On August 26, 2024, Texas ED Chief Judge Randy Crane granted summary judgment to the CFPB and did not grant summary judgment to the trade associations, upholding the validity of the CFPB’s small business data collection rule, although the judge must still rule on the motion to amend the complaint and the motion for judgment on the answer.
On August 2, 2024, Farm Credit Intervenors (three organizations that had intervened as plaintiffs much earlier to take advantage of the preliminary injunction against the CFPB granted to the original plaintiffs based on the Fifth Circuit decision in CFSA v. CFPB) filed an amended motion to intervene. On the same day, Farm Credit Intervenors filed a motion for judgment on the complaint. Both the amended complaint and the motion for judgment on the complaint allege that the development and promulgation of the 1071 rule are invalid because they were illegally funded by the Federal Reserve. This is because there are no “gross revenues of the Federal Reserve System” and the CFPB must be funded from such “gross revenues” under the Dodd-Frank Act. On August 16, 2024, the CFPB filed a motion in the district court to extend the deadline for responding to the motion for judgment on the complaint until the court rules on the Farm Credit Intervenors’ motion to amend the complaint and the CFPB answers the amended complaint on record. The court then granted an indefinite stay and scheduled a status conference for September 24, 2024.
Recently, the CFPB filed a brief opposing the motion to amend the complaint. In the brief, the CFPB charges that the plaintiff-interveners unreasonably delayed amending the complaint, and therefore urges the Court to deny the motion to amend the complaint. The CFPB argues that the plaintiff-interveners knew about the “new” CFPB funding allegations long before they sought to intervene in the case, and should have included the allegations in their original complaint.
Plaintiff intervener filed a reply stating the following persuasive arguments:
The motion to amend the complaint should be granted generously, so long as it does not prejudice the CFPB. The CFPB has not and cannot allege that it will be prejudiced. The plaintiff-interveners point out that the CFPB has already responded to a motion to dismiss the raising of a “new” funding issue in the enforcement action filed by the CFPB and plans to respond soon to the same allegations in several other enforcement actions. The plaintiff-interveners did not have to consider the allegations asserted in the amended complaint until May 16, 2024, when the Supreme Court issues its decision in the CFSA case. Until then, the plaintiff-interveners could rely on the Fifth Circuit’s decision in the CFSA case, which held that the CFPB’s funding structure violates the Appropriations Clause of the U.S. Constitution. It would not have made sense for the plaintiff-interveners to include “new” allegations in their original complaint. At a status conference with the district court in July, the plaintiff-interveners announced that they would file a motion to amend the complaint, then amended it a few days later. The period between May 16, when the Supreme Court issued its CFSA opinion overturning the Fifth Circuit decision, and the filing of the amended complaint was only a few months.
The ball is now in Judge Klain’s hand (literally and figuratively) and I expect he will grant the motion to amend. It is uncertain at this point whether he will grant or deny the motion for judgment on the complaint, or instead allow the CFPB to file a motion to dismiss the amended complaint. Whatever happens, this “new” funding issue will be decided by Judge Klain by the end of the year, with the losing party then likely to appeal. In the meantime, one or more of the judges assigned to the enforcement cases are expected to rule on this issue as well.
