Consumer Financial Protection Bureau v. Seila Law LLC, No. 17-56324 (9th Cir. 2020)
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On remand from the Supreme Court, the Ninth Circuit reaffirmed the district court's order granting CFPB's petition to enforce the law firm's compliance with the Bureau's civil investigative demand (CID) requiring the firm to produce documents and answer interrogatories. The Supreme Court held that the statute establishing the CFPB violated the Constitution's separation of powers by placing leadership of the agency in the hands of a single Director who could be removed only for cause. The Court concluded, however, that the for-cause removal provision could be severed from the rest of the statute and thus did not require invalidation of the agency itself.
The panel concluded that the CID was validly ratified, but the panel need not decide whether that occurred through the actions of Acting Director Mulvaney. After the Supreme Court's ruling, the CFPB's current Director expressly ratified the agency's earlier decisions to issue the civil investigative demand to the law firm, to deny the firm's request to modify or set aside the CID, and to file a petition requesting that the district court enforce the CID. The new Director knew that the President could remove her with or without cause, and nonetheless ratified the agency's issuance of the CID. Therefore, this ratification remedies any constitutional injury that the law firm may have suffered due to the manner in which the CFPB was originally structured. The panel explained that the law firm's only cognizable injury arose from the fact that the agency issued the CID and pursued its enforcement while headed by a Director who was improperly insulated from the President's removal authority. The panel concluded that any concerns that the law firm might have had about being subjected to investigation without adequate presidential oversight and control have now been resolved. The panel rejected the law firm's remaining contentions.
Court Description: Consumer Financial Protection Bureau. On remand from the United States Supreme Court, the panel reaffirmed the district court’s order granting the petition of the Consumer Financial Protection Bureau to enforce Seila Law LLC’s compliance with the Bureau’s civil investigative demand requiring the firm to produce documents and answer interrogatories. The Supreme Court held that the statute establishing the Consumer Financial Protection Bureau (CFPB) violated the Constitution’s separation of powers by placing leadership of the agency in the hands of a single Director who could be removed only for cause. Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2197 (2020). The Court concluded, however, that the for-cause removal provision could be severed from the rest of the statute and thus did not require invalidation of the agency itself. The Supreme Court vacated the panel’s prior judgment, published at CFPB v. Seila Law LLC, 923 F.3d 680 (9th Cir. 2019), and remanded so that the panel could consider in the first instance whether the civil investigative demand (CID) was validly ratified by former Acting Director Mick Mulvaney during his year-long stint in that office. The panel held that the CID was validly ratified, but that there was no need to decide whether the ratification occurred through the actions of Acting Director Mulvaney. On July 9, 2020, after the Supreme Court’s ruling, the CFPB’s current CFPB V. SEILA LAW 3 Director, Kathleen Kraninger, expressly ratified the agency’s earlier decisions “to issue the civil investigative demand to Seila Law, to deny Seila Law’s request to modify or set aside the CID, and to file a petition requesting that the district court enforce the CID.” At the time that she ratified these decisions, Director Kraninger knew that the President could remove her with or without cause. She nonetheless ratified the agency’s issuance of the CID and ongoing efforts to enforce it. Director Kraninger’s ratification remedied any constitutional injury that Seila Law may have suffered due to the manner in which the CFPB was originally structured. Seila Law’s only cognizable injury arose from the fact that the agency issued the CID and pursued its enforcement while headed by a Director who was improperly insulated from the President’s removal authority. Any concerns that Seila Law might have had about being subjected to investigation without adequate presidential oversight and control had now been resolved. A Director well aware that she may be removed by the President at will had ratified her predecessors’ earlier decisions to issue and enforce the CID. The panel rejected Seila Law’s contention that Director Kraninger could not validly ratify the CFPB’s earlier actions because the agency lacked the authority to take those actions back in 2017. The panel held that Seila Law’s argument was largely foreclosed by this court’s decision in CFPB v. Gordon, 819 F.3d 1179 (9th Cir. 2016). Just as in Gordon, the constitutional infirmity related to the Director alone, not to the legality of the agency itself. The panel also rejected Seila Law’s remaining argument that Director Kraninger’s July 2020 ratification was invalid because it took place outside the limitations period for bringing an enforcement action against Seila Law. The 4 CFPB V. SEILA LAW panel held that Seila Law’s argument failed because this statutory limitations period pertained solely to the bringing of an enforcement action, which the CFPB had not yet commenced against Seila Law. The only actions ratified by Director Kraninger were the issuance and enforcement of the CID. The very purpose of such a demand was to assist the agency in determining whether Seila Law had engaged in violations that could justify bringing an enforcement action; it was impossible to know at this point whether such an action would (or would not) be timely. Seila Law therefore had raised its statute-of-limitations argument prematurely.
This opinion or order relates to an opinion or order originally issued on May 6, 2019.
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