Judge casts doubt on CFPB deputy's claim to head agency
WASHINGTON — A federal judge appeared to be leaning toward siding with President Trump during oral arguments Friday in a case in which Consumer Financial Protection Bureau Deputy Director Leandra English is challenging the president's ability to appoint Mick Mulvaney as acting director.
The case, English v. Trump, et al., arose after former CFPB Director Richard Cordray resigned abruptly over Thanksgiving weekend, appointing English as acting director pursuant to a clause in the Dodd-Frank Act that says that the deputy director should serve as interim head in the director's absence. President Trump instead invoked the 1998 Federal Vacancies Reform Act to appoint Mulvaney, who is also the head of the Office of Management and Budget.
Much of the legal questions in the case surround not only what statute should dictate succession at the bureau, but also the criteria the judge should use when considering which law applies.
Deepak Gupta, the lead attorney for English, insisted that just because Mulvaney is currently running the CFPB, that shouldn't count against English's case.
“The reason for that is a simple matter of equity,” Gupta said. If Judge Timothy Kelly were to treat Mulvaney’s directorship as the status quo, he “would reward someone for taking matters into their own hands.”
Kelly, who was appointed by President Trump, said that the two statutes bring into question the relative importance of general versus specific directives in statutes. In order for a judge to decide which applies, there has to be a conflict between the two statutes that directs one to do the opposite of the other. He wasn’t sure that was the case here.
“To get to that canon … the statutes have to be irreconcilable,” Kelly said. “Is that really the case here? There are any number of cases where ‘shall’ is made the default rule and qualified by a ‘may.’ ”
Gupta acknowledged that the question goes "to the core of the case."
"When you have a specific provision, it doesn’t negate the general … except in that [provision] that the specific controls," he said. "That is the most common application of the specific versus the general."
Had the provision in Dodd-Frank regarding succession included a line saying “notwithstanding any provisions in the" Vacancies Reform Act, then the government’s case would have been entirely scuttled, Gupta said. But the ommission of such a line doesn't mean Congress wanted the Vacancies Reform Act to apply in this case; to the contrary, lawmakers took pains in drafting Dodd-Frank to ensure the CFPB was independent that allowing the Vacancies Reform Act to supersede Dodd-Frank would go against congressional intent.
“They read this mandatory succession [clause] into near nullity,” Gupta said of the government's case. "There wouldn’t be much purpose to this provision if you read it the government’s way.”
Deputy Assistant Attorney General Brett Schumate, who argued the case for the government, said that Congress included precisely the kinds of provisions that Gupta describes as being absent elsewhere in Dodd-Frank, so it isn’t as though the legislature was unaware of preceding statutes. And in the event that there was not a deputy director and the director resigned or left office, English's position would hold that the president would be unable to name an acting director.
“Congress knew how to opt out of special requirements,” Schumate said. “I don’t think that Congress wanted a vacancy that the president could not fill.”
Kelly appeared intrigued by this idea and asked whether, if he finds in English’s favor and the president takes a long time to name a permanent director or, for whatever reason, never names a permanent director — then the bureau would be headed by someone who has “never been nominated by any president, has never been confirmed,” and will head an “agency with significant regulatory authority, with significant enforcement authority.” Kelly asked if there were any examples of such an arrangement in government.
Gupta said that the most analogous agency would be the Federal Housing Finance Agency, which has exactly the same succession structure as the CFPB. But he said that, despite Kelly’s framing of the question, there is little risk that English would become a consumer protection dictator if he ruled in her favor. There are succession gaps at federal agencies all the time, he said, and they are often filled in an interim basis by senior staff that are neither appointed nor confirmed by the Senate.
“It just doesn’t really happen that way, because the president names someone,” Gupta said, “but until that occurs, the agencies are headed by someone, sometimes staff, who often come from prior administrations.”
In his arguments, Gupta said the president’s recent tweet about a pending CFPB enforcement action against Wells Fargo demonstrates precisely the importance that regulatory independence plays in the financial arena. Having Mulvaney — a current White House appointee — head what was supposed to be an independent agency undermines the vast and elaborate efforts undertaken by Congress to make the consumer agency insulated from political interference.
“It’s not a surprise to anyone that, if she were in this role, she might perform these functions differently,” Gupta said.
Kelly said that, setting aside the merits of the case, he was concerned about the role clarity should play in making his decision — that is, whether a ruling for English would make the leadership at the agency more clear or less clear.
“How does clarity work in your client’s favor?” Kelly asked Gupta. “The reality is, Mulvaney is functioning in the CFPB … and the CFPB is sitting at the [government’s] table. I don’t know how finding for your client provides more clarity.”
Gupta said that, contrary to the judge’s presumption, the fact that Mulvaney is illegally acting as director of the CFPB means that any and all actions he undertakes will have to be undone, which would create substantially less clarity than if English were installed as director. But that is based on the merits of the case, he said, and it is difficult to answer the question without considering the merits.
“It’s difficult to assess these factors in a vacuum without considering the merits," Gupta said.