Consumer Fin. Prot. Bureau v. MoneyLion Techs.

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CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff, v. MONEYLION TECHNOLOIGES INC. et al., Defendants.

No. 22 Civ. 8308 (JPC)

United States District Court, S.D. New York

December 1, 2023

ORDER

JOHN P. CRONAN, United States District Judge

On October 9, 2023, Defendants (collectively “MoneyLion”) moved to stay this action pending the United States Supreme Court's decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., No 22-448 (U.S.) (“CFSA”). Plaintiff Consumer Financial Protection Bureau (the “CFPB”) opposes MoneyLion's motion. For the reasons that follow the Court grants MoneyLion's motion and stays this case pending the Supreme Court's decision in CFSA or until further order of the Court.

I. Background

The CFPB filed its original Complaint on September 29, 2022. Dkt. 1. On January 10, 2023, MoneyLion moved to dismiss that Complaint, Dkts. 56-58, and the motion was fully briefed on March 7, 2023, Dkt. 61. On June 13, 2023, the Court entered the parties' stipulation, which permitted the CFPB to file an amended complaint. Dkt. 64. Later that day, the CFPB filed the Amended Complaint, alleging violations by MoneyLion of the Military Lending Act, 10 U.S.C. § 987, and its implementing regulation, 32 C.F.R. pt. 232, “in connection with [MoneyLion's] extensions of consumer credit to active-duty servicemembers and their dependents.” Dkt. 65 ¶ 4; see also id. ¶¶ 61-87. In addition, the CFPB “alleges violations of Sections 1031, 1036 and 1054 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536, 5564, by all Defendants for their unfair, deceptive, and abusive acts or practices in connection with loans and associated financial products and services offered and provided to covered borrowers and offered and provided to all consumers.” Id. ¶ 5; see also id. ¶¶ 88-116.

MoneyLion moved to dismiss the Amended Complaint on July 11, 2023, Dkts. 68, 69 (“MTD Motion”), the CFPB opposed the motion on August 18, 2023, Dkt. 70, and MoneyLion replied on September 8, 2023, Dkt. 71. Among other arguments, MoneyLion asserts that this case should be dismissed because the CFPB's funding structure violates the Appropriations Clause of the U.S. Constitution and the nondelegation doctrine. MTD Motion at 8-9; see U.S. Const. art. I, § 1 (“All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.”); U.S. Const. art. I, § 9, cl. 7 (“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”). Then, on October 2, 2023, MoneyLion wrote to the Court in anticipation of its motion seeking a stay of this case pending the Supreme Court's decision in CFSA. Dkt. 72. The CFPB responded on October 6, 2023, arguing its opposition to a stay. Dkt. 76. MoneyLion filed its motion to stay this litigation on October 9, 2023, Dkt. 77 (“Stay Motion”), the CFPB opposed on October 23, 2023, Dkt. 78 (“Stay Opposition”), and MoneyLion replied on October 30, 2023, Dkt. 79 (“Stay Reply”).

Four events occurred leading to MoneyLion's stay motion that implicate its challenge to the constitutionality of the CFPB's funding structure. First, on October 19, 2022, the Fifth Circuit issued its decision in CFSA, holding, inter alia, that the CFPB's “funding apparatus cannot be reconciled with the Appropriations Clause and the clause's underpinning, the constitutional separation of powers.” Cmty. Fin. Servs. Assoc. of Am., Ltd. v. Consumer Fin. Prot. Bureau, 51 F.4th 616, 642 (5th Cir. 2022). Building from that premise, the Fifth Circuit vacated the CFPB-promulgated rule at issue, finding that harm was inflicted on the parties challenging the rule “by the [CFPB]'s improper use of unappropriated funds to engage in the rulemaking at issue,” and further reasoning that the CFPB's “unconstitutional funding structure not only affected the complained-of decision, it literally effected the promulgation of the rule.” Id. at 643 (internal quotation marks and alterations omitted). Second, on February 27, 2023, the Supreme Court granted certiorari to review the Fifth Circuit's decision. CFSA, 143 S.Ct. 978 (2023). Third, on March 23, 2023, in an unrelated case, the Second Circuit held that the CFPB's funding structure does not violate the Appropriations Clause. Consumer Fin. Prot. Bureau v. L. Offs. of Crystal Moroney, P.C. (“Moroney”), 63 F.4th 174, 181-83 (2d Cir. 2023).^[1]Finally, on October 3, 2023, the Supreme Court heard oral argument in CFSA. The Supreme Court's session for the current term is expected to end in late June or early July 2024. See The Court and Its Procedures, The Supreme Court of the United States, available at https://www.supremecourt.gov/about/procedures.aspx (last visited Nov. 30, 2023).

