Court Considers Recusal Standards In CFPB 5th Circuit Suit Over Credit Card Late Fees - Financial Services - United States

[Gunnar Larson]

https://www.mondaq.com/unitedstates/financial-services/1454794/court-considers-recusal-standards-in-cfpb-5th-circuit-suit-over-credit-card-late-fees


23 April 2024
by Tonya M. Esposito and Shirin Afsous
Greenberg Traurig, LLP

View Tonya M. Esposito Biography on their website

The Consumer Financial Protection Bureau (CFPB) and a coalition of
trade-group plaintiffs filed dueling briefs last week over recusal
standards in the Fifth Circuit lawsuit challenging the CFPB's $8 credit
card late fee final rule.1 On April 8, 2024, the court requested
supplemental briefing on whether a judge's ownership interest in a
non-party large credit card issuer would be substantially affected by the
outcome of the case. The final rule defines a larger card issuer as an
issuer that, along with its affiliates, has at least one million open
credit card accounts. The issue arose because U.S. Circuit Court Judge Don
R. Willett, a judge in this matter who already ruled once in this case in a
2-1 panel majority opinion sending the litigation back from D.C. to Texas
federal court, has approximately $2,000 of a large bank's stock held in one
of his children's college funds. While the bank is not a party to this
case, it is a large credit card issuer that would be impacted by the
outcome of this litigation. The supplemental briefing submitted on this
issue turns on how narrowly the court considers the issue, with the CFPB
arguing that "the law requires any judge who owns stock in a large card
issuer to recuse[]" and plaintiffs arguing the potential impact of the
litigation is "too remote and speculative" to justify judicial recusal.

The plaintiff trade groups argue that "courts have held that recusal is not
warranted under the applicable standard unless the litigation's substantial
effect on the judge's interest is 'easily ascertainable.'" Plaintiffs
further assert, "Applying these principles, courts across the country,
including this one, have been 'unwilling to adopt a rule requiring recusal
in every case in which a judge owns stock of a company in the same industry
as one of the parties to the case.'" Using the CFPB's own conduct
concerning the final rule, plaintiffs argued, "The CFPB argued below that,
'[a]s for the large card issuers, they will be fine[]'" and that based on
the CFPB's own representations, it is not easily ascertainable if there
will be "a substantial effect on the stock price—rather than revenue—of any
particular credit card issuer."

The CFPB argues in its supplemental briefing that "the outcome of this
litigation could substantially affect an ownership interest in large credit
card issuers...[because] there is a direct connection between this case—a
facial challenge to a regulation governing the late fees that can be
charged by the 30 to 35 largest card issuers in the country—and the revenue
streams of those directly regulated entities" (emphasis in original). The
CFPB further states, "And while it is difficult to say with precision how
the Late Fee Rule—or the litigation challenging it—would affect card
issuers' revenue and thus profitability (which could in turn affect share
prices), industry analysts have predicted a possible substantial effect."
The CFPB contends that "ownership of stock in a large card issuer would
trigger recusal obligations regardless of whether the litigation could
substantially affect that ownership interest."

Judge Willett has said he does not believe he needs to recuse himself from
the case and that he has received ethical advice concerning the same from
an adviser at the court.

Footnote

1. For background, see previous GT Alerts.
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: text/html
Size: 4417 bytes
Desc: not available
URL: <https://lists.cpunks.org/pipermail/cypherpunks/attachments/20240426/8ee0ce5a/attachment.txt>