Consumer Financial Protection Bureau, People of the State of New…

18-2743-cv (L)
Consumer Financial Protection Bureau, People of the State of New York v. RD Legal Funding, LLC, et al.


                                  UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT

                                                  SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
"SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.


              At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 30th day of October, two thousand twenty.

PRESENT:             BARRINGTON D. PARKER,
                     DENNY CHIN,
                                         Circuit Judges,
                     JANE A. RESTANI,
                                         Judge. *
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CONSUMER FINANCIAL PROTECTION
BUREAU,
             Plaintiff-Appellant-Cross Appellee,

PEOPLE OF THE STATE OF NEW YORK, by
Letitia James, Attorney General for the State of
New York,
                     Plaintiff-Appellant-Cross Appellee,

                              -v-                                                  18-2743, 18-3033,
                                                                                   18-2860, 18-3156

*      Judge Jane A. Restani, of the United States Court of International Trade, sitting by
designation.
RD LEGAL FUNDING, LLC, RD LEGAL
FUNDING PARTNERS, LP, RD LEGAL
FINANCE, LLC, RONI DERSOVITZ,
                Defendants-Third Party Plaintiffs-
                Third Party Defendants-Appellees-
                Cross Appellants.

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FOR PLAINTIFFS-APPELLANTS-                                   CHRISTOPHER DEAL, Senior Counsel
CROSS APPELLEES:                                             (John R. Coleman, Deputy General Counsel,
                                                             Steven Y. Bressler, Assistant General Counsel,
                                                             Kristin Bateman, Senior Counsel, David A.
                                                             King Jr., Counsel, on the brief), for Mary
                                                             McLeod, General Counsel for the Consumer
                                                             Financial Protection Bureau, Washington, D.C.

                                                             CAROLINE A. OLSEN, Assistant Solicitor
                                                             General (Barbara D. Underwood, Solicitor
                                                             General, Steven C. Wu, Deputy Solicitor
                                                             General, and Andrew W. Amend, Senior
                                                             Assistant Solicitor General, on the brief), for
                                                             LETITIA JAMES, Attorney General for the
                                                             State of New York, New York, New York.

FOR DEFENDANTS-APPELLEES-                                    MICHAEL D. ROTH (David K. Willingham,
CROSS APPELLANTS:                                            Jeffrey M. Hammer, on the brief), King &
                                                             Spalding, LLP, Los Angeles, CA, and Scott E.
                                                             Gant, Boies, Schiller Flexner LLP, Washington,
                                                             D.C.



                    Appeal from the United States District Court for the Southern District of

New York (Preska, J.).




                                                                -2-
              UPON DUE CONSIDERATION, IT IS ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is VACATED and the case is

REMANDED for further proceedings consistent with this Order.

              Plaintiffs-appellants Consumer Financial Protection Bureau (the "CFPB")

and the State of New York (the "State") appeal from a judgment of the United States

District Court for the Southern District of New York entered October 29, 2018

dismissing their federal and state law claims against defendants-appellees RD Legal

Funding, LLC; RD Legal Finance, LLC; RD Legal Funding Partners, LP (collectively,

"RD"); and Roni Dersovitz (together with RD, "defendants"). By memorandum opinion

and order entered June 21, 2018, as amended by its September 12, 2018 Order, the

district court granted defendants' motion to dismiss. We assume the parties' familiarity

with the underlying facts, the procedural history of the case, and the issues on appeal.

              We review de novo a district court's grant of a motion to dismiss. See

Hernandez v. United States, 

939 F.3d 191

, 198 (2d Cir. 2019). The CFPB is headed by a

Director, who is appointed by the President with the advice and consent of the Senate

for a five-year term, during which time "[t]he President may remove the Director for

inefficiency, neglect of duty, or malfeasance in office." 12 U.S.C § 5491(b)-(c) (the "for-

cause removal provision"). The district court held that this for-cause removal provision

is unconstitutional, and that the removal provision is not severable from the remainder

of the Consumer Financial Protection Act (the "CFPA") or Title X of the Dodd-Frank


                                             -3-
Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376

(2010). Accordingly, the district court struck the entirety of the CFPA. The district

court also held that then-acting CFPB Director Mick Mulvaney's May 11, 2018

ratification of the CFPB's enforcement action against defendants failed to cure the

constitutional deficiencies in the CFPB's structure or otherwise render defendants'

arguments moot.

               On June 29, 2020, the Supreme Court struck down the for-cause removal

provision on the basis that it violates the separation of powers, but additionally held

that the removal provision is severable from the remainder of the CFPA. See Seila L.

LLC v. Consumer Fin. Prot. Bureau, 

140 S. Ct. 2183

, 2192 (2020). Following Seila, now-

acting CFPB Director Kathleen L. Kraninger ratified the enforcement action on July 8,

2020.

               In light of these developments, we affirm the district court's holding that

the for-cause removal provision is unconstitutional, we reverse the district court's

holding that the for-cause removal provision is not severable from the remainder of the

CFPA, and we remand for the district court to consider in the first instance the validity

of Director Kraninger's ratification of this enforcement action. See 

Seila, 140 S. Ct. at 2208

n.12. 1




1      We do not reach defendants' other arguments, including, for example, that RD Legal
does not qualify as a "covered person" under the Dodd-Frank Act.
                                             -4-
                                      * * *

            For the foregoing reasons, we VACATE the judgment of the district court

and REMAND the case for further proceedings.

                                      FOR THE COURT:
                                      Catherine O'Hagan Wolfe, Clerk




                                        -5-
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