Bureau of Consumer Fin. Prot. v. Fair Collections & Outsourcing, Inc.
| Decision Date | 30 November 2020 |
| Docket Number | Case No.: GJH-19-2817 |
| Parties | BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, v. FAIR COLLECTIONS & OUTSOURCING, INC., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Plaintiff Consumer Financial Protection Bureau ("CFPB" or "Bureau") filed a seven-count Complaint against Fair Collection and Outsourcing, Inc., a third-party debt collection agency headquartered in Beltsville, Maryland. ECF No. 1. The suit also names as Defendants three affiliated companies and their owner Michael E. Sobota (hereinafter, collectively, referred to as "FCO" or "Defendants"). Id. The CFPB's Complaint asserts causes of action under the Credit Furnishers Rule, 12 C.F.R. §1022.42 (Count I), the Fair Credit Reporting Act, 15 U.S.C. §1681, et. seq. (Counts II through VI), and the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et. seq. (Count VII). Id. ¶¶ 88-123. Now pending before the Court is Defendants' Motion to Dismiss, and/or in the Alternative, for Stay of Proceedings. ECF No. 7. No hearing is necessary. Loc. R. 105.6 (D. Md. 2018). For the following reasons, Defendants' motion is denied.
Defendants operate the largest debt collection company in the multi-unit housing industry. ECF No. 1 ¶ 1.2 They collect debt on behalf of assisted living facilities and large apartment complexes, including student and military housing. Id. On September 25, 2019, the CFPB filed a seven-count Complaint against Defendants, alleging that Defendants failed to take steps to ensure the accuracy of the information about consumers that they furnish to consumer-reporting agencies, failed to conduct reasonable investigations of consumers' disputes about debts Defendants placed on their credit reports, reported information that was alleged to have been the result of identity theft without determining whether the information was accurate, and collected debt without a reasonable basis to assert it was owed, among other allegations. ECF No. 1 ¶¶ 88-123.
Defendants moved to dismiss this lawsuit, claiming that the structure of CFPB was unconstitutional and that Plaintiff therefore lacked standing. ECF No. 7. Defendants alternatively moved for a stay of proceedings until the Supreme Court decided Seila Law v. Consumer Financial Protection Bureau, ___ U.S. ___, 140 S. Ct. 2183 (2020), as that case involved the constitutionality of the CFPB. See id. On June 29, 2020, before this Court ruled on Defendants' motion, the Supreme Court decided Seila Law, holding that the CFPB's enabling statute violates Article II of the Constitution to the extent it contained a provision only permitting removal of the CFPB's single Director by the President for cause, but finding that clause separable, and thus upholding the constitutionality of the agency. See Seila Law, 140 S. Ct. 2183.
Three days after the issuance of the Seila Law opinion, the Bureau's Director filed a declaration ratifying the Bureau's decision to bring this lawsuit. ECF No. 14-1. Defendants moved for leave to file supplemental briefing to address the legality of the Director's post-Seila Law ratification. ECF No. 15. This Court granted Defendants' motion. ECF No. 18. Defendants submitted supplemental briefing in support of their motion to dismiss or stay proceedings on September 14, 2020, ECF No. 19, the CFPB responded on September 21, 2020, ECF No. 20, and Defendants submitted their reply on October 5, 2020, ECF NO. 22.
As an alternative to dismissal, Defendants ask the Court to stay this lawsuit pending a ruling by the Supreme Court in Collins v. Mnuchin, No. 19-422, 2020 WL 3865248, (cert. granted July 9, 2020). A district court has broad discretion to stay proceedings as part of its inherent power to "control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." See Landis v. N. Am., 299 U.S. 248, 254 (1936). But that discretion is not without limits. In re Sacramento Mun. Utility Dist., 395 Fed. App'x 684, 687 (Fed. Cir. 2010). A court must "weigh competing interests and maintain an even balance." Landis, 299 U.S. at 255; see also United States v. Ga. Pac. Corp., 562 F.2d 294, 296 (4th Cir. 1977) ().
