An organization of eight banks in Kentucky sued the Consumer Financial Protection Bureau (CFPB), challenging the Small-Business Lending Rule, the constitutionality of the CFPB’s funding mechanism, and that the rule violated the First Amendment. The Kentucky suit was filed in August 2023. However, a few months earlier, in April, some plaintiffs in Texas had brought suit against the CFPB for nearly the exact same reasons (the Texas case did not include the First Amendment claim). The court hearing the Texas case decided to stay the litigation due to the pending case before the Supreme Court of the United States regarding the constitutionality of the CFPB’s funding mechanism. Now, in the Kentucky case, the CFPB asks for a stay on the proceedings until the Texas litigation is resolved.
In Monticello Banking Co. v. Consumer Fin. Prot. Bureau, No. 6:23-cv-00148-KKC, 2024 WL 3723828, 2024 U.S. Dist. LEXIS 141039 (E.D. Ky. Aug. 8, 2024) (opinion not yet released for publication), the court granted the stay requested by the CFPB under the first-to-file rule. The first-to-file rule allows a case to be stayed when a nearly identical case has already been filed elsewhere. When examining this rule, the court considers three factors: “(1) the chronology of events, (2) the similarity of the parties involved, and (3) the similarity of the issues or claims at stake.” If all three lend to applying the rule, the court then must determine if any equitable considerations would lend towards the rule not being applied. First, the court examined the order of the events and found that the Texas case was brought before the Kentucky case. Next, the court examined the parties in each lawsuit. It was reasoned that the types of banks and community organizations bringing suit were essentially the same and that they “have such an identity that a determination in one action leaves little or nothing to be determined in the other.” Third, the court found the issues to be nearly identical, except for the First Amendment issue, which could be rendered moot depending on the outcome of the Texas litigation. Finally, because the court determined all three factors in the CFPB’s favor, it then considered any equitable issues that would prevent the rule from being applied. The court reasoned that the CFPB exercised no bad faith or inequitable conduct and that there were no unique circumstances that would prevent the first-to-file rule from being implemented. Thus, the court extended the stay in the Kentucky litigation pending the resolution of the Texas case.
By Maycee Redfearn: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]