our nd case for arguments this morning is consumer financial protection against consumer st legal liability because nobody proved to defend his did anything wrong there is no with the ready to regulate in the st place and the damage award can even be remotely justified so as i said it's difficult to know where to start i'm going to talk about practice of law but i want to touch briefly on addition to the live testimony to the district court in deposition testimony so it might be a little deceiving to just say six live witnesses well actually the district court did decide you can't contact your lenders directly on seem to focus on with respect to whether under regulation oh you were engaged in the practice of law the judge and you you criticize that is used this you can distilled from all of the states this general idea that the application of legal principles to facts is kind of the common ground and nobody objects to that in any serious way nobody tells the judge is not how it went down before trial judge granted rule that it would be state by state and all to see if you'd be in the defendant's agreed that it would be state by state or than one hundred dollars pages of briefing from both sides on each state the many clients were affected applying each state's laws they talked about representatives that they talked about agreeing on what each state's that there was ten results states judge greg says we're going to do those at trial so it was a total agreement by al your trial judges it in practical terms there's only so many times you can keep saying the same thing or the judge does what the judge is going to do and this judge decided that for practicality for experience it was going to apply this industry  and send you back your position has to be spending five minutes skimming over a file to make sure that everything's in the file is the practice of law well your honor we have a lot to say about practice of law but cancer your question yes the same way a bankruptcy attorney as paralegals assemble the documents they look at them they analyze them they review them they apply the hamp guidelines that is the practice real estate lawyer might do a real estate closing that the guidelines you would analyze the documents you advise your clients yes that is the practice fundamentally this case founders because congress said that the see if he does not have authority to regulate the practice a lot of what they've done here they sued for lawyers in their law firm about a relationship between and turning a client about fundamentally resolving a debt about dealing with a creditor in a breach of a contract situation they want to regulate the terms of the retainer agreement they want to regulate the terms of the attorney they want to regulate the terms of the attorney client fights and there is no authority granted like the judge who ordered the practice of law question there is no  that there is an attorney client relationship here all six thousand four hundred or four had signed attorney client a retainer agreement all eight representative clients testified that they had an attorney client relationship all the representative local partners the same and even judge c there was a lot of testimony at trial from local partners is that we did this maybe a quarter or two with rd of the people who were taking this law firm were in foreclosure what you've done is accepted to see a p b s representation that there were only thirty judge can we never  and there is no basis to accept well what my colleague is going to refer to is if you look at the notes there were only thirty clients who it said in the notes foreclosure defendants only so those were the rare clients and said we don't want any other services we just want you to an is that he was really focusing on what the defendants did not the local attorneys and if you look at what the defendants they said that this relationship to make it appear as if they were a law firm but they really weren't and the defendants for i didn't have any clients who came on didn't have any substantive discussions with any kind of attorneys up front they were brought in by the defendants they paid their fee they signed these retainer agreements but really no if i said was given don't discussion about the types of advice that was kind of done down the road by local primarily had a very pro forma letter where they really were practicing law and even if some of them were practicing law it didn't matter because when looking at the defendant to file an upfront and pulling them in they weren't practicing law and judge say anybody i think you've hit it on the head because at the end of the trial they had that post trial here and judge conley said don't try to convince me these local guys were practicing law they were reviewing documents of course they were present might have says you cannot regulate the practice of law and practice the law is the find if you under the law d of your state under the law every state including illinois headquarters attorney could have billy age with a local testimony and through the closing arguments where there were a lot of discussions from both sides with the district court about what really was at issue here and i'd agree judge connelly did seem to rule on a bit of a different basis than what the plaintiffs were advocating for but does that matter and why it is his his ruling regardless of what the plaintiffs argued why is that originally said that they are practicing law but go after the headquarters of them but at the end of the day the defendants were permitted it's not of beating the regulation is complying with the regulation there is nothing wrong with