On April 5, the U.S. Court of Appeals for the Fifth Circuit issued an order effectively reversing the district court’s decision to transfer the lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB or Bureau) credit card late fee rule from the Northern District of Texas to the District Court for the District of Columbia (D.D.C), finding that the Texas district court lacked jurisdiction to issue its order because the plaintiffs’ appeal of the effective denial of their motion for preliminary injunction was already pending before the appellate court.

As discussed here, last month several trade groups, including the U.S. Chamber of Commerce, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and Texas Association of Business (collectively, the trade groups) filed a complaint in the U.S. District Court for the Northern District of Texas challenging the credit card late fee rule as unconstitutional and violative of the Administrative Procedure Act. Concurrently with the complaint, the trade groups filed a motion for preliminary injunction requesting that the court enjoin the Bureau from implementing the late fee rule against their members until the conclusion of the case. Instead of ruling on the motion, the district court issued an order raising concerns about whether the Fort Worth Division was the proper venue for the suit and ordered the parties to brief the issue. The trade groups filed a notice of appeal from the district court’s “effective denial” of their motion for preliminary injunction (because it was not decided on an expedited basis), and then separately filed a petition for writ of mandamus. Before the Fifth Circuit ruled on those motions, the district court ordered that the case be transferred to D.D.C. (discussed here)

In reversing the district court’s transfer order, the Fifth Circuit stated that it was not opining on “where this case rightly belongs,” but merely ruling that the court was without jurisdiction to issue the order. The court emphasized that once a party properly appeals a district court ruling, the district court has no jurisdiction to do anything that alters the case’s status. The court did not make a broad rule regarding transfers but focused on whether the district court had jurisdiction to enter this particular transfer order. “On these facts, it did not.”

On this basis, the appellate court granted the petition for mandamus, vacated the district court’s transfer order, and ordered the district court to reopen the case. The court also instructed the district court to notify D.D.C that its transfer was without jurisdiction and should be disregarded.

Our Take:

This is a limited ruling because the Fifth Circuit’s order only addressed the trade group’s petition for writ of mandamus and reversed the transfer order. However, there remains a separate appeal pending before the Fifth Circuit regarding the district court’s effective denial of the trade group’s preliminary injunction motion. One positive outcome from this opinion is that it disposes of one of the CFPB’s primary arguments — that there was no appealable order because the district court did not deny the preliminary injunction. The Fifth Circuit rejected this argument stating, “given the [credit card] issuers’ unusually short timeline for complying with the Final Rule or obtaining injunctive relief, the district court effectively denied the [trade groups’] motion for a preliminary injunction by not promptly ruling on it by and by instead opting to hear an unrelated motion sua sponte.” Thus, the appellate court found it has jurisdiction to review the preliminary injunction issue while also acknowledging that the record supports the trade groups’ need for urgency and the burdens of complying with the new rule.

We anticipate that the Fifth Circuit will issue a ruling on the trade groups’ preliminary injunction appeal shortly.