Prop. Mgmt. Connection, LLC v. Uejio

THE PROPERTY MANAGEMENT CONNECTION, LLC, et al., Plaintiffs, v. ACTING DIRECTOR UEJIO, CONSUMER FINANCIAL PROTECTION BUREAU, et al., Defendants.

NO. 3:21-cv-00359

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

May 14, 2021

JUDGE RICHARDSON

MEMORANDUM OPINION

Pending before the Court is Plaintiffs' Motion for Temporary Injunction (Doc. No. 6, "Motion"), whereby Plaintiffs seek a temporary restraining order pursuant to Federal Rule of Civil Procedure 65. Defendants have filed responses (Doc. Nos. 17-18),¹ and Plaintiffs have filed a reply (Doc. No. 20). The Court has determined that a hearing is not necessary.

For the reasons discussed herein, the Court will deny the Motion.

BACKGROUND²

This action challenges a recent Interim Final Rule ("Rule") promulgated by Defendant Consumer Financial Protection Bureau ("CFPB") that Plaintiffs assert requires them to make false statements to tenants who have been sued for unpaid rent and are subject to eviction. Plaintiffs allege that the Rule violates the Administrative Procedures Act ("APA") and Plaintiffs' First Amendment rights and should be declared unlawful and set aside. Via the Motion, Plaintiffs seek a temporary restraining order ('TRO") prohibiting Defendants from implementing the Rule.

Plaintiffs are a Tennessee property management company, an attorney practicing real estate law in Louisiana, and a national association representing more than 5,000 residential property managers nationwide. Defendant CFPB is an independent executive agency of the United States that regulates consumer financial products and services, and Defendant Uejio is the Acting Director of Defendant CFPB. Plaintiffs have also sued the United States.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which included a limited and temporary moratorium on evictions for certain typesof federally-backed housing. On September 1, 2020, the Center for Disease Control ("CDC") issued a nationwide order ("CDC Order"), not limited to federally-backed housing, that prohibited eviction of "any covered person"³ from any residential property in any jurisdiction to which the order applied during its effective period. This CDC Order,⁴ also known as the "Halt Order," has been extended multiple times and is currently set to expire on June 30, 2021, unless extended further.⁵

The CDC Order has been litigated extensively in federal courts. Several federal courts have found that by issuing the order, the CDC exceeded the authority Congress gave it. Some are in the Sixth Circuit. For example, in Skyworks, Ltd. v. Centers for Disease Control & Prevention, No. 5:20-CV-2407, 2021 WL 911720 (N.D. Ohio Mar. 10, 2021), the court found an injunction to be inappropriate because money damages could redress the plaintiffs' alleged injury, but also stated that "[b]ecause the Court determines that the statute is unambiguous and, by issuing a nationwide eviction moratorium, CDC exceeded the authority Congress gave it in Section 361, the Court holds that action unlawful and sets it aside, as the APA requires." Id. at *12. And in Tiger Lily, LLC v. United States Dep't of Hous. & Urb. Dev., No. 2:20-cv-02692-MSN-atc, 2021 WL 1171887, at *10 (W.D. Tenn. Mar. 15, 2021), the court held that "[t]he Halt Order exceeds the statutory authority of the Public Health Act, 42 U.S.C. § 264 [and therefore] is ultra vires and unenforceablein the Western District of Tennessee." Defendants in the latter case filed an emergency motion for a stay of the district court order pending appeal. In a published order, the Sixth Circuit denied the motion on the grounds that the government was unlikely to succeed on the merits, as the CDC Order exceeded the CDC's statutory authority. Tiger Lily, LLC v. United States Dep't of Hous. & Urb. Dev., 992 F.3d 518 (6th Cir. 2021) ("Sixth Circuit Tiger Lily opinion").

However, federal courts have also routinely held that plaintiffs challenging the CDC Order are not entitled to injunctive relief. E.g., Skyworks, Ltd., 2021 WL 911720 (finding an injunction to be inappropriate because money damages could redress the plaintiffs' injury); Chambless Enterprises, LLC v. Redfield, No. 3:20-CV-01455, 2020 WL 7588849, at *12 (W.D. La. Dec. 22, 2020) (finding that plaintiffs did not carry their burden of showing a likelihood of success on the merits and finding that "Plaintiffs cannot satisfy their burden by suggesting that it may be difficult to enforce money judgments against their tenants"); Tiger Lily, 2020 WL 7658126, at *8 (denying motion for preliminary injunction, and finding that "loss of rental income" was not sufficient to show irreparable harm); Brown v. Azar, 497 F. Supp. 3d 1270 (N.D. Ga. 2020) (finding that the plaintiffs had not shown a substantial likelihood of success on the merits, and that plaintiff had not shown an irreparable injury).

