Last Friday, May 10, the Texas federal district court hearing the lawsuit challenging the CFPB’s final credit card late fee rule (Rule) granted the plaintiffs’ preliminary injunction motion and stayed the Rule. The Rule was set to become effective tomorrow, May 14. The district court’s ruling followed the entry of an order by the Fifth Circuit vacating the district court’s order denying the plaintiffs’ motion for expedited consideration of their preliminary injunction motion and remanding the case to the district court with instructions to rule on the plaintiffs’ preliminary injunction motion by May 10.
In issuing the preliminary injunction, Judge Pittman found that that plaintiffs’ had established a likelihood of success on the merits based on the Fifth Circuit’s decision in CFSA v. CFPB which held that the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution. Judge Pittman found it was unnecessary for him to address the plaintiffs’ other arguments that the Rule violates the Truth in Lending Act, the CARD Act, and the Administrative Procedure Act. However, he did comment that the plaintiffs’ other arguments are “compelling.”
The Fifth Circuit’s decision in CFSA v. CFPB is currently before the U.S. Supreme Court. The Supreme Court heard oral argument in the case on October 3, 2023 and is expected to issue its ruling by the end of next month. Many observers believe that the Supreme Court will rule that the CFPB’s funding mechanism does not violate the Appropriations Clause and will reverse the Fifth Circuit’s decision. Should the Supreme Court reverse the Fifth Circuit (or affirm but not make its decision retroactive), we expect the plaintiffs to ask the district court to address the merits of its alternative arguments for invalidating the Rule. Judge Pittman’s comment that these arguments are “compelling” suggests that he will find that the plaintiffs’ have established a likelihood of success on the merits based on one or more of their alternative arguments and he will keep the preliminary injunction in place.
It is worth noting that Judge Pittman devoted a substantial portion of his opinion to expressing his displeasure with the Fifth Circuit. After Judge Pittman entered orders denying the plaintiffs’ motion for expedited consideration of their preliminary injunction motion and transferring the case to the U.S. District Court for the District of Columbia, the Fifth Circuit vacated the transfer order and issued a writ of mandamus directing the district court “to reopen the case and give notice to D.D.C. that its transfer was without jurisdiction and should be disregarded.” In that ruling, the Fifth Circuit stated that the district court “did not act promptly with regard to the [plaintiffs’] motion for a preliminary injunction.” The Fifth Circuit subsequently vacated Judge Pittman’s order denying the plaintiffs’ motion for expedited consideration of their preliminary injunction motion and ordered him to rule on the preliminary injunction motion by May 10.
In his opinion, Judge Pittman stated that “[t]he Court must respectfully disagree with its appellate court colleagues that it did not act ‘promptly’ or was otherwise dilatory or sluggish in its resolution of the preliminary injunction.” He defended his decision to transfer the case before holding a hearing on the plaintiffs’ preliminary injunction motion and stated that “[t]he Court welcomes further guidance from the Court of Appeals as to whether a district court must first rule on the injunction motion before it can transfer a case.”
Judge Pittman also stated that the Fifth Circuit’s order directing him to issue a ruling by May 10 “seems to be a usurpation of the Court’s docket-management authority.” He concluded the opinion by stating:
The Court accepts the ruling of [the] Fifth Circuit in this case without passion or prejudice and will apply its guidance to the utmost of its ability. However, this Court would be remiss if it did not point out the potential landmines the court’s ruling could pose for a trial judge’s day-to-day docket-management discretion, especially in a busy division. Parties should not be allowed to manipulate the court system to order trial judges ‘how,’ ‘what,’ and ‘when’ to rule.
Although it may be premature to declare the Rule dead, it is clearly on life support. Despite Judge Pittman’s displeasure with the Fifth Circuit and the plaintiffs, it seems highly likely that he would continue the preliminary injunction and eventually grant summary judgment in favor of the plaintiffs and against the CFPB on one or more of the alternative grounds if the Supreme Court holds that the CFPB is constitutionally funded. Based on the Fifth Circuit’s obvious desire to keep this case within the Fifth Circuit and the Fifth Circuit’s very conservative nature, we would expect the Fifth Circuit to to affirm. Since there does not now appear to be any issue in the case that would merit Supreme Court review, the Fifth Circuit should have the final say.
