Consumer Financial Protection Bureau v. TransUnion et al
Filing
52
MEMORANDUM Opinion and Order signed by the Honorable Elaine E. Bucklo on 11/18/2022. Mailed notice. (mgh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Consumer Financial Protection
Bureau,
Plaintiff,
v.
TransUnion, Trans Union LLC,
TransUnion Interactive, Inc.,
and John T. Danaher,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 22 C 1880
Memorandum Opinion & Order
On January 3, 2017, the Consumer Financial Protection Bureau
(“Bureau” or “CFPB”) entered into a Consent Order with TransUnion,
Trans Union LLC, and TransUnion Interactive, Inc. (collectively,
“TU”).
Dkt.
No.
(“Stipulation”).
1-1
The
(“Consent
Consent
Order”);
Order
was
see
Dkt.
the
result
No.
of
1-2
an
administrative proceeding in which the Bureau determined that TU
had violated the Consumer Financial Protection Act (“CFPA”). The
Bureau then brought this suit against TU and John T. Danaher, who
served as President of TransUnion Interactive, LLC from 2004 until
April 1, 2021, and Executive Vice President from April 2, 2021,
until February 1, 2022. The complaint alleges violation of the
Consent
Order
against
both
TU
and
Danaher.
Dkt.
No.
1
(“Complaint”). Additionally, as to TU it alleges violations of the
CFPA, the Electronic Fund Transfer Act (“EFTA”), the Fair Credit
Reporting Act (“FCRA”), and the implementing regulations of the
EFTA and FCRA. Id. TU and Danaher now separately move to dismiss
the counts against them under Federal Rule of Civil Procedure
12(b)(6). For the following reasons, the motions are denied.
I.
A.
TU first argues that the Bureau cannot enforce the Consent
Order
because
it
failed
to
satisfy
a
condition
precedent:
responding to TU’s proposed Compliance Plan (governed by Section
VI of the Consent Order). In TU’s view, because the Bureau never
responded, Count I--which asserts violations of the Consent Order
--is untenable.
The
same
principles
used
to
interpret
a
contract
are
applicable to interpreting the Consent Order. See Ferrell v.
Pierce, 743 F.2d 454, 461 (7th Cir. 1984) (“The construction of a
consent decree is a matter of contract interpretation.” (citation
omitted)).1
The
parties
do
not
dispute
what
law
controls,
presumably because the relevant principles do not differ among
Illinois,
federal,
or
some
other
common
law.
See
FTC
v.
A1
Neither TU nor the Bureau indicates that there are differences
between administrative consent orders and judicial consent decrees
that would impact the analysis in this order. See Navajo Nation v.
Wells Fargo, 344 F. Supp. 3d 1292, 1302–03 (D.N.M. 2018).
1
2
Janitorial Supply Corp., No. 17 C 7790, 2018 WL 7508265, at *2 n.2
(N.D. Ill. Sept. 21, 2018). A condition precedent may be express
or implied and is “a condition ‘which is to be performed before
some right dependent thereon accrues, or some act dependent thereon
is performed.’” Heritage Bank & Tr. Co. v. Abdnor, 906 F.2d 292,
297–98 (7th Cir. 1990) (quoting Condition precedent, Black’s Law
Dictionary (5th ed. 1979)). Conditions precedent are generally
disfavored. Navarro v. FDIC, 371 F.3d 979, 981 (7th Cir. 2004)
(citing Restatement (Second) of Contracts § 227(1) (Am. Law Inst.
1981)).
