Banking and Finance Law Daily Wrap Up, CREDIT DEBIT AND GIFT CARDS—N.D. Tex.: Early return of Fifth Circuit mandate re-opens Chamber CARDAct case against CFPB, (Jul 19, 2024)

By Justin Marcus Smith, J.D.

The Consumer Financial Protection Bureau promptly re-filed its motion to dissolve the preliminary injunction; however, the district court ordered additional briefing on standing.

The Clerk of the Northern District of Texas has accepted the re-filing of certain Consumer Financial Protection Bureau motion documents seeking dissolution of the court’s May 10, 2024, preliminary injunction against the final rule implementing the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The court had ordered the Bureau’s motion documents un-filed only days ago pending return of a judgment mandate from the United States Court of Appeals for the Fifth Circuit keeping the case in the Northern District of Texas rather than transfer venue to the District of Columbia. However, the Fifth Circuit returned its mandate earlier than expected, thus permitting the Bureau to tee-up its injunction dissolution motion again (Chamber of Commerce v. CFPB , No. 4:24-cv-0021 (N.D. Tex. July 18, 2024)).

Background. As reported earlier in July (see Banking and Finance Law Daily, July 9, 2024), the Consumer Financial Protection Bureau filed a motion, brief, and supplemental authority with the federal district court in the Northern District of Texas to dissolve a previously granted preliminary injunction and stay in this litigation challenging the CFPB’s CARD Act late-fee rule. The Bureau argued that the recent Supreme Court decision in CFPB v. Cmty. Fin. Servs. Ass’n of Am., Ltd., 601 U.S. 416, 435 (U.S. 2024) justified dissolution of the injunction; however, a July 10, 2024 order of the district court cited a jurisdictional roadblock preventing a ruling on dissolution: although the Firth Circuit had already entered an opinion, as of June 18, dissolving the administrative stay of the Northern District of Texas May 28, 2024 transfer order, the Northern District of Texas said it did not expect the U.S. Court of Appeals for the Fifth Circuit to issue a mandate “until August 12, 2024[.]” Accordingly, as of July 10, the federal district court maintained that it lacked jurisdiction to dispose of any motions or filings until the Fifth Circuit would issue its mandate in August. On July 10, the court accordingly instructed the clerk to “STRIKE and UNFILE” from the docket the Bureau’s motion documents to dissolve the injunction, specifically, ECF document numbers 99, 100, and 101.

Early return. On July 16, 2024, the Northern District of Texas issued an order acknowledging that, in the interim since July 10, a Bureau motion in the Fifth Circuit had caused the Fifth Circuit to issue its mandate earlier than expected. Consistent with the Fifth Circuit’s mandate as returned on July 16, the Northern District of Texas vacated its May 28 transfer order and instructed the clerk to reopen the case.

On July 18, in response to the reopening of the case, the Bureau re-filed its injunction dissolution motion documents, specifically ECF document nos. 105 and 106. The Bureau also filed a notice of supplemental authority, ECF document no. 107.

Dissolution motion. The Bureau argued in its refiled motion to dissolve that the Supreme Court’s decision in Community Financial Services Ass’n of America, Ltd. v. CFPB (CFSA), 51 F.4th 616, 638 (5th Cir. 2022, “fatally” undermined the justification for the May 10, 2024 preliminary injunction. The Bureau described how, just six days later, the Supreme Court reversed the Fifth Circuit’s decision in CFSA and held that the Bureau’s funding mechanism did not, after all, violate the Appropriations Clause. The Bureau contended the upshot was that the Chamber plaintiffs would no longer be able to show a likelihood of success on the merits of their constitutional claim, given the “significant change in the law,” thus warranting dissolution of the preliminary injunction.

The Bureau’s brief continued that the Late Fee Rule’s approach to the penalty fee safe harbor was consistent with the CARD Act. The Bureau contended the Chamber plaintiffs had fundamentally misread the statute inasmuch as it instructed that late fee penalties must be “reasonable and proportional” to a relevant “omission or violation” of a cardholder agreement. The Bureau said it indeed considered the enumerated factors Congress provided and that Congress “explicitly recognized that the Bureau is best positioned” to determine rules ensuring reasonable and proportional fees consistent with the statute.

Supplemental authority. On the same day, July 18, the Bureau also filed a notice of supplemental authority in support of its motion to dismiss or transfer under 28 U.S.C. § 1406. The Bureau said its request for transfer or dismissal was still pending despite the court’s and Fifth Circuit’s resolution of its alternate request for transfer under 28 U.S.C. § 1404. The Bureau said the Chamber plaintiffs had not yet responded to the § 1404 motion, so it was providing notice of supplemental authority to give them a chance to respond to it.

The supplemental authority consists of Justice Thomas’ concurring opinion about associational standing in FDA v. Alliance for Hippocratic Medicine, 602 U.S. 367, 144 S. Ct. 1540, 1565–71 (2024) (Thomas, J., concurring). The Bureau characterized the concurrence as raising serious concerns about associational standing pursuant to Article III limitations on judicial power. The Bureau said the concurrence underscored why the Court should not allow the plaintiffs to “dramatically expand associational standing” beyond even the precedent Justice Thomas criticized in his concurrence. More specifically, the Bureau argued that, in contrast to the Fort Worth Chamber’s stated purpose of promoting commerce in the Fort Worth region, the interests it wants to protect in this litigation are actually the “interests of large card issuers to charge higher late fees.” The Bureau said such interests were not germane to associational purpose to support associational standing.

Ordered briefing. On review of the Bureau’s notice of supplemental authority and a “close reading” of Justice Thomas’ concurrence in the FDA matter, the court issued an order stating it was “deeply concerned” about how associational standing could be used to challenge certain regulatory actions, as here. Accordingly, the court ordered the Bureau to provide a “full briefing on the issue of associational standing” by way of a formal motion to be filed no later than 5PM, July 29, 2024. The court ordered any response by August 12, and any reply thereto by August 19. The court also set a hearing for August 27 at 2:30 p.m.

The case is No. 4:24-cv-00213.

Judge: Garlock, S.

Attorneys: Jennifer B. Dickey, U.S. Chamber Litigation Center, and Michael Murray (Paul Hastings LLP) for Chamber of Commerce of the United States of America, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association and Texas Association of Business. Stephanie Garlock for the Consumer Financial Protection Bureau and Rohit Chopra.

Companies: American Bankers Association; Chamber of Commerce of the United States of America; Consumer Bankers Association; Fort Worth Chamber of Commerce; Longview Chamber of Commerce; Texas Association of Business

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