PHH Corp. argues that the state attorneys general have no basis for being involved in its suit against the CFPB.
PHH Corp. argues that the state attorneys general have no basis for being involved in its suit against the CFPB. Adobe Stock

PHH Corp. is opposing an attempt by Democratic attorneys general in 16 states and the District of Columbia to intervene in an appeals court case that found the Consumer Financial Protection Bureau's structure was unconstitutional.

The Mount Laurel, N.J.-based mortgage servicing firm alleges that the state AGs have no legally protected interest in the case and that they failed to meet the standard for intervening in a timely manner.

The company filed two motions with the U.S. Court of Appeals for the D.C. Circuit on Friday, the deadline for the company to respond to arguments by the state attorneys general and the U.S. Solicitor General.

The arguments are part of the ramped-up jockeying to influence the outcome of the contentious appeals court case, PHH Corp. v. CFPB. The case could determine whether CFPB Director Richard Cordray can keep his job until his term expires in July 2018, or if President Donald Trump can fire him at will.

"The state AGs did not need to read newspaper articles speculating on what 'the Trump administration is planning' to realize that, if the CFPB director were like every other cabinet secretary, then the CFPB would be accountable to the president like every other executive branch agency," attorneys for PHH stated in an 18-page motion. "The [D.C. Circuit] panel’s questions about the constitutionality of the agency at oral argument last year were a matter of public record. The state AGs' decision to wait until after not just the presidential election but the inauguration to seek to intervene, long after the case was brought, is the opposite of 'good cause.'"

PHH also argued that even the U.S. Solicitor General was straining to articulate a basis for an en banc hearing by the appeals court. In October, a three-judge appeals court panel ruled that a provision of the Dodd-Frank Act allowing the CFPB's director to be removed only for cause was unconstitutional. The panel sought to strike that provision, allowing the president to remove the director at any time.

But the CFPB has appealed that decision, seeking an en banc review by the entire appeals court. In an unusual move, the state AGs, two Democratic lawmakers and a consumer advocacy group have all filed motions arguing that they have legal standing to intervene. In its filing, PHH said there are "no examples of an appellate court granting rehearing en banc for the purpose of not reaching an issue."

Cordray, a former Democratic Ohio attorney general, has signaled that he will not resign. He also has said he intends to continue to pursue an aggressive regulatory agenda for the independent agency.

The timing may be a problem for the state AG's petition. Federal appellate rules require that a motion to intervene be filed within 30 days after a petition for review is filed; PHH filed its petition for review in June 2015. Lawyers for PHH said the state attorneys general have no standing to defend the constitutionality of a federal statutory provision that only applies to one federal officer, in this case, the director of the CFPB.

State attorneys general had argued that the D.C. Circuit panel's decision in October effectively gave the president veto power over the states' ability to enforce the Consumer Financial Protection Act because states are required to notify the CFPB of any intended enforcement actions they might file, allowing the CFPB to intervene.

The states "remain free to pursue their own enforcement actions, and the courts will remain the ultimate arbiters of any disagreements," the PHH motion stated.

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