Linton v. Consumer Protection Division
225 A.3d 456
Md.2020Background
- ~100 structured-settlement recipients (many lead-poisoning victims) sued Access Funding alleging fraud in solicitations and use of a purportedly “independent” adviser who was in fact paid/affiliated with Access.
- Before and during that class suit (Linton), Maryland CPD filed a Consumer Protection Act enforcement action and the CFPB later filed a federal enforcement action against the same defendants seeking injunctive relief, civil penalties, and disgorgement/restitution.
- Linton parties negotiated a settlement: a $1.1 million gross fund (declining-limits insurance source), ~$330,000 in attorney fees, and very small pro rata recovery for class members (roughly 4% of alleged loss); the Stipulation contained broad releases and provisions (Sections 3.1–3.3, 10.1–10.3) purporting to bar class members from receiving any benefits from CPD/CFPB recoveries and to assign any such recoveries to Access.
- CPD moved to intervene and objected that the private settlement improperly precluded CPD/CFPB statutory remedies (especially disgorgement/restitution); the Circuit Court nevertheless certified and approved the settlement; after approval the Circuit Court in CPD’s case granted summary judgment limiting CPD’s restitution claim by res judicata.
- The Court of Special Appeals reversed that portion of the Circuit Court judgment, holding private settlement may not preempt agency enforcement; the Court of Appeals granted certiorari and held that private parties cannot lawfully release or assign away CPD/CFPB disgorgement/restitution remedies that serve a public purpose, vacated the Circuit Court approval, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May class members lawfully release or assign to Access rights to money or property that CPD/CFPB seek via disgorgement/restitution? | Linton/class: victims own any restitution; they may waive or assign that right; settlement beneficiaries can prevent double recovery. | CPD/CFPB/State: private parties lack authority to extinguish public statutory remedies; disgorgement serves public purpose and may exceed individual damages. | Court: Private settlement cannot preclude CPD/CFPB from pursuing disgorgement/restitution or direct recovered public remedies to wrongdoer; release/assignment provisions to that effect are unenforceable. |
| Did the settlement improperly interfere with CPD/CFPB enforcement authority, making Circuit Court’s approval erroneous? | Class/Access: settlement was fair and necessary given defendants’ limited assets and declining insurance; CPD could opt out or seek remedies separately. | CPD: settlement was premature, compensated victims only a small fraction, and effectively assigned to wrongdoers any agency recoveries; interfered with public enforcement. | Court: Agreed with CPD; settlement impermissibly interfered with public remedies; approval vacated and case remanded. |
| Is disgorgement/restitution equivalent to private civil damages (i.e., purely compensatory and assignable)? | Class/Access: restitution is practically the same as damages and belongs to victims to accept/waive. | CPD/State: disgorgement/restitution aims to strip wrongful gains and has public/punitive purpose distinct from compensatory damages. | Court: Adopted the damages vs. restitution distinction (Consumer Publ’g); disgorgement has public purpose and can exceed compensatory loss. |
| Were the Circuit Court’s determinations on fairness, class certification, and fee award reversible? | Class: court properly certified class, approved settlement, and awarded fees based on record and mediation; procedural protections (notice, opt‑out) were satisfied. | CPD: approval was procedurally and substantively flawed (premature, inadequate fund, excessive fees). | Court: Because key release provisions were invalid, substantive fairness and fee rulings are effectively moot; remand required to revise/remove impermissible terms and reassess fairness, notice, fees, and related issues. |
| Is a termination clause allowing defendants to cancel if CPD/CFPB do not dismiss their suits (Section 10.3) permissible? | Class/Access: standard pre‑consummation condition; did not bind agencies. | CPD: clause permitted defendants to scuttle settlement and conditioned settlement on agencies dismissing public claims. | Court: Clause implicated the same problem and must be removed/rewritten; as drafted it could frustrate public enforcement and contributed to reversal. |
Key Cases Cited
- Consumer Prot. Div. v. Consumer Publ’g Co., 304 Md. 731 (1985) (distinguishes private damages from restitution/disgorgement and permits agency general restitution orders with procedures for individual determinations)
- LVNV Funding LLC v. Finch, 463 Md. 586 (2019) (limits collateral attack on enrolled judgments; relevant to feasibility of voiding prior transfer-approval judgments)
- Herman v. South Carolina Nat’l Bank, 140 F.3d 1413 (11th Cir. 1998) (private settlements cannot preempt governmental enforcement remedies)
- In re Edmond, 934 F.2d 1304 (4th Cir. 1991) (agency restitution implicates public interest and requires procedures to avoid double recovery)
- U.S. v. Gossi, 608 F.3d 574 (9th Cir. 2010) (restitution/disgorgement serves to restore victims and strip wrongdoer’s gains)
- Gallagher v. Mercy Med. Ctr., 463 Md. 615 (2019) (one‑satisfaction rule: plaintiff entitled to only one compensation for same injury)