http://www.buzzfeed.com/zoetillman/a-judge-just-ruled-that-that-trump-can-install-his-own-pick
“The fact that Trump nominated Kelly hasn't been raised as an issue in the case. Judges aren't disqualified from ruling on cases that involve the presidents who nominated them. Kelly did give a nod to his conservative legal roots, though. In explaining the factors he weighed in denying English's request for an emergency order, he touched on whether the legislative history of the Dodd–Frank Act offered any guidance. Prominent conservative legal thinkers, including the late US Supreme Court Justice Antonin Scalia, have resisted giving too much weight to legislative history. Kelly on Tuesday said he was "dubious" of the value of legislative history, and that in the CFPB case, the record was ambiguous at best.”
The way I see it, Congress in creating the law set a succession procedure, while Trump has the authority to appont a replacement, but that replacement can only take the job after Senate confirmation. Furthermore, Mulvaney already has a job, and what supersedes what is not clear. Kelly did not rule so it can be appealed, either, a weasely act to prevent a fast appeal.