CFPB leadership case assigned to Trump-appointed judge

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A judge recently appointed by President Trump will hear a case deciding the leadership of the Consumer Financial Protection Bureau.

Timothy J. Kelly, who was confirmed to the U.S. District Court for the District of Columbia in September, was assigned Monday to decide whether Leandra English, the CFPB's deputy director, or Mick Mulvaney, the Office of Management and Budget director appointed by President Trump, is the interim head of the CFPB.

English filed suit late Sunday in an attempt to block Mulvaney from taking office. Mulvaney went to the CFPB on Monday carrying donuts for senior staff, and quickly ordered them to disregard any orders from English, who sent a note early Monday to staff as "acting director."

"We are just sort of here running the agency today as the acting director," Mulvaney told an American Banker reporter outside the CFPB in a brief interview on Monday. "You saw that we responded this morning to an email that Ms. English put out. We simply sent an email out that said, 'Look, we don't consider her the acting director and you should disregard her instructions in an official capacity.' "

In his email to staff, Mulvaney said employees must inform the CFPB's general counsel if they received any "additional communication from [English] in any form, related in any way to the function of her actual or presumed official duties."

Andrew Harrer/Bloomberg

He also apologized "for this being the very first thing you hear from me."

English, meanwhile, has been talking to allies on Capitol Hill and was expected to meet later on Monday with Sen. Elizabeth Warren, D-Mass., the founder of the CFPB.

Some observers said Kelly could quickly squash English's effort, denying her request for a temporary restraining order against Mulvaney.

"I'd hate to lose faith in the independence of the judiciary, but I imagine he was appointed because he has certain views in line with the Trump administration and that may include views about the authority of the president," said Richard Horn, a former CFPB attorney who runs his own law firm.

Ben Olson, a partner at Buckley Sandler and a former CFPB deputy assistant director, said that if Kelly denies the temporary restraining order, then Mulvaney would be in charge of the CFPB.

"It’s going to be very difficult for Leandra to claim control down the road," Olson said. “Like any federal judge, I assume he will decide on the facts and law in front of him.”

The battle has thrown the senior leadership of the agency into disarray while the issue is decided.

"People are trying to have meetings and talk about whatever projects they are responsible for, but I bet it's hard to get much of anything done, given all the distractions," Olson said.

A quick resolution is necessary, observers said.

"This can't be good for government in general to have this level of dysfunction at a major agency that governs trillions of dollars in the U.S. economy and financial services," Horn said.

The lawsuit claims that English is the rightful acting director of the CFPB because the Dodd-Frank Act says that the bureau's deputy director will serve as acting its director in the "absence or unavailability of the director."

The White House maintains that the Federal Vacancies Reform Act takes precedence in giving the president broad authority over appointments. A Justice Department memo late Saturday detailed its legal justification for the move, as did a memo from the CFPB's general counsel, Mary McLeod.

Ian McKendry contributed to this article.