Collins v. Yellen (2020)

Docket: 19-422
Decided: 2020-01-01
Public Good score: 62 / 100
Framers' Intent score: 88 / 100

Summary

Question: 1. Did the shareholders of Fannie Mae and Freddie Mac properly bring a claim under the Housing and Economic Recovery Act of 2008? 2. Does the Federal Housing Finance Agency’s (FHFA) structure violate the separation of powers? 3. If FHFA’s structure violates the separation of powers, what is the proper remedy for a final agency action that FHFA took when it was unconstitutionally structured? Conclusion: 1. Because the FHFA did not exceed its authority under the Recovery Act as a conservator of Fannie Mae and Freddie Mac, the anti-injunction provisions of the Recovery Act bar the statutory claim brought by shareholders of those entities. 2. The structure of the Housing and Economic Recovery Act of 2008, which restricts the President’s power to remove the Federal Housing Finance Agency (FHFA) Director, violates the separation of powers. 3. It is unnecessary to set aside the entire Third Amendment, but the case is remanded for the lower court to determine the proper remedy based on the harms suffered. Justice Samuel Alito authored the majority opinion of the Court. The Court first considered whether the shareholders were barred from bringing their statutory claim. The Recovery Act contains a provision known as the anti-injunction provision, stating that unless review is specifically authorized by a provision or requested by 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.” This provision applies only when the FHFA exercised its “powers or functions” “as a conservator or a receiver,” and not when it exceeds those powers or functions. When the FHFA agreed to the Third Amendment, it was acting in the best interests of the regulated entity or the Agency, as required by statute, and thus it was exercising authority granted to it by the Recovery Act. As such, the shareholders are barred from bringing their statutory claim. The Court then considered the shareholders’ constitutional claim—that the Recovery Act violated the separation of powers by restricting the President’s power to remove the Director. As a threshold matter, the Court determined that the shareholders had standing to bring their claim and that their claim is not moot. Turning to the merits, the Court noted that its decision in Seila Law is “all but dispositive”; there, the Court held Congress could not limit the President’s power to remove the single director of an independent agency (the Consumer Financial Protection Bureau, in that case). Just as the CFPB was in Seila Law, the FHFA is led by a single director, so Congress similarly cannot limit the President’s power to remove the director of the FHFA. Finally, the Court considered the relief to which shareholders were entitled based on the success of their constitutional claim. Because the head of the FHFA apparently had the authority to carry out the functions of the office, the Court declined to hold that the Third Amendment must be completely undone and differentiated directors unconstitutionally appointed from those unconstitutionally insulated from removal. The parties disputed whether the unconstitutional restriction caused harm, so the Court remanded the issue for the lower courts to resolve. Justice Clarence Thomas joined the majority opinion in full but authored a concurring opinion to clarify that “the government does not necessarily act unlawfully even if a removal restriction is unlawful in the abstract.” Justice Neil Gorsuch joined the majority opinion except as to the question of retrospective relief. In his concurring opinion, Justice Gorsuch argued that the Court should vacate the judgment below with instructions requiring the appellate court to set aside the Director’s ultra vires actions as “contrary to constitutional right” and criticized the Court’s attempt to differentiate unconstitutionally appointed directors from those unconstitutionally insulated. Justice Elena Kagan authored an opinion concurring in part and concurring in the judgment, joined by Justice Stephen Breyer and Sonia Sotomayor. Justice Kagan agreed with the majority that the FHFA acted within its statutory authority but argued that the Court could have reached the conclusion that the FHFA’s for-cause removal provision violates the Constitution on stare decisis alone, rather than using “faulty theoretical premises” that go “further than it needs to.” Justice Sotomayor authored an opinion concurring in part and dissenting in part, which Justice Breyer joined. Justice Sotomayor pointed out that the Court’s decision in Seila Law expressly distinguished the FHFA from the CFPB on the ground that the FHFA does not possess “regulatory or enforcement authority remotely comparable to that exercised by the CFPB.” As such, Seila Law should not determine the outcome in this case.

Case Brief

Facts

Shareholders of Fannie Mae and Freddie Mac sued the Federal Housing Finance Agency (FHFA) under the Housing and Economic Recovery Act of 2008 (HERA), challenging FHFA's authority to agree to a Third Amendment to the entities' debt and arguing FHFA's single-director structure violated the separation of powers. FHFA, acting as conservator for the entities under HERA, executed the amendment to protect the entities' interests, a role authorized by statute. The shareholders claimed FHFA exceeded its statutory authority and that its structure was unconstitutional.

Procedural History

The District Court dismissed the shareholders' claims for lack of standing and statute of limitations, but the D.C. Circuit reversed, holding FHFA's structure violated separation of powers. The Supreme Court granted certiorari to address the anti-injunction provision's scope and the separation of powers question.

Issue

Does the Federal Housing Finance Agency’s structure, which restricts the President’s power to remove its Director, violate the separation of powers under Article II of the Constitution?

Holding

The anti-injunction provision bars the shareholders' statutory claim; the FHFA's structure violates separation of powers; and the case is remanded for lower courts to determine the appropriate remedy for the constitutional violation.

Rule

Congress cannot insulate a single-director agency from the President's removal power over its principal officers, as established in Seila Law v. CFPB, because the President's Article II authority requires control over executive officers. A constitutional violation in agency structure does not automatically invalidate all agency actions but requires courts to tailor remedies to specific harms.

Reasoning

The Court held that FHFA acted within its conservatorship authority under HERA when executing the Third Amendment, triggering the anti-injunction provision that barred judicial review of its conservatorship actions. The separation of powers violation was compelled by Seila Law, which invalidated a similar removal restriction for the CFPB, as both structures feature single directors subject to for-cause removal. The Court declined to invalidate the entire FHFA structure, emphasizing the need to assess harm on a case-specific basis rather than retroactively voiding all agency actions.

Significance

The case solidifies the Seila Law precedent, preventing Congress from insulating single-director agencies from presidential removal authority and affecting numerous federal agencies. It also establishes a nuanced approach to constitutional remedies, requiring courts to assess specific harms rather than invalidate entire agency structures upon a violation.

Public Good Analysis

GPT: Strengthens separation of powers but limits shareholder oversight of government housing programs, potentially hindering public accountability for entities critical to housing stability and economic fairness. | Claude: This case affirms the separation of powers and limits agency overreach which protects against potential abuse and promotes accountability. While acknowledging harm to shareholders, upholding constitutional structure is a benefit to long-term public interest. The ruling ensures Presidential control over executive agencies, aligning with democratic principles.

Framers' Intent Analysis

GPT: Directly aligns with Madison's Federalist 47 principle that 'no one branch should control another,' and the framers' core concern about executive overreach reflected in Seila Law's originalist reasoning. | Claude: The decision strongly aligns with the Framers' intent concerning separation of powers as articulated by Madison in Federalist No. 47 and Montesquieu’s *Spirit of the Laws*. Limiting Congressional restrictions on Presidential removal power reinforces executive authority, a key tenet debated during the Constitutional Convention, and prevents agency independence from becoming de facto lawmaking—a concern voiced by Anti-Federalists regarding unchecked power.

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