The latest chapter in the case of Consumer Financial Protection Bureau v. Seila Law took place yesterday, as both sides made their arguments before a panel of judges from the Ninth Circuit Court of Appeals, which will determine whether the law firm has to comply with a civil investigative demand that it received from the regulator. The three-judge panel seemed reluctant to want to side with the law firm’s argument that it should not have to comply with the request because the enforcement was “tainted from the very outset.”
Having already won a victory from the Supreme Court in arguing that the leadership structure of the Bureau was unconstitutional, Seila Law now set its sights on arguing that a ratification from CFPB Director Kathleen Kraninger is not enough to cure the lack of authority that the Bureau had to send the CID in the first place.
Seila Law was issued a CID by the CFPB seeking answers to seven interrogatories and four requests for documents. The law firm refused to provide the information, leading the CFPB to file a petition with a District Court, which sided with the regulator. Seila Law appealed that ruling to the Ninth Circuit, which also sided with the CFPB. Seila then appealed the ruling to the Supreme Court, which determine that the leadership structure of the agency was unconstitutional and the the director should be able to be fired for any reason by the president, not just for cause.
“How do you take a position that the CID is invalid,” questioned Judge Paul Watford. “I don’t see anything in the statute or any principle of law that I am familiar with that would say that the CID itself is completely invalid because you think certain time periods of conduct in which your client may have a statute of limitations issue.”
The CFPB has warned that the ramifications of discounting the ratification could “raise doubts about the validity of other actions the Bureau has taken over the past decade” and call into question any enforcement action that the CFPB has taken during its decade of existence.