John Doe Co. v. Consumer Financial Protection Bureau

COMPANY, Appellant DOE JOHN FINANCIAL PROTEC-

CONSUMER Cordray, and Richard

TION BUREAU capacity Director of

in his official as Financial Protection

the Consumer

Bureau, Appellees

No. 17-5026

September Term, Appeals,

United States Court

District of Columbia Circuit.

Filed On: March

Cathy Hinger, Attorney, A. Womble Rice, LLP, & Carlyle Sandridge Washing- ton, DC, Plaintiff-Appellant. Deal, Christopher J. Consumer Finan- Bureau, Division, cial Protection Legal DC, Washington, Defendants-Appel- lees. KAVANAUGH,* MILLETT,

BEFORE: WILKINS, and Judges Circuit. ORDER PER CURIAM Upon consideration of the emergency injunction pending motion for appeal, the thereto, response reply, and the it is injunc- ORDERED that the motion for tion be denied.

Appellant John Doe is a Cali- liability fornia limited company with its principal place of business in Philip- pines. The inis the business of purchasing selling income streams. A recent Accountability Government Office study explained that income-stream-mar- keting businesses target often vulnerable clients military such as our veterans and the elderly, charging effective interest rates far excess of usury state laws cases) (up to 87% some providing lump payouts sum that are roughly half the minimum required under federal law governing pensions. See U.S. Gov’t Ac- countability Office, GAO-15-846T, Pen- sion Questionable Advance Transactions: 23- Business Identified Practices The Report GAO recom- mended that the Federal Trade .Commis- sion and the Consumer Financial Protec- tion investigate Bureau income-stream * Judge Kavanaugh grant Circuit would the mo- reasons set forth in the attached statement. injunction pending appeal tion for for the establishing not met its burden of either a itself been marketers. regulatory proceedings likelihood of success or harm: their consumer six States under at least requests now an emergency district court laws. As the protection injunction pending appeal.

found, dispute side seems to “neither preliminary injunction A is “an of Doe Co. has been

John extraordinary remedy may only that be negative publicity throughout considerable Op. Deny- a clear years.” upon showing few Dist. Ct. awarded that past Inj. Prelim. 7. ing is entitled to such relief.” Winter [movant] Council, Inc., v. Natural Res. Def. 2016, the Consumer Fi- In November 365, 172 Bureau issued a Civil nancial Protection plaintiff seeking preliminary “A a (“CID”) to the Investigative Demand Com- injunction likely must establish that he is statutory authority, pursuant to its pany merits, likely that he is to succeed on 5562(c)(1). § author- Congress 12 U.S.C. in to suffer harm the absence to collect the Bureau to issue CIDs ized relief, preliminary of that the balance of information the enforcement of relevant to favor, Id.; equities tips in his and that an in laws. see protection consumer specified junction public § The issuance of a is in the interest.” Id. at also 12 U.S.C. 5511. investigatory. It does not purely CID is 129 S.Ct. 365. Because the seeks proceeding a law-enforcement initiate exceptional remedy of an has signify any that violation of law even pending appeal, faces the 5562(e). § committed. See U.S.C. been coming difficult task of forward with evi showing that argument dence and self-enforcing, and non CIDs are district court “likelfy]” that the “abused triggers penalty. no fine or compliance in denying preliminary in discretion” Drexen, 5562(e)(1); Morgan § Inc. U.S.C. See, junction. e.g., Washington Metro. Bureau, Prot. v. Consumer Fin. Tours, (D.D.C. 2013), Holiday v. Area Transit Comm’n aff'd, F.Supp.2d (D.C. 2015). 1977); (D.C. Inc., Cir. Compa The 785 F.3d 684 Cir. nothing response in ny Chaplaincy Gospel thus needed to do Full Churches v. (D.C. If recipient it received. de to the CID England, 454 F.3d CID, respond 2006). the Bureau clines it. 12 a court order to enforce

