DC Circuit clears Trump to gut consumer watchdog agency

WASHINGTON (CN) — A D.C. Circuit panel ruled Friday to overturn a court order freezing the Trump administration’s effort to dismantle the Consumer Financial Protection Bureau, finding that a federal judge did not have the jurisdiction to review claims brought by an employee union.

In a 2-1 decision, the panel determined that the National Treasury Employee Union should have brought their claims to the Merit Systems Protection Board, which is meant to handle “adverse personnel actions” under the Civil Service Reform Act.

“We hold that the district court lacked jurisdiction to consider the claims predicated on loss of employment, which must proceed through the specialized-review scheme established in the Civil Service Reform Act,” U.S. Circuit Judge Gregory Katsas wrote. “And the other plaintiffs’ claims target neither final agency action reviewable under the Administrative Procedure Act nor unconstitutional action reviewable in equity.”

Katsas, joined by fellow Donald Trump appointee U.S. Circuit Judge Neomi Rao, vacated U.S. District Judge Amy Berman Jackson’s preliminary injunction that blocked Department of Government Efficiency and White House Office of Management and Budget personnel from terminating employees, canceling contracts and enforcing a stop-work order.

This past April, Jackson blocked the administration from terminating nearly 1,500 employees of the consumer watchdog bureau, after the employee union informed the court that 1,483 employees received reduction-in-force notices.

In an April 18 declaration, CFPB general counsel Mark Paoletta, who was detailed to the consumer watchdog by the Office of Management and Budget, said he had conducted assessments to determine which employees were unnecessary for the agency to continue its congressionally mandated functions.

He concluded that a “200-person agency” would be able to adequately fulfill the CFPB’s statutory duties and “better aligns with the new leadership’s proprieties and management philosophy.”

Jackson’s decision was quickly appealed to the D.C. Circuit, which lifted a previous partial stay that had allowed the CFPB leadership to begin implementing “Reduction in Force” orders at the agency.

Attorney General Pam Bondi applauded the decision in a post on X Friday.

“In a 2-1 ruling, the DC Circuit sided with my Justice Department attorneys in our effort to dismantle the CFPB and rein in crippling Obama-era regulations,” Bondi wrote. “We will continue to pursue the president’s deregulations efforts.”

In dissent, U.S. Circuit Judge Cornelia Pillard slammed the majority’s decision.

“The majority does not deny that defendants acted as the district court found,” the Obama appointee said. “Nor do my colleagues dispute that such actions were unlawful for all the reasons that plaintiffs have alleged. Nevertheless, they elect to shield defendants’ illegality from any effective judicial oversight.”

She noted that the administration “announced and celebrated their lawless decision to reporters and to the broader public,” but did not record its decision in the Federal Register, thus making it a final agency action, which her colleagues relied on to vacate the preliminary injunction.

“Doing so is an invitation to agency evasion and deception,” Pillard wrote. “Our constitutional and statutory responsibility to hold executive agencies to the law requires more.”

The case has already reached the D.C. Circuit once before, with the same panel hearing arguments on April 9 over the first iteration of Jackson’s injunction.

The appellate court lifted parts of Jackson’s initial order on April 11, allowing CFPB leadership to implement “RIFs” so long as they conducted a particularized assessment to ensure no congressionally mandated offices, contracts or positions were affected.

Paoletta conducted the assessment by reviewing “line by line” each competitive area at the bureau, resulting in his conclusion that just 200 people could run the agency’s necessary functions.

That conclusion was quickly challenged, leading Jackson to further block the proposed RIFs and schedule an evidentiary hearing to hear testimony from Paoletta and DOGE agent Gavin Kliger.

An anonymous declarant described Kliger as “screaming” at the RIF team to send termination notices faster while working 36 hours straight.

Looming over the majority’s determination that the employee union’s claims should be brought before the Merit Systems Protection Board is Trump’s newfound authority to oust that board’s chair Cathy Harris and other independent officials.

In April, the Supreme Court issued an administrative stay in a case brought by Harris and National Labor Relations Board member Gwynne Wilcox — both Democratic appointees — challenging their terminations. The following month, the high court lifted the stay after finding the president would likely succeed on his arguments that the fired appointees exercise executive branch power.

In a separate case in July, the high court further indicated that its decision in Trump v. Wilcox effectively overturned the 90-year-old precedent set by Humphrey’s Executor v. United States, which prevented presidents from terminating independent board members at will.

Follow @Ryan_Knappy