Round 2 of CFPB Fight – Both Sides Could Be Correct Legally, But…

Leandra English has returned to federal court, this time seeking a preliminary injunction so she can head the Consumer Finance Protection Bureau [CFPB].

Although her lawyer may be correct in claiming that “Ms. English has a clear legal entitlement to the position of Acting Director of the CFPB,” her request may be denied because she is seeking extraordinary equitable relief, says public interest law professor John Banzhaf.

While most reporting on the legal action has focused on which of the two so-called dueling federal statutes controls, the rules relating to the equitable relief she requested cannot be ignored.
A party may have a clear legal right as a matter of law but still be denied extraordinary relief in the form of a preliminary injunction or similar court order if granting such a request is inconsistent with various maxims governing equitable relief, notes Banzhaf, who teaches this area of law.

Incredible Tax Breaks: How Economic Opportunity Zones Work (Special Report)

Missed Opportunity Economic Opportunity ZonesThis is the first part of a multi-part series on Economic Opportunity Zones. The tax-efficient zones were brought in as part of the Tax Cuts and Jobs Act of 2017 to try and stimulate economic activity in underdeveloped regions. Q2 2020 hedge fund letters, conferences and more   The following articles will cover the benefits Read More

While English may have the stronger legal argument because a specific statute such as Dodd-Frank usually takes preference over a general one such as the Vacancies Act, and there is some legislative history which may support her position, a court must still decide whether issuing a preliminary injunction would be consistent with various equitable maxims.

One maxim, for example, provides that “equity does not require an idle gesture.”

A recent U.S. Court of Appeals ruling, which struck down the statutory requirement that the CFPB director could be removed by the President only for cause such as “inefficiency, neglect of duty or malfeasance,” means that, like many other agency heads, the CFPB head serves at the will of the President, and can be removed from his position at any time and without any reason.

If a director appointed by the President and confirmed by the Senate can be removed by Trump at any time, it would seem that any acting director, not appointed by the President nor confirmed by the Senate, can likewise be removed. If so, issuing an injunction to permit English to assume control as director of the CFPB might seem like an idle gesture, since Trump can nullify the order simply by firing her.

Another maxim says that one who comes into equity must come with “clean hands,” or alternatively, that equity will not permit a party to profit by his own questionable conduct.

Thus former Director Richard Cordray’s unexpected decision to suddenly leave the agency earlier than anticipated, and to make this unusual appointment as he did, could well be viewed – although perfectly legal – as a ploy to frustrate or at least significantly delay Trump’s announced intention to make changes at the agency, and/or to embarrass the President. So if English’s claim does not arise from perfectly clean hands, and/or was done for questionable means, a court may likewise deny extraordinary relief.

The court might also notice that English did not bring her legal action challenging Mulvaney’s right to hold the office under the very statutes designed for such a purpose [D.C. Code Ann. § 16-3501-03], perhaps in part because it limits when and by whom such challenges can be made, and also provides in most situations that any challenger provide as a precondition “security for costs.”

If the court decides that these conditions and restrictions should be applied here, it could likewise adversely affect English’s law suit, along with possible problems showing that she herself will suffer “irreparable injury,” a necessary requirement for any injunction relief.