As TU recognizes, the Consent Order was effective on January
3, 2017, and that was the date TU was required to begin abiding by
its terms. Consent Order ¶ 3(h) (defining “Effective Date” as “the
date on which the Consent Order is issued”); Stipulation ¶ 3
(acknowledging that “the Order will become a final order, effective
upon issuance”). Furthermore, not only do the Conduct Provisions
(Section V of the Consent Order) offer specific steps that TU was
required to take, see, e.g., Consent Order ¶¶ 40(b), 40(c), but
Section IV of the Consent Order, titled “Bureau Findings and
Conclusions,”
identified
the
practices
that
the
Bureau
found
violated federal consumer law. TU’s argument that the Conduct
Provisions were too general for it to know what to do without the
Bureau’s feedback on its more specific Compliance Plan is therefore
unavailing. Of course, as this litigation proceeds, a central issue
3
will likely be what TU was required to do under the terms of the
Consent Order. For now, it is enough that the Conduct Provisions
required TU to take certain actions.
It is true that the word “[a]fter” in paragraph 43 of the
Consent Order suggests the creation of a condition precedent. See
Stoller v. CMH Mfg. W., Inc., No. 18 C 0047, 2020 WL 616464, at *2
(N.D. Ill. Feb. 10, 2020) (citation omitted), aff’d sub nom.
Stoller v. CMH Mfg., Inc., No. 20-1227, 2021 WL 4975294 (7th Cir.
Oct. 26, 2021). But if that language did in fact create a condition
precedent, TU misunderstands what it was a condition precedent to.
The provision states:
After receiving notification that the Assistant Deputy
for Consumer Reporting has made a determination of nonobjection to the Compliance Plan, Respondents must
implement and adhere to the steps, recommendations,
deadlines, and timeframes outlined in the Compliance
Plan.
Consent Order ¶ 43. The text is clear: only after non-objection by
the Bureau will the Compliance Plan become enforceable against TU.
But the Bureau is suing for violations of the Consent Order, not
the Compliance Plan. Responding to the proposed Compliance Plan
was not a condition precedent to the enforceability of the Consent
Order as a whole.
TU further observes (1) the text concerning the Redress Plan
(Section VIII of the Consent Order) is nearly identical to that
concerning the Compliance Plan, and (2) the Bureau responded to
4
TU’s proposed Redress Plan. From this, TU concludes that the Bureau
was required to respond to the proposed Compliance Plan too. But
just as the consequence for the Bureau’s non-response to the
Compliance Plan is that the Compliance Plan itself did not take
effect, if the Bureau had failed to respond to the Redress Plan,
then the Redress Plan would not have been implemented. Whether the
Bureau responded or not to either plan has no bearing on the
enforceability of the Consent Order as a whole.2
B.
TU contends that Counts III–VIII are barred by the doctrine
of claim preclusion and should therefore be dismissed.3 Claim
preclusion prevents parties from relitigating the same claim where
the following three conditions were satisfied in a prior action:
(1) final judgment on the merits, (2) identity of the parties, and
I reject TU’s assertion that the Bureau waived any argument
regarding the alleged condition precedent’s effect on the
enforceability of the Consent Order. The Bureau argues that the
Consent Order was “effective” on January 3, 2017, and that it
became enforceable on that date as well. See Dkt. No. 40 at 17
(citing definition of “Effective Date” in the Consent Order and
paragraph in the Stipulation to argue that the Consent Order became
enforceable on the Effective Date); id. at 21 (responding to TU’s
argument that the word “after” in the Consent Order created a
condition precedent, stating “[p]aragraph 43 does not limit TU’s
obligations to comply with the Order or the Bureau’s ability to
enforce it”).
2
The parties use the term “res judicata” in their briefs, which
is often used interchangeably with the term “claim preclusion.”
But because res judicata can refer to both claim preclusion and
issue preclusion, I use “claim preclusion” in this order. See
Brownback v. King, 141 S. Ct. 740, 747 n.3 (2021).
3
5
(3) identity of the causes of action. Highway J Citizens Grp. v.
U.S. Dep’t of Transp., 456 F.3d 734, 741 (7th Cir. 2006) (citation
omitted). If these requirements are met, the doctrine “bars not
only those issues which were actually decided in a prior [action],
but also all issues which could have been raised in that action.”
Id.
(citation
and
quotation
marks
omitted).
