The Trump Administration can, among other things, resume plans to begin firing more than 1,400 employees at the CFPB, two judges on the U.S. Court of Appeals for the District of Columbia ruled last Friday.
In a 2-1 majority opinion, the D.C. Circuit dissolved a preliminary injunction issued by District Court Judge Amy Berman Jackson. On March 28, Judge Jackson had issued an injunction that required the reinstatement with back pay of CFPB employees that had been terminated. At that time, she had also enjoined the CFPB from terminating any employees except for good cause related to the individual employee. In addition, she had required the CFPB to fully maintain the consumer complaint portal, ordered the defendants to reinstate all third-party contracts which had been earlier terminated, ordered the defendants to not enforce a February 10 stop-work order and required that the CFPB not destroy any records. Shortly thereafter, she had expanded the injunction to preliminarily preclude a Reduction-in Force (RIF), which would have left the CFPB with only about 200 employees.
While the D.C. Circuit dissolved the preliminary injunction, it delayed the mandate for its ruling until seven days after the disposition of any petition for a rehearing or the disposition of a petition for the full Court of Appeals to hear the case. The plaintiffs in the case, including the National Treasury Employees Union, the CFPB Employee Association, the Virginia Poverty Law Center, the NAACP, and the NCLC will have until August 29 (14 days after the judgment of the Court of Appeals on August 15) to file a petition for rehearing before the same panel, which is unlikely, or a petition for rehearing en banc (which is likely). A petition for rehearing en banc seems more likely, as there are 11 judges on the D.C. Circuit Court of Appeals, seven of whom were appointed by Presidents Obama and Biden, and only six votes are needed to grant a rehearing en banc.
The opinion was written by Judge Gregory Katsas and was joined in by Judge Neomi Rao. Judge Corneilia T.L Pillard dissented. Judges Katsas and Rao were appointed by President Trump and Judge Pillard was appointed by President Obama.
Absent a successful petition for a rehearing before the same panel, an en banc review, or the filing before the Supreme Court of a motion to stay the Court of Appeals order, the case will be sent back to the U.S. District Court for the District of Columbia for further proceedings.
The union and the other groups had filed suit, challenging the anticipated closure of the CFPB.
Judge Gregory Katsas disputed the notion that the administration essentially was shutting down the agency.
“For its part, the government does not claim the power to ‘shut down’ the CFPB,” “Nor could it,” Katsas wrote.
The attempted firings followed a memo by CFPB Chief Legal Officer Mark Paoletta stating that the bureau was rescinding its existing enforcement and supervisory priority documents. The agency, he said, would focus its enforcement and supervision priorities on pressing threats to consumers, in particular servicemembers, their families, and veterans.
Katsas noted that the plaintiffs did not point to any definitive statement regarding an agency shutdown, but instead wanted to infer one from various specific acts taken to downsize the CFPB.
He concluded that the agency leadership’s actions reflected a new presidential administration and new Acting Director trying to assess all agency activities, and that federal law gives the CFPB wide discretion in deciding how to operate.
“If the plaintiffs’ theory were viable, it would become the task of the judiciary, rather than the Executive Branch, to determine what resources an agency needs to perform its broad statutory functions,” Katsas wrote. Katsas concluded that the steps taken by the new leadership of the CFPB were too preliminary in nature and did not constitute final agency action under the Administrative Procedure Act. Katsas also concluded that there was no legal basis for an implied equitable claim under the Constitution.
In her dissent, Pillard made it clear she believes the CFPB’s leadership was shutting down the agency.
“It is emphatically not within the discretion of the President or his appointees to decide that the country would benefit most if there were no Bureau at all,” she wrote. “Congress made the contrary decision in legislation establishing the CFPB, and the power to repeal that law lies with the legislative branch.”
She said the courts have the power to intervene in such cases.
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