Consumer Financial Protection Bureau building in Washington, D.C. June 4, 2013. Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL

Updated 6:02 p.m.

A federal judge on Tuesday refused to undo the Trump administration's designation of Mick Mulvaney as the interim leader of the Consumer Financial Protection Bureau, rejecting an argument that the White House unlawfully sidestepped the appointment of another lawyer from within the Obama-era agency.

U.S. District Judge Timothy Kelly in Washington, ruling from the bench, declined to grant a restraining order the agency's deputy director, Leandra English, requested Sunday night in a lawsuit in Washington federal district court. Before resigning as CFPB director last week, Richard Cordray promoted English, then his chief of staff, to the deputy role in an attempt to put her in control of the agency as the Trump administration moved to nominate a permanent, Senate-confirmed leader.

English, represented by Deepak Gupta of Washington's Gupta Wessler, argued the appointment of Mulvaney, director of the Office of Management and Budget, ran afoul of the succession plan laid out in the Dodd-Frank financial reform law. The deputy director, according to the Dodd-Frank law, becomes the acting director in the absence or unavailability of a director. Mulvaney's appointment, English argued, also undermined the CFPB's status as an independent agency.

U.S. Justice Department lawyers convinced Kelly that the Federal Vacancies Reform Act should control the outcome of the leadership dispute. That law gives the president wide authority to install Senate-confirmed acting heads at executive agencies. Kelly said the text of the vacancies law applies in English's case.

“On its face, the [Federal] Vacancies Reform Act does appear to apply to this situation,” Kelly said in court Tuesday. He said the text of the law “does not say that VRA would not be available in this situation.”

Gupta had argued the legislative history of the Dodd-Frank Act showed that Congress intended to have the CFPB's deputy director step in as acting director until a new Senate-confirmed director took office. But Kelly dismissed that argument, saying he was “dubious of the value of legislative history” and that the legislative history around the succession language in Dodd-Frank is “ambiguous at best.”

Gupta said after the hearing he would speak with English and explore possible appeal options, including any appeal.

A White House spokesperson said in a statement:

“The administration applauds the court's decision, which provides further support for the president's rightful authority to designate Director Mulvaney as acting director of the CFPB.  It's time for the Democrats to stop enabling this brazen political stunt by a rogue employee and allow Acting Director Mulvaney to continue the Bureau's smooth transition into an agency that truly serves to help consumers.”

The dueling claims of control had left a cloud of uncertainty over the CFPB. Mulvaney, on his first day at the job, directed agency officials to “disregard any instructions you receive from Ms. English in her presumed capacity as acting director.”

“If you receive additional communications from her today in any form, related in any way to the function of her actual or presumed official duties (i.e. not personal), please inform the general counsel,” Mulvaney wrote to CFPB staff. Mulvaney on Tuesday started tweeting from a new account @CFPBdirector.

 

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Mulvaney has imposed a temporary freeze on hiring and new regulations. A longtime critic of the CFPB who once described it as a “sad, sick joke,” Mulvaney described his first day at the bureau as “extraordinarily smooth and professional.” He said he plans to spend three days a week at the CFPB and another three in his role as the White House's budget chief.

English, in her own email to agency employees, thanked CFPB staff members for their service, signing off as “acting director.” In a new statement on Tuesday, she outlined the steps she is taking to ensure a smooth transition.

“Yesterday, I spent time at the CFPB, I reviewed transition materials, and I met with members of Congress to lay out my plans for ensuring that the consumer bureau continues to fight for working families,” English said in her statement. “Today, I plan on spending the day at CFPB headquarters taking calls and meetings with external stakeholders and bureau staff.”

Dueling friend-of-the-court briefs took sides in the dispute over the agency's interim leadership. Democratic U.S. lawmakers supported English as the acting leader. Republican-led states, meanwhile, sided with Trump.

“Any federal official who wields that level of power should be appointed by the President—not by an unaccountable federal bureaucrat,” Scott Keller, the Texas solicitor general, wrote in a brief on Tuesday.

Cordray, meanwhile, hasn't said much about the dispute publicly. Appearing Monday night on The Rachel Maddow Show, Cordray said the “the law is clear here” that English is next in line for acting director.

 

Read more:

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Who's Leading the CFPB? Trump Tees Up Clash Over Acting Director

Goodwin Procter Grabs Anthony Alexis, Formerly CFPB's Enforcement Chief

The CFPB Is Losing a Trial Court Ally in the U.S. Justice Department

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