Because
claim
preclusion is an affirmative defense, it is not appropriate for
consideration on a motion to dismiss unless “a plaintiff has
pleaded [itself] out of court by establishing the facts that prove
the defense.” Novickas v. Proviso Twp. High Sch. 209, No. 09-cv3982, 2010 WL 3515793, at *2 (N.D. Ill. Aug. 31, 2010) (citing
Muhammad v. Oliver, 547 F.3d 874, 878 (7th Cir. 2008)).
The parties agree that the first two elements are met but
disagree on the third--whether the causes of action in Counts IIIVIII are “identical” to those addressed in the Consent Order.
Actions involve the same claim or cause of action “when they
aris[e] from the same transaction or involve a common nucleus of
operative facts.” Lucky Brand Dungarees, Inc. v. Marcel Fashions
Grp., Inc., 140 S. Ct. 1589, 1595 (2020) (alteration in original)
(citations and quotation marks omitted). The Bureau is correct
that “[c]laim preclusion generally ‘does not bar claims that are
predicated on events that postdate the filing of the initial
complaint.’”
Id.
at
1596
(quoting
Whole
Woman’s
Health
v.
Hellerstedt, 579 U.S. 582, 600 (2016), abrogated on other grounds
6
by Dobbs v. Jackson Women’s Health Org., 142 S. Ct. 2228 (2022);
additional citation omitted); see Perkins v. Bd. of Trs. of the
Univ. of Ill., 116 F.3d 235, 236 (7th Cir. 1997) (“[I]f the
supposedly wrongful events are separated by time and function,
multiple suits are permissible.”). In this suit, the Bureau only
alleges
violations
that
occurred
after
January
3,
2017--the
Effective Date of the Consent Order--so it appears that claim
preclusion is not a viable defense.
The wrinkle, according to TU, is that in this case, the Bureau
was required to pursue violations like those described in the
Consent
Order
through
the
order’s
enforcement
provisions.
In
support, TU cites a recent decision from the Eleventh Circuit,
where the court held that certain CFPB claims were barred by claim
preclusion and had to be addressed by the mechanisms in a consent
judgment in that case. CFPB v. Ocwen Fin. Corp., 30 F. 4th 1079
(11th Cir. 2022). In reaching its determination, the court found
that “the settlement agreement’s extensive three-year servicingstandard, monitoring, and enforcement regime indicates that if
[Ocwen] committed a legal violation covered by the standards, the
parties intended for the CFPB to remedy that violation through the
agreed-upon processes--not through a separate court proceeding.”
Id. at 1085.
The consent judgment in Ocwen is materially different from
the Consent Order here. That consent judgment “specified that if
7
Ocwen violated a servicing standard by exceeding the threshold
error rate for the applicable compliance metric, it would have the
right to cure the violation pursuant to a corrective-action plan,”
which, if successful, meant “no party to the consent judgment could
seek relief with respect to that violation.” Id. at 1082. Only if
the violation was not cured did the Ocwen consent judgment permit
the Bureau to bring suit. Id. Here, there is no curing process.
Indeed,
unlike
the
provision
in
the
Ocwen
consent
judgment
expressly barring the Bureau from suing for cured violations, the
Consent
Order
here
expressly
contemplates
the
possibility
of
bringing suit in federal court. See Consent Order ¶ 82 (“The
provisions of this Consent Order will be enforceable by the Bureau.
. . . In connection with any attempt by the Bureau to enforce this
Consent Order in federal district court, the Bureau may serve
Respondents wherever Respondents may be found and Respondents may
not
contest
Respondents.”).
that
court’s
Although
personal
the
Bureau
jurisdiction
here
“release[d]
over
and
discharge[d] [TU] from all potential liability for law violations
that the Bureau has or might have asserted based on the practices
described in Section IV of th[e] Consent Order,” it only did so
“to the extent such practices occurred before the Effective Date.”
