DOJ says CFPB stop-work order maintains statutory functions

The Department of Justice defended a stop-work order at the Consumer Financial Protection Bureau, claiming that the Trump administration was not shutting down the agency — and is committed to keeping the bureau open to perform statutory work. 

On Friday, the Justice Department filed a reply with the U.S. Court of Appeals for the District of Columbia Circuit in support of an emergency motion for a stay of a preliminary injunction pending appeal. 

Acting CFPB Director Russell Vought was sued in February by the National Treasury Employees Union and consumer groups that have been locked in a bitter legal fight with the government to halt mass firings and the dismantling of the agency. 

On Thursday, a three-judge panel of the appeals court agreed to an administrative stay of a preliminary injunction issued last week by District Judge Amy Berman Jackson. The injunction required that the CFPB reinstate employees terminated in mass firings, preserve the bureau’s records and restart all statutorily required work. The stay remains in effect while an appeals court panel considers the DOJ’s appeal to overturn the injunction.

However, the stay does not affect a previous temporary restraining order agreed upon by the union and the government requiring the CFPB to retain contracts, staffing, funding and records. 

The DOJ in its latest court filing sought to characterize a stop-work order issued by Vought in February as an innocuous request for CFPB employees to get approval to work on urgent matters. Instead, the order was widely interpreted as halting all CFPB operations after Vought also shuttered the bureau’s headquarters in Washington. 

In the filing, the DOJ alleged that Vought and Mark Paoletta, the CFPB chief legal officer, reversed course quickly.

“Once agency leadership recognized that employees had inferred the agency was winding down, it acted to dispel that misimpression,” the DOJ said, contradicting testimony during two days of evidentiary hearings at the district court.

The union, represented by Deepak Gupta, has argued that terminating staff and cancelling contracts was not part of the normal operations of a changeover in the government. A key witness testified at the evidentiary hearings last month that Vought was actively planning to fire 1,175 employees in a first round of layoffs, which was only halted by the union’s lawsuit. Vought also had directed that all CFPB contracts be cancelled, which has already affected the agency’s statutory obligation to keep a complaint database operating. 

The DOJ said “the evidence does not support the district court’s conclusion that a preliminary injunction is necessary to prevent CFPB from being eliminated. But for purposes of this motion, defendants continue to affirm, as they maintained below, that ‘absent congressional action, [CFPB] will remain open and will perform its legally required functions.'” The DOJ filing did not provide a list of functions or legally mandated work that it claims is being performed. 

The district court’s injunction inserted the judiciary into management decisions that the DOJ said are “entirely disconnected from the agency’s ability to carry out statutory obligations.”

The district court’s injunction was far broader than was necessary to remedy the purported problem, the government said. It claims that “keeping an agency ‘open’ requires measures intruding on the executive branch’s discretion, such as a court order to maintain the agency’s earlier staffing levels and contracts. That contention has no basis in either logic or law.”