Lower E. Side People's Fed. Credit Union v. Trump, 17 Civ. 9536 (PGG)

289 F.Supp.3d 568

LOWER EAST SIDE PEOPLE'S FEDERAL CREDIT UNION, on behalf of itself and its members, Plaintiff,

v.Donald John TRUMP, in his official capacity as President of the United States of America; John Michael Mulvaney, in his capacity as the person claiming to be acting director of the Consumer Financial Protection Bureau, Defendants.

17 Civ. 9536 (PGG)

United States District Court, S.D. New York.

Signed February 1, 2018

Debra Lea Greenberger, Ilann M. Maazel, Emery Celli Brinckerhoff & Abady, LLP, New York, NY, for Plaintiff.

Benjamin Thomas Takemoto, Chad A. Readler, Matthew J. Berns, Elizabeth Tulis, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION & ORDER

PAUL G. GARDEPHE, U.S.D.J.:

In this action, Plaintiff Lower East Side People's Federal Credit Union—a non-profit financial cooperative regulated by the Consumer Financial Protection Bureau ("CFPB")—challenges the legality of President Trump's appointment of Defendant John Michael Mulvaney as Acting Director of the CFPB. (Cmplt. (Dkt. No. 1) ¶¶ 11–12, 14–15)

Plaintiff contends that, under 12 U.S.C. § 5491(b)(5)(B), Leandra English—the Deputy Director of the CFPB—"is the only person permitted under the law to be the Acting Director." (Pltf. Br. (Dkt. No, 10–4) at 8, 29) Defendants argue that the President lawfully exercised his authority under the Federal Vacancies Reform Act of 1998 (the "FVRA"), 5 U.S.C. § 3345 etseq., in naming Mulvaney as Acting Director. (Def. Opp. (Dkt. No. 31) at 26)

The Complaint was filed on December 5, 2017 (Cmplt. (Dkt. No. 1)), and Plaintiff moved for a preliminary injunction on December 12, 2017. (See Proposed Order to Show Cause for Preliminary Injunction (Dkt. No. 10–1)) Defendants have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). (Def. Opp. (Dkt. No. 31)) Defendants argue that this action "fails at the outset because Plaintiff has not established Article III standing." (Id. at 12) Defendants contend that "[w]here, as here, a plaintiff does not seek relief from any regulatory burden that imposes costs the plaintiff would avoid if it prevailed, a plaintiff's mere status as a regulated entity does not satisfy the requirements of injury in fact, causation, and redressability." (Id. )

For the reasons stated below, Defendants' motion to dismiss will be granted, and Plaintiff's motion for a preliminary injunction will be denied as moot.

BACKGROUND

I. THE HISTORY OF THE CFPB AND THE INSTANT LEADERSHIP DISPUTE

The Dodd–Frank Act of 2010 ("Dodd–Frank") established the CFPB as "an independent bureau" to "regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws." 12 U.S.C. § 5491(a). Under Dodd–Frank, the CFPB is headed by a Director appointed by the President, by and with the advice and consent of the Senate, for a term of five years. 12 U.S.C. § 5491(b)(1)–(2), (c)(1). The Director may be removed by the President, but only for "inefficiency, neglect of duty, or malfeasance in office." 12 U.S.C. § 5491(c)(3).

The Senate confirmed Richard Cordray as the first Director of the CFPB on July 16, 2013, and he took office on July 17, 2013. (Cmplt. (Dkt. No. 1) ¶ 29) On November 17, 2017—four years into his five-year term—Director Cordray announced that he would resign by the end of the month. See Renae Merle, Richard Cordray Is Stepping Down as Head of Consumer Financial Protection Bureau, Wash. Post (November 15, 2017), https://www.washingtonpost.com/news/business/wp/2017/11/15/richard-cordray-is-stepping-down-as-head-of-consumer-financial-protection-bureau/?utm_term=.197172ea17be.

On November 24, 2017, Director Cordray appointed Leandra English—his chief of staff—to serve as Deputy Director of the CFPB. (Cmplt. (Dkt. No. 1) ¶ 31) Cordray then resigned, effective at midnight. (Id. ¶ 30) In appointing English as Deputy Director, Cordray intended to ensure that she would become Acting Director upon his resignation, pursuant to 12 U.S.C. § 5491(b)(5). (Id. ¶ 32 (" ‘In considering how to ensure an orderly succession for this independent agency,’ Director Cordray explained in a statement, ‘I have also come to recognize that appointing the current chief of staff to the deputy director position would minimize operational disruption and provide for a smooth transition given her operational expertise.’ "))

On the day Cordray resigned, the President issued a memorandum designating Mulvaney as Acting Director of the CFPB:

Pursuant to the Constitution and the laws of the United States, including section 3345(a) of title 5, United States Code, you are directed to perform the functions and duties of the office of Director, Bureau of Consumer Financial Protection, until the position is filled by appointment or subsequent delegation, effective 12:01 a.m. eastern standard time, November 25, 2017.

