Consumer Fin. Prot. Bureau v. Access Funding, LLC
| Decision Date | 12 July 2021 |
| Docket Number | Civil Action No. ELH-16-3759 |
| Parties | CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v. ACCESS FUNDING, LLC, et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
This protracted litigation arises under the Consumer Financial Protection Act of 2010 ("CFPA" or the "Act"), 12 U.S.C. §§ 5481 et seq., and concerns the purchase of structured settlements in tort suits. Plaintiff Consumer Financial Protection Bureau (the "Bureau" or "CFPB") has filed suit against a host of defendants: Access Funding, LLC ("Access Funding"); Access Holding, LLC ("Access Holding"); Reliance Funding, LLC ("Reliance Funding");1 Lee Jundanian, former Chief Executive Officer ("CEO") of Access Funding; Raffi Boghosian, Chief Operating Officer ("COO") of Access Funding; Michael Borkowski, CEO of Access Funding; and Charles Smith, Esquire, an advisor for Access Funding consumers. See ECF 1 ("Complaint").2 Ishall refer to Access Funding, Access Holding, Jundanian, and Boghosian collectively as the "Access Funding Defendants."3
The Amended Complaint (ECF 44), filed in December 2017, is the operative pleading. CFPB alleges that defendants violated the Act by participating in a scheme to pursue structured settlement holders in order to purchase their settlements on unfair terms. CFPB seeks a permanent injunction, damages, disgorgement, payment of redress to consumers, civil penalties, and costs based on defendants' alleged violation of various provisions of the CFPA.
In particular, the Amended Complaint alleges three violations of the CFPA by Smith and two by the Access Funding Defendants and Borkowski. The claims against Smith and one claim against the Access Funding Defendants and Borkowski arise out of Smith's conduct as an independent professional advisor ("IPA"). According to the CFPB, Smith engaged in unfair (Count I), deceptive (Count II), and abusive (Count III) acts and practices, in violation of 12 U.S.C. §§ 5531(a), (b), and (d), and the Access Funding Defendants and Borkowski "provided substantial assistance" with respect to Smith's unfair, deceptive, and abusive acts (Count IV), in violation of 12 U.S.C. § 5536(a)(3). See ECF 44, ¶¶ 62-92. In Count V, which concerns advances by the Access Funding Defendants and Borkowski, CFPB claims that the Access Funding Defendants and Borkowski engaged in abusive acts and practices, in violation of 12 U.S.C. §§ 5531(d)(2)(a) and 5536(a)(1)(B). Id. ¶¶ 93-99.
The Access Funding Defendants have filed a motion to dismiss under Fed. R. Civ. P. 12(b)(1). ECF 138. The motion is supported by a memorandum (ECF 139) (collectively, "Access Funding Motion to Dismiss") and one exhibit. ECF 139-1. In the Access Funding Moiton toDismiss, the defendants urge the Court to dismiss the Amended Complaint on the ground that the Bureau lacks authority to pursue this enforcement action. ECF 139 at 3. CFPB opposes the Access Funding Motion to Dismiss (ECF 148) with two exhibits. ECF 148-1; ECF 148-2. And, the Access Funding Defendants have replied. ECF 154.
CFPB has moved for partial summary judgment (ECF 132), supported by a memorandum (ECF 132-1) (collectively, the "CFPB Motion") and 89 exhibits. CFPB seeks summary judgment as to liability under the five counts in the Amended Complaint.
Smith has filed a combined cross-motion for summary judgment, or in the alternative, motion for judgment on the pleadings under Fed. R. Civ. P. 12(c), and opposition to the CFPB Motion. ECF 137 ("Smith Motion"). The Smith Motion is supported by six exhibits. ECF 137-1 to ECF 137-7.
The Access Funding Defendants have also filed a combined cross-motion for summary judgment as to Counts IV and V of the Amended Complaint and an opposition to the CFPB Motion. ECF 140. The motion is supported by a memorandum (ECF 141) (collectively, "Access Funding S.J. Motion") and 27 exhibits. ECF 141-1 to ECF 141-27.
Borkowski has filed a combined cross-motion for summary judgment and opposition to the CFPB Motion (ECF 146, "Borkowski Motion"), supported by six exhibits. ECF 146-1 to ECF 146-6. Borkowski argues that the CFPB has not established that he was personally engaged in the alleged abusive practices under Count V or provided substantial assistance to Smith's unfair, deceptive, and abusive acts, as alleged under Count IV.
CFPB has submitted a combined opposition to the Smith Motion (ECF 137), the Access Funding S.J. Motion (ECF 140), and the Borkowski Motion (ECF 146), as well as a reply in support of its own motion (ECF 152), with 15 additional exhibits. ECF 152-1 to ECF 152-15. TheAccess Funding Defendants have replied (ECF 157) and submitted ten additional exhibits. ECF 157-1 to ECF 157-10.
