Supreme Court Makes Determination About CFPB But Seila Law Not Out of the Woods Yet

After all these years I can’t believe we are still dealing with the impact of Morgan Drexen in the debt relief industry.

“Clients from Morgan Drexen were then shifted to Howard Law and/or Williamson & Howard. An asset freeze was put in place against those firms and/or attorneys and those attorneys were ordered to pay millions. To get up to speed on this situation, click here.

Currently, the ongoing case is stalled in legal wrangling, mediation, or appeals. Courts are not always neat or logical.

Then clients were shifted to Selia Law.” – Source

Selia Law appeared to be the last shot at keeping the money machine from Morgan Drexen going.

Here is how the Supreme Court summarized the situation:

“Seila Law LLC is a California-based law firm that provides debt-related legal services to clients. In 2017, the CFPB issued a civil investigative demand to Seila Law to determine whether the firm had “engag[ed] in unlawful acts or practices in the advertising, marketing, or sale of debt relief services.” 2017 WL 6536586, *1 (CD Cal., Aug. 25, 2017). See also 12 U. S. C. §5562(c)(1) (authorizing the agency to issue such demands to persons who “may have any information[] relevant to a violation” of one of the laws enforced by the CFPB). The demand (essentially a subpoena) directed Seila Law to produce information and documents related to its business practices.

Seila Law asked the CFPB to set aside the demand, objecting that the agency’s leadership by a single Director removable only for cause violated the separation of powers. The CFPB declined to address that claim and directed Seila Law to comply with the demand.

When Seila Law refused, the CFPB filed a petition to enforce the demand in the District Court. See §5562(e)(1) (creating cause of action for that purpose). In response, Seila Law renewed its defense that the demand was invalid and must be set aside because the CFPB’s structure violated the Constitution. The District Court disagreed and ordered Seila Law to comply with the demand (with one modification not relevant here).”

Then the case bounced around the courts to deal with the single director issue. My guess is Seila Law hoped to get the CFPB pitched and end their ongoing issues with the concerns over their operation.

Chief Justice Roberts delivered the opinion for the majority. He writes, “We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers.”

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So the Supreme Court felt that the single director was not going to fly.

Let’s see how this winds up turning out for Seila Law.

The Supreme Court opinion states, “The provisions of the Dodd-Frank Act bearing on the CFPB’s structure and duties remain fully operative without the offending tenure restriction. Those provisions are capable of functioning independently, and there is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the President. Quite the opposite. Unlike the Sarbanes-Oxley Act at issue in Free Enterprise Fund, the Dodd-Frank Act contains an express severability clause. There is no need to wonder what Congress would have wanted if “any provision of this Act” is “held to be unconstitutional” because it has told us: “the remainder of this Act” should “not be affected.”

Justice Thomas felt the civil investigative demand should be terminated but he was in the minority opinions here.

So after all of this time, money, and billable hours the issue about the director is addressed but, “Because we find the Director’s removal protection sever-able from the other provisions of Dodd-Frank that establish the CFPB, we remand for the Court of Appeals to consider whether the civil investigative demand was validly ratified.”

So back to court the case goes again.

I hope Seila Law is making a ton of money because this fight has to be costing them a fortune.