The U.S. District Court for the Southern District of New York has dismissed for lack of Article III standing the lawsuit filed by a credit union challenging President Trump’s appointment of Mick Mulvaney as CFPB Acting Director.  The dismissal has no impact on Leandra English’s appeal to the D.C. Circuit of the D.C. federal district court’s denial of her preliminary injunction motion in her action challenging Mr. Mulvaney’s appointment.  Briefing is currently ongoing in the appeal.

The dismissal was perhaps foreshadowed by the district court’s instruction at the oral argument on the credit union’s motion for a preliminary injunction and the DOJ’s motion to dismiss that the parties focus on standing.  The credit union claimed  that it had standing to challenge Mr. Mulvaney’s appointment because (1) it is an entity regulated by the CFPB, (2) the CFPB’s actions under Mr. Mulvaney’s leadership have harmed the credit union’s mission of improving the financial health of underserved communities, (3) changes to HMDA compliance will cause economic harm to the credit union, and (4) the uncertainty created by the CFPB’s stated intention to engage in HMDA rulemaking has injured the credit union.

The district court found each of these claims insufficient to establish standing for the following reasons:

Regulated Entity.  In arguing that it had standing based on its status as a CFPB-regulated entity, the credit union relied on the D.C. Circuit’s 2015 decision in State National Bank of Big Spring v. Lew.  In that decision, the D.C. Circuit held that State National Bank had standing to challenge the constitutionality of the CFPB’s structure and Richard Cordray’s recess appointment as CFPB Director, observing that “[t]he Supreme Court has stated that ‘there is ordinarily little question’ that a regulated individual or entity has standing to challenge an allegedly illegal statute or rule under which it is regulated.”

Relying on the D.C. Circuit’s subsequent 2017 decision in John Doe Co. v. CFPB, the district court was unwilling to conclude that State National Bank had “announce[d] a new rule that any plaintiff regulated by an agency automatically has Article III standing to sue that agency.”  In John Doe, the recipient of a CFPB non-self-executing civil investigative demand sought to challenge the constitutionality of the CFPB’s structure without objecting to any regulatory measure taken by the CFPB or identifying other regulatory burdens to which it objected.  After the district court denied John Doe’s request for a preliminary injunction, John Doe filed an emergency motion with the D.C. Circuit seeking an injunction pending appeal.

The D.C. Circuit ruled that John Doe lacked standing, relying on Supreme Court precedent for the proposition that standing is not dispensed “in gross” but, rather, a plaintiff “must demonstrate standing for each claim he seeks to press and for each form of relief that is sought.”  It held that John Doe had failed “to demonstrate that the action of merely requesting information from private entities subject to regulation is . . . exclusively confined to the Executive Branch, and thus that issuance of this CID by the Bureau violates separation of powers.”  In distinguishing State National Bank, the D.C. Circuit noted that the plaintiff had not objected to any regulatory measure taken by the CFPB  or identified other regulatory burdens to which it objected.

The credit union had objected to several actions taken or not taken by the CFPB under Mr. Mulvaney’s leadership, such as its decisions not to assess penalties with respect to 2018 HMDA data reported in 2019, to reconsider its 2015 HMDA rulemaking, and to delay the prepaid card rule April 1, 2018 effective date.  Nevertheless, because there was no contention by the credit union that the CFPB had imposed new obligations on it and that such new obligations had caused the credit union to incur costs that it would no longer incur if it succeeded on its claims, the district court concluded that the credit union had not alleged a “concrete and particularized injury caused by CFPB actions taken under Mulvaney’s leadership.”  (In a footnote, the court indicated that the credit union had asserted for the first time at oral argument that the CFPB’s amendments to HMDA reporting requirements that became effective on January 1, 2018 were causing it to incur costs.  However, the court did not give any weight to this claim for reasons that included the credit union’s concession at oral argument that it did not object to such amendments and the fact that such amendments were finalized four months before Mr. Mulvaney was designated Acting Director.)

Harm to Corporate Mission.  The district court concluded that the credit union did not have standing based solely on its claim that under Mr. Mulvaney’s leadership, the CFPB has harmed the credit union’s corporate mission of improving the health of underserved communities.  The district court based its conclusion on Supreme Court precedent stating that unless it alleges an injury to itself as an organization, an organization advocating for a particular policy goal cannot establish its Article III standing simply on the basis of that goal.

Changes Regarding HMDA Compliance.  The credit union claimed that as a result of the CFPB’s decision not to assess penalties with respect to 2018 HMDA data reported in 2019, banks that are currently investing in community credit unions such as the plaintiff to satisfy their CRA obligations will begin falsifying their HMDA data and, relying on that inaccurate data to show CRA compliance, will reduce their deposits at community credit unions.  The district court found the credit union’s speculation as to the future actions of third parties insufficient to establish an imminent injury.  In addition, the court found the credit union’s “fear-based theory of standing” insufficient to meet the redressability requirement because it had not shown that its anticipated injury was fairly traceable to Mr. Mulvaney as opposed to the actions of third parties.

CFPB’s Intention to Engage in HMDA Rulemaking.  The district court ruled that because the CFPB announced its intention to engage in HMDA rulemaking on December 21, 2017, after the credit union filed its lawsuit, any uncertainty resulting from that announcement could not serve as the basis for standing.  In addition, the court concluded that even if the credit union could rely on the announcement, any alleged injury was too conjectural and hypothetical to confer standing and the CFPB’s announced intention to reconsider its HMDA rule did not establish that the rule “will in fact be altered.”