D.C. Appeals Panel Reinstates Block on CFPB Mass Firings

In a decision released by a Washington D.C. Appeals Panel, the panel issued an order that effectively restored the temporary pause on mass employee firings at the Consumer Financial Protection Bureau. The order allows CFPB employees remain employed despite President Trump’s plan to remove almost 90 percent of the agency.

The panel’s decision comes almost a month after an appeals court modified a trial court’s order which effectively allowed the CFPB to engage in mass firing after conducting a “particularized assessment” of each fired employee. Under this order, the CFPB was required to show that any dismissed employees were in fact “unnecessary expenses” to the agency.

The D.C. panel specifically defined “particularized assessment” as involving “a determination, conducted by the decisionmaker responsible for the reduction in force, that each division or office within the Consumer Financial Protection Bureau will be able to perform any statutorily required duties of that division or office without the employees subject to the reduction in force.”

The complete ban of mass firings issued by the panel comes as a result of a dispute on whether the CFPB Director, Russell Vought, can execute the mass firings while in compliance with the panel’s definition of “particularized assessment.” Many top officials within the CFPB believe that the agency only requires around 200 employees to satisfy its duties and responsibilities such as supervising banks and enforcing consumer financial law. However, many agency employees believe that mass firings would essentially render it impossible for the CFPB to function properly.

The panel’s decision, although not permanent, effectively prohibits the CFPB from pursuing “reductions-in-force”.  According to the panel, it is best to restore the block of mass firings while the parties battle it out in court. By doing so, CFPB employees would still be protected in the case that President Trump loses.

The decision will ultimately be in effect until the panel rules on the original trial court’s injunction issued by Judge Amy Berman Jackson. Judge Jackson initially imposed the injunction that prohibited the CFPB from conducting mass employee firings but also deleting agency data, permanently shredding service contracts, idling employees with stop-work orders or taking the agency’s complaint-handling functions offline. Judge Jackson based her ruling on evidence that showed Director Vought’s “a hurried effort to dismantle and disable the agency entirely.

According to the panel, this order “ensures that plaintiffs can receive meaningful final relief should the defendants not prevail in this appeal, rather than continue collateral litigation over the meaning and reviewability of the ‘particularized assessment’ requirement imposed by this court’s stay order.”

“Reinforcing this conclusion, we have already accommodated the government’s interests by substantially expediting the [injunction] appeal, with oral argument scheduled less than three weeks from today,” the order added. “At that time, we will carefully consider the separation of powers and other arguments raised by the parties.”

One of the panel judges, Judge Rao, dissented from the decision to restore the injunction. He said that the panel’s order raises many separation of power issues and that the CFPB should be permitted to follow President Trump’s orders. Specifically, Judge Rao said that “because the preliminary injunction entered by the district court raises serious separation of powers concerns and has paved the way for ongoing judicial supervision of an executive branch agency, I would continue the stay pending appeal.”

The CFPB has come under fire recently for its series of voluntary lawsuit dismissals against banks and other financial institutions. The agency recently dropped its $2.25 million student loan debt collection against the National Collegiate Student Loan Trusts. The lawsuit aimed at defending college students after they allegedly became victims of deceptive and unfair debt collection litigation strategies.