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From Banking and Finance Law Daily, January 11, 2018

Preliminary injunction to remove Mulvaney as CFPB acting director denied

By Richard A. Roth, J.D.

A U.S. district judge has denied Consumer Financial Protection Bureau Deputy Director Leandra English’s request for a preliminary injunction that would have recognized her claim to be acting director until a final decision in her suit is reached. According to the judge, English is not likely to succeed in her claim that she, rather than Mick Mulvaney, is the acting director; has not shown that a preliminary injunction is necessary to avoid an irreparable injury; and has not demonstrated that the equities of the case favor her (English v. Trump, Jan. 10, 2018, Kelly, T.).

English’s request for a temporary restraining order against Trump and Mulvaney was denied in November 2017 (see Banking and Finance Law Daily, Nov. 27, 2017). The judge’s denial of her preliminary injunction request makes clear that he believes her claims carry little weight.

Basis of dispute. Hours before he resigned as the CFPB’s first director, Richard Cordray raised English to Deputy Director of the Bureau. Under the terms of the Dodd-Frank Act, the deputy director becomes acting director in case of "the absence or unavailability of the Director" (12 U.S.C. §5491). However, President Donald Trump claimed that the Federal Vacancies Reform Act gave him the authority to appoint an acting director, and he put Office of Management and Budget Director Mick Mulvaney in the job. English then sued to vindicate her right to succeed Cordray.

The Department of Justice, which is defending Mulvaney and Trump against English’s suit, does not deny the relevance of the Dodd-Frank Act section and concedes that a vacancy in the office could constitute "absence or unavailability." However, DOJ asserts that the Dodd-Frank Act is not the exclusive avenue to name an acting director; rather, that law and the FVRA provide alternative paths, and the president’s appointment supersedes English’s succession.

memorandum by CFPB General Counsel Mary E. McLeod, who was appointed by Cordray, agrees with the Justice Department analysis. According to the judge, the CFPB division associate directors have agreed to act on the assumption that Mulvaney’s appointment is valid. Mulvaney has asked English to stop claiming to be acting director and to perform her duties as deputy director. He also has said publicly that he is not considering firing English, the judge noted.

Unlikely success. According to the judge, whether English is likely to succeed on the merits of her case turns on two issues: whether the FVRA gives the president the ability to appoint a CFPB acting director and whether Mulvaney may be appointed. English failed on both points.

FVRA applicability. The FVRA gives the president the authority to appoint a CFPB acting director because the CFPB director is an officer of an executive agency who is subject to Senate confirmation, as described by the Act, the judge said. No FVRA exception applies.

There is no conflict between the FVRA and the Dodd-Frank Act succession rules, the judge continued. The two laws can be interpreted to be consistent by saying that the deputy director automatically becomes the acting director but the president can override that automatic succession by making an appointment.

The judge also pointed out that the Dodd-Frank Act says all federal laws on officers or employees are to be followed unless there is an explicit contrary provision (12 U.S.C. §5491). The Dodd-Frank Act direction that the deputy director shall serve as acting director is not such a provision.

English’s arguments that the Dodd-Frank Act implicitly repealed the earlier FVRA and that the legislative history of the Dodd-Frank Act supported her also failed to convince the judge.

Mulvaney’s eligibility. That Mulvaney continues to hold office as OMB Director does not disqualify him, the judge determined. The Dodd-Frank Act establishes who is qualified to be director, and it does not include any such disqualification (see 12 U.S.C. §5491(d)).

English’s assertions that the CFPB, and the FDIC—of which the CFPB director is an ex officio member—are intended to be independent agencies did not convince the judge that Mulvaney was disqualified. Perhaps such independence was intended, he said, but there was no statutory provision outlining how it was to be preserved.

Irreparable harm. Satisfying the irreparable harm requirement for a preliminary injunction required English to show a certain and substantial threat of an imminent and irremediable injury, according to the judge. English could not clear that high hurdle.

The loss of a job, even with its attendant loss of stature and income, is not ordinarily seen to be an irreparable harm, the judge said. That meant that all English could point to was "the loss of a ‘statutory right to function’ in a position directly related to a federal agency’s ‘ability to fulfill its mandate.’" The CFPB would not cease to function if English were not acting director and, even if it would, English herself would not have suffered an irreparable injury.

It was true that the nomination and Senate confirmation of a permanent CFPB director would end any acting directorship, the judge conceded. But there was no way to know how long that process would take. Since it was possible that English could win her suit and again become acting director before a new director was confirmed, she could not show that she was currently threatened with an irreparable injury.

The judge added that a preliminary injunction could, at most, return everyone to their last uncontested status. English’s last uncontested status was as deputy director, not acting director. (This point seems to ignore that English presumably was the acting director in the brief period between Cordray’s resignation and Mulvaney’s disputed appointment.)

Balance of equities. Deciding whether to grant a preliminary injunction requires a consideration of the public consequences—a balancing of the equities—the judge said. The equities in this case did not weigh in favor of an injunction.

Even if English could show an irreparable injury based on her loss of her ability to function as acting director, Mulvaney could claim precisely the same injury, the judge observed. Thus, the balance would not tip toward English.

Granting the preliminary injunction would not benefit the public by providing clarity, in the judge’s opinion. Not only had President Trump appointed Mulvaney, but the CFPB was operating as if that appointment was effective. Rather than providing clarity, upsetting that situation "would only serve to muddy the waters," he said.

The case is No. 17-2534 (TJK).

Attorneys: Deepak Gupta (Gupta Wessler PLLC) for Leandra English. Brett A. Shumate, U.S. Department of Justice, for Donald John Trump and John Michael Mulvaney.

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