641 F.Supp.3d 474
N.D. Ill.2022Background:
- The Consumer Financial Protection Bureau (CFPB) issued a Consent Order against TransUnion entities effective January 3, 2017; the CFPB later sued TransUnion (TU) and former TUI president/executive John T. Danaher for violations of that Order and related statutes.
- CFPB's Complaint alleges post-2017 violations of the Consent Order and against TU additional claims under the CFPA, EFTA, and FCRA; TU and Danaher moved to dismiss under Rule 12(b)(6).
- TU argued the CFPB failed a condition precedent by not responding to TU’s proposed Compliance Plan, that many claims are barred by claim preclusion, that some claims are time-barred, and raised Appropriations Clause and director-removal constitutional challenges.
- Danaher argued the Consent Order is enforceable only against TU (not him), that he was not afforded procedural protections, and that the Complaint fails to plausibly allege his individual liability (authority to control and knowledge).
- The court declined to dismiss: it held the Consent Order enforceable despite the Compliance Plan non-response, rejected claim-preclusion and timeliness dismissal at the pleading stage, rejected the constitutional attacks, and found the Complaint plausibly alleges Danaher’s individual liability.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Consent Order given CFPB non-response to TU’s Compliance Plan | Consent Order became effective Jan 3, 2017 and its Conduct Provisions required TU action; the Compliance Plan non-response only prevents the plan from becoming enforceable, not the Order | CFPB never responded to the proposed Compliance Plan, creating a condition precedent that prevents enforcement of the Consent Order | Court: The "after" language made the Compliance Plan enforceable only after non-objection; it did not make CFPB’s response a condition precedent to enforcing the Consent Order itself—Count I stands |
| Claim preclusion (res judicata) | Claims arise from post-Effective Date conduct and thus are new; CFPB may sue for subsequent violations | Prior administrative proceeding/consent order covers same practices; CFPB should have used enforcement mechanisms in that order | Court: Claim preclusion doesn't bar CFPB; Ocwen (Eleventh Circuit) is distinguishable because Ocwen’s consent judgment had a detailed cure-and-bar regime not present here |
| Statute of limitations under CFPA (3-year rule) | Each violation triggers its own 3-year period; Complaint alleges violations within that period | Many alleged violations predate the 3-year cutoff and thus are time-barred | Court: At pleading stage, claims not hopelessly time-barred; some alleged violations fall within limitations, so dismissal is premature |
| Constitutional challenges to CFPB authority (Appropriations Clause and removal protection) | CFPB funding is authorized by statute; Seila/Collins preserve Director's authority to enter consent orders | CFPB funding structure violates Appropriations Clause; unconstitutional removal protection at the time of the Order invalidates enforcement | Court: Rejects constitutional challenges; funding statute satisfies Appropriations Clause concerns and Seila/Collins leave Director’s exercise of authority intact |
| Individual liability of Danaher for Consent Order violations | Officers can be bound by administrative consent orders; Complaint alleges Danaher had authority to ensure compliance, directed noncompliance, and knew of conduct | Danaher was not a party, lacked §5563 procedural protections, and Complaint fails to plausibly allege his authority/knowledge | Court: Consent Order is a final adjudicative determination that can bind officers; Complaint plausibly pleads Danaher’s control and knowledge (including instruction to cease checkbox), so dismissal denied |
Key Cases Cited
- Ferrell v. Pierce, 743 F.2d 454 (7th Cir. 1984) (consent decree construed using contract principles)
- Lucky Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., 140 S. Ct. 1589 (U.S. 2020) (claims arise from same transaction when they share a common nucleus of operative facts)
- CFPB v. Ocwen Fin. Corp., 30 F.4th 1079 (11th Cir. 2022) (consent judgment with elaborate cure/enforcement regime can channel subsequent claims into that process)
- Seila Law LLC v. CFPB, 140 S. Ct. 2183 (U.S. 2020) (CFPB director removal protection held unconstitutional)
- Collins v. Yellen, 141 S. Ct. 1761 (U.S. 2021) (unlawful removal provision does not nullify the Director’s other actions in settled precedent)
- Wilson v. United States, 221 U.S. 361 (U.S. 1911) (command to a corporation effectively binds responsible officers)
- United States v. ITT Continental Baking Co., 420 U.S. 223 (U.S. 1975) (consent decrees/orders have attributes of both contracts and adjudications)
- B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138 (U.S. 2015) (administrative determinations can constitute final judgments for preclusion purposes)
- Reich v. Sea Sprite Boat Co., 50 F.3d 413 (7th Cir. 1995) (corporate officers may be bound by orders directed to the corporation)
- Fuji Photo Film Co. v. Int’l Trade Comm’n, 474 F.3d 1281 (Fed. Cir. 2007) (administrative orders can bind corporate officers under common-law principles)