(Takemoto Decl., Ex. 1 (Nov. 24, 2017 Memorandum) (Dkt. No. 32–1) at 2)

On November 25, 2017, Mary McLeod—the CFPB's general counsel—issued a memorandum to the agency's Senior Leadership Team "advis[ing] all Bureau personnel to act consistently with the understanding that Director Mulvaney is the Acting Director of the CFPB." (Takemoto Decl., Ex. 3 (Nov. 25, 2017 Memorandum from CFPB general counsel) (Dkt. No. 32–3) at 2) McLeod's memorandum expresses the "legal opinion that the President possesses the authority to designate an Acting Director for the Bureau under the FVRA, notwithstanding [ 12 U.S.C.] § 5491(b)(5)." (Id. at 4) On November 26, 2017, Kate Fulton—the CFPB's Deputy Chief of Staff and Acting Executive Secretary—convened a telephone call with senior CFPB leadership, during which "each of the Associate Directors stated that they would act consistently with the understanding that Mick Mulvaney was the Acting Director of the Bureau." (Fulton Decl. (Dkt. No. 32–4) ¶¶ 2, 6)

On November 27, 2017, Mulvaney arrived at CFPB headquarters and presented himself as the Acting Director. (Id. ¶ 7) Mulvaney was given access to the building and the Director's office and began work as Acting Director. (Id. ) Since that time, Mulvaney has functioned as the CFPB's Acting Director. (Id. ¶¶ 8–10)

II. THE CFPB'S REGULATION OF PLAINTIFF

Plaintiff is a New York City-based non-profit credit union owned by its members, the majority of whom are low-income and immigrants. (Levy Decl. (Dkt. No. 10–3) ¶¶ 3–4) Plaintiff's corporate mission is to "promote economic justice and opportunity in NYC neighborhoods," and provide "high-quality financial services and community development investments in low income, immigrant and other underserved communities." (Id. ¶ 5) Plaintiff offers savings and checking account services, credit cards, consumer home mortgages, and small business and real estate loans. (Id. ¶ 4) Over time, Plaintiff has made approximately $100 million in housing, small business, and consumer loans. (Id. ¶ 3)

As a credit union, Plaintiff is subject to the CFPB's rulemaking authority and must comply with all CFPB rules. (Id. ¶ 6) For example, Plaintiff must comply with CFPB rules requiring it to (1) make certain disclosures to members seeking home mortgages; (2) make a reasonable, good faith determination of a consumer's ability to repay a mortgage; (3) comply with certain provisions of the Home Mortgage Disclosure Act ("HMDA") for the collection, recording, reporting, and disclosure of mortgage lending information; and (4) provide members with disclosures about fees and exchange rates associated with transfers of money abroad. (Id. ¶¶ 7–10)

Linda Levy—Plaintiff's chief executive officer—states in a declaration that Plaintiff "does not know if, or for how much longer, existing CFPB rules will remain in effect, or if planned-for CFPB rules will in fact be going into effect as expected." (Id. ¶¶ 1, 13) Levy complains that "[s]uch uncertainty makes it exceedingly difficult for the Credit Union to determine whether, and to what degree, it should continue to engage in certain key compliance efforts." (Id. ¶ 14) Levy also states that Plaintiff "relies on the CFPB to prevent a recurrence of the 2008 financial crisis," that its members benefit from the CFPB's enforcement actions, and that Plaintiff's "ability to provide financial counseling services to its members is imperiled by Mr. Mulvaney's unlawful appointment." (Id. ¶¶ 16–18)

Levy expresses particular concern about a CFPB rule concerning prepaid debit cards, which is scheduled to become effective on April 1, 2018. (Id. ¶ 15) Many employers are using prepaid debit cards to pay wages to their employees. (Id. ) The CFPB's rule "require[s] clear disclosures to cardholders about fees associated with the prepaid cards, require[s] the provider to allow a cardholder to easily determine a card's balance and transaction history, and protect[s] cardholders if their cards are lost, stolen, or wrongly charged." (Id.) According to Levy, "a number of [Plaintiff]'s members receive payroll cards from their employers or purchase prepaid cards to provide money to loved ones without bank accounts." (Id. ) On December 21, 2017, the CFPB—under Mulvaney's leadership—stated that it was "postponing the April 1, 2018 effective date of the prepaid debit card rule and intends to amend the rule." (Levy Supp. Decl. (Dkt. No. 36) ¶ 25) Levy alleges that Plaintiff's members "are harmed by Mr. Mulvaney's decision to postpone implementation of ... clear fee disclosures, balance and transaction history information, and loss protection." (Id. ¶ 27)

Plaintiff is also concerned about the CFPB's enforcement of the HMDA. (See id. ¶¶ 3–24) In October 2015, the CFPB promulgated a final rule amending Regulation C, which implements the HMDA (the "2015 HMDA Rule"). See 80 Fed. Reg. 66,128 (Oct. 28, 2015). If implemented, the 2015 HMDA Rule would alter, inter alia, data collection, recording, reporting, and disclosure requirements. See id. The 2015 HMDA Rule was slated to become effective on January 1, 2018. Id.

On December 21, 2017, the CFPB, under...