Federal Court Vacates Preliminary Injunction, Allowing CFPB to Proceed with Layoffs

The U.S. Court of Appeals for the District of Columbia Circuit will allow the CFPB to move forward with large-scale agency layoffs after vacating a preliminary injunction entered by Judge Amy Berman Jackson on March 28, 2025. In a 2-1 decision, the D.C. Circuit's opinion, issued on Aug. 15, 2025, and written by President Donald Trump appointee Judge Gregory Katsas, hinged on jurisdictional and factual deficiencies underlying the plaintiffs' claims for relief.

Brief Procedural Background

As previously reported by Holland & Knight, the National Treasury Employees Union (NTEU) and CFPB Employee Association, among others, filed a lawsuit in the U.S. District Court for the District of Columbia in February 2025 in response to CFPB Acting Director Russell Vought's "decision to prevent the CFPB from drawing down more funding and ordering the CFPB's workforce to cease all supervision and examination activity," in addition to closing and "shuttering the Bureau's headquarters for at least a week." The plaintiffs claimed that the actions taken by the CFPB amounted to a unilateral attempt to dismantle the agency, in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the doctrine of separation of powers. Judge Jackson, in support of her March 31, 2025, order enjoining the CFPB from enforcing the sweeping reductions, agreed with the NTEU that the executive branch was seeking to alter the framework of the CFPB, which can be achieved only through legislative action.

After the CFPB appealed Judge Jackson's preliminary injunction, the D.C. Circuit partially stayed the preliminary injunction on April 11, 2025, giving the CFPB latitude 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." In response to the D.C. Circuit's decision, the CFPB issued a reduction in force (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.

The D.C. Circuit on April 28, 2025, clarified 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," but then went a step further and lifted its partial stay that gave the CFPB latitude to issue RIFs after such particularized assessment. Until further ruling from the D.C. Circuit, the CFPB was once again bound by Judge Jackson's preliminary injunction barring further RIFs.

D.C. Circuit Decision and Order

After hearing oral argument on May 16, 2025, Judge Katsas, joined by fellow Trump appointee Judge Neomi Rao, identified multiple grounds to vacate Judge Jackson's preliminary injunction: first, based on the lack of jurisdiction to hear the claims based on loss of employment and, second, based on the insufficiency of the remaining claims.

First, the D.C. Circuit considered the district court's jurisdiction to consider the underlying claims. "The injuries alleged by the NTEU and the CFPB Employee Association flow from their members' loss of employment," but the CFPB argued that Judge Jackson did not have jurisdiction to review those claims. Though federal district courts have jurisdiction over claims arising under federal law, statutory review schemes may displace that jurisdiction. Relevant here, the Civil Service Reform Act regulates nearly every aspect of federal employment, including the review and resolution of employment disputes. As claims predicated on the loss of federal employment "must proceed through the specialized-review scheme established in the Civil Service Reform Act," the court held that Judge Jackson lacked jurisdiction to consider the claims arising from the CFPB's RIF.

Although the remaining plaintiffs did not seek relief for employment-related injuries, their claims also failed as a matter of law, as they did not challenge a "discrete, final agency action" as required by the Administrative Procedure Act (APA). Judge Katsas highlighted that the plaintiffs sought to challenge "a single, overarching decision to shut down the CFPB, which they infer[red] from" the CFPB's decision to lay off employees, cancel contracts, decline additional funding and subject work to an advance-approval requirement. Though "the plaintiffs here could challenge many of these actions in court" via independent claims, it was the attempt to "challenge them all at once" that proved fatal to the plaintiffs' claims. As "plaintiffs seek to set aside an abstract decision, inferred from a constellation of discrete actions, to prophylactically ensure that the Bureau can fulfill its statutory mandate," the D.C. Circuit concluded that the remaining four plaintiffs "have no viable cause of action."

While Judge Katsas and Judge Roe concluded that judicial review is unavailable to challenge the president's discretionary decisions, the D.C. Circuit panel's third member, Judge Cornelia Pillard, appointed by President Barack Obama, criticized the "constricted view" of the scope of the court's authority. In her dissent, Judge Pillard emphasized that while the president has discretion to run the CFPB in a manner he believes best serves the public interest, "it is emphatically not within the discretion of the President or his appointees to decide that the country would benefit most if there were no Bureau at all." Judge Pillard, emphasizing the importance that separation of powers plays in the operation of the federal government, expressed that "[t]he notion that courts are powerless to prevent the President from abolishing the agencies of the federal government that he was elected to lead cannot be reconciled with either the constitutional separation of powers or our nation's commitment to a government of laws."

Next Steps and Potential Implications

Though the Trump Administration has celebrated this ruling, it will not immediately go into effect. Concurrent with the publication of the D.C. Circuit's opinion, on the court's own motion, it ordered the clerk to "withhold issuance of the mandate … until seven days after disposition of any timely petition for rehearing or petition for rehearing en banc." The scope of Judge Jackson's preliminary injunction, therefore, will remain in effect until the plaintiffs appeal the panel's decision to the full bench of the D.C. Circuit or to the U.S. Supreme Court. The plaintiffs have 45 days to petition the D.C. Circuit to rehear the case, so this decision will remain delayed until seven days after any such petition is resolved.

The D.C. Circuit's ruling opens up the path for the CFPB to drastically reduce its operational landscape as it has intended to do since the Trump Administration returned to Washington, D.C, but the agency's actions in the recent months prove that its goal can be achieved even without such resources. As Holland & Knight has previously reported, the CFPB utilized alternative means of scaling back the scope of the agency, including a comprehensive review of all published guidance materials, withdrawal of guidance documents that fail to comply with the APA, seeking dismissal of pending litigation and reducing oversight throughout various industries. Additionally, the CFPB recently published an updated rulemaking agenda, with 24 rules in the prerule, proposed rule and final rule stages, as an indicator of its priorities and plans for action moving forward. Further, on the legislative side, President Trump on July 4, 2025, signed into law the One Big Beautiful Bill Act that has direct impacts on the future of the CFPB. Though the final bill reduces the CFPB's operating budget by almost 50 percent, the Trump Administration has already taken numerous steps to substantially decrease the agency's size and scope.

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