63 F.4th 174
2d Cir.2023Background:
- The Law Offices of Crystal Moroney (Moroney), a debt-collection law firm, received a civil investigative demand (CID) from the Consumer Financial Protection Bureau (CFPB) in 2017; Moroney produced many documents but withheld some as privileged.
- The CFPB sought enforcement of a second, substantially similar CID issued in 2019 after the 2017 enforcement petition was withdrawn; the CFPB filed the 2019 enforcement petition in district court.
- While the enforcement petition was pending, the Supreme Court decided Seila Law (holding the CFPB Director’s for-cause removal protection unconstitutional); the CFPB filed a notice ratifying the CID and the pending enforcement action.
- The district court granted the CFPB’s petition to enforce the 2019 CID; Moroney appealed, raising constitutional and subpoena-related defenses.
- Moroney’s appellate challenges: (1) CID void ab initio under Seila Law (removal protection), (2) CFPB funding violates the Appropriations Clause, (3) CFPA funding violates the nondelegation doctrine, and (4) the CID is unduly burdensome and privileged.
Issues:
| Issue | Plaintiff's Argument (Moroney) | Defendant's Argument (CFPB) | Held |
|---|---|---|---|
| Validity of CID given Seila Law/removal protection | CID is void ab initio because the Director was insulated from at-will removal when the CID issued | Director was validly appointed; Collins requires but-for causation of the unconstitutional removal protection to void agency action | Court requires but-for causation; Moroney failed to show it; CID not void ab initio |
| Appropriations Clause challenge to CFPB funding | CFPB’s self-determined funding from Fed Reserve earnings violates the Appropriations Clause by insulating budget from Congress | Funding was expressly authorized by statute; Congress set purpose, fund, and a statutory cap (12%); Appropriations Clause satisfied | Funding structure does not violate Appropriations Clause; Court declines to follow Fifth Circuit’s contrary CFSA decision |
| Nondelegation challenge to CFPB budget authority | Congress failed to provide an intelligible principle constraining budgetary discretion | CFPA sets objectives, functions, and statutory limits that supply an intelligible principle under existing precedent | Nondelegation challenge rejected; CFPA supplies adequate guiding standards |
| Whether CID is unduly burdensome / privileged | CID is overbroad, seeks privileged attorney-client materials, and is duplicative of prior production | CID serves a legitimate investigative purpose; privilege claims not shown with a privilege log; duplicative claims not demonstrated | Enforcement affirmed; respondent failed to meet heavy burden to show the CID unreasonable or privileged |
Key Cases Cited
- Seila Law LLC v. CFPB, 140 S. Ct. 2183 (2020) (held CFPB Director’s for-cause removal protection unconstitutional; severed the provision)
- Collins v. Yellen, 141 S. Ct. 1761 (2021) (explained remedy principles; actions by properly appointed officers are not void absent a showing of harm linked to removal protection)
- J.W. Hampton, Jr. & Co. v. United States, 276 U.S. 394 (1928) (established the intelligible principle standard for delegation)
- Mistretta v. United States, 488 U.S. 361 (1989) (upheld broad delegations when guided by intelligible principles)
- Office of Personnel Management v. Richmond, 496 U.S. 414 (1990) (described the Appropriations Clause as requiring statutory authorization for payments)
- Cincinnati Soap Co. v. United States, 301 U.S. 308 (1937) (interpreted the Appropriations Clause to require prior statutory authorization without imposing additional procedural constraints)
- Community Financial Servs. Ass’n v. CFPB, 51 F.4th 616 (5th Cir. 2022) (contrary Fifth Circuit decision holding CFPB funding conflicted with the Appropriations Clause)
- In re McVane, 44 F.3d 1127 (2d Cir. 1995) (limited role of courts in enforcing administrative subpoenas)
- RNR Enters., Inc. v. SEC, 122 F.3d 93 (2d Cir. 1997) (four-factor test for enforcing administrative subpoenas)
- SEC v. Brigadoon Scotch Distrib. Co., 480 F.2d 1047 (2d Cir. 1973) (respodent bears heavy burden to show an administrative subpoena unreasonable)