On April 12, 2018, the United States Court of Appeals for the District of Columbia Circuit held oral argument on the appeal brought by Leandra English, CFPB Deputy Director, of the district court’s denial of her application for preliminary injunction. If granted as requested by Ms. English, the injunction would install Ms. English as the Acting Director, in lieu of Mick Mulvaney, whom President Trump appointed to the position following the resignation of Richard Cordray.

Judges Judith W. Rogers, Thomas B. Griffith, and Patricia Millet comprised the panel. All three judges showed significant interest in the issues presented by Ms. English’s appeal.  Oral argument was scheduled for twenty minutes per side, but the hearing lasted over an hour.

The fundamental issue presented by the appeal is whether or not President Trump had the statutory authority under the Federal Vacancies Refom Act (the “FVRA”) to appoint Mr. Cordray’s successor.  Ms. English argued through her counsel that he lacked such power because the Dodd Frank Act specifies that the Deputy Director – i.e., Ms. English – shall serve as Acting Director in the “absence or unavailability” of the Director until a new Director has been appointed by the President and confirmed by the Senate.  The Justice Department disagreed and argued that the FVRA affords the President the power to select an Acting Director upon resignation by the Director, regardless of the language in Dodd/Frank.

The panel expressed skepticism toward both sides. The panel was skeptical as to English’s argument that the language of Dodd-Frank is sufficiently specific to justify a ruling that would supersede the FVRA.  However, the panel was also skeptical as to the arguments advanced by the Justice Department, principally because President Trump appointed Mr. Mulvaney, the current Director of the Office of Management and Budget (“OMB”).  The panel seemed sympathetic to English’s argument that having Mr. Mulvaney wear the proverbial two hats, as noted by Judge Millett, would threaten the CFPB’s status as an independent agency. In underscoring this point, English pointed to specific language in Dodd-Frank which precludes the OMB from having any oversight over the CFPB. The Justice Department argued that there is no language in Dodd-Frank which specifically precludes someone from being both the acting Director of the CFPB and the Director of OMB.

The panel appeared troubled by the prospect of issuing an injunction limiting the powers of the President under the FVRA.  The tenor of the panel’s comments suggests that such a ruling might nevertheless issue, though in a limited fashion.  If the problem identified by the panel is the specific selection of Mr. Mulvaney, rather than the more general power of the President under the FVRA to select an Acting Director after the Director of the CFPB has resigned, then any victory awarded to Ms. English would likely be short-lived.  If the panel concludes that President Trump had the power to appoint the Acting Director but erred in selecting the current OMB Director, the President could correct his error by promptly appointing another Acting Director as long as such person has been previously confirmed by the Senate for another position and is independent of the President.   Even during any brief interim after such a ruling and the President’s appointment of a new Acting Director, it is not clear that Ms. English would serve as Acting Director.  As the panel noted, there is a substantial standing question that also needs to be addressed.  As noted by Judge Griffith, Ms. English’s standing problem could mean that if she prevails on her application for an injunction, she prevents Mr. Mulvaney from functioning as Acting Director, but that does not necessarily mean that she will occupy the position. However, someone needs to be in charge of the agency during that interim period and if it is not English, who else could it be?

The panel also raised questions to both sides regarding their shared assumption that the phrase “absence or unavailability” in the relevant Dodd-Frank provision applies to a vacancy created by the CFPB Director’s resignation.  Although the Office of Legal Counsel has concluded that this phrase does apply to a vacancy resulting from a resignation, for the compelling reasons set forth in our previous blog post [https://www.consumerfinancemonitor.com/2017/11/27/another-argument-for-why-mick-mulvaney-is-the-cfpb-acting-director/], we believe the phrase should not be construed so broadly.  Both parties responded to this line of questioning by noting that they do not disagree with each other on this point.  However, the panel’s questioning indicated that the issue may not be resolved by the parties’ agreement, or by the OLC’s opinion on the matter.

If the court should conclude that Mulvaney was not lawfully appointed as acting director, what are the implications for formal actions which he has taken during his tenure?  Although it is not free of doubt, it would seem that the new acting director appointed by the President could ratify all the actions previously taken by Mulvaney. While he has made many statements about how he is changing the CFPB, he has not taken too many formal actions. One example of a formal action would be his issuance of a final prepaid accounts rule.

