Consumer Financial Protection Bureau v. The Source for Public Data, LP
MEMORANDUM OPINION AND ORDER: The Court DENIES 29 The Source for Public Data, L.P.'s Stay Application. (Ordered by Magistrate Judge David L. Horan on 6/30/2017) (ash)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
THE SOURCE FOR PUBLIC
MEMORANDUM OPINION AND ORDER
The Source for Public Data, L.P. (“Public Data”) seeks a stay pending appeal
from the Court’s orders compelling enforcement of a civil investigative demand (“CID”)
issued by the Consumer Financial Protection Bureau (the “Bureau”). See Dkt. No. 29
(the “Stay Application”). Senior United States District Judge A. Joe Fish referred this
case to the undersigned United States magistrate judge for determination under 28
U.S.C. § 636(b). See Dkt. No. 5.
The Court granted the Bureau’s petition to enforce a CID issued by the Bureau
to Public Data on June 6, 2017, see Dkt. No. 27, and, on June 7, 2017, the Court
ordered that Public Data must comply with the CID by the later of June 28, 2017 or
a later date that may be established by the Bureau, see Dkt. No. 27.
Public Data filed both its Notice of Appeal and the Stay Application on June 26,
2017. See Dkt. Nos. 28 & 29.
The Court held a telephone conference with counsel for the parties on the Stay
Application on June 27, 2017. See Dkt. No. 31. As a result of that discussion, the Court
ordered that “the Clerk of the Court is directed to remove the sealed and ex parte
restrictions from The Source for Public Data. L.P.'s Ex Parte Application for Stay
Pending Appeal  (so that this docket entry will now be publicly available); the
Consumer Financial Protection Bureau must file a response to the Application for Stay
Pending Appeal  by 11:00 a.m. Central Time on June 30, 2017, and no reply will
be permitted; and the deadline set by the Court’s June 7, 2017 Electronic Order [Dkt.
No. 27] is stayed pending the entry of an order of the Court resolving the Application
for Stay Pending Appeal .” Dkt. No. 32.
A stay or injunction pending appeal is extraordinary relief and should be entered
only when four conditions are met: (1) the movant establishes a likelihood of success
on the merits; (2) the movant would suffer irreparable injury if a stay is not granted;
(3) a showing that the stay would not substantially harm the other party; and (4) a
demonstration that the stay would serve the public interest. See In re First South
Savings Assoc., 820 F.2d 700, 704 (5th Cir. 1987); United States v. Baylor Univ. Med.
Ctr., 711 F.2d 38, 39 (5th Cir. 1983). Each part of the four-factor test must be
considered, but these factors should not be applied “in a rigid or mechanical fashion.”
Baylor Univ. Med. Ctr., 711 F.2d at 39. Moreover, the movant “need only present a
substantial case on the merits when a serious legal question is involved and show that
the balance of equities weighs heavily in favor of granting the stay.” Id.; accord
Reading & Bates Petroleum Co. v. Musslewhite, 14 F.3d 271, 272 (5th Cir. 1994).
Public Data asserts that “[e]ach of the criteria for evaluating a request for a stay
pending appeal as enumerated by the U.S. Supreme Court and as applied by the Fifth
Circuit Court of Appeal militate in favor of granting Public Data the requested stay”:
First, the balancing of the equities favors granting a stay as the case
presents serious, novel and unique questions of law that are proper
subjects of an appeal. Second, unless a stay is granted, Public Data will
suffer irreparable harm, its appeal will be rendered moot, and it will be
compelled to comply with an overly burdensome production demand for
documents and information to which the [Bureau] is potentially not
entitled. Third, a stay will not harm the [Bureau] because the [Bureau]
has not received any complaints against Public Data, there is no pending
enforcement action against Public Data, and there are no other matters
that would be affected by a stay. Finally, the public has a strong interest
in ensuring governmental compliance with jurisdictional limitations and
boundaries on statutorily prescribed authority.
Dkt. No. 29 at 2-3 of 19.