II. Standard of Review

District courts have broad power to stay proceedings, which “is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 96 (2d Cir. 2012) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)). Courts in this District weigh five factors in considering stays: “(1) the private interests of the plaintiffs in proceeding expeditiously with the civil litigation as balanced against the prejudice to the plaintiffs if delayed; (2) the private interests of and burden on the defendants; (3) the interests of the courts; (4) the interests of persons not parties to the civil litigation; and (5) the public interest.” Kappel v. Comfort, 914 F.Supp. 1056, 1058 (S.D.N.Y. 1996). The Court must balance these five factors, “with the principal objective being the avoidance of unfair prejudice.” Consumer Fin. Prot. Bureau v. Credit Acceptance Corp., No. 23 Civ. 38 (JHR), 2023 WL 5013303, at *2 (S.D.N.Y. Aug. 7, 2023) (internal quotation marks omitted).

III. Discussion

A. The CFPB's Interests and the Public Interest

The analyses for the first and fifth Kappel factors-the plaintiff's private interests and the public interest-overlap significantly here. The CFPB's interests primarily flow from its interest in the enforcement of the federal consumer protection law without delay; that interest, of course, implicates the public's interest in that same enforcement. See Stay Opposition at 5-8. While both the CFPB and the public certainly have a legitimate interest in this case proceeding at an appropriate pace, under the facts presented here a stay would not unduly prejudice the CFPB's interests and would marginally serve the public interest.

The CFPB argues that a stay would allow MoneyLion to “carry out more violations . . . and thereby inflict more injury on consumers.” Id. at 5. The CFPB also emphasizes the “public's already ‘strong interest in the vigorous enforcement of consumer protection laws,'” id. (quoting Consumer Fin. Prot. Bureau v. TransUnion, No. 22 Civ. 1880, 2023 WL 3605995, at *2 (N.D. Ill. Apr. 13, 2023)), and the risk of “information [being] lost or unavailable by the time discovery begins,” id. at 6. Conversely, MoneyLion argues that “there is little risk that a stay lasting only a few months would cause any meaningful risk of a loss of evidence.” Stay Motion at 12. MoneyLion also disputes the CFPB's assertion that violations are ongoing, insisting that “the bulk of the allegations . . . pertain to allegedly historical conduct” and noting that “the CFPB . . . concedes in the First Amended Complaint that most of the alleged violations ceased in August of 2019.” Id. at 13.

The potential delay here is not lengthy: a decision from the Supreme Court in CFSA is expected by late June or early July 2024. The CFPB's concern about spoliation is minimized by the relatively short duration of the stay. Further, a ruling in CFSA may actually “advance [the CFPB's] interest by providing the Court with guidance as to the quality, nature, and validity of [its] claims, effectively expediting the resolutions of this [case].” In re MPM Silicones, L.L.C., No. 15 Civ. 2280 (NSR), 2017 WL 4386378, at *2 (S.D.N.Y. Oct. 2, 2017). Indeed, two judges in this District in other cases brought by the CFPB have found that delays of similar or greater length would not unduly prejudice the CFPB, with both implementing a stay pending the decision in CFSA. See Credit Acceptance Corp., 2023 WL 5013303, at *3 (finding that there was no “undu[e] prejudice” delaying consideration of the case where a decision from the Supreme Court was not likely for ten months); Consumer Fin. Prot. Bureau v. MoneyGram Int'l, Inc., No. 22 Civ. 3256 (KPF), 2022 WL 17547438, at *3 (S.D.N.Y. Dec. 9, 2022) (“[I]f the Supreme Court indeed follows the Solicitor General's and the CFPB's request, it will grant the Petition on an expedited basis and issue a decision within the next six months. Thus, concerns about undue delays caused by a stay are minimized.”); id., Dkt. 57 (S.D.N.Y. Apr. 7, 2023) (denying a motion to lift the stay following Moroney and the grant of certiorari in CFSA).

Of course, the CFPB would be acting in the interest of the public to the extent it purses a legitimate mission in “protect[ing] consumers, including active-duty servicemembers and their dependents, from harmful violations of federal law.” Stay Opposition at 1; see also John Doe Co. v. Consumer Fin. Prot. Bureau, 235 F.Supp.3d 194, 205 (D.D.C. 2017) (“[T]he public has a strong interest in the vigorous enforcement of consumer protection laws.”). But at the core of the appeal pending before the Supreme Court is the constitutional...