabilitation in favor of ‘winding down’” the enterprises.

The Court emphasized that the Third Amendment grants Treasury “a right to the [enterprises'] net worth in perpetuity” and that the shareholders' complaint included allegations suggesting that FHFA designed the Third Amendment with the intent “to deprive Fannie and Freddie of all their capital.” Id. at 47a, 50a (brackets and citation omitted). The Court acknowledged that its decision “conflicts with at least some other circuits.”

The court of appeals also rejected the government's alternative argument that the Shareholders' statutory claims were independently foreclosed by the Recovery Act's succession clause--under which FHFA, as conservator, “immediately succeed[s] to … all rights … of any stockholder … with respect to the [GSEs] and assets of the [GSEs],” 12 U.S.C. § 4617(b)(2)(A). The Court acknowledged that the succession clause prohibits shareholders from bringing derivative claims on behalf of the enterprises while the enterprises remain in conservatorship. It concluded, however, that the Shareholders' challenge to the Third Amendment was a direct claim, not a derivative one. The Court emphasized that FHFA's acts had allegedly injured the shareholders as “residual claimants of [the GSEs'] value” and that the Shareholders had brought their claims under the APA.

Finally, the Court affirmed the district court's dismissal of the shareholders' claims that the Third Amendment exceeded Treasury's authority and was otherwise arbitrary and capricious, explaining that the Shareholders were outside the zone of interests protected by the relevant statutory provisions.

Judge Haynes, joined by then-Chief Judge Stewart and Judges Dennis, Southwick, Graves, Higginson, and Costa, dissented from the Court’s reversal of the dismissal of the statutory claim against FHFA. The dissenters agreed with the “five other circuits” that have rejected statutory challenges to the Third Amendment.  Given the Recovery Act's “extensive” grant of authority, the dissenters concluded that FHFA “acted within its statutory powers when it adopted” the Third Amendment.

The dissent took the majority to task for holding that the agencies' arguments that the Third Amendment falls within FHFA's conservator powers "in incorrect, at least at the pleading stage." (emphasis added). Here is that portion of the dissent:

During oral argument before the en banc court, a member of our court suggested that this claim should not be resolved on a motion to dismiss because it includes factual allegations beyond what appeared before other courts of appeals. However, neither party had previously argued this point, each proceeding from the assumption that this was purely a legal issue that could be resolved on a motion to dismiss. Indeed, the term “plausible” as it relates to the Shareholders’ complaint appears nowhere in their briefing. Instead, the Shareholders focused their assertions on the contention that the FHFA exceeded its statutory powers as a matter of law. They certainly never argued that there are “fact issues” that need to be litigated or more fully developed as it pertains to their statutory arguments regarding § 4617(f). It is hardly novel law that an appellant’s failure to brief an issue waives it. See, e.g., Singh v. RadioShack Corp., 882 F.3d 137, 149 (5th Cir. 2018).
Despite the clear waiver, that en banc oral argument question has now morphed into the holding of the majority opinion on this issue. The majority opinion concludes that the Shareholders stated a “plausible” claim that the FHFA exceeded its statutory authority in enacting the Third Amendment and remands for “further proceedings.” Now, due to the majority opinion’s departure from the Shareholders’ arguments, will the district court be required to hold a trial on FHFA’s intent? That makes little sense.

Moving on to the constitutional claim, the en banc majority first addresses standing. The agencies argued the Shareholders could not prove an injury in fact because by the time of the net worth sweep, they weren't entitled to dividends and their shares weren't listed on the New York Stock Exchange. The Court was unconvinced. It explained that "pumping large profits to Treasury instead of restoring the GSEs corporate structure is an injury in fact."

The agencies also argued that the Shareholders' claimed in jury was not traceable to the FHFA's unconstitutional structure. They pointed out that even assuming the FHFA's Director had not been subject to sufficient presidential control, the Secretary of Treasury was. Because the Third Amendment was a deal between FHFA and Treasury, the President's control over Treasury was sufficient to thwart the deal even if the President lacked sufficient control over the FHFA Director. The Court disagreed. It explained that plaintiffs weren't required to prove that a properly structured FHFA wouldn't have adopted the Third Amendment to establish standing.

