In the first of what are becoming regular clashes between Democratic state attorneys general and the new President, the attorneys general of Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia sought to intervene in federal court proceedings to defend the constitutionality of the Consumer Financial Protection Act ("CFPA"), which created the Consumer Financial Protection Bureau ("CFPB"), currently headed by Richard Cordray. Cordray is a former Attorney General of the State of Ohio.

On October 11, 2016, a divided panel of the Court of Appeals for the D.C. Circuit held that the CFPB as currently structured is unconstitutional. In particular, the CFPA provided that the director of the CFPB is removable by the President only for cause, as opposed to serving at will. The CFPA's drafters envisioned this would increase the independence of the CFPB. The Appeals panel wrote that this provision made the CFPB insufficiently accountable to the executive branch, and ordered the for-cause provision severed from the CFPA. One month later, the CFPB petitioned for an en banc rehearing (meaning a hearing before all appellate judges of the D.C. Circuit) of the case, which is generally reserved for "question[s] of exceptional importance." Fed. R. App. P. 35. The United States Department of Justice filed in support of the CFPB's petition in December 2016. On January 23, 2016, the state AGs moved to intervene in the proceedings. The D.C. Circuit denied this request on February 2, 2017, issuing a per curiam order without explanation of the decision.

Citing statements of President Trump criticizing the CFPB and its current director, the state AGs argued that "the new administration will not maintain its defense of the CFPB," and that if the panel decision is upheld on rehearing (or is not reheard en banc) that the Trump administration will not seek review at the Supreme Court. The state AGs also argued that their interests and those of their states were directly at stake, because the CFPA empowers state attorneys general to enforce its provisions after notifying the CFPB, which may then intervene. This provision would be threatened, they argued, if the director of the CFPB may be fired without cause: "Removal of the Director's independence as a result of this Court's ruling would turn Congressional intent on its head, effectively giving the President veto power over the State Attorney Generals' enforcement of the CFPA." As explanation for filing so late in the case, the state AGs argued that the need to intervene "only became apparent after the presidential election and indications for the incoming administration revealed that continued defense of the statute might be ended."

Counsel for PHH Corporation, the mortgage company that initially sought review and argued that the CFPB's structure violated the Constitution, argued that the state AGs were far out-of-time, seeking to intervene 19 months after PHH appealed and three months after the election which, the state AGs argued, changed the landscape of the case. PHH also argued that the true motive of the state AGs was to ensure Supreme Court review would be sought in the event of an adverse holding, an effort PHH characterized as "a massive and impermissible intrusion into the Executive's responsibility and constitutional prerogative to control the defense of litigation against the United States."

As regulatory reduction takes center stage at the White House, we can expect that the Democratic AGs will not only fight the Trump administration every step of the way, but also that they may redouble their efforts to enforce state consumer protection provisions as federal regulation is pared back.

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