On March 3, the U.S. District Court for the District of Columbia held a hearing to address the plaintiffs’ motion for a preliminary injunction filed in a case brought by the union representing CFPB employees against CFPB Acting Director Russell Vought (covered by InfoBytes here). The hearing followed a series of weekend submissions of competing declarations regarding whether the CFPB has been (as the government claims) or has not (as the plaintiffs claim) carrying out its functions since the designation of OMB Director Russell Vought as Acting Director of the CFPB on February 7. These declarations included 17 separate declarations filed by plaintiffs on Thursday, February 27, a supplemental declaration of the CFPB’s Chief Operating Officer filed on Sunday, March 2, and another four supplemental declarations filed by the plaintiffs later that day.
The weekend filings exemplified the state of uncertainty for Judge Amy Berman Jackson, who started the hearing by attempting to get a firm handle on the often conflicting and shifting facts. Judge Jackson quickly realized that challenge based on the declarations and signaled she would be holding an evidentiary hearing, enabling her to hear sworn testimony directly from the relevant individuals — including the CFPB’s Chief Operating Officer as well as other CFPB employees. Such testimony will allow each side to cross-examine the other side’s witnesses and will allow Judge Jackson to question those witnesses regarding the state of affairs at the CFPB.
The parties’ competing characterization of the facts was the central theme of Monday’s hearing. The plaintiffs’ central argument was that the CFPB is being dismantled in an unprecedented fashion and that statutorily required functions are not being performed, pointing to Russell Vought’s stop work orders delivered via email to employees of the CFPB (covered here). The defendants countered by suggesting that while CFPB employees have been directed generally to stop work, statutorily-required functions are not included in that order, and that any delays in the performance of statutorily-required functions are part of an ordinary review of ongoing matters to determine if they are consistent with the policies of the new administration.
The court’s factual inquiry was focused on those functions that could be considered “mandatory” under the statute and Judge Jackson stated the court could not issue an order requiring the new leadership to engage in enforcement or rulemaking actions — a point the plaintiffs’ counsel appeared to concede. Instead, much of the argument focused on statutorily-mandated offices of the CFPB, including the Office of Consumer Response, the Office of Research, the Office of Servicemember Affairs, and others.
In addition to discussing the facts, the court heard argument on the legal issues presented by the plaintiffs’ motion, including argument regarding if the court had the authority to issue the broad relief requested by plaintiffs (even accepting their view of the facts), whether the President’s designation of Acting Director Vought was valid under the Federal Vacancies Reform Act, and whether the plaintiffs had stated valid claims under the APA. The court also heard argument on whether plaintiffs had established imminent irreparable harm in the absence of an injunction, and the public interest in maintaining the status quo pending resolution of the case.
The parties and the court agreed to maintain the February 14 order arrangement regarding CFPB leadership actions pending resolution of the plaintiffs’ motion. The court declined the government’s request to predict when Judge Jackson might rule on the motion for a preliminary injunction, stating that it would depend on the facts found during the evidentiary hearing. The court set the evidentiary hearing for Monday, March 10 at 10 a.m. ET.
After the hearing, the parties submitted a joint notice to the court, stating that they had agreed to extend their agreement regarding contract terminations through March 10, and that the CFPB “has frozen and will continue to freeze any and all termination actions regarding its contracts.” The parties further stated that they could not agree about whether the freeze applies to the CFPB’s headquarters lease, with the CFPB taking the position that it does not.
On the declarations, the plaintiff’s submission purported to present new facts, respond to the defendants’ opposition, and address challenges to standing. Among the nearly 380 pages of declarations, the notable points included:
- Mass Termination Plans: One anonymous declarant contended that, around February 13, his team was directed to assist with terminating staff in phases, starting with probationary employees, then 1,200 additional employees, and finally, the agency “would ‘reduce altogether’ within 60-90 days by terminating most of its remaining staff, leaving a Bureau that could not actually perform any functions, or no Bureau at all.” Similarly, another anonymous employee alleged “multiple Senior Executives shared that the intention of the leadership was to fire everyone, but the five positions required by the Dodd-Frank Act.”
- Ombudsman Operations: An anonymous declarant claimed the CFPB’s consumer response functions are not operational, contrary to the defendants’ previous assertions that consumers would continue to be served by the Student Loan Ombudsman, asserting that “the employees of the general Ombudsman Office have been ordered not to perform any work.”
- General Operations: The current assistant director of policy planning challenged certain statements from the defendants’ brief opposing a preliminary injunction. For example, he noted that while the defendants cited an email pledging to maintain legally required functions, two days later his team received another email “directing staff to stop all work.” In another example, he contended the defendants “falsely suggest[ed] that the [CFPB] headquarters building was closed for safety, citing small union protests and one incident where an employee pushing a baby stroller took pictures of White House staff.” He argued this explanation could not possibly be accurate as protests are routinely conducted in its vicinity, which is near the White House.
- Contract Cancellations: An anonymous contracting officer alleged that staff were instructed to terminate contracts across various divisions, impacting over one hundred contracts essential for the agency’s work. He asserted that once a contract is “fully terminated, that termination cannot simply be rescinded” and reestablishing such relationships could take over a year on account of mandatory bidding procedures. Similarly, another anonymous employee asserted that contract terminations have affected nearly every aspect of the CFPB’s operations, representing “approximately $200 million terminated contracts out of approximately $227 million total contracts.”
- Data Preservation: A former chief technologist warned that terminating contracts raises “serious concerns about data preservation and the Bureau’s ability to function at all.” A prominent consumer protection attorney echoed these concerns, arguing that delays could lead to “irretrievable loss and impairment of critical CFPB data before the hearing on [the motion for a preliminary injunction on] March 3.”
- Impact on Minorities: A member of the NAACP contended that the cessation of CFPB activity negatively affects consumers who rely on the agency to “help them avoid predatory financial schemes, educate fellow members about them, and provide direct assistance, including connecting us with resources that could help us get back on our feet[.]”
On February 28, the court granted the motion for leave to file, allowing the declarations to be included in the record.
