Consumer Fin. Prot. Bureau v. Navient Corp.

523 F.Supp.3d 681

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,

v.NAVIENT CORPORATION, et al., Defendants.

3:17-CV-101

United States District Court, M.D. Pennsylvania.

Filed January 13, 2021

Andrea J. Matthews, Pro Hac Vice, Nicholas K. Jabbour, Carl L. Moore, Ebony S. Johnson, Jonathan H. Reischl, Lawrence DeMille-Wagman, Pro Hac Vice, Nicholas C. Lee, Thomas H. Kim, Pro Hac Vice, Tracee J. Plowell, Manuel G. Arreaza, Washington, DC, for Plaintiff.

Daniel P. Kearney, Kirkland and Ellis LLP, Washington DC, DC, Jonathan E. Paikin, Pro Hac Vice, Webb Lyons, Gary R. Dyal, Karin Dryhurst, Pro Hac Vice, Matthew T. Martens, Pro Hac Vice, Natalie R. Bilbrough, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, Daniel T. Brier, Donna A. Walsh, Richard L. Armezzani, Myers Brier & Kelly, LLP, Scranton, PA, for Defendant Navient Corporation.

Daniel P. Kearney, Kirkland and Ellis LLP, Washington DC, DC, Jonathan E. Paikin, Webb Lyons, Gary R. Dyal, Karin Dryhurst, Pro Hac Vice, Matthew T. Martens, Natalie R. Bilbrough, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, Daniel T. Brier, Donna A. Walsh, Richard L. Armezzani, Myers Brier & Kelly, LLP, Scranton, PA, for Defendants Navient Solutions, Inc., Pioneer Credit Recovery, Inc.

MEMORANDUM OPINION

Robert D. Mariani, United States District Judge

I. INTRODUCTION AND PROCEDURAL HISTORY

Plaintiff, the Consumer Financial Protection Bureau ("CFPB" or "Bureau"), filed a Complaint in the above-captioned action on January 18, 2017. (Doc. 1). The eleven count Complaint alleges that Defendants, Navient Corporation, Navient Solutions, Inc., and Pioneer Credit Recovery, Inc., (collectively "Navient"), committed various violations of the Consumer Financial Protection Act ("CFPA" or "Act"), 12 U.S.C. §§ 5531, 5536 (Counts I-VIII), the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e (Counts IX-X), and Regulation V of the Fair Credit Reporting Act, 12 C.F.R. § 1022.42 (Count XI). (Doc. 1).

On March 24, 2017, Navient filed a Motion to Dismiss or, in the alternative, for a More Definite Statement (Doc. 28), which this Court denied on August 4, 2017 (Docs. 57, 58). Following the Court's Opinion and Order, the parties raised a myriad of discovery disputes, necessitating a number of conference calls, oral argument, and opinions and orders from this Court in an effort to resolve these issues. On January 16, 2019, upon agreement by the parties, the Court appointed the Honorable Thomas I. Vanaskie (Retired) as Special Master in this case to decide "current and future discovery disputes in this action" (Doc. 158), which resulted in approximately 18 Special Master Reports and 74 Orders by the Special Master between January, 2019 and April, 2020.

Following the completion of extensive discovery, in May, 2020, the CFPB filed a Motion for Summary Judgment (Doc. 468) "with respect to liability on all claims in the complaint" and Navient filed a Motion for Summary Judgment (Doc. 469) as to all counts of the complaint, each submitting lengthy briefs and statements of material fact¹ and voluminous exhibits in support of their respective positions.

On June 29, 2020, the Supreme Court issued a decision in Seila Law LLC v. Consumer Financial Protection Bureau , ––– U.S. ––––, 140 S.Ct. 2183, 207 L.Ed.2d 494 (2020) (hereinafter " Seila "). The Supreme Court held therein that the structure of the CFPB violated the Constitution's separation of powers; but because the provision addressing the CFPB Director's removal protection was "severable from the other statutory provisions bearing on the CFPB's authority," the CFPB could continue to operate, id. at 2192.

Defendants filed a Motion for Judgment on the Pleadings (Doc. 504) on July 10, 2020, based on the Seila decision. On July 14, 2020, the CFPB filed a "Notice Regarding Seila Law LLC v. CFPB and Ratification" (Doc. 506), explaining that "in the wake of the decision in Seila Law rendering [the CFPB Director] removable at will, the Bureau's Director has considered the basis for the decision to file the complaint in this proceeding, and has ratified that decision." Attached to the CFPB's notice was the Declaration of Kathleen L. Kraninger, Director of Plaintiff Consumer Financial Protection Bureau, Regarding Ratification (Doc. 506-1). Director Kraninger stated therein that in her "capacity as the Bureau's Director, [she has] considered the basis for the Bureau's decision to file the above-captioned lawsuit against Defendants" and that "[o]n behalf of the Bureau, [she] hereby ratif[ies] the decision to file the above-captioned lawsuit against Defendants." (Id. at ¶¶ 4-5).

