Consumer Financial Protection v. Seila Law LLC
923 F.3d 680
9th Cir.2019Background
- CFPB issued a civil investigative demand (CID) to Seila Law LLC seeking responses to seven interrogatories and four document requests regarding whether Seila Law violated the Telemarketing Sales Rule in offering debt-relief services.
- Seila Law refused to comply; CFPB petitioned the district court to enforce the CID under 12 U.S.C. § 5562(e)(1); the district court granted enforcement with one uncontested modification.
- Seila Law appealed, raising two main challenges: (1) the CFPB’s single-Director, for-cause removal structure violates the separation of powers; and (2) the CID exceeded the CFPB’s statutory authority—claiming (a) the practice-of-law exclusion barred the inquiry and (b) the CID failed to state the nature of the alleged violation under § 5562(c)(2).
- The Ninth Circuit affirmed enforcement, holding (1) the CFPB’s removal protection is constitutional under Humphrey’s Executor and Morrison, and (2) the CID is statutorily authorized because an exception to the practice-of-law exclusion applies and the CID adequately states the nature of the investigation.
- The court emphasized that § 5517(e)(3) permits CFPB authority to investigate attorneys to the extent they are subject to enumerated consumer laws, and that the Telemarketing Sales Rule covers attorneys providing debt-relief services.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constitutionality of CFPB Director's for-cause removal protection | CFPB: Humphrey's Executor and Morrison permit for-cause protection for agencies exercising quasi-legislative/quasi-judicial and some executive powers | Seila Law: Single Director with substantial executive authority removable only for cause violates Article II separation of powers | Court: Upheld constitutionality; Humphrey's Executor and Morrison control and do not impair President's duty to faithfully execute laws |
| Applicability of practice-of-law exclusion (12 U.S.C. § 5517(e)(1)) | Seila Law: CID seeks information about legal services and is barred by practice-of-law exclusion | CFPB: § 5517(e)(3) exception preserves CFPB authority over attorneys as to enumerated consumer laws, including the Telemarketing Sales Rule | Court: § 5517(e)(3) applies; Telemarketing Sales Rule covers attorneys; CID permitted |
| Sufficiency of CID under 12 U.S.C. § 5562(c)(2) (notice of nature of alleged violation) | Seila Law: CID too general/vague; does not state nature of alleged violation | CFPB: CID identifies conduct under investigation and applicable laws, providing adequate notice | Court: CID satisfies § 5562(c)(2); not unconstitutionally vague or overbroad |
Key Cases Cited
- Humphrey’s Executor v. United States, 295 U.S. 602 (1935) (upheld for-cause removal for officials exercising quasi-legislative and quasi-judicial functions)
- Morrison v. Olson, 487 U.S. 654 (1988) (upheld for-cause removal for independent counsel exercising significant prosecutorial functions)
- Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (2010) (addressed removal protections in independent entities overseeing significant executive functions)
- PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. en banc 2018) (extensive en banc analysis upholding CFPB structure under existing precedent)
- United States v. Morton Salt Co., 338 U.S. 632 (1950) (notice sufficiency principles for administrative demands)