18

- 2743

- cv (L) Consumer Financial Protection Bureau, People of the State of New York v. RD Legal Funding, LLC, et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT
. C ITATION TO A SUMMARY ORDER FILED ON OR AFTER J ANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY F EDERAL R ULE OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT ' S L OCAL R ULE 32.1.1. W HEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COU RT , A PARTY MUST CITE EITHER THE F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION

" SUMMARY ORDER "). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL
. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 30 th d ay of October, two thousand twenty

.
PRESENT: BARRINGTON D. PARKER , DENNY CHIN , Circuit Judges , JANE A. RESTANI, Judge

. *

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

CONSUMER FINANCIAL PROTECTION BUREAU , Plaintiff

- Appellant

- Cross Appellee ,
PEOPLE OF THE STATE OF NEW YORK, by Letitia James, Attorney General for the State of New York, Plaintiff

- Appellant

- Cross Appellee ,

- v - 18

- 2743 , 18

- 3033, 18

- 2860, 18

- 3156

* Judge Jane A. Restani , of the United States Court of International Trade, sitting by designation.- 2

- RD LEGAL FUNDING, LLC, RD LEGAL FUNDING PARTNERS, LP, RD LEGAL FINANCE, LLC, RONI DERSOVITZ , Defendants

- Third Party Plaintiffs

Third Party Defendants

- Appellees

Cross Appellants

.

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FOR PLAINTIFF S

- APPELLANT S

- CHRISTOPHER DEAL, Senior Counsel CROSS APPELLEE S : ( John R. Coleman , Deputy General Counsel , Steven Y. Bressler , Assistant General Counsel , Kristin Bateman, Senior Counsel, David A. King Jr., Counsel, on the brief ) , for Mary McLeod , General Counsel for the Consumer Financial Protection Bureau , Washington, D.C

.
CAROLINE A. OLSEN , Assistant Solicitor General (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, and Andrew W. Amend, Senior Assistant Solicitor General, on the brief ), for LETITIA JAMES, Attorney Gen eral for the State of New York , New York, New York.

FOR DEFENDANTS

- APPELLEES

- MICHAEL D. ROTH (David K. Willingham, CROSS APPELLANTS : Jeffrey M. Hammer, on the brief ), King & Spalding, LLP, Los Angeles, CA, and Scott E. Gant, Boies, Schiller Flexner LLP , Washington, D.C

.

Appeal from the United States District Court for the Southern District of

New York ( Preska, J. ).- 3

- UPON DUE CONSIDERATION, IT IS ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court is VACATED and the case is

REMANDED for further proceedings consistent with this Order.

Plaintiffs

- appellants Consumer Financial Protection Bureau ( the " CFPB ")
and the State of New York (the "State") appeal from a judgment of the United States

District Court for the Southern District of New York entered October 29, 2018
dismissing their federal and state law claims against defendants

- appellees RD Legal
Funding, L LC; RD Legal Finance, LLC; RD Legal Funding Partners, LP (collectively,
"RD") ; and Roni Dersovit z (together with RD, "defendants") . By memorandum opinion
and order entered June 21, 2018, as amended by its September 12, 2018 Order, the

district court grant ed defendants' motion to dismiss

. We assume the parties' familiarity
with the underlying facts, the procedural history of the case, and the issues on appeal.

We review de novo a district court's grant of a motion to dismiss. See

Hernandez v. United States , 939 F.3d 191, 198 (2d Cir. 2019). The CFPB is headed by a
Director, who is appointed by the President with the advice and consent of the Senate

for a five

- year term, during which time " [t]he President may remove the Director for
inefficiency, negl ect of duty, or malfeasance in office. " 12 U.S.C § 5491(b)

- (c) (the " for

cause removal provision " )

. The district court held that this for

- cause removal provision

is unconstitutional , and that the removal provision is not severable from the remainder

of t he Consumer Financial Protection Act (the "CFPA") or Title X of the Dodd

- Frank- 4

- Wall Street Reform and Consumer Protection Act, Pub. L. No. 111

- 203, 124 Stat. 1376
(2010) . Accordingly, the district court struck the entirety of the CFPA. The district

court also held that then

- acting CFPB Director Mick Mulvaney's May 11, 2018

ratification of the CFPB's enforcement action against defendants failed to cure the

constitutional deficiencies in the CFPB's structure or otherwise render defendants'

arguments moot.
On June 29, 2020, the Supreme Court struck down the for

- cause removal
provision on the basis that it violates the separation of powers , but additionally held
that the removal provision is severable from the remainder of the CFPA. See Seila L

.
LLC v. Consumer Fin

. Prot

. Bureau , 140 S.Ct. 2183, 2192 (2020). Following Seila , now
acting CFPB Director Kathleen L. Kraninger ratified the enforcement action on July 8,

2020.
In light of these developments, w e affirm the district court's holding that

the for

- cause removal provision is unconstitutional, we reverse the district court's
holding that the for

- cause removal provision is not severable from the remainder of the

CFPA , and we remand for the district court to consider in the first instance t he validity

of Director Kraninger's ratification of this enforcement action

. See Seila , 140 S. Ct. at

2208 n.12. 1

1 We do not reach defendants' other arguments, including, for example , that RD Legal does not qualify as a "covered person" under the Dodd

- Frank Act.- 5

- * * *
For the foregoing reasons, we VACATE the judgment of the district court

and REMAND the case for further proceedings.

FOR THE COURT: Catherine O'Hagan Wolfe, Clerk