Finally, the agencies argued that plaintiffs' requested relief would not redress their alleged injury. Specifically, they claimed that vacating past agency action is improper in a removal case. The Court, again, was not persuaded. In its view, "the form of injunctive or declaratory relief is a merits question." The Shareholders requested, among other thing, vacatur of the net worth sweep--a remedy that would redress their claimed injury. Accordingly, the Court held that plaintiffs had standing.

The agencies also argued that HERA's succession clause bars the Shareholders' constitutional challenge. The Court agreed that the provision precludes Shareholders from bringing derivative actions on behalf of the enterprises during a conservatorship. But it held that the succession clause did not apply to the Shareholders' constitutional challenge because it was a "direct claim" and because of the separation of powers issues involved. The Court explained that, “[i]f the constitutional structure of our Government that protects individual liberty is compromised, individuals who suffer otherwise justiciable injury may object.” (quoting Bond v. United States, 564 U.S. 211, 223 (2011)). The Court also asserted that a statute should be read to “preclude judicial review of constitutional claims” only where the statute makes Congress's intention to do so “clear.”

The Court concluded that the Shareholders were entitled to judgment on their constitutional claim and reinstated Part IIB2 of the panel opinion:

We hold that Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable. We reach this conclusion after assessing the combined effect of the: (1) for-cause removal restriction; (2) single-Director leadership structure; (3) lack of a bipartisan leadership composition requirement; (4) funding stream outside the normal appropriations process; and (5) Federal Housing Finance Oversight Board’s purely advisory oversight role.

The Court rejected several of the government's arguments regarding the Shareholders' constitutional claim. First, the agencies noted that the Third Amendment was adopted by FHFA's acting Director. Because the for-cause removal provision doesn't address acting directors, and the provision providing for acting directors doesn't address removal, the agencies argued that even assuming that HERA created an unconstitutional structure for the FHFA, this case doesn't present the issue.

The en banc majority disagreed:

But HERA unequivocally says what kind of agency it creates: “There is established the Federal Housing Finance Agency, which shall be an independent agency of the Federal Government.” In history and Supreme Court precedent, Presidential removal is the “sharp line of cleavage” between independent agencies and executive ones. So we do not read the procedural guidance for choosing an acting Director to override the removal restriction, much less FHFA’s central character. Instead, we read these provisions together. The removal restriction applied to the acting Director.

Nor was the en banc majority persuaded by the agencies' argument that FHFA in its conservator capacity does not exercise executive power and therefore any separation-of-powers violation was harmless in this case. "FHFA is a federal agency, empowered by a federal statute, enriching the federal government" and "adopted the Third Amendment "with federal governmental power." And because the agencies do not and could not "contend . . . that the Third Amendment was quasi-legislative or quasi-judicial," the Court concluded that FHFA was exercising executive power. The fact that private parties can act as receivers under federal law did not "budge this point," according to the majority. The Court concluded its discussion of the constitutional issue this way:

The Constitution bounds Congress’s power to create agencies, draw their structure, and grant them authority. Agencies with removal-protected principal officers were a unique, but recognized, blend of legislative, executive, and judicial powers long before the FHFA. Their unique position has also been relatively static, until recently. The removal-protected FHFA Director is a new innovation and falls outside the lines that Humphrey’s Executor recognized. Granting both removal protection and full agency leadership to a single FHFA Director stretches the independent-agency pattern beyond what the Constitution allows.


