Consumer Financial Protection v. Chance Gordon
2016 U.S. App. LEXIS 6770
| 9th Cir. | 2016Background
- Chance Gordon, a California attorney, ran a paid "Pre-Litigation Monetary-Claims Program" that promised loan-modification help and conditioned free "pro bono" negotiation services on purchase of the paid program; marketing was performed by Abraham Pessar.
- CFPB filed suit (July 2012) alleging Gordon violated the CFPA (12 U.S.C. §§ 5531, 5536) and Regulation O via deceptive marketing, upfront fee collection, false government-affiliation impressions, and advising clients not to contact lenders; district court granted summary judgment for CFPB and ordered $11,403,338.63 in restitution/disgorgement and a three-year injunction.
- Cordray was recess-appointed Director of the CFPB on Jan 4, 2012; his recess appointment was later deemed invalid under Noel Canning, but he was confirmed by the Senate in July 2013 and ratified his prior acts in Aug. 2013.
- Gordon challenged the suit on Article III standing and Appointments Clause grounds, and contested liability and remedy calculations; the district court avoided deciding the Appointments Clause issue, finding waiver.
- The Ninth Circuit addressed: (1) Article III standing despite an initially invalid director; (2) whether Cordray’s later confirmation and ratification cured Appointments Clause defects; (3) merits of CFPA and Regulation O violations; and (4) scope and calculation of equitable monetary relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing to bring suit when agency director was initially improperly appointed | CFPB: as part of the Executive Branch the Bureau has standing to enforce public rights; director’s initial appointment doesn’t defeat Article III jurisdiction | Gordon/JEP: Cordray’s invalid recess appointment meant CFPB lacked executive authority and thus Article III standing | Court: CFPB has Article III standing; Appointments Clause problems are Article II matters and do not strip Article III jurisdiction when the Executive (agency) continues to pursue the suit |
| Appointments Clause — can later confirmation/ratification cure earlier invalid appointment | CFPB: Cordray’s valid Senate confirmation and his Aug. 30, 2013 ratification cured any constitutional defect | Gordon: initial invalid appointment voids acts taken while unconstitutionally appointed | Court: Ratification by properly appointed director cures Appointments Clause defect under agency/Restatement principles; Legi-Tech approach accepted |
| Liability under CFPA (deceptive acts) and individual liability for corporate marketing | CFPB: marketing gave net deceptive impression (HUD/govt affiliation, misrepresentations); Gordon controlled/approved marketing and is liable | Gordon: marketing run by Pessar; signed client agreements corrected any prior deception; advertising was puffery | Court: Summary judgment for CFPB affirmed — materials were deceptive, Gordon had authority/knowledge, later contracts don’t erase initial deception, puffery argument waived |
| Remedies — scope and calculation of restitution/disgorgement (time period) | CFPB: restitution/disgorgement may be measured by amounts collected from consumers across period (Jan 2010–July 2012) | Gordon: should exclude fees pre-Regulation O, refunds, satisfied clients, or limit to amounts actually unjustly retained | Court: District court’s methodology permissible but monetary award vacated and remanded to consider retroactivity/effective-date issues for conduct predating CFPA/Reg O authority; injunction affirmed as not an abuse of discretion |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requires concrete, particularized, traceable, and redressable injury)
- Hollingsworth v. Perry, 570 U.S. 693 (2013) (private proponents lacked Article III standing to defend a state measure)
- Buckley v. Valeo, 424 U.S. 1 (1976) (Appointments Clause limits on who may exercise substantial executive authority; de facto validity and equitable relief discussion)
- Freytag v. Commissioner, 501 U.S. 868 (1991) (Appointments Clause issues often treated as nonjurisdictional for appellate consideration)
- National Labor Relations Bd. v. Noel Canning, 573 U.S. 513 (2014) (limits on the President’s recess appointment power)
- United States v. Providence Journal Co., 485 U.S. 693 (1988) (sovereign interest in litigation may persist despite questions about individual official’s authority)
- SEC v. JT Wallenbrock & Assocs., 440 F.3d 1109 (9th Cir. 2006) (disgorgement is an equitable remedy requiring a reasonable approximation of profits)