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D.C. Circuit panel questions Mulvaney’s dual CFPB/OMB roles in English appeal oral argument

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, 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.

Copyright © by Ballard Spahr LLP

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About this Author

Elisabeth R. Connell, Litigation attorney, Ballard Spahr
Associate

Elisabeth R. Connell represents clients in commercial litigation matters, including lead-based paint claims, labor and employment law issues, and insurance coverage and defense.

Judicial Clerkships/Internships

Clerk, Hon. Stephen J. Sfekas, Baltimore City Circuit Court, 2014-2015

Intern, Hon. Edward R. K. Hargadon, Baltimore City Circuit Court, 2012

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