Union says DOJ appeals to wrong court over CFPB injunction

The Trump administration’s appeal of a ruling stopping the efforts to shut down the Consumer Financial Protection Bureau was taken to the wrong court, plaintiffs argue, complicating an already heated legal challenge to the administration’s activities at the beleaguered bureau. 

The CFPB’s union countered a Saturday appeal by the Department of Justice to the U.S. Court of Appeals for the District of Columbia Circuit with its own motion alleging that the Justice Department failed to first request a stay of the preliminary injunction to the district court, as required by the general rules of public procedure. Instead, the Trump administration filed an appeal directly to the D.C. Circuit, claiming that it had already asked for a stay retroactively in an opposition brief filed in the district court five weeks ago — before the preliminary injunction was granted.

The legal wrangling is the latest skirmish in a much larger fight over the future of the CFPB. 

President Trump has said his goal is to eliminate the agency, which was created by Sen. Elizabeth Warren, D-Mass., in the aftermath of the 2008 financial crisis.

Some legal experts think the DOJ is trying to take the fight to the Supreme Court as quickly as possible. Already there are six pending emergency applications by the Trump administration before the Supreme Court. Since Trump took office, more than 158 lawsuits have been filed against the government, according to legal tracking site Just Security.

The battle over the CFPB centers on a sweeping preliminary injunction granted on Friday by U.S. District Judge Amy Berman Jackson. She ordered the government to rehire all probationary and temporary CFPB employees who had been fired, reinstate all contracts, and preserve the agency’s data, while prohibiting the government from firing employees en masse or stopping them from working.

“This is lawless. These commands have no anchor in statute. They do not track any specific CFPB duties Congress made obligatory,” the Justice Department wrote in an 81-page motion. “Nothing in any statute requires President Trump to maintain, organize,or administer the Bureau in the same manner as did President Biden. Nor does anything prohibit the Bureau’s leadership from using normal tools — including, as appropriate, reductions-in-force and contract terminations — to administer the Bureau as they think the public interest warrants, within the broad parameters established by statute.”

The National Treasury Employees Union, which sued the CFPB’s acting Director Russell Vought in February, argued that the government did not follow proper legal procedure. Under the federal rules of civil procedure, Rule 8 requires that parties seeking a stay from an appellate court not only “move first in the district court” but also “state any reasons given by the district court” for denying a stay, wrote Deepak Gupta, who represents the CFPB’s union.

The judge noted in her ruling on the preliminary injunction that Vought and the bureau’s Chief Legal Officer Mark Paoletta had planned to gut the agency and fire 1,175 employees even as the DOJ was claiming in court that the CFPB’s staff was performing all legally mandated work. Vought and Paoletta both have top jobs at the Office of Management and Budget, with secondary jobs at the CFPB.

Separately, an email sent Tuesday by Adam Martinez, the CFPB’s chief operating officer, ordered the bureau’s employees to comply with the district court’s preliminary injunction and “continue performing tasks required by law.” The email, obtained by American Banker, continued to make a distinction between statutory work and discretionary work that required approval from Paoletta. 

Martinez has been used by Vought and Paloetta as a go-between with staff. Several CFPB employees, who requested anonymity for fear of retribution, said they have not heard directly from Vought or Paoletta since Feb. 10. 

Though employees were ordered to return to work or to work remotely, the CFPB’s headquarters at 1700 G Street remains closed and all regional office leases were terminated by the General Services Administration on Feb. 21.