In a dramatic turn of events, a federal appellate court has reversed a previous decision favoring the Trump administration in a contentious case involving the Consumer Financial Protection Bureau (CFPB). This decision, announced on Wednesday, marks a significant development in the ongoing legal battle.

The U.S. Court of Appeals for the District of Columbia Circuit, in an unusual move, decided to rehear the case en banc, which means it will be reviewed by the full court rather than just a panel of judges. This decision was detailed in a concise, two-page per curiam order, following a challenge from the National Treasury Employees Union (NTEU) regarding extensive layoffs.

The order explicitly states, “This case will be reheard by the court sitting en banc,” and further announces the vacating of a previous judgment from August 15, 2025. Additionally, it maintains the partial stay previously imposed in April of the same year.

This full court review overturns a decision made this past summer by a smaller panel of three judges. That ruling had allowed the federal government to proceed with significant reductions in force, citing a lack of jurisdiction and the inadequacy of the claims presented by the NTEU.

The legal proceedings have been marked by a series of back-and-forth decisions at both district and appellate levels, creating a complex legal landscape. At the heart of the conflict is the NTEU’s assertion that Russ Vought, Director of the Office of Management and Budget, unlawfully terminated CFPB employees and erased crucial data, including cybersecurity-related contracts, without proper justification.

The lawsuit brought forward by the NTEU accuses Vought of various constitutional violations and breaches of the Administrative Procedure Act (APA), which governs federal agency actions. The case has become a pivotal confrontation over the limits of executive authority and the protection of federal employees’ rights.

After the lawsuit was filed in February, U.S. District Judge Amy Berman Jackson, a Barack Obama appointee, issued a multi-pronged preliminary injunction in March. The lower court judge opined that she was acting with haste to “make sure [the CFPB] hasn’t been choked out of its very existence” before a final judgment on the merits could be issued.

In early April, however, the appellate court stepped in to stay several prongs of the injunction, allowing some firings to continue.

Specifically, the appeals court modified the third prong of the eight-pronged injunction to allow the government to perform a RIF of employees determined “after a particularized assessment to be unnecessary to the performance” of the CFPB’s statutorily mandated duties.

In turn, the Trump administration took the court’s permission slip and ran, aiming to dye it pink at scale. One week later, OMB used the panel’s order to try to fire between 1,400 and 1,500 employees, which would have eliminated some 90% of the agency’s workforce.

The next day, Jackson issued a second injunction to stop the firings.

In late April, the panel reversed itself – clarifying some of the language but broadly making the proposed wave of layoffs impermissible.

“In response, plaintiffs highlight that the proposed RIF currently at issue, involving nearly 90 percent of agency employees, exceeds the scope of the RIF that prompted the district court’s original preliminary injunction,” the panel explained, in a volte-face.

Still, all that spring jostling was essentially an appetizer.

In August, in a 2-1 decision, Trump-appointed U.S. Circuit Judges Gregory Katsas and Neomi Rao voted to vacate the injunction in full.

“We hold that the district court lacked jurisdiction to consider the claims predicated on loss of employment, which must proceed through the specialized-review scheme established in the Civil Service Reform Act,” Katsas wrote. “And the other plaintiffs’ claims target neither final agency action reviewable under the Administrative Procedure Act nor unconstitutional action reviewable in equity.”

In other words, the majority said the plaintiffs filed a defective lawsuit alleging far too much – and in the wrong court system – and that Jackson’s relief for the plaintiffs could simply not be squared with those basic legal errors by the employees on the chopping block.

The August ruling goes on, at length:

The plaintiffs seek to set aside an abstract decision, inferred from a constellation of discrete actions, to prophylactically ensure that the Bureau can fulfill its statutory mandate. This theory contravenes all the APA limits…agency action, finality, ripeness, and discreteness alike. If the plaintiffs’ theory were viable, it would become the task of the judiciary, rather than the Executive Branch, to determine what resources an agency needs to perform its broad statutory functions. Such pervasive judicial control of agency administration falls well beyond limited APA review.”

Now, a different majority has had a say and the judges are offering the NTEU, and several other plaintiffs, a second bite at the appellate apple.

Briefing for the full appellate court’s rehearing is set to begin on Jan. 9, 2026, and end by Feb. 17, 2026. The court further explained that the schedule was almost certainly set in stone.

“Because the briefing schedule is keyed to the date of argument, the court will grant requests for extension of time limits only for extraordinarily compelling reasons,” the per curiam order reads.