D.C. Circuit Prohibits All CFPB Reductions in Force Pending Appeal

The U.S. Court of Appeals for the District of Columbia Circuit on April 28, 2025, enjoined the CFPB from conducting any Reduction in Force (RIF) pending appeal, lifting its partial stay of U.S. District Court for the District of Columbia Judge Amy Berman Jackson's preliminary injunction.

Prior to this ruling, in an order issued on April 11, 2025, a three-judge panel for the D.C. Circuit gave the CFPB the freedom to terminate employees if, after a "particularized assessment," the agency determined that the employees to be terminated would be "unnecessary to the performance of [the agency's] statutory duties," as Holland & Knight previously reported. In response to the D.C. Circuit's decision, the CFPB issued an RIF, effectively terminating 90 percent of agency employees. After the plaintiffs filed an emergency motion to show cause as to how the RIF did not violate the district court's preliminary injunction, the CFPB sought relief from the D.C. Circuit in the form of clarification of the "particularized assessment" requirement or enforcement of its order staying the applicable paragraph of the preliminary injunction.

Judge Cornelia Pillard, appointed by President Barack Obama, and Judge Gregory Katsas, an appointee of President Donald Trump, began by clarifying that a particularized assessment "involves a determination, conducted by the decisionmaker responsible for the RIF, that each division or office within the Consumer Financial Protection Bureau will be able to perform any statutorily required duties of that division or office without the employees subject to the RIF." However, the majority did not stop there. On its own accord, the D.C. Circuit lifted its partial stay that gave the CFPB latitude to issue RIFs after a particularized assessment. Instead, the CFPB is now bound by the provision of Judge Jackson's preliminary injunction barring further RIFs.

Judges Pillard and Katsas emphasized in the majority opinion that the panel's April 11, 2025, order was intended to maintain the status quo but instead has merely opened a new realm of debate and litigation among the parties. Rather than focusing on the merits of the pending appeal, the parties began debating the scope and applicability of the D.C. Circuit's order, particularly the availability of judicial review as to whether an assessment is "particularized" and whether the employees subject to termination are "unnecessary to the performance of [the CFPB's] statutory duties." Though the CFPB believes any such judicial review would render the preliminary injunction to be "impermissibly vague," the plaintiffs highlight the CFPB's recent decision to issue an RIF applicable to nearly 90 percent of agency employees, and well beyond the scope of the RIF prompting the district court's preliminary injunction initially. In an effort to eliminate an open forum for continued debate, the D.C. Circuit's April 28, 2025, order ensures that the CFPB cannot take further action that would eliminate the availability of meaningful relief for the plaintiffs should the defendants not prevail on appeal.

In a dissenting opinion, Judge Neomi Rao, an appointee of President Trump, took the position that Judge Jackson's preliminary injunction "turns the separation of powers on its head" by requiring judicial supervision of the executive branch. Judge Rao went on to express the opinion that instead of remedying Judge Jackson's transgressions, the D.C. Circuit's order "hamstrings the Executive and prevents the CFPB from downsizing until the merits of the appeal are resolved."

Following the D.C. Circuit's order, Judge Amy Berman Jackson dismissed the plaintiffs' emergency motion without prejudice as moot and canceled evidentiary hearings on the matter previously set for April 29 and 30, 2025. Subsequently, and in light of Judge Jackson's dismissal, the CFPB filed an unopposed motion to dismiss its appeal of the plaintiff's emergency motion on May 7, 2025.

Oral argument is still scheduled for May 16, 2025, after the D.C. Circuit placed the CFPB's appeal on an expedited track, in consideration of the government's interest in this matter. After hearing oral argument and reviewing the parties' briefings, the D.C. Circuit will enter a ruling on the merits of the parties' arguments as to the validity of Judge Jackson's preliminary injunction.

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