"When considering a discretionary motion to stay, courts typically examine three factors: (1) the impact on the orderly course of justice, sometimes referred to as judicial economy, measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected from a stay; (2) the hardship to the moving party if the case is notstayed; and (3) the potential damage or prejudice to the non-moving party if a stay is granted." Int'l Refugee Assistance Project v. Trump, 323 F. Supp. 3d 726, 731 (D. Md. 2018). "[A] district court has discretion to stay actions when proceedings in another matter involve similar issues." Popoola v. MD-Individual Practice Ass'n, Inc., No. Civ.A.DKC 2000-2946, 2001 WL 579774 (D. Md. May 23, 2001) (citing 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1360 (2d. ed. 1990)). In order to issue a stay, a court must be satisfied that a "pressing need" exists, and that "the need for a stay outweighs any possible harm to the nonmovant." Elite Const. Team, Inc. v. Wal-Mart Stores, Inc., JKB-14-2358, 2015 WL 925927, at *3 (D. Md. Mar. 2, 2015).
Defendants argue that a stay is warranted because the issues presented in its Motion to Dismiss are pending before the Supreme Court in Collins v. Mnuchin, and thus this Court should wait for the Supreme Court's ruling. According to Defendant, "the Court is considering whether the Federal Housing Financial Agency's ("FHFA") structure violates the separation of powers, and if so, whether it should set aside action taken by the FHFA when it was unconstitutionally structured." ECF No. 19 at 9. Because, Defendants assert, "[a] related remedy is sought here, i.e., dismissal of a lawsuit filed by an unconstitutional created agency," id., Collins v. Mnuchin presents "the potential for a dispositive ruling in favor of FCO," id. at 25. In the Court's view, however, Defendant's preferred outcome is not sufficiently likely to warrant a stay.
First, Collins v. Mnuchin will not, by necessity, translate to a case involving a different agency, given that there are key factual differences between the CFPB and FHFA. Therefore, it is far from certain that even if the Supreme Court finds the FHFA's structure unconstitutional and proceeds to determine the proper remedy, its holding would be controlling with respect to the CFPB.
Furthermore, Collins v. Mnuchin does not involve an action that was subsequently ratified and, thus, the question of ratification is not at issue in that case—as the challengers stated in their brief before the Fifth Circuit, "[t]he validity of any efforts at ratification would need to be decided in a future case depending on the specific procedures used and facts presented." Suppl. En Banc Br. of Pls.-Appellants at 35, Collins v. Mnuchin, No. 17-20364 (5th Cir. filed Dec. 12, 2018). Thus, although Defendants state, "[i]f the Supreme Court in Collins v. Mnuchin holds that agency action taken during the period when it was unconstitutionally structured must be set aside, this ruling would require this Court to dismiss the present enforcement action," ECF No. 19 at 25, that is not necessarily true. Collins v. Mnuchin will be addressing that question only with respect to an unratified action.3 This case, involving a ratified action, presents a separate question. Moreover, regarding that separate question—whether a later-ratified action originally taken during the period when an agency was unconstitutionally structured must be set aside—as discussed below, Seila Law has already suggested that the answer is no. If dismissal were absolutely required, it would not have remanded to the Ninth Circuit for a determination of the validity and permissibility of ratification, as doing so would have been "futile." 140 S. Ct. at 2208.
Given the uncertainty surrounding the effect a decision in Collins v. Mnuchin will have on the present case, the Court will deny Defendant's Motion to Stay.
Defendants move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), arguing this Court lacks jurisdiction over the matter because the Bureau lacks standing. See, e.g., Miller v. Pacific Shore Funding, 224 F.Supp.2d 994-95 (D. Md. 2002) (citing Marshall v. Meadows, 105 F.3d 904, 905-96 (4th Cir. 1977)). "A district court should grant a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) 'only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.'" Upstate Forever v. Kinder Morgan Energy Partners, L.P., 887 F.3d 637, 645 (4th Cir. 2018) (quoting Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999)). "The burden of establishing subject matter jurisdiction rests with the plaintiff." Demetres v. East West Constr., 776 F.3d 271, 272 (4th Cir. 2015). "When a defendant challenges subject matter jurisdiction pursuant to Rule 12(b)(1), 'the district court is to regard the pleadings as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.'" Evans, 166 F.3d at 647 (quoting Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991)). Where jurisdiction "ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co. v. Citizens for a Better Env't, 523 U.S....
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