In short, today’s oral argument suggested the possibility that Ms. English may prevail but that any victory secured by Ms. English may very well be pyrrhic.

An audio recording of the hearing is available on the court’s website.

We will monitor the case and update our blog after the panel issues its decision.

The D.C. Circuit will live stream the oral argument scheduled for April 12 in Leandra English’s appeal in her action seeking a declaration that she, rather than Mick Mulvaney, is the lawful CFPB Acting Director.  Ms. English has appealed the district court’s denial of her preliminary injunction motion.

In December 2017, the D.C. Circuit announced that it would live stream any oral argument upon request in an individual case.  (A panel can make an exception for case-specific confidentiality concerns.)

The court’s notice indicating that it approved a request to live stream the English oral argument contains instructions for how to listen.  We previously blogged about the members of the panel that will hear the oral argument.

 

Leandra English has filed her reply brief in her appeal of the district court’s denial of her preliminary injunction motion in her action seeking a declaration that she, rather than Mick Mulvaney, is the lawful CFPB Acting Director.  Her brief responds to the DOJ’s opposition brief filed last week with the D.C. Circuit.

A substantial portion of Ms. English’s reply brief is devoted to her argument that the Dodd-Frank Act (DFA) succession plan for the CFPB Director is “exclusive and mandatory” rather than permissive, as the DOJ contends.  According to Ms. English, established principles of statutory construction dictate that Congress’s use of the word “shall” in the DFA provision that provides that the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director” reflects a deliberate choice to make the succession plan mandatory.  She also contends that construing the provision to be mandatory is “the more natural reading of Dodd-Frank–consistent with its text, structure, and legislative history,” including Congress’s goal of making the CFPB independent “from direct presidential control.”

In her reply brief, Ms. English renews the argument she made in her opening brief that President Trump’s appointment of Mr. Mulvaney violates the DFA requirement that the CFPB operate as an independent agency.  According to Ms. English, “it is no exaggeration to say that [Mr. Mulvaney’s] appointment transformed the CFPB from an ‘independent bureau’ into an executive department of the White House.”

The filing of Ms. English’s reply brief completes the scheduled briefing in her appeal.  D.C. Circuit rules provide that the names of the judges sitting on a case’s merits panel are usually posted on the court’s website 30 days before the oral argument date.  Accordingly, since oral argument in Ms. English’s appeal is scheduled for April 12, the composition of the merits panel is likely to be posted next week.

 

 

Three amicus briefs have been filed in the U.S. Court of Appeals for the D.C. Circuit in support of President Trump and Mick Mulvaney, who are asking the D.C. Circuit to affirm the district court’s decision denying Leandra English’s motion for a preliminary injunction in her action seeking a declaration that she, rather than Mr. Mulvaney, has the legal right to serve as CFPB Acting Director.

The three amicus briefs were filed by the following amici:

  • Chamber of Commerce.  The Chamber represents 300,000 direct members and indirectly represents the interests of more than 3 million companies and professional organizations.
  • Republican State Attorneys General.  Amici are the attorneys general of the following 13 states: Texas, West Virginia, Alabama, Arizona, Arkansas, Florida, Georgia, Kansas, Louisiana, Michigan, Nebraska, Oklahoma, and South Carolina.
  • 113 Current Members of Congress.  Amici consist of 38 Republican Senators and 75 Republican House members.

In its opposition brief filed with the D.C. Circuit, the DOJ relied primarily on the argument that the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director” does not override the President’s authority under the Federal Vacancies Reform Act (FVRA) to temporarily fill a vacancy in an executive agency position requiring confirmation.  The DOJ also argued that “[n]othing in either the text or structure of the Dodd-Frank Act or the FVRA supports English’s assertion that there should be an unwritten exception precluding the President from choosing a particular Senate-confirmed official—the OMB Director—from serving in a vacancy to which the FVRA applies.”

All three amici agree with the DOJ’s position that the President’s designation of Mr. Mulvaney as Acting Director was proper under the FVRA.  They also argue that Ms. English’s position raises serious constitutional issues under the U.S. Constitution’s Appointments Clause.  Under the Appointments Clause, a “principal officer” of the United States may only be appointed by the President with the Senate’s consent.