On April 22, 2021, pursuant to the Fair Debt Collection Practices Act ("FDCPA"), the CFPB issued the Rule entitled "Debt Collection Practices in Connection with the Global COVID-19 Pandemic (Regulation F)." The Rule sets forth "prohibitions" applicable to "debt collectors" as follows:⁶

(c) Prohibitions. During the effective period of the CDC Order, a debt collector collecting a debt in any jurisdiction in which the CDC Order applies must not, in connection with the collection of that debt:

(1) File an eviction action for non-payment of rent against a consumer to whom the CDC Order reasonably might apply without disclosing to that consumer clearly and conspicuously in writing, on the date that the debt collector provides the consumer with an eviction notice or, if no eviction notice is required by applicable law, on the date that the eviction action is filed, that the consumer may be eligible for temporary protection from eviction under the CDC Order; or

(2) Falsely represent or imply to a consumer that the consumer is ineligible for temporary protection from eviction under the CDC Order.

Debt Collection Practices in Connection With the Global COVID-19 Pandemic (Regulation F), 86 Fed. Reg. 21163 (Apr. 22, 2021); 12 C.F.R. § 1006.9.⁷ As Defendants correctly note, (Doc. No. 17 at 13), Plaintiffs do not appear to challenge the prohibition set forth in paragraph (c)(2) of the Rule. Rather, Plaintiffs challenge only the provisions of paragraph (c)(1)—which actually set forth in essence conditional requirements rather than "prohibitions." That is, during the effective period of the CDC Order, paragraph (c)(2) requires any debt collector (1) seeking to collect unpaid rent (2) from a tenant ("consumer") to whom the CDC Order reasonably might apply (3) in a jurisdiction in which the CDC Order applies (4) when or before filing an eviction action or providing the tenant with an eviction notice, to disclose in writing to that tenant that the tenantmay be eligible for temporary protection from eviction under the CDC Order. Thus, if these four conditions are satisfied, the Rule essentially requires debt collectors, while the CDC Order is in effect, to do what is set forth above in italics: tell the tenant that the tenant may be eligible for relief from the CDC Order.

Plaintiffs challenge Paragraph (c)(2) on the grounds that the written disclosure it conditionally requires (at least in some jurisdictions) is false. That is, Plaintiffs contend that if the Rule is upheld, they will be forced to provide their tenants with a written disclosure that is inaccurate and misleading in light of various federal court rulings around the country that have invalidated the CDC Order. Based on this contention, and as explained more fully below, Plaintiffs assert that the Rule violates the APA by exceeding the CFPB's statutory and regulatory authority (Count I) and also violates the First Amendment (Count II).⁸

As indicated above, however, by its own terms the Rule applies only during the effective period of the CDC Order, only to tenants to whom the CDC Order reasonably might apply, and only in jurisdictions in which the CDC Order applies. Defendant CFPB has opined, in its response to the Motion, that "the Rule's provisions—by the Rule's own operation—have no application where the CDC Order, on account of a court order or otherwise, does not apply." (Doc. No. 17 at 10). The Court concurs with this view, and it intends to hold CFPB to this view (and believes that other courts perhaps should do likewise).

STANDARDS FOR MOTION FOR TEMPORARY RESTRAINING ORDER

In determining whether to issue a TRO pursuant to Rule 65 of the Federal Rules of Civil Procedure, the Court is to consider: (1) the plaintiff's likelihood of success on the merits; (2) whether the plaintiff may suffer irreparable harm absent the injunction; (3) whether granting the injunction will cause substantial harm to others; and (4) the impact of the injunction on the public interest. Abney v. Amgen, Inc., 443 F.3d 540, 546 (6th Cir. 2006). When determining whether to issue a TRO, a threat of an immediate, irreparable harm must be present. Fed. R. Civ. P. 65(b)(1)(A) (requiring a court to examine, on application for a TRO, whether "specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant"); Cunningham v. First Class Vacations, Inc., No. 3:16-cv-2285, 2019 WL 1306214, at *1 (M.D. Tenn. Jan. 11, 2019).

Alternatively, the Sixth Circuit permits a district court, in its discretion, to grant a preliminary injunction or temporary restraining order "even where the plaintiff fails to show a strong or substantial probability of ultimate success on the merits of his claim, but where he at least shows serious questions going to the merits and irreparable harm which decidedly outweighs any potential harm to the defendant if an injunction is issued." Friendship Materials, Inc. v. Mich. Brick, Inc., 679 F.2d 100, 105 (6th Cir. 1982).

Courts sometimes describe this inquiry as a balancing test. S...