The Texas federal district court hearing the lawsuit challenging the CFPB’s final credit card late fee rule (Rule) issued an order today setting April 2 as the date for a hearing on the plaintiffs’ motion for a preliminary injunction.  Yesterday, the plaintiffs filed a notice that they are appealing to the Fifth Circuit the Texas federal district court’s “effective denial” of their motion for a preliminary injunction.  At the end of last week, the CFPB filed a motion with the district court to transfer the case to the U.S. District Court for the District of Columbia.  (We do not read into the order setting a hearing date on the preliminary injunction motion that the court has decided to deny the CFPB’s transfer motion.)  Finally, despite setting a hearing date for the preliminary injunction motion, the court also entered an order today referring the case for mediation, appointing Judge David L. Evans as mediator, and directing the parties to mediate with Judge Evans on April 19, 2024.  (This strikes us as irrelevant since we do not see this dispute as one that can be resolved through mediation.)

Notice of Appeal.  On March 20, the district court denied the plaintiffs’ motion for expedited consideration of their preliminary injunction motion.  While the denial of that motion is not an appealable order, the plaintiffs argue in their notice of appeal that, in denying the motion, the district court has effectively denied their request for meaningful preliminary injunctive relief and, under Fifth Circuit precedent, action by a district court that has the practical effect of denying injunctive relief necessary to remediate a threat of serious or irreparable harm is immediately appealable.  According to the plaintiffs, because the Rule has a May 14, 2024 effective date, their members must act immediately to meet their obligations under the Rule and must notify current cardholders of any changes they make to the terms of their cardholder agreements to mitigate the late fee change at least 45 days before such changes become effective.  To time those changes with the Rule’s effective date, customers would have to receive such notices by March 29.  In the absence of any action by the district court on their preliminary injunction motion, the plaintiffs’ assert that immediate appellate review is needed to avoid the “ongoing, and accumulating, irreparable harm” faced by the plaintiffs.  It is possible that the Fifth Circuit will request special briefing on whether it has jurisdiction to hear an appeal at this juncture.

Motion to transfer venueIn support of its motion to transfer venue, the CFPB argues even if the Northern District of Texas or the Fort Worth Division were a proper venue, a transfer to the D.C. federal district court would be appropriate under 28 U.S.C. Sec. 1404.  (In its opposition to the plaintiffs’ preliminary injunction, the CFPB argued that the venue was not proper in the Northern District because, even though one of the plaintiffs is a resident of the Northern District, it cannot satisfy the test for associational standing and thus cannot serve as the basis for venue in the Northern District.)   Section 1404 provides “[f]or the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.”  As an initial matter, the CFPB argues that venue in the D.C. federal district court is proper because the central event giving rise to the plaintiffs’ claim (i.e. the issuance of the Rule) occurred in D.C. and three of the plaintiff associations “call D.C. home.”  The CFPB then argues that there is good cause for the transfer and that each of the In re Volkswagen private- and public-interest factors favor transfer.

In their reply to the CFPB’s transfer motion, the plaintiffs argue that neither the private- nor public-interest factors in In re Volkswagen favor transfer to the D.C. federal district court.  According to the plaintiffs, the only public-interest factor that might support transfer is court congestion.  However, they assert that under Fifth Circuit precedent, a transfer under Section 1404 cannot be granted solely because of court congestion.  The plaintiffs argue that at best, the private-interest factors are neutral as are the public-interest factors other than court congestion. 

Because the CFPB has not shown that the transferee venue is clearly more convenient than their chosen venue, the plaintiffs contend that their choice of venue is entitled to deference.  The plaintiffs also argue that their connections to the Fort Worth Division weigh in favor of giving deference to their choice of venue.  They point to specific member banks whose total loan receivables include a high percentage of  receivables from Texas and who have a large number of cardholders residing in the Fort Worth region.

The plaintiffs further argue that if the court determines either that venue is improper or that a transfer would best serve the interest of justice and the convenience of the parties, the court should transfer the case to the Tyler Division of the Eastern District of Texas.  According to the plaintiffs, the Tyler Division (where one of the plaintiffs, the Longview Chamber of Commerce, resides) has a greater connection to the lawsuit than the District of Columbia based on the greater number of cardholders and retail partners that certain of the plaintiffs’ members have in the Tyler Division as compared with the District of Columbia. 

In its reply brief, the CFPB argues that venue in the Tyler Division would be improper because the Longview Chamber, even if it resides in the Tyler Division, does not have standing since it has not identified an injured member and no bank has identified itself as a member of the Longview Chamber.  Also, the Longview Chamber “has not explained how protecting the interests of any (unnamed) member is germane to the Longview Chamber’s mission of advancing [business interests in Longview.]”  In addition, according to the CFPB, the plaintiffs cannot establish venue by showing that a substantial part of the acts or omissions giving rise to their claims arose in the Tyler Division since the CFPB’s conduct took place in D.C. where the Rule was issued and the “few dozen issuers subject to the rule issue credit cards to customers nationwide, and do not meaningfully ‘suffer burden’ in Tyler (or Texas) as opposed to anywhere else.”  With the filing of the CFPB’s reply brief, the transfer motion is now fully briefed.