Bureau of Consumer Fin. Prot. v. Fifth Third Bank

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BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, v. FIFTH THIRD BANK, N.A., Defendant.

No. 1:21-cv-262

United States District Court, S.D. Ohio, Western Division

July 18, 2024

OPINION AND ORDER

DOUGLAS R. COLE UNITED STATES DISTRICT JUDGE

In this case, the Bureau of Consumer Financial Protection (the Bureau) alleges that Fifth Third Bank, N.A., (Fifth Third) violated various federal consumer protection statutes in its dealings with its customers, mainly by opening accounts or adding products or services to existing accounts, without customer authorization, thereby causing those customers to incur fees. (Am. Compl., Doc. 73). The parties have now settled their dispute. Or, rather, they are willing to settle their dispute, contingent upon this Court's approving a consent decree they jointly submitted. (Doc. 151).

While consent decrees are a common method for resolving disputes like this, at least some courts confronted with them have nonetheless raised concerns. These concerns extend to both the court's basic authority to enter such decrees in an otherwise-settled matter (i.e., jurisdictional concerns) and the scope of the court's remedial authority under traditional principles of equity to enter what amounts to permanent injunctive relief.

The Court, however, will not belabor those points here. That is because, in a thoughtful opinion, Judge Beaton has recently explored both issues in detail. Lexington Ins. Co. v Ambassador Grp., LLC, 581 F.Supp.3d 863 (W.D. Ky. 2021). This Court echoes the concerns raised there, but it has little to add beyond the careful analysis that opinion articulates.

More relevant here, the Court agrees with Judge Beaton that whatever the merits of either the jurisdictional concerns or the remedial concerns if this Court were writing on a blank slate, the Sixth Circuit has already resolved them in binding decisions. Id. at 868, 870. On the jurisdictional front, the Sixth Circuit instructs that a court has jurisdiction to enter a consent decree in support of settlement so long as the decree (1) “spring[s] from and serve[s] to resolve a dispute within the court's subject-matter jurisdiction,” (2) “com[es] within the general scope of the case made by the pleadings,” and (3) “further[s] the objective of the law upon which the complaint was based.” Benalcazar v. Genoa Twp., 1 F. 4th 421, 425 (6th Cir. 2021) (quoting Local No. 93, Int'l Ass'n of Firefighters v. City of Cleveland, 478 U.S. 510, 525 (1986)). And the Sixth Circuit has also confirmed that whether the Court should actually issue a permanent injunction (which is what a consent decree amounts to) is largely guided by traditional equitable principles, under which the Court is to determine “whether the decree is fair, adequate, and reasonable as well as consistent with the public interest.” Lexington Ins., 581 F.Supp. 37 at 870 (quoting United States v. Lexington-Fayette Urb. Cnty. Gov't, 591 F.3d 484, 489 (6th Cir. 2010)). Beyond that, “the district court's inherent power is broad and the court's choice of remedies is reviewed for abuse of discretion.” Id. (quoting United States v. Bd. of Cnty. Comm'rs of Hamilton Cnty., 937 F.3d 679, 688 (6th Cir. 2019)) (cleaned up).

How do those two frameworks play out here? Start with jurisdiction. The proposed consent decree clearly springs from and serves to resolve a dispute within this Court's subject-matter jurisdiction. This action involves allegations that Fifth Third violated federal statutes that the Bureau has the authority to enforce. That suffices to establish subject-matter jurisdiction. 28 U.S.C. § 1331. And the parties engaged in vigorous negotiations to resolve this matter, which strongly suggests the consent decree (one of the terms they negotiated) is necessary to resolution. As to the second element, the proposed consent decree falls well within the general scope of the case. The consent decree orders Fifth Third not to violate the very provisions that the Bureau sought to enforce against Fifth Third's past conduct here in the future. (Doc. 151-1, #2211, 2213-14). Beyond that, it also requires Fifth Third to maintain various policies and procedures designed to serve that goal, to adopt a compliance plan along those lines, to engage in certain ongoing reporting, and to maintain various records relating to all of these actions. (Id. at #2214-17, 2221-22). That all strikes the Court as related to the scope of the case here. Finally, the Court concludes that the terms of the consent decree also further the objective of the law. Congress presumably adopted these laws (and the Bureau, its corresponding regulations) based on the view that compliance with them would serve customers' interests. Consumer Financial Protection Act of 2010 (CFPA) § 1021, 12 U.S.C § 5511 (“The Bureau shall seek to implement and, where applicable, [to] enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.”). Accordingly, steps designed to ensure such compliance, or to detect non-compliance, would further those objectives.

