United States Supreme Court Opinions in Seila Law v. Consumer Financial Protection Bureau and Bostock v. Clayton County

Insights United States Supreme Court Opinions in Seila Law v. Consumer Financial Protection Bureau and Bostock v. Clayton County John R. Mussman · July 1, 2020

June 30, 2020

In the last two weeks, the United States Supreme Court has issued two opinions that may have an impact on banks, financial institutions and other financial service companies:

  • Seila Law, issued June 29, 2020, will have an impact on the leadership structure of the CFPB, and perhaps ultimately the Federal Home Finance Agency (FHFA).
  • Bostock, issued June 15, 2020, may have wide-ranging impacts on discrimination against gay and transgender persons in employment, and possibly in housing and lending.
  1. Seila Law v. Consumer Financial Protection Bureau.[1]

Yesterday (June 29, 2020), the United States Supreme Court ruled that the single-director structure of the Consumer Finance Protection Bureau, where the director could be fired only for cause, violated the separation of powers and was therefore unconstitutional. In announcing a full-throated endorsement of the President’s Article II powers to fire members of the executive branch, Chief Justice John Roberts refused to extend either of the recognized exceptions to provisions protecting the CFPB director from other than “for cause” discharge. The Chief Justice stated that such exceptions applied only to “expert agencies”, such as the Federal Trade Commission, or to “certain inferior officers with narrowly defined duties” such as the independent counsels appointed to investigate and prosecute alleged crimes by high-ranking government officials.

Writing for the Court, Chief Justice John Roberts stated that “the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers” set forth in Article II of the Constitution:

“Article II provides that ‘[t]he executive Power shall be vested in a President,’ who must ‘take Care that the Laws be faithfully executed.’ Art. II, §1, cl. 1; id., §3. The entire ‘executive Power’ belongs to the President alone.”

After determining that the leadership structure of the CFPB was unconstitutional, Chief Justice Roberts applied the severance provisions contained in the Dodd-Frank Act and simply struck the “for cause” language to provide the President with clear power to terminate the CFPB Director without cause. This approach allowed the court to correct the constitutional problem without destroying the operations of the CFPB. This approach was joined by four dissenting Justices and Justice Kavanaugh.

One of the arguments advanced by the Chief Justice is that there was scant precedent for a single-director structure.  But in her dissent — joined by Justices Ginsburg, Breyer and Sotomayor — Justice Kagan rejected the Chief Justice’s contention that the single-director structure was novel or unique.

“By contrast, the CFPB’s single-director structure has a fair bit of precedent behind it. The Comptroller of the Currency. The Office of the Special Counsel (OSC). The Social Security Administration (SSA). The Federal Housing Finance Agency (FHFA). Maybe four prior agencies is in the eye of the beholder, but it’s hardly nothing.” (emphasis added).

Ultimate Impacts of Seila Law

Political Impact of Seila Law

The decision to strike the “for cause” limitation on the President’s ability to fire a CFPB director — although a victory for the Trump Administration’s vision of strong, relatively unqualified Article II powers — ironically may give a subsequent President a free hand to cashier Trump’s appointee and choose a new director of the CFPB whenever he or she takes office. President Trump’s selection of CFPB director did not occur until well into President Trump’s term; if Seila Law had upheld the “for cause” protections, Trump’s selection, Director Kraninger, may have served well into Trump’s successor’s term. After the Court’s rewrite of the Dodd-Frank Act, a successor President will have a clear hand to appoint a CFPB director with a completely different vision.

Impact on the FHFA Structure: Collins v. Mnuchin, 938 F.3d 553 (5th Cir. Sept. 6, 2019) (cert. pet. filed Oct. 25, 2019).

Seila Law may also influence judicial treatment of the FHFA corporate structure. The Wall Street Journal, however, quoted Mark Calabria saying that Seila Law “does not directly affect the constitutionality of FHFA, including the for-cause removal provisions.”

In Collins, on September 6, 2019, the Fifth Circuit held the Federal Housing Finance Agency (FHFA) leadership structure unconstitutional because the President’s ability to terminate the FHFA director only “for cause” violated the Constitution’s separation of powers by unconstitutionally limiting the President’s executive power to discharge its director. The Fifth Circuit’s analysis was similar to that employed by the Chief Justice John Roberts in nullifying the limitation on the President’s rights to fire the CFPB’s Director.

A petition for cert from Collins is currently pending before the United States Supreme Court and yesterday the Supreme Court’s docket revealed that the cert petition may be considered at the Court’s conference tomorrow.[2] If the Court uses logic regarding the FHFA removal clause in Collins that it used in Seila Law, then the Court may consider the effect of such blue-pencil change of the President’s firing power, including the impact of the reconfiguration of the FHFA on other the FHFA’s actions — particularly FHFA’s actions as conservator of Fannie Mae and Freddie Mac.

  1. Bostock v. Clayton CountyR.G. & G.R. Harris Funeral Homes Inc. v. EEOC, and Altitude Express Inc. v. Zarda.[3]

On June 15, 2020, the United States Supreme Court held that employment discrimination against a gay or transgender person violates Title VII of the Civil Rights Act of 1964. Although focused on the text of the labor provisions, the opinion may have an impact with on other federal civil rights acts, including those prohibiting discrimination in lending, housing and health care.

