Ninth Circuit Affirms Ruling for CFPB in Seila Law Case

In a battle that has been to the Supreme Court and back, the Court of Appeals for the Ninth Circuit yesterday reaffirmed a District Court ruling that grants a petition from the Consumer Financial Protection Bureau seeking to enforce a civil investigative demand letter that was sent to a law firm. The Appeals Court determined that a ratification from Director Kathleen Kraninger of prior enforcement actions undertaken by the CFPB was more than enough to allow the CID to proceed, even after the Supreme Court ruled the leadership structure of the agency was unconstitutional in this very case.

A copy of the ruling in the case of CFPB v. Seila Law can be accessed by clicking here.

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 to have the CID enforced. The District Court 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 determined 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. It remanded the case back to the Ninth Circuit to deal with the question of whether the CID could be enforced or not.

“Director Kraninger’s ratification remedies any constitutional injury that Seila Law may have suffered due to the manner in which the CFPB was originally structured,” the Appeals Court wrote in its ruling. “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 have now been resolved. A Director well aware that she may be removed by the President at will has ratified her predecessors’ earlier decisions to issue and enforce the CID.”

Along with arguing that the CFPB lacked the authority to ratify enforcement actions while it had a leadership structure that was unconstitutional, Seila Law also argued that the ratification occurred outside the statute of limitations period for bringing an enforcement action against the firm. But the Ninth Circuit determined that the statute of limitations period “pertains solely to the bringing of an enforcement action, which the CFPB has not yet commenced,” because the CFPB has not yet been able to determine whether Seila Law has committed any violations.

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