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Petition for certiorari filed by State National Bank of Big Spring raising constitutional challenge to CFPB

petition for certiorari was filed in the U.S. Supreme Court late last week by State National Bank of Big Spring (SNB) which, together with two D.C. area non-profit organizations that also joined in the petition, had brought one of the first lawsuits challenging the CFPB’s constitutionality.

Originally filed in 2012 in D.C. federal district court, the complaint alleged that the CFPB’s structure violated the U.S. Constitution’s separation of powers. The district court dismissed for lack of standing but on appeal, the D.C. Circuit held that the plaintiffs did have standing and remanded the case to the district court.  Further proceedings in the case were held in abeyance by the district court pending the outcome of the PHH case in the D.C. Circuit.

Following the D.C. Circuit’s en banc PHH decision that held the CFPB’s structure is constitutional, the district court lifted its abeyance order and, with the parties having agreed that PHH foreclosed the district court from ruling in favor of the plaintiffs on their constitutional challenge, entered judgment against the plaintiffs.  On June 8, 2018, the D.C Circuit entered an order summarily affirming the district court’s judgment.  Citing its en banc PHH decision, the D.C. Circuit order stated that “the merits of the parties’ positions are so clear as to warrant summary action.”

In their petition for certiorari seeking Supreme Court review of the D.C. Circuit’s June 8 order,  SNB and the non-profits urge the Supreme Court to grant the petition “to resolve the conflict” between PHH and the Fifth Circuit’s decision in Collins v. Mnuchin.  In Collins, the Fifth Circuit ruled that the Federal Housing Finance Agency (FHFA) is unconstitutionally structured because it is excessively insulated from Executive Branch oversight.  While stating that it was “mindful” of the D.C. Circuit’s en banc PHH decision, the Fifth Circuit found that “salient distinctions” between the CFPB’s structure and the FHFA’s structure dictated different conclusions as to each agency’s constitutionality.  SNB and the non-profits argue in their petition that “the approaches of the D.C. Circuit and the Fifth Circuit cannot be reconciled.”

We continue to follow two other active cases involving challenges to the CFPB’s constitutionality that could come before the Supreme Court.  In April 2018, the Fifth Circuit agreed to hear All American Check Cashing’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality.  In RD Legal Funding, Judge Preska of the Southern District of New York is expected to soon enter a Rule 54(b) judgment against the CFPB so that it can file an appeal with the Second Circuit from her June 21 order in which she ruled that the CFPB’s structure is unconstitutional and struck all of Title X of Dodd-Frank.

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
Partner

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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