Id. ¶ 77. To remove doubt, the release provision also reserves the
Bureau’s right “to seek penalties for any violations of the Consent
Order.” Id.
8
TU also cites Friends of Milwaukee’s Rivers v. Milwaukee
Metropolitan Sewerage District, 382 F.3d 743 (7th Cir. 2004), as
an example of a case in which violations that occurred after a
consent judgment (there, a “stipulation”) was subject to claim
preclusion. However, in that case, the court reasoned that poststipulation violations were not separate causes of action from the
pre-stipulation violations because the stipulation “was intended
to address the underlying causes of the continuing violations by
implementing remedial measures some of which, due to their large
scale, will take several years to complete.” Id. at 758. That makes
sense, since the stipulation in that case envisioned expending
$907 million to construct deep tunnels. Id. at 750–51. Here, the
Consent Order does not contemplate delayed implementation of many
of the Conduct Provisions.4
In short, TU fails to disturb the general rule that events
that take place after a “final judgment” for claim preclusion
purposes are not barred. Lucky Brand, 140 S. Ct. at 1596. The
consent judgment in Ocwen included detailed enforcement provisions
that made clear the parties’ intent to cure violations through
prescribed
processes,
and
the
stipulation
in
Friends
of
Some provisions indicate delayed compliance timelines, but even
those are less than the “several years” contemplated in Friends of
Milwaukee’s Rivers.
See, e.g., Consent Order ¶ 40(b)(ii)
(“reasonable time after the Effective Date”); id. ¶ 53 (“within 10
days of the Effective Date”).
4
9
Milwaukee’s Rivers contemplated compliance to take years. Neither
rationale applies here.
C.
TU also argues that the complaint is time-barred. The CFPA
provides that an action must be brought no more than “3 years after
the date of discovery of the violation to which an action relates.”
12 U.S.C. § 5564(g)(1).5 A “violation” is defined in the statute
as “any act or omission that, if proved, would constitute a
violation of any provision of Federal consumer financial law.” 12
U.S.C. § 5561(5). Thus, by its terms, the limitations period runs
separately for each violation. See CFPB v. Howard, No. 8:17-cv00161-JLS-JEM, 2018 WL 4847015, at *3 (C.D. Cal. May 3, 2018)
(holding each violation of CFPA, even if part of continuing course
of conduct, has its own limitations period); CFPB v. NDG Fin.
Corp., No. 15-cv-5211 (CM), 2016 WL 7188792, at *19–20 (S.D.N.Y.
Dec. 2, 2016) (holding that each violation “would constitute a new
and separate cause of action under the CFPA”).
TU argues that at the very least, I should narrow the temporal
scope of this litigation to exclude any claims for violations which
occurred prior to what it asserts is the start date for the
limitations period, February 4, 2018. I decline to do so because
For purposes of this motion only, TU does not contest that this
limitations period applies to all the Bureau’s claims. See Dkt.
No. 29 at 31 n.12.
5
10
dismissal on timeliness grounds is only appropriate where “it is
clear from the face of the . . . complaint that it is hopelessly
time-barred.” Cancer Found., Inc. v. Cerberus Cap. Mgmt., LP, 559
F.3d 671, 675 (7th Cir. 2009). The complaint sufficiently alleges
violations occurring within the limitations period (or at least
does not establish that each violation occurred outside that
period),
see,
e.g.,
Complaint
¶¶ 21,
49–55,
98,
and
partial
dismissal is unwarranted, cf. BBL, Inc. v. City of Angola, 809
F.3d 317, 325 (7th Cir. 2015) (“A motion to dismiss under Rule
12(b)(6) doesn’t permit piecemeal dismissals of parts of claims;
the question at this stage is simply whether the complaint includes
factual allegations that state a plausible claim for relief.”
(emphasis in original) (citation omitted)); see also CFPB v.
Howard, No. 8:17-cv-00161-JLS-JEM, 2017 WL 10378953, at *7 (C.D.