them practicing  i granted you for the sake of argument that the local attorneys did nothing which obviously we strongly strongly but let's say the local attorneys didn't i say we still win because it is acceptable d for the somebody was practicing law but my colleagues like it is ruling was exactly the opposite that he push comes to shove you didn't say this but maybe one of the grete that the local attorneys were practicing law but what the defendants at headquarters were doing here was not practicing law for the reasons that i said a moment ago what's erroneous about that ruling i mean judge i think the record testimony showed there was a lot of law being practiced that of course that's how this the regulation says and that's what they backed off a judge that he because the statute says you only have to be licensed in under the law of the state where you're practicing and under the law of this press state where you're practicing you affiliate you can affiliate with local council you can affiliate with local parks that is why judge calmly did back off because he didn't want to take a gun and i'm old i jurisdictional law for structure complies with the law law was a practice i think we all would have to agree this was a law firm doing things lawyers do so somebody was doing it the judge saying you know they're claiming it was done in headquarters more than they were claiming it was done at the local level we're where like there bankruptcy practice there was a lot of efficiency it was done at headquarters and they used local parks so there's really nothing to debate if law is being practiced in headquarters and there's nothing to debate it was being practiced at the local level you know judge calmly said well i find this whole thing distasteful but that doesn't you know it's got it it is a country of laws and habits what did they violate they didn't violate anything they had to he has no authority to regulate the practice of law if the defendants were practicing law and headquarters there's no authority to regulate and if they're practicing law at at the local level there is no authority to record i wouldn't mr povey when you come rector's and i wonder whether that tracks the statutory language because the statute says that legal services have to be rendered by a person with a license to practice law in the client's jurisdiction so if you have a more tighter restrictions a law firm somebody in arizona and somebody in illinois rendering advice to a person in arizona watch the person rendering the advice in illinois covered by the examp i think you need to address the statutory language which so far you haven't mentioned judges you pick the most interesting issue in the case but the statutory language doesn't say that a lawyer has to be licensed in the state of the property the client if says under the laws of the state or the client when you just read was what he and the itc's regulation says that they literally have to be licensed in the state if we look at the statutory language and it's it's and twenty seven and you wanted it says with respect to an activity engaged in by its attorney may not exercise supervisory authority with respect to an attorney and gauged him by an attorney as part of the practice of law under the laws of that which the attorney of lights of your being the key word if i practiced law in illinois illinois law and bar rules allow me to practice in other jurisdictions if you were to read it so that it was literally you had to be in those jurisdictions i couldn't prohibit i couldn't have markers in those courts they don't i couldn't talk about the i'm not asking what illinois provides i'm asking whether the statute requires the illinois i can affiliate with local council under the laws of illinois i can have partners in the various states it's an all interviewees allocation to do what the c f p did here which said you have to literally be licensed in that to right i do want to talk briefly about damages there is absolutely no authority for a twenty one million dollars restitution award we talked about it at length in our brief st they said it was deception then they did group deception and they said consumer lost there was no consumer that lost anything here twenty one billion dollars bears no relationship to anything that happened to lou case what's the rest and he debate it should have been net profits not gross revenue and that's a case decided after trial it's mandatory language it's very clear in the c m p p's only response is well that would be in there is no damages well if you have a case where no consumer was injured and the defendants have no ill gotten gains then no damages is the correct result even if you disagreed with me on the technical violation liability or that there was a or there was no damages and i don't see a war even less defensible they don't even postulate a coherent narrative that can support it the district court found that the conduct wasn't wrongful on its face there in nature he found that there was ambiguity about regulation zero and he and he found that they had gotten its act it's going to say that on top of that they're going to throw thirty one million dollars in penalty is on the defendants did not commit any kind of liability they could support that and i see that i'm out of time if there are other questions i will answer them but otherwise we ask you to to correct this injustice thank you very much mr prado it please the court kevin friedel for the consumer financial protection bureau so there was a lot in that presentation that we disagree with and that was an accurate i'll get right into it with respect to the over the practice of law