DOGE staffer, CFPB top lawyer ordered to appear in court

Frank Gargano

A federal judge has ordered a top staffer to Elon Musk and the chief legal officer at the Consumer Financial Protection Bureau to explain mass firings at the CFPB that appear to be in defiance of a court order.

U.S. District Court Judge Amy Berman Jackson on Monday ordered Mark Paoletta, the CFPB's chief legal officer, and Gavin Kliger, a staff member at the Department of Government Efficiency who is on a detail to the CFPB, to testify about reductions in force notices that were sent to 90% of the CFPB's staff last week. 

On Friday, Jackson temporarily blocked the Trump administration from firing the employees and scheduled an evidentiary hearing on April 28 to determine whether the firings comply with an existing injunction. The employees who received the RIF notices have been placed on administrative leave pending the outcome of the litigation.  A union representative said the employees are "shell shocked." 

In the past week alone, the Trump administration has fired 1,250 employees at the Federal Deposit Insurance Corp.; fired the two Democratic members of the three-member board of the National Credit Union Administration (leaving only a Republican appointee in place); and threatened to fire Federal Reserve Chair Jerome Powell. 

The Trump administration and the CFPB's union have been locked in contentious litigation since February when the National Treasury Employees Union union sued acting CFPB Director Russell Vought to stop the agency from being dismantled. The latest court orders could create a conflict. 

"This is a real test of executive power," said Scott Pearson, a partner at the law firm Manatt, Phelps & Phillips LLP. "The administration is trying to take on the bureaucracy dramatically — not just at the CFPB, but across the entire government."

Many legal experts, including Pearson, have noted that the Trump administration is also seeking to overturn a nearly century-old precedent — Humphrey's Executor v. United States — that holds that independent agency appointees can only be fired for cause. 

Some experts suggest the CFPB could have conducted mass layoffs legally by adhering to the union's collective bargaining agreement and notifying employees at least 90 days in advance that an RIF was being considered. Unlike other agencies, the CFPB has not offered early retirement and severance to foster attrition and lessen the blow of a substantial reduction in force, a union representative said. 

The mass layoffs on Friday mark the third round of firings at the CFPB. In March, acting CFPB Director Russell Vought first fired temporary and then fired term employees, but was forced to rehire them again under a court order. 

The key issue before the U.S. District Court for the District of Columbia is whether the administration has the discretion to reduce the CFPB's headcount to roughly 200 employees, and if doing so adheres to the specific statutory requirements of the Dodd-Frank Act. 

Litigation

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April 18, 2025 5:58 PM

On Friday, Paoletta submitted a declaration with the court stating that the bureau's new leadership had undertaken a review of the CFPB's activities and staffing, in compliance with an appeals court panel, before sending RIF notices to 1,483 employees. 

The appeals panel had issued a partial stay of a preliminary injunction that prohibited the agency from issuing RIFs. The judges allowed the CFPB to terminate individual employees and issue stop-work orders, but only after conducting a "particularized assessment" of whether the workers are "unnecessary" to perform the bureau's legally mandated duties. 

Paoletta claimed the assessment took place. Jackson did not appear confident that his assessment met the standard set forth by the appeals court, experts said. 

For example, the CFPB's enforcement division would be reduced to a staff of 50, down from 248. Supervision would drop from 487 employees to 50. And the Consumer Response unit would retain just 16 employees, down from 128.

Last week, Paoletta sent a sweeping memo to the bureau's staff stating that the bureau will no longer supervise nonbanks, and will have most enforcement and supervision conducted by the states. Lawyers are questioning how the CFPB plans to rescind and reissue rules if the CFPB's regulations unit has just 10 employees, down from 66 currently. 

"The decision to stop supervision of and enforcement against nonbank lenders has opened the door for abuses just as, 20 years ago, Congress, bank regulators and the Fed's refusal to regulatory predatory lenders spawned a worldwide financial crisis," said Kathleen C. Engel, a research professor at Suffolk University Law School.

Paoletta wrote that the Trump administration has "a much more limited vision for enforcement and supervision activities."

"Over the course of this review, leadership has determined to take the Bureau in a new direction that would perform statutory duties, better align with Administration policy, and right-size the Bureau," he wrote. 

Adding to the mix is an anonymous CFPB employee referred to in the litigation as Alex Doe, who claimed that DOGE employee Kliger kept a CFPB team up for 36 hours to ensure that the firing notices went out on April 17. 

The sworn declaration states: "Gavin was screaming at people he did not believe were working fast enough to ensure they could go out on this compressed timeline, calling them incompetent."

It is unclear if the Trump administration will describe the layoffs as part of the normal changeover in administrations, as they have in the past, or how the court will determine what work is legally required. 

"Now you've got courts coming in in response to lawsuits and, arguably, micromanaging what the executive is permitted to do," said Pearson. "There are real constitutional questions about to what extent when Congress says there needs to be an Office of Consumer Response, what does the Office of Consumer Response needs to do and how well do they need to do it?"

Since Jan. 20, the Trump administration has been sued 203 times, which includes four closed cases, according to litigation tracking site Just Security.