Cal. May 30, 2017) (declining, on a motion to dismiss, to narrow
scope of claims to violations occurring within limitations period,
since
at
least
some
violations
allegedly
occurred
within
limitations period).
Danaher
also
seeks
dismissal
on
statute
of
limitations
grounds. I decline to do so for the reasons stated above--namely,
“there
is
a
conceivable
set
of
facts,
consistent
with
the
complaint, that would defeat a statute-of-limitations defense.”
Sidney Hillman Health Ctr. v. Abbott Lab’ys, Inc., 782 F.3d 922,
928 (7th Cir. 2015).
11
D.
TU
next
lodges
two
constitutional
arguments
against
the
Bureau’s ability to bring this suit. First, relying on recent Fifth
Circuit opinions, TU argues that the Bureau’s funding structure
violates the Appropriations Clause,6 so it cannot use its funds to
bring this action. Cmty. Fin. Servs. Ass’n of Am., Ltd. v. CFPB,
51 F.4th 616 (5th Cir. 2022), petition for cert. filed, No. 22448 (U.S. Nov. 14, 2022); CFPB v. All Am. Check Cashing, Inc., 33
F.4th 218 (5th Cir. 2022) (en banc) (Jones, J., concurring).
Second, TU argues that Count I should be dismissed because an
unconstitutional restriction on removal of the Bureau’s director
was in effect at the time the Consent Order was entered, rendering
it unenforceable. Neither argument is persuasive.
The Appropriations Clause “‘means simply that no money can be
paid out of the Treasury unless it has been appropriated by an act
of Congress,’” which is to say that “the payment of money from the
Treasury must be authorized by statute.” OPM v. Richmond, 496 U.S.
414, 424 (1990) (quoting Cincinnati Soap Co. v. United States, 301
U.S. 308, 321 (1937)). Courts are ill-equipped to second guess
exactly how Congress chooses to structure the funding of financial
regulators like the Bureau, so long as the funding remains tethered
This clause states that “[n]o Money shall be drawn from the
Treasury, but in Consequence of Appropriations made by Law.” U.S.
Const. art. I, § 9, cl. 7.
6
12
to a law passed by Congress. See Am. Fed’n of Gov’t Emps., AFLCIO, Loc. 1647 v. Fed. Lab. Rels. Auth., 388 F.3d 405, 409 (3d
Cir. 2004) (“Congress itself may choose, however, to loosen its
own reins on public expenditure. So, for example, although Congress
ordinarily requires that appropriations be spent within a single
year, it may also authorize appropriations that continue for a
longer period of time.” (citation omitted)). The Bureau receives
its funding pursuant to a statute passed by Congress,7 which
Congress has the power to amend or repeal. See CFPB v. Fair
Collections & Outsourcing, Inc., No. GJH-19-2817, 2020 WL 7043847,
at *7–9 (D. Md. Nov. 30, 2020) (“Here, an act of Congress provided
for the CFPB’s funding, satisfying the Appropriations Clause’s
simple mandate. That Congress funded the CFPB outside the normal
appropriations
process
does
not
create
a
constitutional
problem.”). Until the Fifth Circuit’s decision last month, courts
confronted with the issue had uniformly upheld the Bureau’s funding
structure. See, e.g., Cmty. Fin. Servs., 51 F.4th at 641 & n.15
(collecting cases and recognizing that every other court to have
considered the issue reached the opposite conclusion). For the
See 12 U.S.C. §§ 5497(a)(1)–(2) (allowing the Bureau’s director
to annually request an amount not exceeding 12 percent of the
Federal Reserve’s total operating expenses); id. § 5497(d)
(allowing the Bureau to use penalties it has collected in
enforcement actions).
7
13
reasons
above,
I
agree
with
the
conclusion
reached
by
this
substantial majority of courts.