Judge Haynes, joined by then-Chief Judge Stewart and Judges Dennis, Owen, Southwick, Graves, Higginson, Costa, and Duncan, wrote a separate majority opinion for the en banc Court regarding remedies. Only Judges Owen, Southwick, Haynes, Graves, and Duncan agreed with the separate en banc majority that the FHFA is unconstitutionally structured. Chief Judge Stewart and Judges Dennis, Higginson, and Costa dissented from that holding. They all agreed, however, that assuming there was in fact a constitutional violation, "the appropriate--and most judicially conservative--remedy is to sever the 'for cause' restriction on removal of the FHFA director from the statute." 938 F.3d at 592 (citing 12 U.S.C. 4512(b)(2)). Relying primarily on Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 508 (2010), the Court explained that "[w]hen addressing the partial unconstitutionality of a statute such as this one, we seek to honor Congress’s intent while fixing the problematic aspects of the statute." Id. Other remedies, the majority explained, were too "invasive and editorial." Id. (quoting Free Enterprise Fund, 561 U.S. at 509).

The Shareholders asked the Court to invalidate the net worth sweep, "claiming the remedy must resolve the injury." The Court refused plaintiffs' attempt to "pick and choose among remedies based on the their preferences," explaining

The Shareholders’ complaint requested that a court invalidate only the Net Worth Sweep. They never requested a declaratory judgment about the PSPAs as a whole or even the Third Amendment. That is because the rest of the deal is a pretty good one for them: who would not want a virtually unlimited line of credit from the Treasury? Yet the Shareholders’ constitutional theory is that everything the FHFA has done since its inception is void because it was an unconstitutionally structured agency. They never explain why if all acts were void (or voidable), they are entitled to pick and choose a single provision to invalidate. That is inconsistent with the usual course of remedies.

The Court also emphasized that “the President had adequate oversight” of the adoption of the Third Amendment: The Secretary of the Treasury “was subject to at will removal by the President,” meaning that the President “had plenary authority to stop the adoption of the [Third Amendment]” if he so desired. “This is thus a unique situation," the Court reasoned, "where we need not speculate about whether appropriate presidential oversight would have stopped the [Third Amendment]. We know that the President, acting through the Secretary of the Treasury, could have stopped it but did not.”

Additional Concurrences and Dissents

I'm going to march through the various concurring and dissenting opinions very briefly not because they're uninteresting but because I'd like to keep my post on this case to fewer than 150 pages.

First, Judge Duncan, joined by then-Judge Owen, concurred separately to explain that, in their view, Supreme Court precedent compels the conclusion that invalidating the net worth sweep would be an improper remedy.

Judge Oldham, joined by Judge Ho, concurred in part and dissented in part and wrote separately to respond to Judge Higginson's dissent regarding the constitutionality of FHFA's structure. Their separate opinion places heavy emphasis on history and the development of Supreme Court precedent to argue that the FHFA's novel structure violates separation of powers. They go on to explain their disagreement with the majority opinion regarding remedies. In their view, Article III doesn't permit courts to "blue pencil" a statute by "severing" an offensive provision while leaving the rest of the statute untouched. The result in this case, they explain, is a "remedy" (declaring the removal provision unconstitutional) that affords the Shareholders--who didn't complain of any threatened future action--no relief at all.

The most interesting portion of their opinion is their final argument that courts actually don't "strike down" laws when they exercise judicial review. I quote that discussion in full here:

