Labor & Employment Law Daily Wrap Up, PUBLIC EMPLOYEES—D.D.C.: Federal Reserve Governor Lisa Cook, removed by Trump, reinstated pending ongoing litigation, (Sep 10, 2025)

By Jason Albright, J.D.

President Trump purported to fire Dr. Cook on August 25 in a two-page letter posted to a social media account.

Federal Reserve Governor Dr. Lisa D. Cook is entitled to a preliminary injunction in her suit challenging President Trump’s decision to remove her from office, a federal district court in D.C. found Tuesday. Cook “made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision,” the best reading of which is that the bases for removal of a Federal Reserve Governor are “limited to grounds concerning a Governor’s behavior in office” rather than, as here, alleged conduct that “occurred before they began in office,” the court held. In addition, the removal likely violated Cook’s procedural rights under the Fifth Amendment’s Due Process Clause (Cook v. Trump, No. 25-cv-2903 (JMC) (D.D.C. Sept. 9, 2025)).

Cook’s tenure on the Board. President Biden nominated Dr. Cook for a 14-year term on the Federal Reserve Board of Governors on May 12, 2023. At the time, she was already serving on the Board, having previously been appointed by President Biden and confirmed by the Senate, on May 10, 2022, to fill the remainder of an unexpired term that was scheduled to end on January 31, 2024. Cook’s nomination to the new 14-year term was confirmed by the Senate on September 6, 2023. This term was set to expire in 2038.

Pulte’s referral letter. On August 15, 2025, the Director of the Federal Housing Finance Agency (FHFA), William Pulte, sent a referral letter to Attorney General Pamela Bondi and Department of Justice Special Attorney Edward Martin, accusing Cook of committing mortgage fraud in June and July 2021, before she was nominated and confirmed to the Board.

“Cook must resign, now!!!” On August 20, 2025, Pulte publicly released two screenshots of pages from the letter on the social media platform X, formerly known as Twitter. Within 30 minutes, President Trump posted on the social media platform Truth Social that “Cook must resign, now!!!,” and shared a link to a news article regarding the allegations.

Alleged falsification of residence statuses in 2021. The letter, as excerpted in Pulte’s post on X, accused Cook of “falsifying residence statuses for an Ann Arbor, Michigan-based residence and an Atlanta, Georgia-based property in order to potentially secure lower interest rates and more favorable loan terms.” According to Pulte, on June 18, 2021, Cook had taken out a loan on a property in Michigan. The terms of the mortgage agreement stated that Cook would use the property as her “principal residence” for at least one year after the date of occupancy. Two weeks later, however, Cook purchased a condominium in Atlanta, and in the mortgage agreement she affirmed that this property would serve as her “primary residence” for a full year.

Purported firing. Two days after Pulte posted the referral letter, Trump said in an interview that “what [Cook] did was bad” and that he would “fire her if she doesn’t resign.” Then, on August 25, Trump posted screenshots of a two-page letter to his Truth Social account. Cook alleges that she was provided no advance notice of the letter before it was posted.

The letter, dated August 25 and addressed to Cook, stated, “Pursuant to my authority under Article II of the Constitution of the United States and the Federal Reserve Act of 1913, as amended, you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately.” The letter added, “The Federal Reserve Act provides that you may be removed, at my discretion, for cause. See 12 U.S.C. § 242. I have determined that there is sufficient cause to remove you from your position.”

Reference to Pulte’s criminal referral. In support of this conclusion, the letter cited Pulte’s August 15 criminal referral. Trump stated that “there is sufficient reason to believe you may have made false statements on one or more mortgage agreements.” Citing Pulte’s referral, Trump said Cook “signed one document attesting that a property in Michigan would be [her] primary residence for the next year,” and “[t]wo weeks later... signed another document for a property in Georgia stating that it would be [her] primary residence for the next year.” Trump claimed that it was “inconceivable that [Cook was] not aware of [her] first commitment when making the second,” and it was “impossible that [she] intended to honor both.”

“[D]eceitful and potentially criminal conduct...” Trump then acknowledged the Federal Reserve’s “tremendous responsibility for setting interest rates and regulating reserve and member banks.” He continued: “The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity. At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator.” Trump concluded by stating that “I have determined that faithfully executing the law requires your immediate removal from office.”

Lawsuit. Cook filed a six-count complaint on August 28, 2025. Count One alleges that the President violated the Federal Reserve Act because his justification for removing her did not qualify as “cause” under the statute. Count Two alleges that under the Federal Reserve Act, Cook was entitled to notice and a hearing before her removal. Count Three alleges that the termination, without notice and any opportunity to be heard, violates the Fifth Amendment’s Due Process Clause because Cook has a property interest in her continued employment as a Governor. Count Four seeks a declaratory judgment that the defendants lack the authority to remove her without complying with applicable statutes and regulations. Count Five, brought only against Chair Jerome H. Powell and the Board of Governors, seeks a writ of mandamus commanding them not to effectuate Trump’s purported termination. And Count Six also seeks equitable relief against Powell and the Board to prevent and restrain ongoing violations of statutory and constitutional law.

“For cause” requirement of Federal Reserve Act. The key question in this dispute, the court initially observed, is the meaning of the term “for cause” in the Federal Reserve Act. 12 U.S.C. § 242. The government argued that Trump provided a legal cause under the Federal Reserve Act to remove Cook, and that his decision to do so is not subject to judicial review. Disagreeing on both points, the court found that Cook showed Trump’s allegations likely do not qualify as cause justifying her removal under the Federal Reserve Act, and that the court can resolve the parties’ dispute about the interpretation of this statute.