TU’s contention that the Consent Order is invalid because it
was entered into while an unconstitutional removal provision was
in place also fails. The Supreme Court clarified after holding the
removal provision unconstitutional in Seila Law that “[s]ettled
precedent . . . confirms that the unlawfulness of the [CFPB]
removal provision does not strip the Director of the power to
undertake the other responsibilities of his office.” Collins v.
Yellen, 141 S. Ct. 1761, 1788 n.23 (2021) (citing Seila Law LLC v.
CFPB, 140 S. Ct. 2183, 2207–11 (2020)). Such responsibilities
include entering into consent orders.
II.
A.
Danaher argues that the Consent Order is only enforceable
against TU, so he cannot be held liable for violating it. For
starters, the parties agree that the Bureau may “commence a civil
action”
against
any
person
who
“violates
a
Federal
consumer
financial law,” 12 U.S.C. § 5564(a), including “any rule or order
prescribed by the Bureau,” id. § 5481(14), such as the Consent
Order here. But according to Danaher, because he was not a party
to the Consent Order and was not afforded the procedural safeguards
enumerated in § 5563, the Consent Order may not be enforced against
him.
14
It is an “elementary” rule of law that “[a] corporation can
act only through its agents.” Mandel Bros., Inc. v. FTC, 254 F.2d
18, 22 (7th Cir. 1958), rev’d on other grounds, 359 U.S. 385
(1959); see Korte v. Sebelius, 735 F.3d 654, 668 (7th Cir. 2013)
(“It is axiomatic that organizational associations, including
corporations, act only through human agency.” (citing Reich v. Sea
Sprite Boat Co., 50 F.3d 413, 417 (7th Cir. 1995))). In Reich, the
Seventh Circuit held that a corporation’s president was bound by
a court order enforcing the decision of an administrative agency
against that corporation. 50 F.3d at 417; see id. (“An order issued
to a corporation is identical to an order issued to its officers,
for incorporeal abstractions act through agents.”). It is true
that Reich and some other cases cited by the Bureau dealt with
court orders, rather than administrative consent orders. But where
administrative agencies act in their judicial capacities, the same
standard applies. See United States v. ITT Continental Baking Co.,
420 U.S. 223, 236 n.10 (1975) (“Consent decrees and orders have
attributes both of contracts and of judicial decrees or, in this
case,
administrative
orders.
While
they
are
arrived
at
by
negotiation between the parties and often admit no violation of
law, they are motivated by threatened or pending litigation and
must be approved by the court or administrative agency.”).
As a general matter, the Supreme Court has held:
15
A command to the corporation is in effect a command to
those who are officially responsible for the conduct of
its affairs. If they, apprised of the writ directed to
the corporation, prevent compliance or fail to take
appropriate
action
within
their
power
for
the
performance of the corporate duty, they, no less than
the corporation itself, are guilty of disobedience
. . . .
Wilson v. United States, 221 U.S. 361, 376 (1911). The Federal
Circuit recognized that this principle supports the notion that an
order issued by an administrative agency can bind a corporation’s
officers, even where “the administrative complaint and proceedings
were directed solely to the corporation and there was no specific
statutory
authority
for
the
issuance
of
orders
to
corporate
officers.” Fuji Photo Film Co. v. Int’l Trade Comm’n, 474 F.3d
1281, 1292 (Fed. Cir. 2007) (citing W. Fruit Growers Sales Co. v.
FTC, 322 F.2d 67, 70 (9th Cir. 1963); Mandel Bros., 254 F.2d at
22)). Thus, even though Federal Rule of Civil Procedure 65(d),
which binds corporate officers to injunctions issued to their
corporations, does not apply to administrative proceedings, the
common law principle underlying the rule, and expressed by the
Court in Wilson, does apply. See FTC v. Standard Educ. Soc’y, 302
U.S. 112, 119 (1937) (reiterating the principle announced in Wilson
and concluding that individuals “who are in charge and control of
the affairs of respondent corporation[] would be bound by a cease
and desist order rendered [by the FTC] against the corporation[]”).