in certain respects the three that same provision which defendants completely ignore says however this limitation it does not apply to the extent an attorney is subject to  certain preexisting federal authorities of which relation and the statute under which it was promulgated qualified so the statutory exemption has nothing to say about this case here it is completely a red herring the regulatory exemption is also being i think inaccurately described so it is more complicated than just exempting all attorneys who are practicing law or all attorneys the various ways the board would have sorry had the bureau would envision the operation of this system for one of the many multi jurisdictional love firms that we have in the country these days mean huge numbers of firms jones day is all over the planet actually not just even the country does that mean they just have to stay out of this business or does it mean that there is some way to comply  o judge would we have not disputed that if the local attorneys were in fact providing these services as the part of the practice of law and if they were you know associated with the  defendants and it is in some meaningful way and you know and met the other parts of the exemption that they could have qualified were not making the argument that it was impossible for this structure to be exempt from the regulation so they have chicago that's got a few lawyers who are overlooking the paralegal or administrative staff or anything else that the structures a whole is compatible with the statute and regulation we haven't disputed that your honor in this case  but what we argued and what judge conley correctly found was that what the local attorneys did here it didn't satisfy again even this artificially  this is a shortened version of the exemption such that any of the defendants could qualify so you know there are a few spit of initial issues that defendants haven't addressed either here or in the briefing for example the evidence showed that for nearly two thousand of defendants consumers they were never assigned a local attorney at all defendants have no response to that but certainly as to this which is almost a rd of their customer  chicago because i'd like some help you know contesting a contract or something i'd like some help with the transaction don't i sign the retainer agreement with the firm and then whether i wind up working with a certain partner or some associates or a combination of those things that can be determined later but perhaps your honor but to qualify for this exemption defendants had to show that these local attorneys were actually under the language of the regulation providing these services as part of the practice of local attorneys were doing here at the court and i know there was a lot of dialogue about that back and forth during the closing arguments the court seemed to focus on what was happening at headquarters do you agree with that or defendants attempts to sort of patrol a local attorneys as the partners in these firms he didn't think i believe that there was really meaningful connection between the local attorneys and the firms but i think this all sort of goes to the broader point that they clearly just calmly was looking at the totality of the circumstances here he was looking at the system that defendants set up and clearly that system did not call for the local attorneys to be did not require them to  ruling as concluding that the local attorneys across the board were not providing mortgage assistance really did he did he rule on that that's i didn't see that in his ro he emphasizes that you know certain local attorneys might have considered and wanted to be providing but if i had legal services but you looked at the system that was set up as a whole the fact that you know there were as the bureau showed only thirty consumers who actually got these foreclosure defense services that defendants focus on for most of them they were just getting help with mortgage modification applications that was done by defendants not attorney staff so but i think the thing is saying to these local attorneys or nat providing legal services yes that they didn't meet judge connelly definition that judge connelly was applying t they were not ready to headquarter attorneys the local attorneys and i believe the headquarters attorneys but i think what we're discussing is really multiple bases in which the judgment could be could be affirmed and i do want to emphasize that  you know there are actually two completely other grounds grounds for affirming the district court's finding with respect to the exemption they don't even require the court to go down this road we think clearly there was  there was a clear error in judge conley's bottom line factual finding but if the court disagreed or even if the court didn't just didn't want to resolve the case on that basis it could also affirm this part of the court's finding and the judgment particular regulation section six hundred and twenty six of the omnibus appropriations act two thousand and nine and the bureau statute the consumer financial protection act give transferred from the f t c to the bureau the authority over this regulation which governs mortgage relief providers but i don't think that really gets to my question mr both these bureau may not exercise any supervisory or enforcement authority with respect to an attorney activity to dot it out it out under the laws of a state in which the attorney is licensed to practice law and mr argument is that the defendants were licensed to practice in illinois which permitted them to do what they did as attorneys as long as they associated with local counsel