On the eve of a court-ordered deadline to respond to a defendant’s motion to dismiss, the Consumer Financial Protection Bureau has abandoned its effort to enforce a Civil Investigative Demand against the Law Office of Crystal Moroney, a collection law firm, potentially marking the end of a years-long investigation into the firm’s collection practices.
The last-minute shift in position results in the case becoming moot and therefore leading the CFPB to ask a federal judge to dismiss its own case. According to the defendant, the CID sought production of its clients’ confidential documents and information, including those protected by the attorney-client privilege and the attorney work product privilege. The firm refused to produce that protected information and the CFPB filed suit in a New York federal court to enforce the CID.
The CFPB had filed two requests with Judge Stephen Nelson Roman of the District Court for the Southern District of New York seeking extensions to respond to the documents filed by the defendant. The deadline for the second request was today, but last night, the CFPB filed its notice withdrawing the CID, explaining that it no longer seeks to enforce the CID against the firm.
The CFPB did not indicate why it was dropping its case against the defendant.
In July 2017, the CFPB issued the CID to the defendant, seeking information that might be relevant to its investigation. The defendant, according to the CFPB, failed to fully comply with the CID, which led the agency to seek a federal judge to compel the defendant to comply.
In response to the suit, the law firm filed a motion to dismiss the case asserting several challenges to the CFPB’s action, including accusing the Bureau’s structure of being unconstitutional. The law firm pointed to several cases supporting its position, including the case of CFPB v. RD Legal Funding, which was decided in the same court.
Instead of replying to the law firm’s motion to dismiss and appearing for oral argument scheduled later this week, the CFPB opted to abandon the case and avoid the legal fight over constitutionality. The CFPB is likely saving those arguments for its Seila Law case, which is now pending before the Supreme Court. The Supreme Court is expected to rule on the constitutionality of the CFPB in Seila Law, including a decision on how to fix the CFPB’s leadership structure in the event it is found to be unconstitutionally structured. In Seila Law