16
The Consent Order bears the hallmarks of a final adjudicative
determination by the Bureau. Perhaps most simply, it is identified
on its cover page as part of an “Administrative Proceeding” and
titled “In the Matter of: TransUnion Interactive, Inc., Trans Union
LLC, and TransUnion.” Consent Order at 2. More substantially, it
was issued pursuant to 12 U.S.C. §§ 5563 and 5565, which authorize
the
Bureau
to
conduct
adjudication
proceedings,
including
“determin[ing] a controversy by consent,” 5 U.S.C. § 554(c)(2).
See also Consent Order ¶ 78 (noting it “is intended to be, and
will be construed as, a final Consent Order issued under . . .
§ 5563”); Stipulation ¶ 3 (agreeing that “the [Consent] Order will
become a final order, effective upon issuance, and will be fully
enforceable by the Bureau”). It also contains findings of fact and
conclusions of law, and constitutes a final judgment on the merits
for claim preclusion purposes. See B & B Hardware, Inc. v. Hargis
Indus., Inc., 575 U.S. 138, 148 (2015). Accordingly, the Consent
Order constitutes a final adjudication and therefore binds not
only TU, but Danaher as well.
I am not persuaded by Danaher’s argument that enforcing the
Consent
Order
against
him
violates
due
process.
Danaher
had
adequate notice of the Consent Order, see Dkt. No. 31-2 at 8, and,
as president, was “in active concert or participation with the
party
specifically
Scandinavia
Online
enjoined.”
AB,
226
Microsystems
F.3d
17
35,
Software,
42–43
(1st
Inc.
Cir.
v.
2000)
(considering whether a non-party to an injunction can be held in
contempt); see Fuji Photo Film Co., 474 F.3d at 1292–93. As
explained below, Danaher had the authority to control TU’s actions
with respect to at least some of the alleged violations, and he
knew of the violating conduct.
Moreover, contrary to Danaher’s assertion, the Bureau is
permitted under the CFPA to seek monetary relief in this action.
Section 5564(a) allows the Bureau to bring a civil action against
any person for violation of “[f]ederal consumer financial law,”
which, pursuant to § 5481(14), includes an “order prescribed by
the Bureau,” like the Consent Order. Once a civil action is
brought,
§ 5565(a)(1)
authorizes
the
court
to
“grant
any
appropriate legal or equitable relief with respect to a violation
of Federal consumer financial law, including a violation of a rule
or order prescribed under a Federal consumer financial law.” Thus,
if Danaher violated the Consent Order, he may be liable for
monetary damages. See also 12 U.S.C. § 5565(c)(1) (providing that
“[a]ny person that violates, through any act or omission, any
provision of Federal consumer financial law shall forfeit and pay
a civil penalty pursuant to this subsection”).
B.
Danaher next argues that the Bureau’s complaint falls short
of what is required to allege individual liability in this case.
To hold Danaher liable for TU’s violations, the parties agree for
18
the purposes of this motion that the Bureau must allege that he:
“(1) participated directly in the illegal practices or acts or had
the authority to control them; and (2) knew or should have known
about the illegal practices.” CFPB v. Mortg. L. Grp., LLP, 196 F.
Supp. 3d 920, 944 (W.D. Wis. 2016) (citations omitted).8
Some courts have held that an individual’s status as a
corporate officer alone is sufficient to allege authority to
control. United States v. MyLife.com, Inc., 499 F. Supp. 3d 751,
754–55 (C.D. Cal. 2020) (citation and quotation marks omitted);
see FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 573 (7th Cir.
1989) (“Authority to control the company can be evidenced by active
involvement in business affairs and the making of corporate policy,
including assuming the duties of a corporate officer.” (citations
omitted)), overruled on other grounds by FTC v. Credit Bureau Ctr.,
LLC, 937 F.3d 764 (7th Cir. 2019). But see FTC v. Swish Mktg., No.