and fifteen point seven a two says that the this is true only if the client is in the same state as the attorney right place in which the consumers dwelling is located so the regulatory tension looks narrower than the statutory so the question i'm asking is what is the source of the bureau so foreign to narrow the scope of the statutory exemption now mr lowy may be wrong about his interpretation of the meaning of the statutory exemption but to the extent that the regulatory exemption is narrower what is the source of the bureau's authority to do that that's what i'm asking so i think that there are two issues here judges for one the statutory limitation we're discussing is a limit on the bureau's enforcement and supervisory authority it doesn't purport to speak to the bureau's rulemaking authority which is whether it exercised in issuing a regulation or regulation can also be enforced even now by the one that's the statute that gave us the authority to probably get this rule and or authorities transferred to the bureau under certain subtitles of its statute regulation it was one of those so the statutory limitation simply has no role to play here whatsoever it doesn't limit our authority to have issued the same rule that the f t c had previously it didn't limit our authority to bring this action and as a general matter i just want to be clear i defend its seem to portray this as the bureau trying to regulate the practice of law that's not what we're doing this regulation no is about mortgage relief service providers the bureau in bringing this action  you know is seeking to enforce that against nationwide mortgage modification bill that sought to hide behind this facade of local attorneys now regulation no actually you know it applies to mortgage service providers and generally however you know regardless of whether their training is not however attorneys actually get special treatment under the regulations they can avoid regulation of those requirements entirely if only they can show that they need these you know specific conditions of the regulatory exemption and judge conley correctly found certainly there was no clear error that they had failed to satisfy the st two elements of the exemption i just calmly you know was the one who  finding that you know there was clear error here that there are factual record didn't provide a plausible basis for that ruling don't understand how deposition testimony in trial exhibits can answer a question about the there's no question about there might be there was a question at trial about defendant's qualification for this exemption i don't think there's any question about the bureau's authority to bring this case you've cited this statutory limitation terms it doesn't apply here and so the trial exhibits don't speak to that question they speak to this different issue of whether the defendants could qualify for a regulatory exemption that they didn't show they qualify for and again there's this finding just calmly made that's one basis for affirming his decision there's also the fact that defendants couldn't satisfy this other provision that they showing that they complied with relevant state laws th clearly didn't they were making all sorts of misrepresentations there to desperate homeowners telling them that they were going to receive legal services from a consumer that a three and b those parts of the regulatory exemption we're talking to go she held that those were invalid and outside the bureau's authority to issue on the basis of this statutory limitation we've been talking about which doesn't even speak to the bureau's rule making authority in the st place so we think about that was error that but that folding governed what judge connelly did later and that's why at a few words on lou against c c because i'm concerned about the use of the net revenues as opposed to net profits of the term net profits appears about every th line in the lo don't think lou applies here because it was about a different remedy but i want to make sure i make something clear to the court even if the court doesn't have to decide this question here because even if lou applied it would make no difference in this case on summary judgment defendants were already arguing this restitution amount which the bureau came forward with they were arguing this has to be reduced to account for expenses so it should be profits not net revenues and they were arguing it has to be reduced to account for whatever value  their clients supposedly received they made those arguments even even before lou but the district court found they had failed to back that up to the way you have to do it summary judgment with a specific number they didn't say the restitution now should be reduced by any specific figure they didn't connect that to specific facts in the record all the things you have to do a summary judgment so lou just says you get an opportunity to try to avert to get these questions i'm sorry who plaintiffs comes forward with their estimate of what these damages should be and the other side has the obligation at that point as the bureau ever come forth with an estimate about the defendants net defendant should be required to show something different but if all the bureau has ever tried to do is estimate the gross receipts and that's legally the wrong standard why does that move a burden to the defen program out of restitution the defendants there were claiming just like defendants here that that amount should be reduced to account for their expenses that it should be basically profits not not revenue and the district court found they hadn't properly presented that argument because they didn't