Seila Law files supplemental brief with Ninth Circuit

Ballard Spahr LLP

Ballard Spahr LLP

Last week, Seila Law filed its supplemental brief with the Ninth Circuit.  The CFPB filed its supplemental brief last month.

In its Seila Law decision, after ruling that the CFPB’s structure was unconstitutional because its Director could only be removed by the President “for cause,” the U.S. Supreme Court remanded the case to the Ninth Circuit to consider the CFPB’s ratification argument.  Because it had ruled that the CFPB’s leadership structure was constitutional, the Ninth Circuit had not previously considered the CFPB’s argument that former Acting Director Mulvaney’s ratification of the CID issued to Seila Law cured any constitutional deficiency.  Following the Supreme Court’s Seila Law decision, the CFPB filed a declaration with the Ninth Circuit in which Director Kraninger stated that she had ratified the Bureau’s decisions to issue the CID, to deny Seila Law’s request to modify or set aside the CID, and to file a petition in federal district court to enforce the CID.

In its supplemental brief, Seila Law makes the following principal arguments:

  • The appropriate remedy is to deny the CFPB’s petition to enforce the CID.  As a result of the CFPB’s structural constitutional defect, the CFPB lacked the authority to issue and enforce the CID and its actions in doing so are void.
  • The CFPB’s purported ratifications of the CID by former Acting Director Mulvaney and Director Kraninger are invalid.  Under U.S. Supreme Court precedent, for a valid ratification to occur, the party ratifying must be able to do the act ratified both at the time the act was done and at the time of ratification.  The CFPB cannot satisfy either requirement because:
    • As principal, the CFPB did not have the authority to issue the CID at the time it was issued.  As a result, ratification is unavailable to its agent, the CFPB Director.
    • The CFPB could not issue the CID at the time of Director Kraninger’s ratification.  Since the applicable three-year statute of limitations for bringing any action against Seila Law for the alleged violations to which the CID relates had expired by the date of Director Kraninger’s ratification, the CID serves no valid purpose and the ratification is ineffective.

The case docket indicates that the court will notify the parties if it wishes to schedule oral argument.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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