must obtain Company’s sole re 5562(e). proceeding, § In that court U.S.C. of success on the merits garding likelihood any legal can raise relevant recipient and the district court has before this court to enforcement of the CID. objection majority point been to to the now-vacated case, did not In this wait Corporation in PHH Consumer opinion of the the Bureau to seek enforcement Bureau, Protection Financial CID, pre-enforcement but instead filed n (D.C. 2016), vacated, e banc reh’g challenging the consti- suit district — F.3d —, granted, No. and tutionality of the Bureau’s structure 2017). But WL 631740 Cir. Feb. to halt and all Bureau action seeking to show not remember: the company, Mot. for Prelim. “adverse” to the just potentially persuasive that there is enjoining enforcement of Inj. including legal position, but that the authority for its forbidding the disclosure of the CID and in not district court abused its discretion identity. district court crediting showing that sufficiently in- request preliminary for a denied Doe’s in- preliminary balancing equities had junction, concluding junctive requires. Pointing relief to PHH cause he “does not possess au- unilateral enough is not four reasons. thority to bring law enforcement actions citizens, against private which is the core First, the PHH decision on which the of the executive power primary Company relies has been vacated. And threat to liberty posed by individual execu- decision, panel even within that members (court’s power”); tive id. at 20 n.5 holding appropriateness differed on the or necessi- would not ty issuing separation-of-powers single-director rul- invalidate other ing given predicate statutory independent issues in the agencies they because “do not PHH, (Henderson, J., case. 839 F.3d at 56 exercise the core power bring- executive concurring part dissenting part) actions”). ing law enforcement (declining to reach the constitutional ques- contrast, The Company, by pre- filed a tion an adequate remedy because could be enforcement suit to stop non-self-execut- provided statutory ground); on the see also ing investigative demand for regulatory (also J., at (Randolph, concurring) id. information. The Company objec- no voices finding constitutional error in the ALJ who tion here to the scope or content of the proceeding). suggesting heard the Without argue CID and does not that it falls be- anything way one or the other about how yond statutory the Bureau’s authority. The might ultimately the en banc resolve Company’s sole is that the Bu- the PHH case and with all respect due to single-Director reau’s structure is uncon- members, panel its the district court did injury stitutional. And the sole it asserts not abuse its discretion in determining that appeal on is the harm by occasioned hav- simply pointing majority to the vacated ing respond to to a non-self-executing opinion PHH did not establish the like- CID.1 an lihood of identical constitutional ruling by the en banc court in PHH or the court Standing is determined on a claim- in this case. See, by-claim e.g., FEC, basis. Davis v. Second, even assuming purposes 171 L.Ed.2d this motion that the en banc court were to (2008) (explaining that standing is not reach the ruling same constitutional as the “dispensed gross” plaintiff but a “must majority PHH, opinion in demonstrate standing for each claim he remotely in the same constitutional press seeks to and for each form of relief position PHH, remember, as PHH. was on sought”) that is (quotation marks and cita receiving end of a completed law en- omitted). tions only thing And the that proceeding by forcement Bureau, happened prior to Company filing its pay had been ordered to million $109 pre-enforcement suit was the Bureau’s is PHH,