The three amici argue that because the Acting Director exercises the power of a principal officer, the CFPA places no limits on how long an Acting Director can serve, and the nomination and confirmation process for a new permanent Director can be lengthy, Ms. English’s position encroaches on the President’s appointment authority, thereby raising questions about the extent to which Congress can constitutionally limit such authority.  Citing U.S. Supreme Court or D.C. Circuit case law indicating that preference should be given to a statutory interpretation that avoids a constitutional issue, the amici contend that the D.C. Circuit should rule in favor of President Trump and Mr. Mulvaney to avoid the Appointments Clause questions.

 

The Department of Justice has filed its opposition brief in Leandra English’s appeal of the district court’s denial of her preliminary injunction motion in her action seeking a declaration that she is the lawful Acting CFPB Director.  Ms. English filed her opening brief with the D.C. Circuit on January 30.

The DOJ relies primarily on the same argument it made to the district court in opposing Ms. English’s preliminary injunction motion–namely, that the provision in the Consumer Financial Protection Act that provides that the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director” does not displace the President’s authority under the  Federal Vacancies Reform Act to appoint an Acting Director.  It also argues that “[n]othing in either the text or structure of the Dodd-Frank Act or the FVRA supports English’s assertion that there should be an unwritten exception precluding the President from choosing a particular Senate-confirmed official—the OMB Director—from serving in a vacancy to which the FVRA applies.”

As it did in opposition to Ms. English’s preliminary injunction motion, the DOJ asserts that its arguments demonstrate that Ms. English is unlikely to succeed on the merits of her claim and that she has not satisfied the other requirements for injunctive relief (i.e. a likelihood of irreparable harm absent preliminary relief and that the balance of harms and public interest weigh in favor of an injunction.)

Ms. English must reply to the DOJ’s brief by March 6.  Oral argument is scheduled for April 12.

 

A group of Democratic Senators and House members have sent a letter to Mick Mulvaney and Leandra English expressing concern about Mr. Mulvaney’s announcement that he plans to reorganize the CFPB’s Office of Fair Lending (OFLEO).

Earlier this month, Mr. Mulvaney announced that he plans to transfer the OFLEO from the Supervision, Enforcement, and Fair Lending Division (SEFL) to the Director’s Office, where it will become part of the Office of Equal Opportunity and Fairness (OEOF).  At that time, Mr. Mulvaney stated that OFLEO “will continue to focus on advocacy, coordination, and education, while its current supervision and enforcement functions will remain in SEFL.”  The OEOF oversees equal employment, diversity, and inclusion at the CFPB, and has no enforcement or supervisory role.

In their letter, the Democratic lawmakers expressed concern that the reorganization will frustrate the CFPB’s efforts to protect consumers from unfair, deceptive, or abusive acts and practices and from discrimination.  They cited OFLEO’s role in “help[ing] design specialized oversight and support[ing] bank examiners in assuring that CFPB’s regulated institutions were complying with anti-discrimination laws” and in “work[ing] with the CFPB’s enforcement lawyers and the Department of Justice to bring lawsuits” when problems identified in examinations could not be resolved. They noted that OFLEO has “also counseled banks in their efforts to build good compliance systems” and comment that of the OFLEO’s functions to date, “only the counseling will be supplied after the reorganization, though in the absence of dedicated anti-discrimination enforcement, it’s not clear whether there will be continuing demand.”

The Democratic lawmakers seek written responses to the questions asked in their letter by March 1, 2018 as well as “a copy of all documents and communications relating to the decision to [reorganize the OFLEO].”  Among the questions asked by the lawmakers are:

  • Whether the CFPB performed “a legal analysis to determine whether stripping the OFLEO of its enforcement authority would hinder the CFPB’s ability to carry out its statutory mandate to provide oversight and enforcement of federal fair lending laws
  • How transferring the OFLEO to the Director’s Office will “modify the Bureau’s decision-making process with regard to enforcement and other actions to protect consumers from unfair discrimination”
  • Whether Mr. Mulvaney or any other CFPB employee discussed the reorganization before it was announced “with any outside entities—including lobbyists or representatives of the banking or financial services industry”
  • Whether the CFPB is considering any substantive changes to its approach to the enforcement of fair lending laws, including changes to the CFPB’s interpretation of such laws

 

Five amicus briefs have been filed in the U.S. Court of Appeals for the D.C. Circuit in support of Leandra English.  Ms. English has appealed the district court’s denial of her preliminary injunction motion in her action seeking a declaration that she, rather than Mick Mulvaney, has the legal right to serve as CFPB Acting Director.

