On June 19, 2024, the Fifth Circuit dissolved the district court’s order transferring the case challenging the CFPB’s credit card late fee rule.  In granting the writ of mandamus filed by the plaintiff trade associations challenging the rule, the three-judge panel rejected Judge Mark Pittman’s second order to transfer the case to D.C. federal district court, holding that he misapplied the controlling standard for transferring cases.

By way of a brief procedural history regarding the transfer orders, Judge Pittman granted the CFPB’s initial motion to transfer the case on March 28, and plaintiffs filed an emergency petition for mandamus the next day.  On April 5, the Fifth Circuit granted the petition and held that the district court lacked jurisdiction to transfer the case because plaintiffs’ appeal to the Fifth Circuit of the order denying expedited consideration divested the district court of jurisdiction at the time of the transfer of the case by the district court.  That appeal was dismissed after Judge Pittman granted a preliminary injunction, and the CFPB again moved to transfer the case to the D.C. district court on May 28.  That same day, plaintiffs again petitioned the Fifth Circuit for a writ of mandamus and requested a stay; the stay was granted until June 18 pending the appellate court’s consideration of the mandamus petition.

Addressing the transfer, the Fifth Circuit found that the transfer order misapplied the controlling Fifth Circuit standard for transferring cases under 28 U.S.C. § 1404(a) and precedent applying that standard.  Section 1404(a) permits a district court to “transfer any civil action to any other district or division where it might have been brought . . . [f]or the convenience of parties and witnesses [and] in the interest of justice.”  In determining whether the CFPB has clearly demonstrated good cause to transfer the case, the Fifth Circuit considered four private interest factors and four public-interest factors set forth in an earlier case addressing transfer, In re Volkswagen of Am., Inc. (Volkswagen II), 545 F.3d 304, 315 (5th Cir. 2008):

The private interest factors are: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive.

The public factors are: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws [or in] the application of foreign law.

While the appellate panel found the district court was within its discretion in weighing the first three private interest factors, it found the court clearly abused its discretion by considering the convenience of counsel, most of whom were based in D.C., as a factor in making trial of the case “easy, expeditious and inexpensive.”  Looking to the public interest factors, the Fifth Circuit found that the district court clearly abused its discretion by determining that D.C. residents had a localized interest in the case just because the final rule was promulgated there, finding that it is not a “localized” case and any such interests are neutral in regard to transfer.  While the court conceded that court congestion could properly be considered as a factor, it stated that it is well settled that a transfer cannot be granted solely because of court congestion.

While a writ of mandamus is an extraordinary remedy, the Fifth Circuit held it was appropriate here in the motion to transfer context where there is no appeal as of right, the issuance of the writ was clear and indisputable, and the issues implicated not only the parties’ interests “but the interests of all parties who litigate against government defendants located in D.C. and seek to have their cases heard by judges and juries outside the nation’s capital.”

The decision urged district courts to adopt a practice of staying their venue transfer orders for a short time “so that opposing parties may have time to seek review, if warranted, on a less hurried/harried basis,” pointing out that doing so here would have avoided two highly expedited mandamus reviews.  Other federal district courts in Texas have already promulgated a 21-day stay rule on transfer orders.  In what appears to be a coordinated announcement or a well-timed coincidence, the Chief Judge of the U.S. District Court for the Northern District of Texas announced a new rule on June 17, 2024 automatically staying any order transferring a case outside the Fifth Circuit for 21 days absent the consent of all affected parties.  The rule, which came in the form of an order from Chief Judge David Godbey, is effective starting on September 3, 2024 unless modified following public comment.

The new rule, Local Rule 62.2 states:

Unless all affected parties consent to the transfer, an order that transfers a case to a district court outside the Fifth Circuit is stayed for 21 days from the date the order is entered on the docket.

The Northern District of Texas has become a preferred jurisdiction for legal challenges to Biden Administration policies.  Some divisions within the district only have one or two sitting judges, which means a party filing suit in a particular district can essentially select the judge that will hear their case.  The Judicial Conference of the United States, which sets policy for the federal court system and includes the Chief Justice of the Supreme Court as its presiding officer, announced a policy in March calling for the random assignment of judges through a district-wide random selection process in civil actions that seek to bar or mandate state or federal actions through declaratory actions or injunctive relief.  Similarly, in May the Committee on Judicial Review of the Administrative Conference of the United States, an independent federal agency tasked with improving government operations, approved a recommendation that judicial review of agency rulemaking be directed to federal appellate courts and that lawsuits challenging agency rules in district courts should be subject to district-wide assignment to avoid forum shopping.  The new local rule staying transfers does not directly conflict with these recommendations, although Chief Judge Godbey has previously stated that the Norther District of Texas will not follow the Judicial Conference’s recommendation in assigning cases.

While Chief Judge Godbey’s order states that “[a] majority of the District Judges of this Court have considered and adopted the attached amendment,” it does not explain the rationale for the rule or why a judge ruling on a contested motion to transfer a case would automatically stay their own order.  The Fifth Circuit’s decision granting the writ of mandamus in the credit card late fee case answers that question: It provides an increased opportunity to challenge any transfer through a writ of mandamus during the stay period and for the Fifth Circuit to become the ultimate arbiter of whether a case is actually transferred instead of the district court judge.

The CFPB must now decide whether to file a petition for a rehearing en banc.  Under Rule 40 of the Rules of Appellate Procedure, the CFPB has 45 days to file such a petition.  If the CFPB opts not to petition for rehearing, or its petition is denied, we expect the CFPB will then move to lift the preliminary injunction as it was based on the Fifth Circuit’s holding in CFSA v. CFPB that the CFPB’s funding mechanism was unconstitutional, a decision that was recently vacated by the Supreme Court.  We would then expect the plaintiffs to oppose the CFPB’s motion based on the other grounds that were initially raised in the complaint and preliminary injunction motion.  However, while Judge Pittman did not substantively address the plaintiffs’ other grounds in granting the preliminary injunction, including that the rule violates the Truth in Lending Act, the CARD Act, and the Administrative Procedures Act, he noted that he found them “compelling.”