fine. 839 F.3d at 7. In finding a suance of an investigative demand for in violation, separation-of-powers majori- formation relevant ty opinion repeatedly emphasized its view adherence to federal law. of the Constitution’s assignment of “law accordingly has to demonstrate that enforcement” authority to the Executive merely action of See, requesting information e.g., Branch. id. at (discussing “the private from regulation core Article II entities to power executive of bringing (Social actions”); by law exclusively enforcement at itself id. confined to the Ex Security Administrator distinguishable Branch, be- ecutive and thus that issuance of 1. Company object Nor does the tory to other objects. burdens to which it State Cf. Bureau, regulatory Lew, by measure taken Big Spring Nat’l Bank identify injunction papers 2015). in its regula- other (rather PHH’s) sepa- injury Bureau violates the than this CID powers. ration of meant it had not established a likelihood of appeal. success on that utterly has failed it arguments Nowhere in its even task. Third, Company’s argument acknowledged posture the distinct alleged separation-of-powers violation re- of the proceeding or the nature preemptive quires stopped the Bureau be in its to halt. That governmental action seeks ignores tracks traditional constraints on attempt discharge failure to even separation-of-powers remedies. Often proof burden of is fatal. To particularized cases, separation-of-powers severance of on the injunction pending appeal obtain provision the unconstitutional is the chosen transgresses the ground that the Bureau remedy. That is what the now-vacated ma- just by issuing a separation powers jority opinion PHH did—the decision just by investigating regulated en- CID — just severed the Director’s for-cause re- federal law—the tity’s compliance with provision, making moval him removable only have to show that Company would As the re- opinion the President will. Branch can demand infor- the Executive stated, peatedly the Bureau could continue or take regulated mation from businesses See, PHH, apace. e.g., its work 839 F.3d at is, steps. say That investigative such (declining to “shut down the entire least, constitutionally far from self-evident. CFPB”); see also Free Enter. Fund v. subpoenas issues Congress .informa- Bd., Accounting Oversight Public Co. 1, Valeo, 424 Buckley U.S. tion. And 3138, 177 L.Ed.2d U.S. 130 S.Ct. (1976), 612, 46 L.Ed.2d 659 the 96 S.Ct. (2010) (severing provi- unconstitutional out specifically carved Supreme removal of offi- requiring sion for-cause from its hold- investigative such measures cers); 142, Buckley, 424 at 96 S.Ct. U.S. there was exer- ing that Commission (allowing the to continue its in- FEC cising powers forbidden the Constitu- and administrative actions vestigations tion, id. at 96 S.Ct. 612. unconstitutionally though even it was argu frames Company That the its structured). challenge a facial to the Bureau’s ment as addition, not past In vacatur of actions is to ability any to take “action adverse PHH decision did not undo routine. The it, assuming it Plaintiff’ does not save even action and make the Bureau enforcement sweeping relief standing to seek such court sim it start over from scratch. The juncture pre-enforcement on the at this Bureau to address ply remanded for the of nothing of other than the issuance basis PHH, at 8. matters. See specified facially unconstitu A statute is not CID. Indeed, court Court and this in all of tional unless it is unconstitutional of validity past accorded to acts have often See, e.g., States v. applications. United governmental unconstitutionally structured 2095, Salerno, 739, 745, 107 481 U.S. S.Ct. See, at e.g., Buckley, agencies. (1987) (“A challenge L.Ed.2d 697 facial 612; 142, Abatement Citizens is, course, Act of the most legislative to a Noise, Metropolitan Inc. v. successfully, challenge to mount difficult of Aircraft Auth., F.2d Airports Wash. no challenger must establish that since 1990) (“We direct, however, that which set of circumstances exists under to this date valid.”). actions taken the Board that, Act Given would be automatically on the basis be invalidated certainly did not abuse its district 252, 111 decision.”), aff'd, 501 U.S. Compa our concluding discretion (1991); see alleged ny’s argue failure to even its own S.Ct. Application In re President’s States District also Court for the Central Dis- Crime, Organized on Comm’n trict of California. The has made 1985) (11th 1191, 1202 J., (Fay, writing argument requiring no whatsoever that it (“[O]ur separately) holding regarding the to raise its claim in an actual enforcement separation powers doctrine does not re proceeding would somehow “foreclose all quire voiding” of a Commission sub review,” meaningful judicial id. J., poena); (Roney, specially id. concur Also, plaintiffs unlike the in Abbott Lab ring) (agreeing with decision to enforce the Gardner, oratories v. 387 U.S. subpoena despite infirmity). (1967), - that, Given all of failed to any exception has not identified showing make relevant at all that it al response measures must undertake in succeeding has a likelihood of on its effort fact, noted, to In the CID. as no action at prevent to the Bureau from investigating all required unless and until the CID company taking any via CID or other Thus, enforced. unlike Abbott Laboratories unspecified adverse action. Or.at least the Street, or State has come to district court did not abuse its discretion in this court halt an agency to action that concluding. so requires nothing part, certainly on its