The second problem we have with the remedy endorsed by a majority of our Court is that we do not believe Article III of the Constitution permits us to “strike” the FHFA Director’s for-cause protection from the statute. See Murphy v. NCAA, ––– U.S. ––––, 138 S. Ct. 1461, 1485, 200 L.Ed.2d 854 (2018) (Thomas, J., concurring) (explaining that “[e]arly American courts did not have a severability doctrine” because “[t]hey recognized that the judicial power is, fundamentally, the power to render judgments in individual cases”); Jonathan F. Mitchell, The Writ-of-Erasure Fallacy, 104 VA. L. REV. 933, 936 (2018) (explaining “federal courts have no authority to erase a duly enacted law from the statute books” but have only the power “to decline to enforce a statute in a particular case or controversy” and “to enjoin executive officials from taking steps to enforce a statute”); Kevin C. Walsh, Partial Unconstitutionality, 85 N.Y.U. L. REV. 738, 756 (2010) (explaining that the Founders did not conceive of judicial review as the power to “strike down” legislation).
At the Constitutional Convention, several delegates, including James Wilson and James Madison, argued for a “Council of Revision” comprised of federal judges and the executive. Mitchell, supra, at 954. The Council would have had the power to veto legislation passed by Congress, subject to congressional override. Ibid. A veto of legislation would render it “void,” without any legal effect. Ibid. That proposal was defeated at the Convention on June 4, 1787. *611 Id. at 957. Wilson and Madison tried again on July 21, but again they were defeated. Id. at 958. Finally, on August 15, they made one last attempt to give the judiciary a veto over federal legislation, proposing that the Supreme Court be given the power to veto legislation independent of the President, subject to congressional override. Id. at 958–59. Again, they were defeated. Id. at 959.
In the final Constitution, the judiciary was given only the power to decide cases and controversies—to resolve legal disputes between parties and order remedies to redress injuries. Thus, when a court concludes that a statute is unconstitutional, it is not “striking down” or “voiding” or “invalidating” the law. It is merely holding that the law may not be applied to the parties in the dispute. The Constitution does not empower courts to delete sections of state and federal codes. The Founders expressly considered the possibility of a judicial veto, and they rejected it multiple times during the Constitutional Convention.
This history has been obscured by rhetoric that Chief Justice Marshall used in Marbury v. Madison, 5 U.S. (1 Cranch) 137, 2 L.Ed. 60 (1803), to explain judicial review. In that case he famously declared that a statute found unconstitutional by a court becomes “entirely void,” “invalid,” and “not law.” Id. at 177–78. Subsequent cases have compounded the confusion. See, e.g., The Civil Rights Cases, 109 U.S. 3, 26, 3 S.Ct. 18, 27 L.Ed. 835 (1883) (holding “void” sections 1 and 2 of the Civil Rights Act of 1875). Nevertheless, it is indisputable that courts do not have the power to erase duly enacted statutes. Instead, they may decline to enforce them or enjoin their future enforcement to resolve cases and controversies.
Our Court should not add to the confusion about the judiciary’s limited powers by claiming to “sever” a statute based on open-ended speculation about how Congress would have solved the separation-of-powers problem. And we certainly should not rewrite the statute while pretending such legislative activity is the most modest judicial remedy. We would instead remand to the district court with instructions to fashion a remedy that actually redresses Plaintiffs’ harms.

Next, Judge Haynes, joined by then-Chief Judge Stewart and Judges Dennis, Southwick, Graves, Higginson, and Costa, dissented from the majority's holding regarding the Shareholders' statutory claims. I already discussed this dissent earlier in this post, so I won't delve any deeper here.

Judge Higginson, joined by then-Chief Judge Stewart and Judges Dennis and Costa, wrote a separate opinion dissenting in part. They argued that the FHFA's structure does not violate separation of powers principles. This part was most memorable to me:

Neither the parties nor the majority has addressed the statutory text central to the constitutional issue: the provision establishing the FHFA Director’s five-year term “unless removed before the end of such term for cause by the President.” 12 U.S.C. § 4512(b)(2). For-cause removal provisions typically enumerate the specific grounds that would justify removal, such as “inefficiency, neglect of duty, or malfeasance in office.” See Humphrey’s Executor v. United States, 295 U.S. 602, 619, 55 S.Ct. 869, 79 L.Ed. 1611 (1935) (quoting 15 U.S.C. § 41). This one does not. Thus, it is concerning that no one in this litigation has addressed why or how § 4512(b)(2) is an undue impediment to removal in practice; indeed, no one has even suggested what § 4512(b)(2)’s text means. Furthermore, no one has identified an entity empowered to block a presidential removal under § 4512(b)(2). It is unwise to base a momentous constitutional ruling on the expected effects of a statutory provision no one has made the effort to construe.

