Morgan Drexen, Inc. v. Consumer Financial Protection Bureau
415 U.S. App. D.C. 85
D.C. Cir.2015Background
- Morgan Drexen, a company providing software and paralegal/support services to law firms, was the target of a CFPB investigation and received a notice of possible enforcement for alleged violations of the CFPA and the Telemarketing Sales Rule.
- Kimberly Pisinski, a Connecticut attorney, contracts with Morgan Drexen for paralegal services and joined Morgan Drexen in suing the CFPB in D.C. district court seeking declaratory and injunctive relief that Title X (which created the CFPB) is unconstitutional.
- Three weeks after the D.C. filing, the CFPB filed a civil enforcement action against Morgan Drexen and its CEO in the Central District of California; Pisinski was not named in that enforcement suit.
- The D.C. district court dismissed the D.C. complaint without reaching the constitutional merits: it held Pisinski lacked Article III standing and held Morgan Drexen had an adequate remedy at law in the California enforcement action, so injunctive/declaratory relief was inappropriate.
- On appeal the D.C. Circuit affirmed: it found Pisinski failed to present evidence of an imminent, concrete injury at the time of filing, and it concluded the district court did not abuse its equitable discretion in dismissing Morgan Drexen’s pre-enforcement challenge once the CFPB filed suit in California.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing of Pisinski | Pisinski says CFPB’s enforcement of Morgan Drexen effectively targets her practice and threatens economic and reputational harm | CFPB says it never threatened enforcement against Pisinski and record lacks evidence of imminent injury to her practice | No standing: Pisinski failed to show a concrete, imminent injury or substantial risk of harm at filing |
| Appropriateness of pre-enforcement declaratory/injunctive relief for Morgan Drexen | Morgan Drexen argues facial constitutional challenge to Title X justifies immediate relief and pre-enforcement review | CFPB and courts note alternative: raise constitutional defenses in the enforcement action; discretionary equitable factors counsel against D.C. relief | Dismissal affirmed: district court did not abuse discretion; enforcement suit in California provided adequate remedy |
| Whether timing (D.C. suit filed before CFPB sued) compels relief | Morgan Drexen contends it filed before CFPB decided whether to sue and thus needed protection | CFPB points to communications showing Morgan Drexen knew an enforcement action was likely and to principles preventing procedural fencing | Court found procedural fencing and that filing first is not dispositive; timing did not require declaratory relief |
| Whether declaratory relief would serve judicial economy and avoid unnecessary constitutional decision | Morgan Drexen: public importance and advanced D.C. record justify decision in D.C. | CFPB: resolving merits in enforcement action could avoid constitutional ruling; parallel litigation would cause piecemeal outcomes | Court applied discretionary factors (Wilton/Hanes) and rejected declaratory relief as impractical and potentially duplicative |
Key Cases Cited
- eBay Inc. v. MercExchange, 547 U.S. 388 (injunctive-relief standard for permanent injunction)
- Wilton v. Seven Falls Co., 515 U.S. 277 (discretion to decline declaratory relief)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing: injury in fact requirements)
- Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477 (facial structural challenge context)
- Abbott Labs. v. Gardner, 387 U.S. 136 (principle that courts may dismiss declaratory suits where same issue pending elsewhere)
- Morales v. Trans World Airlines, 504 U.S. 374 (pre-enforcement review when penalties accumulate)
- MedImmune, Inc. v. Genentech, 549 U.S. 118 (declaratory judgment principles)
- Clapper v. Amnesty Int'l USA, 568 U.S. 398 (requirement that threatened injury be certainly impending or substantially probable)