Fourth, Company’s prospects farm,” does not force it to “bet the Free yet of success respect: stumble another Enterprise, 561 U.S. S.Ct. 3138. proper this court is not the forum for the respect obligation With to its press separation powers harm, demonstrate Compa multiple claim. We have held on occasions ny entirely started with the unsubstantiat that, if a party even is the of an conclusory ed and assertions that its cus arguably regulatory unconstitutional ac employees tomers and will flee and its tion, that constitutional should reputation will be materially harmed if be raised within the context of an adminis word of investigation gets the Bureau’s See, proceeding. trative enforcement e.g., Tellingly, out. Company sug does not (D.C. SEC, 9, Jarkesy v. 12 803 F.3d Cir. gest that employees customers or defected 2015); Drexen, 694; Morgan 785 F.3d at cf. regulatory after six state investigations, an Reich, Thunder Basin Coal Co. v. 510 U.S. report, adverse GAO and the “considerable 200, 215-216, 114 S.Ct. negative publicity” already that has sur (1994) (holding petitioner’s that constitu Company, Op. Deny rounded the Dist. Ct. tional claims brought could first be before ing Inj. Prelim. 7. The district court thus agency). did not abuse finding its discretion in that that, The Company notes in Free Enter Company’s conclusory assertions of prise, Supreme permitted Court reputational harm, and economic unaccom standalone, pre-enforcement constitutional panied by any declarations, relevant did challenge. enough. True But the injury not establish an that is “both certain because, Court did so there to do other * * * great; and actual and not theoretical.” wise, could meaning have all “foreclosed FERC, 669, Wisconsin v. Gas Co. 758 F.2d judicial ful Enterprise, review[.]” Free (D.C. 1985). event, In any Cir. it is 489, at 130 S.Ct. 3138 (quoting Thun not, “well settled that economic loss does Basin, der 510 U.S. at 114 S.Ct. 771). itself, in and of irreparable constitute by contrast, The Company, has im harm,” id. at especially mediate access to another forum in when it is which it can nothing raise its constitutional more than speculation claim: the' about how enforcement pending action in the parties might respond United third to routine reg- ulatory investigations. tory proceedings” For .those same rea- is not an irreparable sons, Cal., harm. has failed demon- FTC v. Standard Oil Co. 232, 244, court why strate the district abused its U.S. 66 L.Ed.2d (1980); in that its name need holding Renegotiation discretion see also v. Bd. Co., public Clothing in kept not be confidential 415 U.S. Bannercraft Indeed, (1974) has of- 94 proceedings. (“Mere point litigation no expense, fered this court answer that even substantial cost, readily identity unrecoupable its could be obtained does not constitute Act, because, through irreparable injury.”). a Freedom of Information That if warranted, § request. constitutionally U.S.C. found to be “[v]aeatur, even at the appeal-from-final- (see By reply Reply its brief this court judgment stage, fully would vindicate” the n.2), Br. 10 & abandoned separation-of-powers rights of Compa reputa- asserted further defense of those al-Nashiri, ny. In re F.3d 80-81. harms, putting all of tional and economic has offered this court no eggs per se basket: why precedent as to such does any alleged separation-of-pow- insists here, not apply point, why or more to the injury very irreparable. nature ers .is it was not an abuse of discretion for the is that this short answer no irreparable district court find harm In held otherwise. the absence “immedi- special under these circumstances. ongoing stemming harm from the ate or defects,” Given the failure to establish alleged constitutional [Bureau’s] a likelihood of success on the merits of its separation powers” by “violation of pre-enforcement challenge invariably irreparable inju- an itself is not harm, of equities especially the balance al-Nashiri, 71, 79-80 ry. In re — protection— to consumer when comes Drexen, 2015); Morgan see also weighs against granting (being at 695 n.3 forced to await pending appeal. proceeding litigate and to an enforcement greater no burden another forum where reasons, motion foregoing For the imposed irreparable injury); is not Til injunction pending appeal for an is denied. (2d SEC, F.3d ton KAVANAUGH, Judge, Circuit 2016) (holding, Appointments Clause dissenting: injury of challenge “ judges, to SEC subjected to an unconstitutional

‘being injunc- I the motion for an grant would adjudicative with the attendant procedure,’ appeal. pending tion * * * ordeal, ‘embarrassment, expense, Company Doe claims Petitioner John * * * anxiety state of and insecuri [and] being regulated by that it is an unconstitu- ” harm”) (al ty’ was not an “irremediable tionally agency, the Consumer structured omitted). original; terations in citation Financial Protection Bureau. The CFPB doubly only

That so here where the govern is the binding has issued rules denying, injunction conduct, of consequence and the CFPB can pending appeal Company’s pre-en- against in the the bring enforcement actions (or it must rules Company forcement suit is that raise for violations of those statutes). arguments Supreme in the Court’s separation-of-powers of Under precedents, action in district and this Court’s pending CID enforcement entity standing has to raise regulated has ex- as a Supreme court. As the claim, and free-standing constitutional plained, expense disruption “the of need not adjudica- ripe. claim is defending protracted [oneself] 1136 by

