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The Court of Appeals for the District of Columbia has granted a request for an en banc rehearing in the National Treasury Employees Union's (NTEU) and others' challenge to the firing of more than 1,400 CFPB employees and the taking of certain other actions to curtail the operations of the CFPB.
The Plaintiffs sued the Administration, contending that its plan to lay off the employees at the CFPB and to take certain other actions is tantamount to an abolishment of the agency. Only Congress has that power, the Plaintiffs said.
On August 15, 2025, a divided panel of the D.C Circuit held that "the district court lacked jurisdiction to consider the claims predicated on loss of employment, which must proceed through the specialized-review scheme established in the Civil Service Reform Act." The panel also held that the remaining claims of the plaintiffs did not challenge reviewable final agency action nor unconstitutional action reviewable in equity.
As a result, the panel dissolved a Federal District Court injunction granted by Judge Amy Berman Jackson blocking the firings and the taking of certain other actions and said the Trump Administration could take those actions.
However, when it dissolved the injunction, the panel withheld issuing the mandate in the case until the plaintiffs timely petitioned for a rehearing en banc. The plaintiffs subsequently filed a request for the en banc rehearing. The Plaintiffs argued that the CFPB's actions constituted a plan to shut down the agency. In light of the granting of a rehearing, the panel's opinion is vacated.
The Circuit Court expedited the hearing, which, is scheduled for February 24, 2026, at 2:00 PM, ET. The Defendants' brief is due January 9, 2026. The Plaintiffs' brief is due February 2, 2026. The reply brief of the Defendants is due on February 17, 2026. Amicus briefs are due one week after each party's opening brief is due.
A short while ago, the Defendants filed in the District Court a notice and motion to clarify the injunction issued by Judge Jackson based on a legal opinion rendered by the Office of Legal Counsel ("OLC") of the Department of Justice. In its opinion, OLC advised CFPB Acting Director Vought that he could not lawfully request operating funds for the CFPB from the Federal Reserve Board because under the Dodd-Frank Act the CFPB receives funding out of "combined earnings" of the Federal Reserve System. OLC then opined that "combined earnings" means combined profits and that since September 2022, and continuing through the date of OLC's opinion, there have been no combined profits. As a result of the OLC opinion, Acting Director Vought notified the court that he would not be requesting any funds from the Federal Reserve Board and that the CFPB would run out of operating funds by the end of this year or early next year. As a result, according to Vought, it will be impossible for the CFPB to comply with the injunction.
Judge Jackson ordered additional briefing by all parties with respect to whether the District Court had jurisdiction to take any action in light of the fact that the case is now on appeal and asked both parties to identify any aspects of the injunction that the District Court should clarify.
The plaintiffs argued in their brief that the OLC opinion is wrong because "combined earnings" means "combined revenues", not "combined profits", and that there is no lawful reason why the CFPB may not request funds from the Fed. An amicus brief was filed by former Federal Reserve System officials in the District Court agreeing with the Plaintiffs' position, maintaining that the Federal Reserve System is now profitable and arguing that even if OLC's definition of "combined earnings" means profits, the CFPB may now lawfully request funding from the Fed.
The Department of Justice recently wrote a letter to Jerome Powell, Chairman of the Fed, asking for his opinion about whether the Fed may lawfully honor funding requests from the CFPB. Judge Jackson has ordered the Defendants to file in court any response from Chairman Powell.
Although it is always hazardous to predict what a court might do, we think that the Circuit Court might remand the case to Judge Jackson for further fact-finding and a determination of whether the CFPB may lawfully request funds from the Fed.
Further complicating matters is a new lawsuit filed in Federal District Court for the Northern District of California by Public Citizen and others seeking a declaration that the Fed may lawfully fund the CFPB and requiring Vought to request sufficient funds so that the CFPB may perform statutorily required functions.
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