Former CFPB director Richard Cordray, an Obama appointee, resigned and had given the reins to deputy director Leandra English on his way out.
However, Judge Kelly's opinion rejects that notion saying that the agency is still financially and structurally independent from Congress. Arguments regarding which legal precedent is correct - the Federal Vacancies Act or the Dodd-Frank Act - were more nuanced and are likely to continue to be a subject of debate.
"Under English's reading, the CFPB's Director has unchecked authority to decide who will inherit the potent regulatory and enforcement powers of that office, as well as the privilege of insulation from direct presidential control, in the event he resigns".
English sued in late November, arguing that she should be acting director of the bureau because of the way the Dodd-Frank Act was worded.More news: Blackhawks Rout Senators, 8-2
"The moving party must meet a higher standard than in the ordinary case by showing clearly that he or she is entitled to relief or that extreme or very serious damage will result from the denial of the injunction", Kelly said.
When President Trump then appointed outspoken CFPB critic Mulvaney to head the organization, the stage was set for turmoil and controversy in the months to come.
Trump claims the power to fill open positions in federal agencies through the Federal Vacancies Reform Act.
Department of Justice spokeswoman Lauren Ehrsam told Law360, "We are pleased the court vindicated the President's authority to appoint Mick Mulvaney as Acting Director of CFPB, finding that Ms".
Trump tapped Mulvaney, who also serves as director of the White House Office of Management and Budget, to lead the CFPB on an interim basis after Cordray's departure.More news: 100% FDI in single-brand retail to help Apple, Chinese cos
English sought a restraining order to block Mulvaney from assuming the title, citing the Dodd Frank Act, which listed its own rules for succession.
English's lawyer Deepak Gupta expressed disappointment about the ruling but did not guarantee an appeal.
"In summary, the record evidence suggests that CFPB's operations have continued with the understanding that Mick Mulvaney is the acting director, '" Kelly said.
"The law is clear: President Trump may not circumvent the Senate confirmation process by installing his White House budget director to run the CFPB part time", Gupta said in a statement. "Mr. Mulvaney's appointment undermines the Bureau's independence and threatens its mission to protect American consumers".
"Because the court has determined that English is not likely to succeed on the merits, the balance of the equities would necessarily weigh against granting her an injunction", Kelly said in his opinion.More news: Stifel Says Buy Amazon.com, Inc. (AMZN) Now For A 14% Upside