On June 21, 2018, Judge Preska of the Southern District of New York (“SDNY”) issued a decision finding that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional.  In doing so, the SDNY held that Title X of Dodd-Frank—the title that created the CFPB and established its regulatory, supervisory, and enforcement authority—should be stricken in its entirety.

The SDNY went further in finding that Mulvaney’s ratification of the CFPB’s decision to bring the lawsuit was inadequate to cure the constitutional deficiencies.  The decision was issued in response to the motion to dismiss filed by the defendants in the CFPB’s and New York Attorney General’s case against RD Legal Funding, LLC.

This decision is in direct conflict with the D.C. Circuit’s en banc decision in the PHH case, which held that the CFPB’s structure is constitutional.  Adopting portions of two dissenting opinions in the en banc decision, the SDNY found that, not only is the CFPB’s structure unconstitutional, but the proper remedy is to strike all of Title X rather than just its for-cause removal provision.

While the SDNY dismissed the CFPB from the RD Legal Funding case, it allowed the New York Attorney General’s claims to proceed.  Because part of the case remains active, the CFPB cannot appeal the decision unless the SDNY certifies that there is no reason to delay that appeal under Rule 54(b) of the Federal Rules of Civil Procedure.  Assuming such a certification by the SDNY, the CFPB could appeal to the Second Circuit.