The short answer is that the outcome of the Supreme Court hearing (whose oral argument is scheduled for May 15 at 10 am) is of immense importance to all stakeholders in the consumer financial services industry. We will explain why that is the case.
The Fourteenth Amendment states: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside."
Section 2(a) of President Trump's Executive Order of January 20, 2025, entitled "Protecting the Meaning and Importance of American Citizenship states:
Sec. 2. Policy. (a) It is the policy of the United States that no department or agency of the United States government shall issue documents recognizing United States citizenship, or accept documents issued by State, local, or other governments or authorities purporting to recognize United States citizenship, to persons: (1) when that person's mother was unlawfully present in the United States and the person's father was not a United States citizen or lawful permanent resident at the time of said person's birth, or (2) when that person's mother's presence in the United States was lawful but temporary, and the person's father was not a United States citizen or lawful permanent resident at the time of said person's birth.
This Executive Order effectively ends birthright citizenship for children born to mothers who are unlawfully present or temporary lawful residents in the United States and whose fathers are not lawful permanent residents at the time of the child's birth. One day later, four states and three individuals challenged this order in the U.S. District Court for the Western District of Washington, which three days later granted a universal temporary restraining order enjoining the government from implementing this order. Two weeks later, this became a nationwide injunction. Other similar nationwide injunctions have since been issued from the U.S. District Court for the District of Maryland and the U.S. District Court for the District of Massachusetts. The government has appealed all of these, and the question of whether the Supreme Court should stay the district courts' preliminary injunctions (except as to the individual plaintiffs and identified members of the organizational plaintiffs or states) is now set to be argued on May 15.
The Supreme Court will not at this juncture will not be considering the Constitutionality of the Executive Order itself. Instead, the sole issue before the Supreme Court is whether it was constitutional to apply the Executive Order universally to persons who are not plaintiffs in the three lawsuits. In other words, should the lower courts have limited the beneficiaries of the injunctions to just the plaintiffs or members of the plaintiff organizations.
This now brings me to the direct connection between these cases and the consumer financial services world. Anyone who follows closely the developments at the CFPB knows that under the leadership of Director Rohit Chopra, the CFPB issued a raft of regulations during his tenure. They included, among other regulations, a regulation limiting late fees charged on credit cards issued by large banks to $8 and a lawsuit challenging an amendment to a CFPB UDAAP Exam Manual which defined "unfairness" to encompass discrimination. A Texas Federal District Court granted a preliminary injunction in favor of the bank trade associations and their members. That resulted in a flurry of motions to intervene followed by motions for preliminary injunctions by trade associations who were not plaintiffs in the original lawsuit. Several banks and companies who were not members of the associations that were plaintiffs joined one of such associations with the hope that that would make them eligible to be a beneficiary of the injunction. The District Court Judge who at some point apparently tired of entertaining motions to intervene followed by new motions for preliminary injunctions, decided to expand the injunction in order to preclude the CFPB from enforcing it against non-plaintiffs.
There are many other instances in which courts have issued universal or nationwide injunctions in order to preclude a federal agency from enforcing a regulation against entities otherwise covered by the regulation who are not plaintiffs or members of plaintiff associations.
If the Supreme Court grants a stay of the preliminary injunctions issued in the birthright citizenship cases that could result in it being unlawful for a court to obtain a universal or nationwide injunction against an unlawful regulation.
A related concern is whether the Supreme Court might use the birthright citizenship cases to say something about the continued viability of the concept of associational standing. The Supreme Court has previously held that under certain circumstances members of plaintiff associations are beneficiaries of injunctions issued in favor of such associations. Justice Thomas has urged the Court to revisit that doctrine on the basis that it unconditionally confers standing on non-parties.
We hope that we have piqued your interest and concern about the outcome of the birthright citizenship cases pending before the Supreme Court.
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