Plaintiffs' Combined Reply in Support of Motion for Summary Judgment, Opposition to Defendants' Motion to Dismiss, and Opposition to Defendants' Cross-Motion for Summary Judgment

INTRODUCTION

Defendants know that, if this Court reaches the merits, then they lose. Defendants concede that, under the Fifth Circuit’s decision in Community Financial, the CFPB’s funding scheme is unconstitutional and so its manual update must be vacated in full. See Cmty. Fin. Servs. Ass’n of Am., Ltd. v. CFPB, 51 F.4th 616 (5th Cir. 2022). The agency should also be enjoined from exercising the authority asserted in the update, since that authority lacks constitutional funding too. Defendants are in just as much trouble under the APA. If this Court agrees with Plaintiffs that the update is final agency action, then Defendants have no defense for why they bypassed notice and comment. Defendants have little to say under the arbitrary-and-capricious standard, since they can’t point to any reasoned decision-making. And they have nothing persuasive to say about the limits on their statutory authority. Congress knows how to grant agencies the all-important power to regulate discrimination, and it did not silently slip that power into a statute governing “unfairness.”

Because Defendants have no defense of their statutory interpretation, they resort to a straw-man, falsely characterizing Plaintiffs’ position as an attempt to insulate conduct that meets the statutory definition of a UDAAP but that also happens to be discriminatory. But the agency did not spend so much time and energy drafting and promoting the update just to tell examiners and regulated entities that UDAAP means what everyone always understood it to mean. The update announces the agency’s view that discrimination is a UDAAP: Examiners must look for discrimination itself. Regulated entities must set up compliance programs keyed to discrimination itself (in new contexts not covered by actual nondiscrimination statutes). And discrimination itself satisfies the statutory elements of a UDAAP. And not just discrimination, but discrimination based on disparate impacts against an unidentified and potentially endless set of protected classes. That is what grossly exceeds the CFPB’s statutory authority.

Understanding their predicament on the merits, Defendants ask this Court to dismiss the case on procedural grounds. Though Plaintiffs represent the entities that are directly regulated by Defendants’ new rule, Defendants claim that not one of Plaintiffs’ members has Article III standing. And though Defendants understand that their manual directs the behavior of agency personnel and regulated entities—indeed, that’s the whole point—Defendants claim that the update is not final agency action. These arguments fail. And the final-agency-action argument is not a defense to Plaintiffs’ constitutional claim anyway, where Defendants concede that Plaintiffs win on the merits.

This Court should grant Plaintiffs’ motion for summary judgment under both the Appropriations Clause and the APA. District courts rule on alternative grounds every day, and addressing all of Plaintiffs’ claims together will allow this Court to close the case and avoid the possibility of an unnecessary remand and second appeal. Because Plaintiffs prevail on all their claims, this Court should also deny Defendants’ motion to dismiss and cross-motion for summary judgment. And it should enter all forms of relief—vacatur, declaratory, and injunctive—that Plaintiffs are entitled to.

ARGUMENT

Defendants simultaneously filed a cross-motion for summary judgment and a motion to dismiss. The two documents are word-for-word identical. Compare CFPB-Mot. (Doc. 22), with MTD (Doc. 23). Neither has merit. Defendants identify no grounds for dismissing this case outright. And Plaintiffs have the better of the argument on which side is entitled to summary judgment.

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