Memoranda by the Justice Department and a federal credit union are the opening moves in the credit union’s effort to block President Donald Trump’s appointment of Mick Mulvaney as the Consumer Financial Protection Bureau’s acting director. Responding to a complaint and request for a preliminary injunction filed by Lower East Side People’s Federal Credit Union, the DOJ is asserting the financial institution does not have standing to sue and has failed to satisfy any of the requirements for the injunction. The credit union’s reply brief in Lower East Side People's Federal Credit Union v. Trump offers counter-arguments.
Lower East Side’s complaint alleges that, due to conflicting claims of authority raised by Mulvaney and CFPB Deputy Director Leandra English, the institution does not know who is in charge and cannot decide whose directions to follow. The Trump administration relies on the Federal Vacancies Reform Act to authorize Mulvaney’s appointment, but the Dodd-Frank Act automatically made English the acting director when Richard Cordray resigned the directorship, Lower East Side asserts.
DOJ’s motion to dismiss the complaint and supporting brief raise three attacks:
- Lower East Side does not have standing to sue because it does not have “a cognizable personal stake” in the appointment controversy.
- The credit union is not likely to succeed on the merits of its suit because the Mulvaney appointment is legal.
- A preliminary injunction is inappropriate because Lower East Side will not suffer any irreparable harm from the appointment and the public interest and equities are not in its favor.
More specifically, the credit union does not claim the CFPB has taken any action against it that could cause it any harm, DOJ argues. Simply being a regulated financial institution is not enough. “Accordingly, injury, causation, and redressability are all lacking.”
Since Lower East Side is regulated by the CFPB, it has standing to sue, the institution replies—its regulated-entity status is enough. If more is needed, a recent CFPB action that will “neuter” mortgage disclosure rules has enough effect on the credit union to create standing.
Appointment legality. As far as the conflict between the Federal Vacancies Reform Act, which allows the president to fill vacancies temporarily by appointment, and the Dodd-Frank Act, which says the CFPB deputy director automatically becomes acting director when the director is unavailable, the FVRA is what matters, DOJ asserts. The FVRA on its face applies to the CFPB, and none of the FVRA exceptions are relevant.
The Dodd-Frank Act provision might authorize the Bureau’s deputy director to step in, DOJ continues, but that provision is not the exclusive way to fill the job. It does not supersede the FVRA provision.
“Shall still means shall,” the credit union replies. The Dodd-Frank Act says the deputy director “shall . . . serve as acting Director in the absence or unavailability of the Director,” and that clear direction resolves the dispute. To the extent that a conflict between the two laws might exist, the later-passed Dodd-Frank Act would supersede the FVRA.
Injunctive relief hurdles. Lower East Side also fails to clear the hurdles that apply to all requests for injunctive relief, according to DOJ. The credit union is not threatened by any irreparable harm, and neither the public interest nor the balance of the equities between the government and the credit union support blocking the Mulvaney appointment.
A violation of the U.S. Constitution’s Appointments Clause, which the financial institution claims has occurred, is not alone sufficient to constitute an irreparable harm, DOJ asserts. In fact, Lower East Side cannot point to any harm, let alone an irreparable harm.
The government typically has broad discretion in managing its own operations, the DOJ continues. The potential for disruption that would be caused by an injunction must be given significant weight. Interfering with the CFPB’s operations would be disruptive, and an order compelling the President to withdraw his appointment “would be an extraordinary intrusion into core Executive Branch operations.”
Injunctions have been issued against other Presidents, the credit union says, and there is no reason not to issue a preliminary injunction in this case. A violation of the Appointments Clause is a violation of the institution’s constitutional rights, and that always constitutes an irreparable harm. The same is true for regulation by a director who has no authority.
More specifically, Lower East Side says that part of its mission is “promoting economic justice and serving financially underserved communities.” Recent CFPB actions under Mulvaney that reduce the effectiveness of the Home Mortgage Disclosure Act and the rules on prepaid debit cards interfere with the credit union’s ability to accomplish its mission, and that also is an irreparable harm.
As for the effect that a preliminary injunction might have on the CFPB’s ability to conduct its own business, Lower East Side asserts that “This claim is hard to take seriously, from a defendant who by his own admission wants to eviscerate the Bureau. The only people interfering with the Bureau’s execution of the nation’s consumer protection laws are Donald Trump and Michael Mulvaney . . .”
In a subsequent reply, DOJ argues that the credit union cannot rely on the HMDA statement to show an injury. That statement was issued after the suit was filed and so cannot create standing at the time of filing, the reply points out. Even if the timing of the statement were disregarded, Lower East Side “misunderstands the agency’s statement, offers an impermissibly speculative and attenuated theory of injury, and cannot establish standing based on how the CFPB exercises its enforcement discretion against third parties,” the government explains.
Quo warranto statute. The DOJ's later reply also claims that the federal quo warranto statute is the only avenue open to someone who wishes to challenge another’s authority to carry out the duties of a federal office. Quo warranto—meaning “by what authority”—applies only when the challenger claims a personal interest in the office, and the credit union raises no such claim, the government says.
Lower East Side should be required to wait until the CFPB has taken some action that actually causes it an injury and then raise a collateral attack on Mulvaney’s authority, according to the DOJ.
For more information about the structure of the CFPB, subscribe to the Banking and Finance Law Daily.