The 6-3 decision was authored by Justice Gorsuch and joined by Chief Justice John Roberts and the four more liberal members of the bench. There were two strong dissents written by three conservative members of the Court, but the decision arguably demonstrates broader judicial consensus for this expanded protection of gay and transgender employees.

The decision harmonized three Title VII cases in three circuits:

  • Bostock v. Clayton County. The Eleventh Circuit held that Title VII did not protect Gerald Bostock when he was fired from his position as a child welfare advocate for Clayton County, Georgia after he joined a gay softball league, revealing his gay orientation.
  • Altitude Express Inc. v. Zarda. The Second Circuit held that Title VII did protect skydiver Donald Zarda from being discharged for being gay.
  • R.G. & G.R. Harris Funeral Homes Inc. v. EEOC. The Sixth Circuit held that Title VII did prohibit a funeral home from firing Aimee Stephens for being transgender.

For purposes of his analysis, Justice Gorsuch accepted the employers’ narrow definition of “sex”, to “biological distinctions between male and female,” and that the prohibitions of Title VII against “discrimination” had the same meaning in 2020 as they did in 1964. Here the Court found that the firings would not have occurred had the employee been a member of the opposite gender. For instance, had Stephens been born a woman rather than a man, she would not have been fired for dressing and acting as a woman.

The Court noted that gender must be a “but-for” cause of the discriminatory discharge, but need not be the only “but-for” cause of the firing or other adverse employment decision:

“For an employer to discriminate against employees for being homosexual or transgender, the employer must intentionally discriminate again individual men and women in part because of sex.”

The Court rejected the language and legislative history arguments presented by the minority opinions. Although “homosexuality and transgender status are distinct concepts from sex,” “discrimination based on homosexuality or transgender status necessarily entails discrimination based on sex; the first cannot happen without the second.”

Both dissenting opinions observed that both the Senate and the House of Representatives have at different times considered and separately passed measures aimed at specifically prohibiting discrimination based on “sexual orientation” and that that action illustrates that “sexual orientation” is a distinct and separate class from “sex,” but observed that at no time was such legislation passed by both chambers and signed by the President. Justice Gorsuch’s opinion for the court countered that such failure to enact legislation and that speculation about why a later Congress declined to adopt new legislation offers a “‘particularly dangerous’ basis on which to rest an interpretation of an existing law a different and earlier Congress did adopt.”

In his dissent, Justice Alito, joined by Justice Thomas, focused on the historic distinction regarding sexual orientation discrimination, particularly in circuit court decisions prior to 2017, and then pointed out the “far-reaching consequences” of the Court’s opinion in gender issues in non-employment contexts, including bathrooms, locker rooms, women’s sports, housing, employment by religious organizations, healthcare and freedom of speech.

In his dissent, Justice Kavanaugh accused the Gorsuch opinion of improperly adopting a “textual” reading of the term sex, presenting a long history of federal and state legislative and judicial action that distinguished “sexual orientation discrimination” from “sexual discrimination.”

Impact on Other Federal Civil Rights Statutes: Will the holding in Bostock extend the anti-discrimination provisions of the FHA and ECOA to gay and transgender persons? 

The United States Supreme Court’s conclusion that sexual discrimination includes sexual orientation may comprehend other civil rights statutes, particularly regarding federal statutes regarding fair lending and fair housing. A logical application of the Bostock opinion to the language in the FHA and ECOA would be to construe this language as prohibiting housing and credit discrimination based on sexual orientation.

The Fair Housing Act

The FHA contains provisions prohibiting various forms of discrimination, including “refusing to sell or rent … or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, family status, or national origin … or to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling … because of … sex.” 42 U.S.C.A. § 3604.[4]

Prior to Bostock, courts have not generally found that the FHA covers discrimination based on sexual orientation. Illustratively, in Walsh v. Friendship Village,[5] the district court dismissed two married, gay women’s claims under the FHA based on a denial of housing by Friendship Village. The court held that the term sex in the FHA does not cover discrimination based on sexual orientation. Note, however, that HUD has provided that eligibility for HUD-assisted or FHA-insured housing must be determined “without regard to actual or perceived sexual orientation, gender identity, or marital status.”[6]


Like Title VII of the Civil Rights Act, the Equal Credit Opportunity Act[7] also contains language similar though not identical to Title VII faced in Bostock, making it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction … on the basis of race, color, religion, national origin, sex or marital status, or age.” Courts have seldom addressed claims regarding sexual orientation applying to credit applications, but in at least one decision, a circuit court found a potential claim when a transgender person was denied a credit application. Rosa v. Park W. Bank & Tr. Co., 214 F.3d 213 (1st Cir. 2000) (plaintiff may have made a claim based on sexual discrimination under ECOA where plaintiff was denied a credit application because he was wearing traditionally feminine garb). The Bostock decision makes the success of such discrimination claims under ECOA more likely.

John Mussman is a leading banking and financial services lawyer. Mr. Mussman represents banks, mortgage lenders, and other financial services providers, focusing on banking and commercial and consumer credit law. He also represents bank affiliates and non-bank players in the commercial and consumer credit space. Read more about John here.

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