Gibson Dunn's Ted Olson Puts New Squeeze on Consumer Bureau
A team from Gibson Dunn fought the CFPB in the D.C. Circuit—and now they're in the Fifth Circuit challenging the agency's single-director design. Will one of these cases reach the U.S. Supreme Court?
April 18, 2018 at 05:57 PM
5 minute read
The original version of this story was published on National Law Journal
When a Washington federal appeals court upheld the Consumer Financial Protection Bureau's independent, single-director design in January, the dispute over the agency's constitutionality appeared poised to ascend quickly to the U.S. Supreme Court.
No circuit split was necessary, the thinking went.
But as the deadline to petition for Supreme Court review draws near, it is not necessarily clear that the mortgage servicing company PHH Corp., the CFPB's opponent in the U.S. Court of Appeals for the D.C. Circuit, will try to take its constitutional challenge to the high court. After all, the D.C. Circuit decision was not a complete loss for PHH, which saw its $109 million penalty tossed out and its case sent back to the agency for further proceedings.
Regardless of how PHH elects to proceed, Gibson, Dunn & Crutcher partner Theodore Olson has no intention of letting up in his bid to have the CFPB's single-director design declared unconstitutional.
Olson, a former U.S. solicitor general in the George W. Bush administration who argued for New Jersey-based PHH in the D.C. Circuit, this month pressed the U.S. Court of Appeals for the Fifth Circuit to take up a similar challenge to the CFPB.
Olson's latest push, on behalf of All American Check Cashing, comes as the CFPB seeks to prevent arguments over the agency's constitutionality from proceeding in federal courts.
All American Check Cashing, a Mississippi-based provider of check cashing services and payday loans, joined the chorus of companies challenging the CFPB's constitutionality after the agency in May 2016 accused it of deceiving customers. The company contended that the CFPB's case should be dismissed, in part, because of an alleged unconstitutional flaw in its structure: the agency's then-director, Richard Cordray, could only be fired at will by the president.
Under Cordray, the CFPB defended the constitutionality of its structure. The agency has taken a different track now under the interim leadership of Mick Mulvaney, the White House budget director. CFPB lawyers are trying to convince courts not to take up any more questions about the agency's structure.
In several cases, Mulvaney endorsed, or “ratified,” enforcement actions brought under Cordray's tenure. In the All American Check Cashing case and at least two other enforcement actions, the CFPB has argued that the ratifications rendered the constitutional arguments moot because Mulvaney can be readily removed by the president.
Olson has resisted the CFPB's ratification play. The “constitutional question,” Olson wrote, “is not moot, and regardless is certain to recur as soon as the acting director, whose tenure is limited by law, steps down.”
“As soon as a new director is confirmed, the CFPB will revert to its original structure. Thus, even accepting the CFPB's argument, the constitutional issue is certain to spring back into being, and soon,” Olson said in a brief filed on Monday.
The White House has not named a permanent pick for the consumer bureau director. Any nominee would be subject to Senate confirmation.
U.S. District Judge William Barbour Jr. of the Southern District of Mississippi has paused the All American Check Cashing proceedings in the U.S. District Court for the Southern District of Mississippi while the company asks the Fifth Circuit to address the CFPB's constitutionality.
Barbour rejected the company's challenge last month, in a ruling that drew from the D.C. Circuit decision in the PHH case.
“For the same reasons stated in PHH Corp., this court rejects the arguments raised by defendants, and likewise finds that the bureau is not unconstitutional based on its single-director structure,” Barbour wrote.
The CFPB last week said the Fifth Circuit's review, if granted, “will only delay the ultimate resolution of this litigation.” It described All American Check Cashing's constitutional argument as “now-inapplicable” under Mulvaney, who is serving only as the acting leader.
“Here's the rub: Since last November, the bureau has been led by an acting director who can be removed by the president at will,” the bureau's lawyers wrote. “And the bureau's acting director has ratified the bureau's decision to sue defendants. Even if there were a constitutional defect with the bureau's initiation of this suit, that defect has been cured.”
Read more:
Financial Industry Pushes for More Secrecy at Mulvaney's Consumer Bureau
Inside the DC Circuit Tussle Over Consumer Watchdog's Rightful Leader
Mulvaney's CFPB Doesn't Want to Keep Arguing Over the Agency's Structure
The DC Circuit's Big CFPB Ruling Carries Wide Implications. Here's What's Next
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