Plaintiffs Ask For En Banc Rehearing In CFPB Shutdown Case

Contending that the decision of a divided three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia would lead to a shutdown of the CFPB by the Trump Administration, plaintiffs in a lawsuit challenging proposed Reductions-in-Force at the bureau are asking for an en banc rehearing in the case before all of the active judges of the D.C Circuit.

"The Executive Branch may not unilaterally abolish an agency created by Congress," the plaintiffs in the case, (the National Treasury Employees Union, the CFPB Employee Association, the Virginia Poverty Law Center, the NAACP, and the NCLC) said. The union represents CFPB workers.

They added, "As the district court found, absent a preliminary injunction, the defendants 'will eliminate' the CFPB."

A divided appeals court has said that the Trump Administration can resume plans to begin firing more than 1,400 employees at the CFPB.

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 by the administration. 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.

Among other things, the appeals court said that the Trump Administration had announced the firing of the employees but never announced a final decision to close the agency.

"Yet because the agency had not made that announcement, the majority concluded that it had not taken any agency action at all," the plaintiffs said. "The majority believed that absent a statement, the shut-down decision could not be an 'agency rule.'"

The decision also "allows the Executive Branch to alter the fundamental structure of our government without congressional authorization or judicial review," the plaintiffs said. "And to reach its decision, the majority rewrote core principles of administrative and constitutional law that will have far-reaching impact beyond this case."

The impact will not be limited to the bureau, according to the plaintiffs. They said that if the decision stands, it would license the destruction of any agency at the whim of the Executive Branch without Congressional approval.

They said that if the agency is closed, consumers would face immediate harm as they would go unaided. In addition, the nation's largest banks would go unsupervised, according to the plaintiffs. "And the same regulatory gap that led to the 2008 financial crisis—out of which the CFPB was born—will once again threaten the economy," they added.

They concluded that once the CFPB shuts down, it simply cannot be restarted. "Building an agency takes years," they said. "And in those years, the CFPB's absence will be devastating for consumers and the American economy."

The government may not file a response to the petition unless requested by the en banc Court. The petition may not be granted unless the Court first requests such a response.

When it dissolved the injunction, the Appeals Court withheld the mandate in the case until the plaintiffs timely petitioned for a rehearing en banc. The mandate will now remain in effect unless and until seven days after the petition for rehearing is denied or a motion for a further stay is granted, whichever is later. A further stay of 90 days may be granted upon motion to the court saying that the plaintiffs intend to file a petition for a writ of certiorari with the Supreme Court. The Circuit Court may grant the stay only if it believes that the cert petition would raise a "substantial question."

The petition for rehearing will be granted only if a majority of the active judges of the court votes in favor of it. Five of the eight active judges were appointed by Democratic presidents. Two of the three judges on the panel that decided the case were appointed by President Trump.

In a related development, House Financial Services ranking Democrat Rep. Maxine Waters, D-Calif., wrote OMB Director and acting CFPB Director Russell Vought expressing concern that the Trump Administration intends to use the government shutdown as an excuse to furlough CFPB employees.

"Such an action would be both legally baseless and extremely harmful to American consumers at a time when they are suffering from the Trump Administration's harmful economic policies that are increasing inflation and unemployment," she wrote.

And she reminded Vought that the CFPB is not subject to the annual appropriations process, and instead, is funded by the Federal Reserve.

"A shutdown does not apply to the CFPB," she wrote.

Strangely, Rep.Waters did not mention the litigation discussed above and the fact that the Administration has been and still is subject to the injunction issued by the District Court precluding any reduction-in-force at the CFPB

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.