wait for a CFPB enforcement action whether sitting this Court en banc or order to the constitutional challenge. raise by Supreme Court. The Enterprise See Free Fund v. Public Com- shown a of likelihood success on the mer- Board, pany Accounting Oversight 561 its. 477, 490, 130 S.Ct. L.Ed.2d The Company irrepara- also has shown (2010); Abbott Laboratories v. Gard- Irreparable ble harm. harm occurs almost ner, 136, 152-53, 1507, 387 U.S. S.Ct. by definition a person entity when dem- (1967); National Bank State onstrates a likelihood that it being regu- Lew, 48, Big Spring v. 795 F.3d 53-54 of (D.C. by lated on an ongoing basis an unconstitu- 2015). “To Cir. use the tionally agency structured that has issued words, ‘normally Court’s we do require binding rules governing plaintiffs con- plaintiffs the farm’ violating bet authority duct and that has bring en- challenge law in order to the constitution- against forcement actions plaintiff. See ality regulating agency.” of the State Na- Holder, (D.C. 638, Gordon v. 721 F.3d Big Spring, tional Bank 795 F.3d at 54 of 2013) Cir. (“Although plaintiff a seeking Fund, (quoting Enterprise Free 561 U.S. equitable relief must show a threat of sub- (internal 490, quotation 130 S.Ct. 3138 irreparable injury, stantial and immediate omitted)). Indeed, marks this Court has prospective violation of a constitutional already that a may bring held business right injury constitutes challenge stand-alone constitutional (alteration purposes.”) these and internal structure of the CFPB —and that case is omitted) quotation (quoting marks Davis v. pending now in the U.S. District Court for Columbia, District 158 F.3d the District of Columbia. See id. at 53-54. (D.C. 1998)); Cir. see also National Feder In order to obtain a preliminary injunc- ation Employees-IAM Federal v. Vil tion or pending appeal, sack, (D.C. 2012); Cir. (i) show, here, must as relevant Columbia, Mills v. District a likelihood of success on the merits and (D.C. 2009); Chaplaincy Cir. (ii) irreparable harm. Gospel Full England, Churches v. view, In my has shown a (D.C. 2006); F.3d 303-04 Free cf. likelihood of success on the merits of its Fund, Enterprise 561 U.S. at claim, fully reasons ex- 3138; Correctional Corp. Services plained in opinion this Court’s in PHH Malesko, 534 U.S. CFPB, Corp. v. 839 F.3d 1

2016). The “CFPB’s structure Ar- violates that, argues CFPB if agen- even the ticle II of the Constitution because the cy is unconstitutionally structured under CFPB operates independent as an agency II, remedy Article for the Article II single headed Director.” Id. at 12. violation would be to sever the for-cause The CFPB’s structure a single-Direetor as yast provision, removal as PHH held. In that independent agency rulemaking with scenario, the CFPB would reg- continue to and enforcement authority unprecedent- ulate Company, although the CFPB sure, ed in history. American To be would do agency so as an executive PHH will instead case soon be reheard by this independent of an view, agency. According Court en my banc. But in to the CFPB, CFPB’s structure is the the unconstitutional. therefore is not And given the entitled to a prec- preliminary injunction Court’s Article II in- edents, I believe junction pending appeal prevent CFPB’s struc- likely unconstitutional, ture is to be ruled CFPB in its regulating current form from in analysis equities tips now. The CFPB s its favor. Winter v. Natu- Council, Inc., ral Resources point badly is mistaken. Unless and on this Defense U.S. in remedy put place until that and the public by The interest is not served actually provision for-cause removal sev- letting unconstitutionally an structured statute, from the will ered agency continue to until the operate consti- regulated ongoing continue to be on an tutional flaw is in fixed. And this circum- by agency. basis an unconstitutional What stance, equities favor people whose objects merely reg- to is not being infringed, liberties are not un- CFPB, regulation ulation but rather constitutionally agency. structured in by the CFPB its current unconstitution- namely, unprecedented al and respectfully I dissent from the Court’s structure — agency by single headed a independent injunction denial of the motion for an Director is unaccountable to the Pres- who pending appeal. fellow commissioners. A

ident or injunction would alleviate that

preliminary harm.

ongoing primary strategy to defeat CFPB’s Company’s irreparable argument harm says is deflection. The CFPB there is no ABM ONSITE SERVICES— (the irreparable WEST, INC., harm because other courts Petitione District of California and ultimate- Central r v. Circuit) can ly the Ninth entertain the LABOR NATIONAL RELATIONS in a arguments BOARD, Respondent investigative demand challenge to the civil Company by issued to the the CFPB. The International Association of Machinists sense, Workers, Lodge makes little Aerospace CFPB’s District Lodge 1005, my party seeking preliminary view. A and Local Intervenor W24 injunction in one court is not barred from No. 15-1299 injunction obtaining preliminary sim- with 15-1347 Consolidated ply might because some other court some- of Appeals, United States Court sure, day party. relief to that To grant be District of Columbia Circuit. jurisdiction if this lacked or statuto- time, Argued November ry authority to hear this case at this grant preliminary injunc- we could not March Decided tion, jurisdiction if But this Court (as statutory authority to hear a case we here, Fund, 561 Enterprise

do see Free 3138), then a

party’s claim of harm injunction

preliminary context is de- party’s

feated the mere fact that the eventually

constitutional claims could also court.

be raised another sup- factors also

Finally, the other two

port preliminary injunction. Compa-

ny has shown that an “is

public interest” and that the “balance of

Case Details

Case Name: John Doe Co. v. Consumer Financial Protection Bureau

Court Name: Court of Appeals for the D.C. Circuit

Date Published: Mar 3, 2017

Citation: 849 F.3d 1129

Docket Number: 17-5026

Court Abbreviation: D.C. Cir.