D.C. Circuit Stops CFPB RIF For Now
Today, April 28, 2025, the D.C. Circuit Court of Appeals issued an order that effectively stops the CFPB’s acting leadership from moving forward with its RIF of almost all agency employees (I wrote about the RIF here) until it rules on the appeal of the preliminary injunction preventing the RIF. The CFPB issued the RIF notices on April 17th, and the plaintiffs in NTEU v. CFPB immediately filed an emergency motion in district court to enforce the court’s preliminary injunction in the case (which had been partially stayed by the D.C. Circuit and I wrote about here), which resulted in the district court suspending the RIF on April 18th (which I wrote about here) pending an evidentiary hearing scheduled for April 28.
Today’s order from the D.C. Circuit lifts its partial stay of paragraph 3 of the district court’s preliminary injunction, which (as I described here) had provided that the acting leadership could not terminate any CFPB employee, except for cause related to the individual employee’s performance or conduct, and not issue any reduction-in-force notice to any CFPB employee. The court’s partial stay had allowed the CFPB’s acting leadership to RIF employees if they conducted a “particularized assessment” determining that the employees were “unnecessary to the performance of defendants’ statutory duties.” The lifting of this part of the D.C. Circuit’s partial stay order leaves in place the original paragraph of the district court’s preliminary injunction. This effectively prevents the attempted RIF of the CFPB’s employees, until the D.C. Circuit decides on the CFPB’s appeal of the preliminary injunction. Oral argument for the appeal is scheduled for May 16, 2025 at 2:00 p.m.
The D.C. Circuit highlighted that the parties disputed whether the court could review whether the CFPB leadership’s assessment was “particularized,” as well as other arguments raised by the parties, and reasoned that:
we think it best to restore the interim protection of paragraph (3) of the preliminary injunction, which 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 appeal, with oral argument scheduled less than three weeks from today. At that time, we will carefully consider the separation-of-powers and other arguments raised by the parties.
Essentially, this order prevents another stream of litigation, while the defendants appeal the preliminary injunction in the D.C. Circuit.
In addition, it is worth noting that the D.C. Circuit’s order acknowledged that the term “particularized assessment” was not “clearly defined” in its order, and provided a brief clarification (one could argue the definition is still quite muddy). The court stated:
That term was not clearly defined in our stay order, so we define it now. Such a “particularized assessment” involves a determination, conducted by the decisionmaker responsible for the RIF, 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 RIF. The declaration filed by the CFPB’s Chief Legal Officer on April 18, 2025 states that the defendants conducted the requisite “particularized assessment.”
Today’s order from the D.C. Circuit responds to an emergency motion filed by the CFPB’s acting leadership on April 18th, which asked the court for immediate relief, arguing, in part, that “an office-by-office assessment like that documented in the Chief Legal Officer’s declaration is entirely sufficient to discharge defendants’ duty to make particularized assessments before engaging in the now-suspended reduction in force.”
It is also worth noting that at least one judge on the three-judge panel sided with the CFPB and issued a dissenting opinion. Judge Rao stating that “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.” In addition, the dissent argued that the district court’s April 18th suspension of the RIF was a modification of its preliminary injunction that the circuit court should vacate because the district court was injecting itself into day-to-day management and personnel decisions of the agency. The dissenting judge also stated that if the stay was unclear, she would only clarify that the district court could “issue appropriate relief, targeted to that plaintiff’s specific injury,” and “in the alternative, if a partial stay is truly ‘unworkable,’ I would put an end to these cat-and-mouse games and stay the preliminary injunction entirely.”
In light of the D.C. Circuit’s order today, the district court ruled that “the RIF enjoined by this Court on April 18 cannot go forward at all.” The district court also stated that, because the issue was now moot, the scheduled evidentiary hearing on the RIF was cancelled.
Judge Rao’s dissenting opinion is about as strong a signal as you can get that she will rule in favor of the CFPB on appeal of the district court’s preliminary injunction. So, the CFPB only needs one more judge on the panel to overturn the district court’s preliminary injunction and move forward with the RIF. Question is, will a second judge follow suit? Will the CFPB have a permanent director in place before the court rules? We will see in a few weeks.
One other thought on all of this – what effect will this have on the CFPB and the industries it regulates going forward? Will highly talented and qualified employees want to leave behind high-paying private sector jobs or move to join this agency with the chance that in the next administration they will be RIF’d? Will this affect the quality of the industry’s interactions with, and the work product coming out of the CFPB? While I strongly believe that the CFPB needed serious house cleaning (as I’ve written and spoke about before), in addition to hoping that the CFPB will begin to be run like a mature, serious financial regulatory agency, I do hope that great people will still want to join the CFPB in the future, as that will help the industry and the public at large.
If you would like to discuss, please email me at rich@garrishorn.com.
