On June 18, the Fifth Circuit Court of Appeals granted the plaintiffs’ petition for a writ of mandamus, effectively halting the transfer of the lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB or Bureau) credit card late fee rule from a Texas federal district court to the District of Columbia. This decision marks another pivotal moment in the ongoing legal battle over the CFPB’s Final Rule, which has seen a complex procedural history unfold over the past few months.

As discussed here, the CFPB’s Final Rule reduces the safe harbor amount for late fees charged by major credit card issuers from $30 and $41 to $8. The rule was set to take effect on May 14, 2024. In response, a coalition of trade groups, including one based in Fort Worth, Texas, filed a lawsuit in the Northern District of Texas, challenging the rule on constitutional and statutory grounds and seeking a preliminary injunction.

The Texas federal district court initially transferred the case to D.C., prompting the plaintiffs to file an emergency petition for writ of mandamus. On April 5, the Fifth Circuit issued an order, discussed here, finding that the Texas federal district court lacked jurisdiction to issue its first transfer order because the plaintiffs’ appeal of the effective denial of their motion for preliminary injunction was already pending before the appellate court. The plaintiffs moved for a preliminary injunction pending the U.S. Supreme Court’s decision in Community Financial Services Association of America, Limited (CFSA) v. CFPB, which would decide whether the CFPB’s special funding structure violated the appropriations clause. The Fifth Circuit remanded the case to the district court to enter an order addressing the preliminary injunction motion, which the district court granted on May 10, discussed here.

As discussed here, on May 16 the U.S. Supreme Court issued its decision in CFSA v. CFPB, finding the CFPB’s funding structure constitutional. On May 28, the CFPB filed a second motion to transfer, which the district court granted the very same day. Within hours of the order’s issuance, the plaintiffs filed with the Fifth Circuit an emergency petition for writ of mandamus and administrative stay of transfer arguing that the transfer “would delay the resolution of this challenge and deprive [the plaintiffs] of their choice of a proper and appropriate venue.”

In its latest decision, the Fifth Circuit panel concluded that the Texas federal district court misapplied the transfer standard and that the order constituted a clear abuse of discretion. Judge Willett, writing for the panel, stated, “Controlling venue and transfer rules preclude sending this case to Washington, D.C.” The court emphasized several points:

  • Convenience of Counsel: The district court erred by considering the convenience of counsel as a factor in its transfer analysis. The Fifth Circuit reiterated that the convenience of counsel is irrelevant under § 1404(a), which focuses on the convenience of the parties and witnesses.
  • Localized Interests: The court found that the district court improperly concluded that D.C. residents had a localized interest in the case simply because the CFPB is based there. The Fifth Circuit clarified that the effects of the CFPB’s rule are nationwide, making the local interest factor neutral.
  • Court Congestion: While the district court noted that the Northern District of Texas has a busier docket than the District of Columbia, the Fifth Circuit held that court congestion alone cannot justify a transfer under § 1404(a).

The Fifth Circuit dissolved its earlier administrative stay, granted the plaintiffs’ petition for a writ of mandamus, and directed the district court to vacate its transfer order.

The Fifth Circuit’s decision could have broader implications for future litigation against government agencies located in D.C. Judge Willett noted that the issues in this case “implicate not only these parties’ interests, but the interests of all parties who litigate against government defendants located in D.C. and seek to have their cases heard by judges and juries outside the nation’s capital.”

Troutman Pepper will continue to monitor this case closely and provide updates on any further developments.