Summary
finding ratification ineffective after determining the removal provision was not severable, as therefore the agency "lacks authority to bring this enforcement action because its composition violates the Constitution's separation of powers"
Summary of this case from Bureau of Consumer Fin. Prot. v. Fair Collections & Outsourcing, Inc.Opinion
18-2743 18-3033 18-2860 18-3156
10-30-2020
CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff-Appellant-Cross Appellee, PEOPLE OF THE STATE OF NEW YORK, by Letitia James, Attorney General for the State of New York, Plaintiff-Appellant-Cross Appellee, v. RD LEGAL FUNDING, LLC, RD LEGAL FUNDING PARTNERS, LP, RD LEGAL FINANCE, LLC, RONI DERSOVITZ, Defendants-Third Party Plaintiffs-Third Party Defendants-Appellees-Cross Appellants.
FOR PLAINTIFFS-APPELLANTS-CROSS APPELLEES: CHRISTOPHER DEAL, Senior Counsel (John R. Coleman, Deputy General Counsel, Steven Y. Bressler, Assistant General Counsel, Kristin Bateman, Senior Counsel, David A. King Jr., Counsel, on the brief), for Mary McLeod, General Counsel for the Consumer Financial Protection Bureau, Washington, D.C. CAROLINE A. OLSEN, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, and Andrew W. Amend, Senior Assistant Solicitor General, on the brief), for LETITIA JAMES, Attorney General for the State of New York, New York, New York. FOR DEFENDANTS-APPELLEES-CROSS APPELLANTS: MICHAEL D. ROTH (David K. Willingham, Jeffrey M. Hammer, on the brief), King & Spalding, LLP, Los Angeles, CA, and Scott E. Gant, Boies, Schiller Flexner LLP, Washington, D.C.
SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 30th day of October, two thousand twenty. PRESENT: BARRINGTON D. PARKER, DENNY CHIN, Circuit Judges, JANE A. RESTANI, Judge. FOR PLAINTIFFS-APPELLANTS-CROSS APPELLEES: CHRISTOPHER DEAL, Senior Counsel (John R. Coleman, Deputy General Counsel, Steven Y. Bressler, Assistant General Counsel, Kristin Bateman, Senior Counsel, David A. King Jr., Counsel, on the brief), for Mary McLeod, General Counsel for the Consumer Financial Protection Bureau, Washington, D.C. CAROLINE A. OLSEN, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, and Andrew W. Amend, Senior Assistant Solicitor General, on the brief), for LETITIA JAMES, Attorney General for the State of New York, New York, New York. FOR DEFENDANTS-APPELLEES-CROSS APPELLANTS: MICHAEL D. ROTH (David K. Willingham, Jeffrey M. Hammer, on the brief), King & Spalding, LLP, Los Angeles, CA, and Scott E. Gant, Boies, Schiller Flexner LLP, Washington, D.C.
Judge Jane A. Restani, of the United States Court of International Trade, sitting by designation.
Appeal from the United States District Court for the Southern District of New York (Preska, J.).
UPON DUE CONSIDERATION, IT IS ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is VACATED and the case is REMANDED for further proceedings consistent with this Order.
Plaintiffs-appellants Consumer Financial Protection Bureau (the "CFPB") and the State of New York (the "State") appeal from a judgment of the United States District Court for the Southern District of New York entered October 29, 2018 dismissing their federal and state law claims against defendants-appellees RD Legal Funding, LLC; RD Legal Finance, LLC; RD Legal Funding Partners, LP (collectively, "RD"); and Roni Dersovitz (together with RD, "defendants"). By memorandum opinion and order entered June 21, 2018, as amended by its September 12, 2018 Order, the district court granted defendants' motion to dismiss. We assume the parties' familiarity with the underlying facts, the procedural history of the case, and the issues on appeal.
We review de novo a district court's grant of a motion to dismiss. See Hernandez v. United States, 939 F.3d 191, 198 (2d Cir. 2019). The CFPB is headed by a Director, who is appointed by the President with the advice and consent of the Senate for a five-year term, during which time "[t]he President may remove the Director for inefficiency, neglect of duty, or malfeasance in office." 12 U.S.C § 5491(b)-(c) (the "for-cause removal provision"). The district court held that this for-cause removal provision is unconstitutional, and that the removal provision is not severable from the remainder of the Consumer Financial Protection Act (the "CFPA") or Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). Accordingly, the district court struck the entirety of the CFPA. The district court also held that then-acting CFPB Director Mick Mulvaney's May 11, 2018 ratification of the CFPB's enforcement action against defendants failed to cure the constitutional deficiencies in the CFPB's structure or otherwise render defendants' arguments moot.
On June 29, 2020, the Supreme Court struck down the for-cause removal provision on the basis that it violates the separation of powers, but additionally held that the removal provision is severable from the remainder of the CFPA. See Seila L. LLC v. Consumer Fin. Prot. Bureau, 140 S.Ct. 2183, 2192 (2020). Following Seila, now-acting CFPB Director Kathleen L. Kraninger ratified the enforcement action on July 8, 2020.
In light of these developments, we affirm the district court's holding that the for-cause removal provision is unconstitutional, we reverse the district court's holding that the for-cause removal provision is not severable from the remainder of the CFPA, and we remand for the district court to consider in the first instance the validity of Director Kraninger's ratification of this enforcement action. See Seila, 140 S. Ct. at 2208 n.12.
We do not reach defendants' other arguments, including, for example, that RD Legal does not qualify as a "covered person" under the Dodd-Frank Act. --------
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For the foregoing reasons, we VACATE the judgment of the district court and REMAND the case for further proceedings.
FOR THE COURT:
Catherine O'Hagan Wolfe, Clerk