The Court of Appeals for the Second Circuit yesterday dismissed an appeal brought by a trust connected to a large-scale Consumer Financial Protection Bureau enforcement action against a debt relief operation and its related entities, ruling that it lacked jurisdiction to reconsider issues already decided in connection with a previously affirmed preliminary injunction. The case stems from a joint enforcement action brought by the CFPB and the Attorneys General of New York, Colorado, Delaware, Illinois, Minnesota, North Carolina, and Wisconsin.
The background: The underlying suit alleges that Strategic Financial Solutions and a network of subsidiaries and affiliated entities operated a debt relief business that collected illegal advance fees from consumers before providing any debt settlement services. The defendants were accused of charging large fees that were disproportionate to the relief obtained and, in some cases, routed funds through consulting firms and other entities. The trust was named as a relief defendant based on allegations that it received funds traceable to the challenged practices.
- A district court judge granted a preliminary injunction, froze assets of the defendants and certain relief defendants, and placed various entities, including the trust, into a receivership. The court concluded that plaintiffs had made a preliminary showing that illegal fees were collected in violation of federal and state law. The Second Circuit previously upheld that preliminary injunction in full.
- While that earlier appeal was pending, the trust moved to modify the injunction. It sought removal of its assets from the receivership estate, restrictions on the use of its assets to pay receivership expenses, and the unfreezing of funds to pay its own counsel without oversight from plaintiffs.
- The district court denied those requests and later approved the receiver’s first fee application.
The ruling: On appeal, the Second Circuit concluded that the trust’s motion to modify was effectively an attempt to relitigate the original injunction. The court emphasized that appellate review of a denial of a motion to modify an injunction is not a vehicle to revisit issues already decided. Because the trust had already challenged the inclusion of its assets in the receivership during the initial appeal and lost, the court held that it lacked jurisdiction to hear the renewed objections.
- The panel also rejected arguments that subsequent developments, including procedural issues related to the trustee’s identification and the location of a receivership bank account, transformed the request into a true modification.
- It further declined to apply the collateral order doctrine or mandamus as alternative bases for jurisdiction.