In her opening appeal brief, Ms. English relies primarily on the argument that the provision of the Federal Vacancies Reform Act (FVRA) that authorizes the President to temporarily fill a vacancy in an executive agency position requiring confirmation is superseded by the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director.”  Ms. English also argues that appointing Mr. Mulvaney as the CFPB Acting Director is inconsistent with the CFPA’s mandate that the CFPB be an “independent” agency.

Except as noted below, the amici that filed the five amicus briefs in support of Ms. English’s appeal also filed amicus briefs in the district court in support of her motion for a preliminary injunction.  The amici consist of the following:

  • Consumer Financial Regulation Scholars.  Amici consist of a group of 20 academics described as “scholars on financial regulation and consumer finance who regularly study the legal underpinnings of the [CFPB].”  The “scholars” listed on the amicus brief filed in the D.C. Circuit include 10 individuals who were not listed on the amicus brief filed in the district court.
  • Current and former Democratic members of Congress.  Amici consist of a group of 26 current and former Representatives and Senators described as “sponsors of Dodd-Frank [who] participated in drafting it, serve or served on committees with jurisdiction over the federal financial regulatory agencies and the banking industry, currently serve in the leadership, or served in the leadership when Dodd-Frank was passed.”  12 of the current and former Democratic members who joined the amicus brief filed in the district court are not listed on the amicus brief filed in the D.C. Circuit.
  • Democratic State Attorneys General.  Amici consist of the attorneys general of 16 states and the District of Columbia.  The Pennsylvania AG, who joined the amicus brief filed by the Democratic state AGs in the district court, is not listed on the amicus brief filed in the D.C. Circuit.
  • Consumer advocacy groups.  Amici consist of 10 nonprofits who are described as “consumer organizations that protect and defend the rights of consumers through education, advocacy, policy, research, and litigation.”
  • Peter Conti-Brown.  Professor Conti-Brown is an Assistant Professor at the Wharton School of the University of Pennsylvania who is described as “a scholar of the structure, history, and evolution of financial regulatory institutions, including especially the U.S. Federal Reserve System.”

In their amicus briefs filed in the D.C. Circuit, the amici rely on the same primary arguments that they made in their district court briefs.  The primary argument made by the Consumer Financial Regulation Scholars, the current and former Democratic members of Congress, and the Democratic state AGs is that the CFPA succession provision supplants the FVRA and provides the sole means for temporarily filling a vacancy in the position of CFPB Director until Senate confirmation of a new Director.

The amicus brief filed by the consumer advocacy groups does not directly discuss the FVRA and CFPA provisions and instead focuses on the public interest prong of the preliminary injunction standard.  The groups argue that a preliminary injunction “will serve the public interest by enabling the CFPB to pursue its statutory mission and maintain its independence during the course of this litigation.”  Professor Conti-Brown argues that even if the FVRA applies, “President Trump does not have the legal authority to appoint a White House official to lead the CFPB.”  (As we previously commented, we find no support in the FVRA for Professor Conti-Brown’s argument.  Mr. Mulvaney, as OMB Director, serves in an office to which he was appointed by the President and confirmed by the Senate.  As such, he satisfies the FVRA’s criteria for whom the President can appoint to fill a vacancy.  Nothing in the FVRA would disqualify someone who satisfies such criteria from being appointed by the President to serve as CFPB Acting Director because he or she is a “White House official.”)

Earlier this week, Mick Mulvaney, President Trump’s designee as CFPB Acting Director, announced that he has appointed Kirsten Sutton Mork as CFPB Chief of Staff.  Ms. Sutton Mork has been serving as staff director of the House Financial Services Committee under Chairman Jeb Hensarling.  We previously blogged about Mr. Hensarling’s announcement that Ms. Sutton Mork had been named CFPB Chief of Staff.

Mr. Mulvaney’s announcement states that Ms. Sutton Mork was a member of Mr. Hensarling’s staff during House Financial Services Committee, House, and conference committee consideration of the Dodd-Frank Act and “is intimately familiar with the Bureau’s statutory mission and obligations.”