C 09-03814 RS, 2010 WL 653486, at *5 (N.D. Cal. Feb. 22, 2010)
(finding
allegations
that
individual
defendant
was
CEO
of
defendant corporation insufficient to show authority to control).
Indeed, where an individual defendant was an officer of multiple
corporations, the Seventh Circuit noted that the defendant “would
be hard-pressed to establish that he lacked authority or control
The Bureau also argues that Danaher is independently liable based
on his own violations of the Consent Order. Because I find the
complaint sufficiently alleges Danaher’s liability for TU’s
violations, I do not address that argument here.
8
19
over them.” FTC v. World Media Brokers, Inc., 415 F.3d 758, 764
(7th Cir. 2005).
The complaint here alleges that Danaher was President of TUI
from 2004 until April 1, 2021, and Executive Vice President of TUI
from April 2, 2021, until February 1, 2022. Complaint ¶ 14. But
the complaint also alleges that Danaher “ha[d] the authority” to
“ensure
Corporate
Defendants’
compliance
with
the
[Consent]
Order,” id. ¶ 170, and details that he “determined that complying
with the [Consent] Order would reduce TUI’s revenue and created a
plan to delay or avoid implementation of the requirements of
Paragraph 40 of the [Consent] Order,” id. ¶ 171. See id. (“Danaher
instructed
TUI
to
cease
using
the
checkbox
in
Affiliate
marketing.”). That is sufficient at the pleading stage to allege
authority
to
control.
As
for
Danaher’s
argument
regarding
paragraph 45 of the Consent Order, which states that “the Board
will
have
the
ultimate
responsibility
for
proper
and
sound
management of Respondents and for ensuring that Respondents comply
with Federal consumer financial law and this Consent Order,” I
find that does not negate the broader command in the Conduct
Provisions prohibiting CFPA violations by “Respondents, their
officers, agents, servants, employees, and attorneys who have
actual notice of this Consent Order, whether acting directly or
indirectly,” Consent Order ¶ 40.
20
The Bureau has also sufficiently alleged that Danaher knew or
should have known about the illegal practices. The complaint
alleges that Danaher knew about at least one of the activities the
Bureau claims violated the Consent Order. See Complaint ¶ 171
(“Danaher instructed TUI to cease using the checkbox in Affiliate
marketing.”). But Danaher argues that the Bureau must also allege
that Danaher knew that, or was recklessly indifferent to the fact
that, the actions violated the Consent Order. See CFPB v. Consumer
First Legal Grp., LLC, 6 F.4th 694, 711 (7th Cir. 2021) (agreeing
with the district court that the Bureau was required to prove
recklessness with respect to the illegality of the conduct at
issue, “since the conduct at issue here is not obviously wrongful,
dangerous, or illegal on its face” (citation omitted)). Even if
the standard applied in Consumer First applies here, this case is
only at the pleading stage, and all the Bureau must do is plausibly
allege that Danaher was recklessly indifferent to the wrongfulness
of TU’s actions over which he had authority. I conclude it has
done so because it alleges that because of financial implications,
Danaher actively “created a plan to delay or avoid” implementing
the Consent Order. Complaint ¶ 171. The Bureau even specifically
alleges that TU initially complied with the checkbox requirement
from Consent Order ¶ 40(b)(i), but ceased doing so at Danaher’s
instruction because he determined that complying had negative
financial consequences. Complaint ¶ 171. Danaher suggests that the
21
checkbox requirement does not extend to affiliates, but I accept
as true the allegation that the affiliates were under TU’s control,
id. ¶ 20, which supports the notion that the affiliates were
required
under
the
Consent
Order
to
implement
the
checkbox
requirement while acting on TU’s behalf. Taken together, that is
enough for me to plausibly infer Danaher’s knowledge of the conduct
and his reckless indifference to its wrongfulness.
III.
For the foregoing reasons, the motions to dismiss are denied.
ENTER ORDER:
_____________________________
Elaine E. Bucklo
United States District Judge
Dated: November 18, 2022
22
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?