What about the propriety of the requested permanent injunctive relief (via the entry of a consent decree) as a matter of equitable principles? The types of harms alleged here-unauthorized fees-strike the Court as harms for which there is generally an adequate remedy at law. E.g., CFPA § 1055(c), 12 U.S.C. § 5565(c). But two further thoughts. First, the alleged harms are diffuse and inflicted on unknowing customers, so a remedy at law might not be so easy after all. Second, and more importantly, the interest the Bureau's suit seeks to advance is its own separate regulatory interest in preventing such violations in the first instance. True, the statute makes civil penalties available for violations, which means the Bureau could wait for the harm to occur and to seek a remedy on the back end. But those civil penalties do not really “remedy” the regulatory interest in preventing such harms up front. Beyond that, at least one of the statutes under which the Bureau proceeds here, the CFPA, specifically authorizes the Bureau to seek “equitable relief including a permanent or temporary injunction as permitted by law,” CFPA § 1054(a), 12 U.S.C. § 5564(a), which demonstrates that Congress agrees that injunctive relief should be available in cases prosecuted under that statute. True, the statute's reference to the availability of such relief does not render the other elements traditionally required to obtain injunctive relief unnecessary. See Starbucks Corp. v. McKinney, 144 S.Ct. 1570, 1576-77 (2024). But it certainly suggests that Congress sees the harms at issue as irreparable. And, as noted, the Court agrees. The balance of harms likewise favors the relief, as both the Bureau and Fifth Third have agreed to it. That suggests both parties view the entire settlement as providing more benefits than harms and that relief at law will not, on its own, adequately remedy the alleged harms. Cf. McGowan v. Parish 237 U.S. 285, 295-96 (1915) (noting that a party's proffer of a consent decree can waive his objection that a legal remedy may be available and may therefore bar equitable relief in a cause that properly invokes the court's equity authority).

Beyond that, the Court also concludes that the settlement is “fair, adequate, and reasonable,” and “consistent with the public interest.” Lexington Ins., 581 F.Supp. 37 at 870 (citation omitted). As just noted, the consent decree emerged from hard-fought negotiations between the parties. That suggests each side has concluded that it is fair, adequate, and reasonable. Having reviewed the consent decree, the Court sees no reason to upset that conclusion. Cf. Hawes v. Macy's Inc., No. 1:17-cv-754, 2023 WL 8811499, at *11 (S.D. Ohio Dec. 20, 2023) (“Each party entered mediation with separate sets of goals and each extracted concessions from the other. The Court therefore presumes the settlement negotiations were not plagued by fraud or corruption.”). As for the public interest, as already described above, the injunctive relief under the consent decree is largely directed at preventing and detecting future violations, a result that presumably serves that interest. And then there is also the underlying public policy that favors settling disputes, thereby avoiding (or at least reducing the length of) complex, costly, time-consuming litigation. See Aro Corp. v. Allied Witan Co., 531 F.2d 1368, 1372 (6th Cir. 1976) (“Public policy strongly favors settlement of disputes without litigation.”); Kukla v. Nat'l Distillers Prods. Co., 483 F.2d 619, 621 (6th Cir. 1973) (“The power of a trial court to enter a judgment enforcing a settlement agreement has its basis in the policy favoring the settlement of disputes and the avoidance of costly and time-consuming litigation.”).

Finally the Court addresses one additional issue that is appropriate for courts to consider whenever parties ask the court to enter an order that will require ongoing judicial monitoring: administrability. Cf. Ramirez v. Collier, 595 U.S. 411, 433-34 (2022) (discussing the administrability of the equitable remedy requested as a factor weighing in favor of granting the relief that a court considers as part of its weighing the balance of equities). Whether categorized as an aspect of reasonableness, or instead as a public policy consideration, the point is that courts should hesitate to enter judicial orders that are difficult to administer. Such concerns have at least two facets. The first is definiteness. Any obligations that an order imposes on a party must be stated with sufficient clarity...