The Motion for Judgment on the Pleadings has been fully briefed and is now ripe. Because a decision on this motion may be dispositive of the entire action, the Court finds it necessary to address Defendants’ motion for judgment on the pleadings prior to turning to the parties’ cross-motions for summary judgment (Docs. 468, 469), Objection to the Special Master's Report (Doc. 459), and other pending evidentiary motions and unresolved discovery disputes (see e.g. Docs. 391, 507, 519, 524, 543).

For the reasons that follow, the Court will deny Defendants’ Motion (Doc. 504).

II. STANDARD OF REVIEW

"After the pleadings are closed – but early enough not to delay trial – a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Under Federal Rule of Civil Procedure 12, judgment on the pleadings is only appropriate in favor of the moving party when that party "clearly establishes that no material issue of fact remains to be resolved" such that the party is "entitled to judgment as a matter of law." Rosenau v. Unifund Corp. , 539 F.3d 218, 221 (3d Cir. 2008) (internal quotation omitted). When reviewing a motion for judgment on the pleadings, a court must view the facts in the plaintiffs complaint as true and draw all reasonable inferences in the plaintiff's favor. Allah v. Al-Hafeez , 226 F.3d 247, 249 (3d Cir. 2000) ; Snyder v. Daugherty , 899 F.Supp.2d 391, 396 (W.D. Pa. 2012). A district court thus applies the same standard to a judgment on the pleadings as a motion to dismiss pursuant to Rule 12(b)(6), but may also review the answer and instruments attached to the pleadings. Brautigam v. Fraley , 684 F.Supp.2d 589, 591-592 (M.D. Pa. 2010).

III. ANALYSIS

This Court has previously set forth the extensive factual allegations contained in the CFPB's Complaint (see Doc. 57)(memorandum opinion denying Defendants’ motion to dismiss) and need not do so here as Navient's motion for judgment on the pleadings does not challenge the facts of the Complaint. Rather, Navient asserts that, in light of the Supreme Court's recent decision in Seila , "[i]t is now established law that the CFPB never had constitutional authority to bring this action and that the filing of this lawsuit was unauthorized and unlawful" and further that because the statute of limitations ran on all of the CFPB's claims prior to the decision in Seila , any ratification now by a Director of the CFPB who is properly subject to the President's removal power would be improper in that it "cannot revive the statute of limitations period." (Doc. 505, at 1).

In Seila , the Supreme Court held that "the structure of the CFPB violates the separation of powers"; however "the CFPB Director's removal protection is severable from the other statutory provisions bearing on the CFPB's authority" and "[t]he agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will." 140 S.Ct. at 2192. In so holding, the Supreme Court severed 12 U.S.C. § 5491(c)(3), which states that "The President may remove the Director for inefficiency, neglect of duty, or malfeasance in office", from the remainder of the provisions in § 5491 ("Establishment of the Bureau of Consumer Financial Protection"). The Supreme Court found that "[t]he only constitutional defect we have identified in the CFPB's structure is the Director's insulation from removal" and thus "[i]f the Director were removable at will by the President, the constitutional violation would disappear." Id. at 2209. Upon review of the Dodd-Frank Act, the Supreme Court explained:

The provisions of the Dodd-Frank Act bearing on the CFPB's structure and duties remain fully operative without the offending tenure restriction. Those provisions are capable of functioning independently, and there is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the President.

Id. (emphasis in original). The Supreme Court thus remanded the case to the Court of Appeals for the Ninth Circuit "to consider whether the civil investigative demand was validly ratified." Id. at 2211. In so doing, the majority rejected Justice Thomas’ "belie[f] that any ratification is irrelevant" as set forth in his partial concurrence and partial dissent. Id. at 2208 n.12.²

In applying the doctrine of ratification, "it is essential that the party ratifying should be able not merely to do the act ratified at the time the act was done, but also at the time the ratification was made. " Federal Election Commission v. NRA Political Victory Fund , 513 U.S. 88, 98, 115 S.Ct. 537, 130 L.Ed.2d 439 (1994) (emphasis in original). "This ‘timing problem’ has since been read to require that the ratifier have the ‘power’ to reconsider the earlier decision at the time of ratification." Advanced Disposal Servs. East, Inc. v. NLRB , 820 F.3d 592, 603 (3d Cir. 2016). Further, where an agency ratifies a previously unauthorized agency action, there are three general requirements for ratification:

First, the ratifier must, at the time of ratification, ... have the authority to take the action to be ratified. Second, the ratifier must have full knowledge of the decision to be ratified. Third, the ratifier must make a detached and considered affirmation of the earlier decision.

Id. at 602.³...