December 17, 2017

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English files motion for preliminary injunction, amended complaint in CFPB Acting Director dispute

As required by Judge Kelly’s scheduling order, yesterday afternoon Leandra English filed a motion for a preliminary injunction in her action seeking a declaration that she, rather than Mick Mulvaney, has the legal right to serve as CFPB Acting Director.  The motion was accompanied by a supporting memorandum.  Ms. English also filed a First Amended Complaint yesterday.

Like her unsuccessful motion for a temporary restraining order (TRO), Ms. English’s preliminary injunction motion 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that authorizes the President to temporarily fill a vacancy in an executive agency position requiring confirmation is superseded by the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall…serve as acting Director in the absence or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’s argument continues to be based on the premise that the phrase “absence or unavailability” in the CFPA provision covers a vacancy created by the CFPB Director’s resignation.  However, for the compelling reasons set forth in our blog post, we believe the phrase should not be construed to cover such a vacancy.   (We note that the succession provisions in other federal statutes cited by Ms. English on pg. 11 of her memorandum in support of her argument that the CFPA provision should prevail over the FVRA expressly address succession “in the event of a vacancy” in a leadership position.  None of these statutes use the phrase “absence or unavailability” found in the CFPA provision.  Indeed, the other statutes cited by Ms. English provide further support for the argument that the CFPA provision is inapplicable.  )

In support of her preliminary injunction motion, Ms. English also renews her TRO argument that Mr. Mulvaney’s appointment is inconsistent with the CFPB’s status as an “independent agency” because, as Director of the Office of Management and Budget, he is an “at-will employee” who can be dismissed by the President without cause.  She also adds two new arguments not advanced in support of her TRO motion.

First, she argues that even if the CFPA provision does not supersede the FVRA, the FVRA does not apply to the appointment of a CFPB Acting Director.  The FVRA provides that the President’s authority to use the FVRA to fill vacancies does not apply to positions held by “any member who is appointed by the President, by and with the advice and consent of the Senate to any board, commission, or similar entity that… (A) is composed of multiple members; and (B) governs an independent establishment or Government corporation.” 5 U.S.C. § 3349c(1).  The Dodd-Frank Act amended the Federal Deposit Insurance Act (FDIA) to provide that the CFPB Director, or the Acting CFPB Director in the event of a vacancy in the Director’s position, shall serve as a member of the FDIC Board.  According to Ms. English, because this provision would make the CFPB Acting Director a member of the FDIC Board, the President cannot use his FVRA authority to appoint a CFPB Acting Director.

The same argument was made in the lawsuit filed this week in U.S. District Court for the Southern District of New York by the Lower East Side People’s Federal Credit Union seeking a declaration that Ms. English has the legal right to serve as Acting Director.  As we commented in our blog post about the credit union’s lawsuit [link], while clever, this argument is based on an incorrect reading of the FVRA.  The FVRA provides that the President’s authority to use the FVRA to fill vacancies does not apply to positions held by “any member who is appointed by the President, by and with the advice and consent of the Senate to any board, commission, or similar entity that… (A) is composed of multiple members; and (B) governs an independent establishment or Government corporation.” 5 U.S.C. § 3349c(1).  The Dodd-Frank Act amended the Federal Deposit Insurance Act (FDIA) to provide that the CFPB Director, or the Acting CFPB Director in the event of a vacancy in the Director’s position, shall serve as a member of the FDIC Board.  According to Ms. English, because this provision would make the CFPB Acting Director a member of the FDIC Board, the President cannot use his FVRA authority to appoint a CFPB Acting Director.

Ms. English’s (and the credit union’s) argument ignores the fact that neither the CFPB Director nor the Acting Director “are appointed by the President, by and with the advice and consent of the Senate to any board….”  Rather, the FDIA designates the CFPB Director or Acting Director members of the FDIC Board by virtue of their CFPB positions.  (A person serving on a board by virtue of another position that he or she holds is often referred to as an “ex officio” member.)  Indeed, the FDIA specifically recognizes this distinction by referring to the three FDIC Board members who are appointed by the President as the “appointed members.”  Moreover, Ms. English implicitly acknowledges that Mr. Mulvaney would only serve on the FDIC Board by virtue of his appointment as CFPB Acting Director, arguing that the President exceeded his FVRA authority when he “attempted to designate Mr. Mulvaney as the Acting Director of the CFPB—and thus as a member of the FDIC Board.” (emphasis added).  Accordingly, since the President did not appoint Mr. Mulvaney to the FDIC Board, and has only appointed him CFPB Acting Director (as well as OMB Director), the President can properly use his FVRA authority to appoint Mr. Mulvaney CFPB Acting Director.

The second argument added by Ms. English in support of her preliminary injunction motion is that the President’s appointment of Mr. Mulvaney violates the Appointments Clause of the U.S. Constitution.  According to Ms. English, the Appointments Clause only gives the President two means of appointing officers: with the advice and consent of the Senate or pursuant to statute.  She argues that the FVRA does not provide a valid statutory basis for Mr. Mulvaney’s appointment and his confirmation as OMB Director does not, in itself, allow the President to assign duties at another agency to Mr. Mulvaney.

Ms. English’s amended complaint generally tracks the introduction and factual allegations in her original complaint and seeks the same relief, namely a declaration that she, and not Mr. Mulvaney, is the CFPB Acting Director, an order directing President Trump to refrain from appointing, recognizing, or causing any person to recognize someone other than Ms. English as Acting Director, and an order directing Mr. Mulvaney to refrain from accepting an appointment as Acting Director or asserting or exercising in any way the authority of that office.  Unlike her original complaint, however, the amended complaint breaks down her claims for relief into specific counts and references the new arguments made in her memorandum in support of her preliminary injunction.

Ms. English’s claims for relief in the amended complaint consist of the following:

  • Count I.  Mr. Mulvaney’s appointment as Acting Director is unlawful under the CFPA and is unauthorized under the FVRA.
  • Count II.  Mr. Mulvaney’s appointment violates the CFPA’s “independence requirement” for the CFPB.
  • Count III.  Mr. Mulvaney appointment violates the Appointments Clause.
  • Count IV.  Actions taken by Mr. Mulvaney as Acting Director violate the Administrative Procedure Act because they are not “in accordance with law.”
  • Count V.  Ms. English is entitled to declaratory relief under the Declaratory Judgment Act.
  • Count VI.  Ms. English is entitled to equitable relief.
Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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