The defendants have also filed a joint motion to strike the deposition testimony of Stephen Thomas, one of Access Funding's consumers, docketed at ECF 132-45. ECF 142. The motion is supported by a memorandum (ECF 143) (collectively, the "Motion to Strike") and one exhibit. ECF 143-1. The Bureau opposes the Motion to Strike (ECF 151), supported by two exhibits. ECF 151-1 to ECF 151-2. And, defendants have replied. ECF 153.
CFPB filed a notice of supplemental authority docketed at ECF 158. The Access Funding Defendants and Smith filed a "Motion for Leave to File a Response to the Bureau's Notice of Recent Authority" (ECF 159), along with the proposed response. ECF 159-1. The Access Funding Defendants, together with Smith, also filed an additional notice of supplemental authority. ECF 161. In addition, CFPB filed supplemental authorities. See ECF 160; ECF 162; ECF 163.
The motions are fully briefed and no hearing is necessary to resolve them. See Local Rule 105.6. Because CFPB has not opposed ECF 159, I shall grant that motion. I shall also grant the Motion to Strike (ECF 142). But, for the reasons that follow, I will deny all other motions.
CFPB "is an agency of the United States charged with regulating the offering and providing of consumer-financial products and services" under certain federal statutes, including the CFPA. ECF 44, ¶ 5. It "has independent litigating authority, including the authority to enforce the CFPA." Id. (citing 12 U.S.C. § 5564(a)-(b)).
Maryland has enacted a Structured Settlement Protection Act ("SSPA"). Id. ¶ 21. See Md. Code , §§ 5-1101 et seq. of the Courts and Judicial Proceedings Article ("C.J."). It is one of 49 states in the country that has enacted a statute governing structured settlements. ECF 44, ¶ 21. Maryland's SSPA requires structured-settlement-factoring companies to obtain court approval before purchasing a payment stream. Id. ¶ 22; C.J. § 5-1102. It also requires "the court to find that the consumer has consulted with an [IPA] before it can approve a structured-settlement transfer." ECF 44, ¶ 29.
After suit was filed, defendants moved for abstention under Burford v. Sun Oil, Co., 319 U.S. 315 (1943), and for a stay or, in the alternative, to dismiss. ECF 13; ECF 16. By Memorandum (ECF 27) and Order (ECF 28) of September 13, 2017, Judge Motz denied these motions. But, he granted the motions to dismiss as to Counts I-IV of the Complaint, which were based upon the conduct of Smith, and denied the motion as to Count V, lodged against the Access Funding Defendants and Borkowski, alleging substantial assistance to Smith's unfair and deceptive acts.
Judge Motz determined that Smith was engaged in the practice of law when he provided advice to consumers, and therefore his conduct fell under the "practice of law" exclusion to the CFPA, pursuant to 12 U.S.C. § 5571(e). ECF 27 at 26. Further, he found inapplicable the first exception to the practice-of-law exclusion—for conduct that, although undertaken by an attorney practicing law, takes place "outside the scope of the attorney-client relationship." Id. Judge Motzreasoned that if the allegations in the Complaint were true, "both Smith and the consumers manifested the intent necessary to form an attorney-client relationship." Id.
CFPB subsequently moved for leave to file an Amended Complaint as to Counts I-IV, seeking to add allegations that consumers never formed an attorney-client relationship with Smith. ECF 37. The Access Funding Defendants and Smith opposed that motion. ECF 39; ECF 40. I granted the Bureau's motion (ECF 42; ECF 43), and the Amended Complaint followed. ECF 44.
Thereafter, on December 27, 2017, Smith moved to dismiss the Amended Complaint or, in the alternative, for summary judgment. ECF 46. Borkowski also moved to dismiss. ECF 48. By Order of June 5, 2018 (ECF 66), I denied both motions.
Then, on April 6, 2018, before discovery was completed, the defendants filed a joint motion for partial summary judgment with regard to the Bureau's claims for monetary damages on behalf of consumers. ECF 58; ECF 59. The basis for defendants' motion was a settlement agreement in connection with a class action suit filed in the Circuit Court for Baltimore City, Crystal Linton, et al. v. Access Holding, LLC, et al., Case No. 24-C-16-003894-OT. ECF 59 at 1-2. In light of the settlement agreement, defendants argued that the Bureau's effort to enforce the CFPA "is barred by the doctrine of res judicata and the bar against obtaining a double recovery." Id. at 2.
I concluded that the settlement agreement in the State case was not a final judgment on the merits. ECF 87 at 23. Thus, defendants' res judicata claim failed. By Memorandum Opinion (ECF 87) and Order (ECF 88) of January 18, 2019, I denied defendants' motion for partial summary judgment.
Thereafter, the parties continued to engage in discovery. See Docket. Then, on October 24, 2019, defendants filed a joint motion to stay, pending the outcome of two cases: Seila Law LLC v. Consumer Financial Protection Bureau, ___ U.S.___, 140 S.Ct. 2183, 2197 (2020), which was thenpending before the Supreme Court and is discussed, infra, and Linton v. Consumer Protection Division, 467 Md. 502, 225 A.3d 456 (2020), which was then...
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