The CFPB’s former Chief of Staff was Leandra English, who was appointed Deputy Director by former Director Cordray only hours before his resignation became effective at midnight on November 24, 2017.  Ms. English is currently appealing the district court’s denial of her motion for a preliminary injunction in her action challenging President Trump’s appointment of Mr. Mulvaney as CFPB Acting Director.

The U.S. Court of Appeals for the D.C. Circuit is scheduled to hear oral argument on April 12, 2018 in Leandra English’s appeal of the district court’s denial of her preliminary injunction motion in her action seeking a declaration that she is the lawful CFPB Acting Director.

The D.C. Circuit’s order setting the briefing schedule in her appeal directed the Court Clerk to calendar the case for oral argument on the first available date following the completion of briefing.  Ms. English filed her opening appeal brief on January 30.

Under the D.C. Circuit’s briefing schedule, the DOJ’s opposition brief is due by February 23, 2018 and Ms. English’s reply brief is due by March 6, 2018.  Pursuant to federal appellate rules, amicus briefs must be filed within 7 days of the due date of the brief of the party an amici is supporting.  Accordingly, amicus briefs supporting Ms. English must be filed by February 6, 2018 and amicus briefs supporting Mr. Mulvaney must be filed by March 2, 2018.

 

On January 30, 2018, the federal district court hearing Leandra English’s action seeking a declaration that she is the lawful Acting CFPB Director granted the parties joint motion to stay further proceedings pending a decision from the D.C. Circuit in her appeal of the district court’s denial of her preliminary injunction motion.

Leandra English also filed her opening appeal brief with the D.C. Circuit on January 30.  In her brief, English argued that the district court “violated elementary principles of statutory construction in holding that Dodd-Frank’s mandatory language is ‘implicitly qualified’ by the FVRA.”  She also argued that appointing Mick Mulvaney as the Acting CFPB Director was inconsistent with Dodd-Frank’s mandate that the CFPB be an “independent” agency.  English appears to have abandoned the argument she made at the district court level that the FVRA does not apply because the Acting CFPB Director serves on the FDIC Board.

In her brief, English also claimed that the district court’s denial of the preliminary injunction was wrong because the court failed to recognize that she is suffering irreparable harm from the inability to exercise authority over the CFPB.

Strangely, English relied upon (a mischaracterized) quote of Alan Kaplinsky, the chair of Ballard Spahr’s Consumer Financial Services Group, in an attempt to support her argument that a preliminary injunction is needed to remove uncertainty as to who is the lawful Acting CFPB Director.  She references an article that quotes Alan as saying that the industry needs certainty about who the director is.

English neglected to mention, however, that the article, in the paragraph immediately before the one containing the  quote relied upon in her brief, also quotes Alan’s statement to the reporter that “[o]nly a permanent director, confirmed by the Senate, would definitely resolve the leadership dispute in the near term, Alan S. Kaplinsky said.”  Alan did not, as English suggests, say that granting her preliminary injunction motion would resolve the uncertainty problem.

Indeed, Alan, along with Jeremy Rosenblum and Theodore Flo of Ballard Spahr, filed an amicus brief in the district court case explaining why Mulvaney, not English, should serve as Acting CFPB Director.  That’s because the language in Dodd-Frank upon which English relies only covers temporary situations where the Director is unable to fulfill his/her duties as Director (e.g., hospitalization) and not a permanent vacancy resulting from a resignation.  As we argued in our amicus brief, the FVRA explicitly covers the latter situation.  Having decided to challenge Mulvaney’s appointment despite the lack of merit in her legal position, English should not now be permitted to benefit from the uncertainty her lawsuit has created.

Under the briefing schedule established by the D.C. Circuit, the DOJ’s opposition brief is due by February 23, 2018 and English’s reply brief is due by March 6, 2018.  Pursuant to federal appellate rules, amicus briefs must be filed within 7 days of the due date of the brief of the party an amici is supporting.  Accordingly, amicus briefs supporting English must be filed by February 6, 2018 and amicus briefs supporting Mulvaney must be filed by March 2, 2018.  The D.C. Circuit’s order setting the briefing schedule directed the Court Clerk to calendar the case for oral argument on the first available date following the completion of briefing.