Bureau of Consumer Fin. Prot. v. Citizens Bank, N.A.

• Decision Date: 01 December 2020
• Docket Number: C.A. No. 20-044 WES
• Citation: 504 F.Supp.3d 39
• Parties: BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, v. CITIZENS BANK, N.A., Defendant.
• Court: U.S. District Court — District of Rhode Island

504 F.Supp.3d 39

BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff,

v.CITIZENS BANK, N.A., Defendant.

C.A. No. 20-044 WES

United States District Court, D. Rhode Island.

Signed December 1, 2020

Charles Mothander, Rebeccah G. Watson, Office of Enforcement, Lawrence DeMille-Wagman, U.S. Consumer Financial Protection Bureau, Washington, DC, for Plaintiff.

Brenna Anatone Force, Daniel J. Procaccini, Geoffrey W. Millsom, Adler Pollock & Sheehan P.C., Providence, RI, Brian A. Richman, Pro Hac Vice, Elizabeth P. Papez, Pro Hac Vice, Helgi C. Walker, Pro Hac Vice, Jacob T. Spencer, Pro Hac Vice, Max E. Schulman, Pro Hac Vice, Gibson Dunn & Crutcher LLP, Washington, DC, Stephen T. Gannon, Pro Hac Vice, Citizens Financial Group, Boston, MA, for Defendant.

OPINION AND ORDER

WILLIAM E. SMITH, District Judge.

Defendant Citizens Bank, N.A. moves to dismiss all counts of Plaintiff Bureau of Consumer Financial Protection's Complaint, arguing that the claims are time-barred, the case cannot proceed due to the separation of powers violation identified in Seila Law LLC v. CFPB, ––– U.S. ––––, 140 S. Ct. 2183, 207 L.Ed.2d 494 (2020), and Plaintiff's funding structure is unconstitutional. Defendant also argues that certain claims and prayers for relief should be dismissed because they are inadequately pled. For the following reasons, Defendant's Motion to Dismiss, ECF No. 14, is DENIED.

I. Background

On April 22, 2016, the Bureau of Consumer Financial Protection ("CFPB") issued a Civil Investigative Demand ("CID") to Citizens "to determine whether Citizens Bank engaged in, or was engaging in, unlawful acts and practices in connection with claims of billing errors or fraud relating to credit cards, or the provisions of credit counseling information to customers ...." Tolling Agreement, Richman Decl. Ex. 6, ECF No. 15-6. The parties later signed agreements tolling all relevant statutes of limitations from February 23, 2017, to January 31, 2020. See Tolling Agreements, Richman Decl. Exs. 6-12, ECF Nos. 15-6 to 15-12.¹ On the penultimate day of tolling, the CFPB filed its Complaint, alleging that Citizens violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and the Consumer Financial Protection Act ("CFPA"), 12 U.S.C. § 5481 et seq., in its dealings with credit card customers.² See Compl., ECF No. 1. The alleged violations began in 2010 or earlier and ended, depending on the violation, sometime in 2015 or 2016. See id. ¶¶ 15, 20, 22, 23. Citizens moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, arguing (1) the claims are time-barred; (2) the CFPB is unconstitutional in multiple ways, thus requiring dismissal of the case; and (3) certain claims and prayers for relief are inadequately pled. See Mem. in Supp. of Mot. to Dismiss ("Mot. to Dismiss") 10, 15, 23, ECF No. 14-1.

To understand the Bank's constitutional argument, greater context is needed. Prior to and during this case, the CFPB has been in peril. The brainchild of then-Professor and now-Senator Elizabeth Warren, the CFPB was created in the wake of the "Great Recession" as part of the Dodd-Frank Act. See Seila Law, 140 S. Ct. at 2192 ; id. at 2244 (Kagan, J., concurring in part). Professor Warren envisioned an agency led by an independent board, like that of the Federal Reserve. See PHH Corp. v. CFPB, 839 F.3d 1, 6 (D.C. Cir. 2016) (" PHH I"), reh'g en banc granted, order vacated (Feb. 16, 2017), on reh'g en banc, 881 F.3d 75 (D.C. Cir. 2018) (" PHH II") (citation omitted). But in the end, the CFPA, which was passed as part of the Dodd-Frank Act, established the CFPB with just a single Director, appointed for a five-year term and removable only for inefficiency, neglect, or malfeasance. See 12 U.S.C. § 5491(c)(1), (3).

