Weeks after a Federal Reserve Board governor filed a lawsuit to prevent her termination by Donald Trump, Lisa Cook managed to convince a federal judge in Washington, D.C., that mortgage fraud allegations, which date back to before her time in office, do not meet the criteria of “for cause” required for her removal.

U.S. District Judge Jia Cobb, appointed by President Joe Biden in 2021, began her decision in favor of Cook by recognizing the unprecedented nature of the case — noting it as a “first impression” case — and concluded by highlighting that this marks the “first” attempt at “‘for cause’ removal of a Federal Reserve Board Governor[.]”

Cook, also selected by Biden and starting her 14-year term in 2023, along with her prominent lawyer Abbe Lowell, argued successfully, at least temporarily, that despite the disputed mortgage fraud allegations, federal law indicates that the “best reading of the ‘for cause’ provision is that the bases for removal of a member of the Board of Governors are limited to grounds related to a Governor’s conduct in office and their fulfillment of statutory duties,” not based purely on alleged and unproven actions before her appointment.

“‘For cause’ thus does not involve removing someone solely for actions that took place before their tenure,” Cobb stated, noting that inefficiency, neglect of duty, and malfeasance in office (INM) commonly justify dismissals within independent agencies like this situation. “Moreover, the Court finds that the removal likely infringed upon Cook’s procedural rights under the Fifth Amendment’s Due Process Clause. She has also shown irreparable harm from her dismissal.”

Lowell and Cook contended in their court documents that the DOJ’s proposed definition of cause — “any articulable justification that the President deems sufficient to warrant removal” — was fundamentally flawed, and nor could it be alleged that Cook experienced sufficient due process. The judge concurred on both points, awarding Cook a temporary restraining order that the court recognized as a preliminary injunction to temporarily prevent the firing.

“The Court finds Cook substantially likely to succeed on at least two of her claims. First, the Court finds Cook likely to succeed on her argument that President Trump violated the Federal Reserve Act because her purported removal did not comply with the statute’s ‘for cause’ requirement,” Cobb said. “Second, the Court finds Cook likely to succeed on her claim that the purported removal deprived her of procedural rights guaranteed by the U.S. Constitution.”

Although the judge said Cook is “likely not correct that ‘for cause'” and the standard of inefficiency, neglect of duty, and malfeasance in office are “perfectly synonymous,” the Trump administration doomed itself by supporting an “any articulable justification” standard.

If the administration’s argument were true, then that would be “tantamount to being able to fire for policy disagreement, which the Government has admitted the President cannot do,” Cobb wrote, before indicating her ruling is not controversial,

“The Government’s argument that a rule that does not take into account pre-confirmation conduct will lead to a parade of horribles also ignores that this is precisely the line that Congress has drawn in dozens of statutes over the past century,” the judge continued. “For the officers that Congress insulated with INM protections, pre-confirmation conduct has never been a basis for removal. The Court is not breaking new ground in interpreting the Federal Reserve Act’s ‘for cause’ provision consistent with this historical landscape.”

In sum, Cobb found that “permissible cause for removal” of Cook and similarly situated officials “extends only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office.”

In addition, the judge ruled that Trump’s determinations for firing Cook are reviewable by the courts and that the administration’s arguments to the contrary would lead to an “absurd result” because Federal Reserve Board members would essentially be removable at will, even for mere policy disagreement that the DOJ itself has said could not be “cause” for firing:

Finally, taken to its logical conclusion, the Government’s argument leads to an absurd result: While admitting that the President cannot remove an official for policy disagreements, the Government claims that under Reagan, a removal on the grounds of a policy disagreement would nevertheless be unreviewable. This cannot be the case. Such a rule would provide no practical insulation for the members of the Board of Governors. It would mean that the President could, in practice, “remove a member . . . merely because he wanted his own appointees on the” Board of Governors. Here, there is a disagreement between the Parties about the interpretation of a federal statute. The Court is exercising its appropriate role in resolving this dispute.

Next, the judge added in two caveats in footnotes. First she pointed out that the ruling was made without “inquiring into the sufficiency” of the mortgage fraud evidence “presented by President Trump.” Second, Cobb did not reach Cook’s claim that her firing was fueled by pretext. Still, she found that Trump had a “legally impermissible reason for firing Cook” by referring “only to allegations regarding Cook’s conduct before she began serving on the Federal Reserve Board” — conduct that “may have occurred before she was confirmed to her position.”

Nor were both the criminal referral Federal Housing Finance Agency Director Bill Pulte posted on social media and Trump’s immediate call for her to resign adequate notice and opportunity to respond to the allegations before her firing, the judge said, finding Cook “likely did not receive any due process in her removal[.]”

In closing, Cobb refused to grant the Trump administration a stay pending appeal and issued an injunction directing Federal Reserve chair Jerome Powell and the Board of Governors to “allow Cook to continue to operate as a member of the Board for the pendency of this litigation.”

Read the full opinion here.