WASHINGTON — A federal appellate judge has quashed a move to send a lawsuit against the Consumer Financial Protection Bureau's late fee rule
The suit, brought by the U.S. Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association and multiple Texas industry-related groups, challenged the CFPB's rule that would cap credit card late fees at $8 in most cases. The U.S. Court of Appeals for the 5th Circuit in a late Friday opinion determined that Texas Judge Mark Pittman didn't have the authority to send the case to D.C.
"Once a party properly appeals something a district court has done — here, the effective denial of a preliminary injunction — the district court has zero jurisdiction to do anything that alters the case's status," the 5th Circuit judges, two appointees of former President Donald Trump, Don Willett and Andrew Oldham, said in the opinion. "Importantly, we are not announcing today a broad rule regarding inter-circuit transfers. Indeed, we do not even reach the question of where this case rightly belongs. Our decision today is exceedingly narrow and procedural, focused not on the correctness of the district court's transfer order but rather on whether the court had jurisdiction to enter it. On these facts, it did not."
U.S. Circuit Judge Stephen Higginson, an appointee of former President Barack Obama, issued a dissenting opinion.
"I believe that the new proposition of law created by the majority is incompatible with district court discretion over docket management and prudent policing of forum shopping," he said.
Jaret Seiberg, an analyst with TD Cowen, said the most likely outcome of the ruling would be for the lower court in Texas to issue an injunction preventing the rule from taking effect because the 5th Circuit had ruled that the CFPB's funding structure is unconstitutional — a case that the Supreme Court is likely to rule on in the coming weeks.
"The most compelling argument for a stay is that the 5th Circuit has deemed the CFPB's funding to be unconstitutional," Seiberg said. "Under that precedent, the agency lacks the power to finalize any rule. It is hard for us to see how the judge does not grant the stay given this precedent."
The CFPB case, which could have major implications for banks if the CFPB proposal on late fees prevails, is also part of a larger narrative on
The industry groups originally filed their lawsuit in Forth Worth, Texas, which has become a favorite for litigants looking to challenge the regulations of President Joe Biden's administration. The U.S. Judicial Conference last month announced a new policy aimed at curbing so-called "judge shopping," assigning cases that challenge federal or state laws to a judge randomly throughout a federal district.
"The practice of judge shopping has given MAGA-right plaintiffs the ability to hijack and circumvent our federal judiciary by targeting courts that would all but guarantee a handpicked MAGA-right judge who would rule in their favor," said Senate Majority Leader Chuck Schumer, D-N.Y., in a statement. "This anti-democratic practice has eroded Americans' faith in the judicial system and undermined the rule of law."
Schumer had previously written to the U.S. Judicial Conference, urging it to adopt policies curbing the practice. He also said that the Senate would "consider legislative options to put an end to this misguided practice."
"Congress has quite a bit of authority to affect the federal judicial process, which would include, for example, modifying the assignment of cases in the various judicial districts," said Joseph Lynyak, a partner at Dorsey & Whitney. "On its face, this would be an easy modification — and simply could entail expanding the pool of federal judges from which a case would be assigned. However, in light of the success the business lobby has had in regard to the assignment of sympathetic judges in the 5th Circuit, it is probable that any such legislation would be strongly contested."