In 2017, the Department of Justice argued in a case challenging the CFPA that this for-cause removal provision was unconstitutional. See Brief for United States as Amicus Curiae 23, PHH II (No. 15-1177), 2017 WL 1035617. Lower federal courts, however, concluded otherwise. See PHH II, 881 F.3d at 77 ; CFPB v. Seila Law LLC, 923 F.3d 680, 683 (9th Cir. 2019), vacated and remanded, ––– U.S. ––––, 140 S. Ct. 2183, 207 L.Ed.2d 494 (2020). One of those cases made its way to the Supreme Court, where the CFPB relented, adopting the position of the Department of Justice. See Seila Law, 140 S. Ct. at 2195. In September 2019, CFPB Director Kathleen Kraninger also sent a letter to Congress stating that the for-cause removal provision was unconstitutional. See Letter from Director Kathleen Kraninger to Speaker Nancy Pelosi 1 (Sept. 17, 2019), ECF No. 15-3. She maintained, however, that the provision was severable and that the CFPB could thus continue to operate with her at the helm. See id. at 2-3. The Supreme Court agreed. See Seila Law, 140 S. Ct. at 2192, 2197. The Court declined, however, to answer whether post-severance ratification of an enforcement action by the Director would cure the constitutional infirmity. See id. at 2208.

Shortly thereafter, Director Kraninger ratified the agency's action in this case. See Kraninger Decl. 2, ECF No. 26-1. This Court requested supplemental briefing regarding the impact of Seila Law, and specifically the effectiveness (or not) of the ratification; the Court heard oral argument on October 20, 2020.

II. Legal Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, to survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. at 678, 129 S.Ct. 1937 (citation and quotations omitted). In addition to the Complaint, the Court may consider "documents the authenticity of which are not disputed by the parties; ... documents central to the plaintiffs’ claims; [and] documents sufficiently referred to in the complaint." Curran v. Cousins, 509 F.3d 36, 44 (1st Cir. 2007) (citation and quotations omitted).

Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, the legal standard is "similar to that accorded a dismissal for failure to state a claim[.]" Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995). The Court must grant the motion to dismiss "[i]f the well-pleaded facts, evaluated in that generous manner, do not support a finding of federal subject-matter jurisdiction." Fothergill v. United States, 566 F.3d 248, 251 (1st Cir. 2009). Under Rule 12(b)(1), the Court has wider latitude to consider materials outside the pleadings. See Menge v. N. Am. Specialty Ins. Co., 905 F. Supp. 2d 414, 416 (D.R.I. 2012) (citing Gonzalez v. United States, 284 F.3d 281, 288 (1st Cir. 2002) ).

III. Discussion

1. Statute of Limitations

The CFPB is tasked with enforcing nineteen consumer protection statutes, including the CFPA (the CFPB's enabling statute) and TILA. See 12 U.S.C. § 5481(12) and (14) ; see also id. § 5581. Counts I, III, and V are brought under TILA, its implementing Regulation Z, and the Official Staff Interpretations of Regulation Z ("staff commentary"). Counts II, IV, and VI are brought based on the same conduct alleged in Counts I, III, and V, respectively, but are pled under the CFPA. See 15 U.S.C. § 1607(b) ("[A] violation of any requirement imposed under [TILA] shall be deemed to be a violation of [the CFPA].").

TILA imposes various restrictions on the ways in which lenders interact with their customers. The act also contains two provisions providing for enforcement of those restrictions: 15 U.S.C. §§ 1607 and 1640. Citizens contends that the CFPB's claims here are governed by § 1640 and its one-year statute of limitations. See Mot. to Dismiss 15. Conversely, the CFPB argues that the claims are brought pursuant to § 1607, which states that TILA compliance shall be enforced under Subtitle E of the CFPA. See Pl.’s Opp'n 7-8, ECF No. 19. Subtitle E, in turn, provides that claims must be brought within three years of their discovery by the CFPB. 12 U.S.C. § 5564(g)(1).

The Complaint alleges that the unlawful conduct began (at the latest) in 2010 and ended sometime between early 2015 and early 2016. See Compl. ¶¶ 15, 20, 22, 23. Per the tolling agreements, all relevant statutes of limitations were tolled from February 23, 2017, until January 31, 2020. See Tolling Agreements, Richman Decl. Exs. 6-12, ECF Nos. 15-6 to 15-12. Thus, if Citizens is correct, and a one-year deadline applies, all the claims were time-barred prior to the start of the tolling agreements, and the entire case must be dismissed. Conversely, if the CFPB is correct that a three-year discovery period applies, the statute of limitations had not expired at the time that the tolling agreements were signed. Assuming that the tolling agreements were valid (more on this in Section III(2)(b)), none of the claims would be time-barred.³ For the following reasons, the Court concludes that the three-year limit controls.

a. Statutory Language

"[S]tatutory interpretation turns on the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Nken v. Holder, 556 U.S. 418, 426, 129 S.Ct. 1749, 173 L.Ed.2d 550 (2009) (citation and quotations omitted). In the absence of ambiguity or absurdity, "courts must presume that a legislature says in a statute what it means and means in a statute what it says there." Carcieri v. Salazar, 555 U.S. 379, 392-393, 129 S.Ct. 1058, 172 L.Ed.2d 791 (2009) (citation and quotations omitted).

Section 1640, titled "Civil liability," provides that "any creditor who fails to comply with any requirement imposed under this part ... with respect to any person is liable to such...