Judge Higginson concluded on a similar note:

Regarding Appellants’ constitutional claim against the FHFA, I see only reasons for caution and skepticism, and none for action. Neither the Constitution’s text, nor the Supreme Court’s constructions thereof, nor the adversary process in this litigation has given us much ground on which to declare the FHFA’s design unconstitutional. If so thin a record may be made the basis for invalidating Congress’s considered response to a major crisis in American life, I am apprehensive about the responsible use of our nullification power henceforth.

Next, Judge Costa, joined by Judge Higginson, dissented in part and argued that the Court lacks jurisdiction:

In concluding that unravelling the Net Worth Sweep is not the remedy for the allegedly unconstitutional insulation of the FHFA, the court recognizes that the President has always maintained “oversight” of the Net Worth Sweep. Majority Op. (Remedy) 592–93. But that conclusion does not just resolve the final question for the constitutional claim. It also answers the first question any case poses: Is there jurisdiction?
The answer is “no” because presidential control of the Net Worth Sweep means there is no connection between the good-cause removal provision for FHFA Directors that plaintiffs challenge and the injury from the New Worth Sweep they allege. In other words, the limitation on *621 the removal power did not cause their injury.
The requirement that an alleged constitutional defect caused the plaintiff’s injury is part of the threshold standing inquiry—the standing lingo is “traceability”—that ensures we are only deciding constitutional issues when they arise in “cases” or “controversies.” Raines, 521 U.S. at 818–19, 117 S.Ct. 2312. For numerous reasons described below (some of which are recognized in the court’s remedial ruling), the Net Worth Sweep is not traceable to the for-cause limitation on the President’s power to remove the FHFA Director. In deciding whether Congress has violated the separation of powers at the behest of plaintiffs who lack standing, we violate the separation of powers ourselves. See Clapper v. Amnesty Int’l, 568 U.S. 398, 408, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013) (“The law of Article III standing ... is built on separation-of-powers principles.”).

Finally, Judge Willett, joined by Judges Jones, Smith, Elrod, Ho, Engelhardt, and Oldham, dissented in part and took issue with the majority's conclusion regarding the proper remedy for the Shareholders' constitutional claim.  Judge Willett and co. would have vacated the Third Amendment.

The back and forth between the judges in this case is fascinating. I encourage anyone who follows administrative law and/or the Fifth Circuit to set aside some time to read all of the opinions in full.

Where Things Stand

On September 25, 2019, the Shareholders filed a petition for a writ of certiorari, seeking review of the Fifth Circuit's holdings regarding plaintiffs' constitutional claims and remedies, which is curious given that the Shareholders prevailed on the constitutional issue in the Fifth Circuit. Collins v. Mnuchin (No. 19-422). Thirty days later, the government filed its own petition seeking review of whether the statute's anti-injunction and succession clauses bar the Shareholders' claims. Mnuchin v. Collins (No. 19-563).

By the time the government filed its petition, the Supreme Court had granted certiorari in Seila Law LLC v. CFPB (No. 19-7) to review the Ninth Circuit's decision holding that the CFPB's structure, which is similar (though not identical) to the FHFA's, is constitutional, and, if so, whether the removal provision at issue there can be severed from the rest of the statute. When the CFPB alerted the Supreme Court that it would not oppose the petition for certioarari, the Supreme Court appointed Paul Clement to brief and argue in support of the judgment upholding the constitutionality of the CFPB's structure.

All American Check Cashing v. CFPB, No. 18-90015, which was pending before the Fifth Circuit when the Court issued its en banc decision, involves yet another constitutional challenge to the CFPB's structure. All American Check Cashing, Inc., raised the constitutional issue as a defense to an enforcement action brought against it by the CFPB. The district court certified the constitutional issue for interlocutory appeal, and the Fifth Circuit granted an interlocutory appeal. The Court heard oral argument on March 12, 2019, and has scheduled a second oral argument for December 4, 2019, following the completion of supplemental briefing regarding the implications for that case of the Court's en banc decision in Collins v. Mnuchin. In the meantime, however, All American filed a petition for a writ of certiorari before judgment on September 30, 2019.

Collins v. Mnuchin, 938 F.3d 553 (5th Cir. September 6, 2019) (en banc)
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