The court found that the “for cause” provision in the Federal Reserve Act extends only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of circumstances that have occurred while they are in office. The historical background, it said, showed that when creating various agencies, departments, and boards during the period leading up to the passage of the Banking Act of 1935 and enumerating the grounds for removal from those bodies, Congress was narrowly focused on grounds of inefficiency, neglect of duty, or malfeasance (INM).

A conclusion that Congress was not particularly concerned with addressing conduct that occurred before the officeholder assumed the position was similarly consistent with the Board of Governors’ appointment scheme, the court observed. “That scheme involves extensive opportunities for investigation and rigorous vetting by both the President who appoints the nominee and the Senate who confirms them.”

No infringement on Article II powers. Finally, the court said it was satisfied that its understanding of the “for cause” protection in 12 U.S.C. § 242 does not unduly infringe on the President’s Article II powers. The court’s reading of “for cause,” it noted, “provides broader grounds for removal than the removal protection blessed by the Supreme Court in Humphrey’s Executor, which permitted removal only for the classic INM standard.”

In Trump v. Wilcox, moreover, which raised concerns about the constitutionality of removal provisions narrower than the one in question here, the Supreme Court made clear that its analysis did not extend to the Federal Reserve Board’s “for cause” protection. Accordingly, the court found that permissible cause for removal of a Federal Reserve Governor extends “only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office.”

No qualifying cause under statute. Having determined that the “for cause” protection in 12 U.S.C. § 242 restricts presidential removal of members of the Board of Governors to situations where the record of the Governor’s in-office behavior demonstrates they cannot effectively and faithfully carry out their statutory duties, the court found that Trump failed to state a legally permissible cause for Cook’s removal. Trump’s stated cause referred only to allegations regarding Cook’s conduct before she began serving on the Federal Reserve Board, and such allegations are not a legally permissible cause.

Due process claim. In addition, the court found that Cook was likely to prevail on the merits of her constitutional due process claim. She argued that her purported removal violated procedural rights guaranteed to her by the Fifth Amendment’s Due Process Clause, which required that she receive notice and be provided an opportunity to be heard before any “for cause” removal occurred. The record, the court concluded, “demonstrates that Cook did not receive such notice and hearing, and thus has shown a procedural violation.”

Observing that the due process requirements laid out by the Supreme Court in Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985) apply to Cook’s case, the court said it doubted that Cook “received any notice or opportunity to be heard, let alone notice and a hearing that were constitutionally ‘meaningful.’” The court found it “difficult to construe President Trump’s social media post on August 20, 2025, which itself linked to a third-party news article regarding Director Pulte’s allegations, as ‘written notice of the charges against [her].’” And though Trump’s comments to reporters on August 22 “arguably indicated that President Trump was considering firing Cook,” the court said, they fell short of providing Cook with an “explanation of the... evidence” that Trump was considering in weighing his dismissal decision.

Irreparable harm. Next, weighing the remaining equitable factors, the court agreed with Cook that preventing her from discharging her duties as a Federal Reserve Governor, a unique Presidentially appointed and Senate-confirmed role with significant responsibility, itself constituted irreparable harm remediable only by her reinstatement.

Balance of equities and public interest. And the final two factors, which merged here, also cut in her favor. She demonstrated an ongoing irreparable harm, and against that harm, the government raised Wilcox, Boyle, and the D.C. Circuit’s stay in Dellinger, to argue that the Government suffers a greater harm in “allowing a removed officer to continue exercising the executive power than a wrongfully removed officer faces from being unable to perform her statutory duty.” The court was unpersuaded.

First, Cook’s retention on the Board of Governors, the court noted, does not offend the President’s Article II authority in the way the officers’ reinstatement was found to in Wilcox and Boyle. Wilcox’s theory of harm was premised on the ground that the government suffered from having a reinstated officer exercise the “executive power,” but the Supreme Court in Wilcox expressly disclaimed that its analysis on this issue implicated the “uniquely structured, quasi-private entity” that is the Federal Reserve.

Further, noted the court, the public interest here is not only limited to the interests of the Executive Branch. “[T]here is a substantial public interest in having governmental” actors like the President “abide by the federal laws,” and Congress, which implemented the “for cause” protection and sought to secure the Federal Reserve’s independence, also has an interest in ensuring that Federal Reserve Board members are removed for only statutorily permitted reasons.

And finally, said the court, the public interest in Federal Reserve independence weighs in favor of Cook’s reinstatement. “That independence is critical in helping the nation’s ‘banking system to promote stability.’”

Preliminary injunction granted, stay denied. Because all four factors favored Cook, the court granted relief in her favor, in the form of a preliminary injunction requiring Powell and the Board of Governors of the Federal Reserve to allow Cook to remain a member of the Board during the pendency of the litigation. The government’s request for a stay pending any appeal was denied.

The case is No. 25-cv-2903 (JMC).

Judge: Cobb, J.

Attorneys: David A. Kolansky (Lowell & Associates) for Lisa D. Cook. Christopher R. Hall, U.S. Department of Justice, for Donald J. Trump, Board of Governors of the Federal Reserve System, and Jerome H. Powell.

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