After bouncing from the Texas federal district court to the D.C. federal district court to the Fifth Circuit and back again to the Texas federal district court, the industry lawsuit challenging the CFPB’s credit card late fee rule (Rule) is poised for another round of possible twists and turns in the wake of the U.S. Supreme Court’s May 16 ruling in CFSA v. CFPB that the CFPB’s funding does not violate the Appropriations Clause of the U.S. Constitution.
On May 10, the Texas federal district court granted the plaintiffs’ preliminary injunction motion and stayed the Rule. The Rule was set to become effective on 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.
The Fifth Circuit’s order remanding the case to the district court to allow the district court to rule on the plaintiffs’ preliminary injunction motion stated as follows:
Accordingly, we VACATE the district court’s effective denial of the motion for preliminary injunction and REMAND with instructions that the district court rule on the Chamber’s motion for preliminary injunction by May 10, 2024. This is a limited remand. Our panel retains jurisdiction over this appeal.
In issuing the preliminary injunction, Judge Pittman found that that the plaintiffs had established a likelihood of success on the merits based on the Fifth Circuit’s decision in CFSA which held that the CFPB’s funding mechanism was unconstitutional. 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 were “compelling.”
On May 13, Judge Pittman issued another order in which he asked the parties to submit briefs by May 15 regarding what the “live pleadings” are in the case and next steps in the case. In its response filed on May 15, the CFPB identified the complaint as a remaining live pleading and indicated that its motion to transfer, which the Fifth Circuit had vacated because the district court lacked jurisdiction, “is currently in limbo.” The CFPB asserted that the district court’s order granting the preliminary injunction had mooted the plaintiffs’ pending appeal and that it had filed a motion with the Fifth Circuit to dismiss the appeal. It also asserted that until the Fifth Circuit released its jurisdiction over the plaintiffs’ appeal, “this Court’s ability to transfer the case is uncertain” and that the CFPB might renew its motion to transfer. The CFPB also indicated that it might move to “to vacate or dissolve the preliminary injunction if the basis for the Court’s ruling—the Fifth Circuit’s holding in [CFSA]—is reversed by the Supreme Court.”
In their response filed on May 15, the plaintiffs proposed a schedule for motions for summary judgment which the CFPB opposed in a supplemental response filed on May 16. Also on May 16, immediately after the Supreme Court announced its ruling in CFPB v CFSA, the plaintiffs filed their supplemental response in which they noted that the CFPB had indicated its possible intent to move to vacate or dissolve the preliminary injunction if the Supreme Court overruled the Fifth Circuit’s decision and stated that they “would oppose such a motion and would request that the Court maintain the injunction on the alternative grounds already briefed” (noting that that the Court had described those arguments as “compelling” in its order granting the preliminary injunction). They also requested that if the Court were to vacate or dissolve the preliminary injunction “it provide sufficient time for Plaintiffs’ members to comply with the Final Rule and stay its decision pending appeal.”
Also on May 16, the plaintiffs submitted a letter to the Fifth Circuit to advise the Court of the Supreme Court’s CFSA ruling. They also stated their intent to oppose the CFPB’s motion asking the Fifth Circuit to dismiss the plaintiffs’ appeal, repeated their intent to oppose any motion by the CFPB to vacate or dissolve the preliminary injunction, and stated the following:
Given these developments, we respectfully suggest it might be helpful for this Court to clarify that, under its April 30 remand order, the district court has authority to resolve any motion attempting to vacate or dissolve the preliminary injunction. Although the May 10 deadline in this Court’s remand order has passed, the district court may, consistent with that order, exercise limited jurisdiction over the preliminary injunction entered on that date. Any appeal from the district court’s decision will be brought directly to this Court given the panel’s continued jurisdiction over the case.
In response to the plaintiffs’ May 16 letter, the CFPB submitted a letter to the Fifth Circuit on May 17 restating their view that “allowing this empty appeal to remain pending would create jurisdictional uncertainty and complicate the district court’s ability to manage the case going forward.” Rejecting the plaintiffs’ suggestion that the Fifth Circuit should retain jurisdiction but clarify that, under its limited remand, the district court could still rule on the preliminary injunction, the CFPB stated:
That approach, however, would inappropriately divest the district court of its ordinary control over this case—treating it as, in effect, a special master advising this Court of what should happen next, rather than the judicial body tasked with managing this litigation and deciding the need for preliminary relief in the first instance.
These filings were followed by the issuance of an order by the Fifth Circuit on May 17 dismissing the plaintiffs’ appeal “as moot” and providing that the “[m]andate issue date is 07/09/2024.”
The dismissal order returns full jurisdiction over the case to the district court. However, because the Fifth Circuit’s mandate will not issue until July 9, any action that the district court can take before that date is arguably limited at most to action it could take pursuant to the limited remand—meaning it could rule on a motion to continue the preliminary injunction based on non-constitutional grounds but could not rule on a motion to transfer. Accordingly, it is not surprising that today, the CFPB filed a motion with the Fifth Circuit asking it to issue the mandate immediately to remove any uncertainty as to the district court’s jurisdiction and allow the district court to “proceed with this case as it sees fit and without the cloud of the still pending appeal.”
It would also not be surprising if, in addition to opposing the CFPB’s motion for immediate issuance of the mandate, the plaintiffs quickly file a motion with the district court to continue the preliminary injunction based on their non-constitutional arguments and seek expedited consideration of that motion. (The CFPB would likely argue that the district court does not have jurisdiction to consider such a motion until the Fifth Circuit mandate issues.) With the district court already having called those non-constitutional arguments “compelling,” it seems likely that the court would continue the injunction. However, it is possible that rather than rule on the non-constitutional arguments for continuing the injunction, the district court might transfer the case to D.C.C. once again. Should it rule on the plaintiffs’ non-constitutional arguments and continue the injunction based on those arguments, it is unclear whether the district court would be precluded from subsequently transferring the case. One thing does seem certain—if the district court were to deny a motion to continue the preliminary injunction before re-transferring the case, the plaintiffs would immediately seek a stay of that order and file a new appeal with the Fifth Circuit that would once again divest the district court of jurisdiction to rule on a motion to transfer. If our readers think this is starting to resemble a complicated game of chess, we would agree.
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