The Bureau responds that
Public Data has not met its burden to establish that a stay is warranted.
The Bureau issued a Civil Investigative Demand (CID) in January
seeking information as part of an investigation to determine whether
consumer reporting agencies, persons using consumer reports, or other
persons may be violating federal consumer financial protection laws,
including the FCRA. More than six months later, the Bureau has yet to
receive any information in response to its CID. On June 7, 2017, the
Court ordered Respondent to comply with the CID by June 28, 2017 after
it considered the relevant factors and found that the Bureau’s jurisdiction
for issuing the CID was not “plainly lacking” because there are plausible
grounds to believe that Respondent may have information related to a
violation of the FCRA. Respondent neither demonstrates that the Court
misapplied that standard to the facts of this case nor provides any basis
for use of a different standard. Instead, Respondent argues that a stay is
now required to shield it from the burden of complying.
Respondent has not established any one of the elements necessary
for a stay. Respondent has not established a likelihood of success on the
merits on appeal. Instead, it simply reiterates its arguments that it is not
subject to the FCRA. Respondent similarly fails to make any showing
that it will suffer irreparable harm absent a stay. A stay would, however,
seriously prejudice the Bureau’s – and the public’s – interest in the
Bureau expeditiously investigating potentially unlawful conduct.
Dkt. No. 32 at 1-2.
As to the first factor, Public Data does not assert that it has a substantial
likelihood of success on appeal but rather only “that the case was sufficiently close (or
the issues sufficiently novel) that the party has a reasonable likelihood of appellate
success and that there are equitable reasons for staying the relief temporarily.” Dkt.
No. 29 at 12 of 19 (emphasis in original). And, Public Data asserts, “[t]his standard is
further loosened in cases, like this one, that present the court with serious and novel
legal questions.” Id.
The best point that Public Data has in its favor in support of a stay is its
unsuccessful reliance on the recent decision of the United States Court of Appeals for
the District of Columbia in Consumer Financial Protection Bureau v. Accrediting
Council for Independent Colleges and Schools (ACICS), 854 F.3d 683 (D.C. Cir. 2017).
Public Data asserts that its “appeal presents, at a minimum, a substantial case on the
merits involving serious legal questions concerning the authority of the [Bureau],
especially in light of recent precedent, including the D.C. Circuit’s ACICS decision, and
that, “[a]lthough the Court ultimately did not find in favor of Public Data, its detailed
analysis of the jurisdictional issues presented reflects both their novelty and legal
importance, as well as the fact that resolving whether the [Bureau] has exceeded its
authority presented a close question.” Dkt. No. 29 at 13, 14 of 19.
The Bureau responds that, while Public Data “rehashes the DC Circuit’s [ACICS
opinion] by arguing (as it did in response to the Bureau’s Petition to Enforce) that the
Notification of Purpose in this case is deficient,” “[t]his Court thoroughly analyzed this
argument in the June 6 Opinion and rejected it out of hand; there is no basis for this
Court to now conclude that Respondent is likely to succeed on the merits, or that the
Bureau’s Notification of Purpose here presents a ‘serious legal question’ with broad
implications that warrants a stay.” Dkt. No. 32 at 4-5.
The Court cannot agree that it rejected Public Data’s reliance on ACICS out of
hand but also does not believe that the issues that this Court addressed or that Public
Data is likely to raise on appeal involve what could properly be called a serious legal
question. The Bureau did not challenge the D.C. Circuit’s legal analysis of what, as a
general matter, authority the Bureau has to issue a CID or what must be included
under 12 U.S.C. § 5562(c)(1), and this Court likewise accepted the D.C. Circuit’s
explanation of the law. Rather, the Bureau argued – and this Court agreed – that the
Notification of Purpose in this CID issued to Public Data does not, unlike the one in
ACICS, fail to state adequately the unlawful conduct under investigation or the
applicable law. This Court’s decision on the Bureau’s petition involved an application
of this unchallenged law to the particular facts here, one in which the Court noted that
“[t]he CID to Public Data presents a closer case than the one in ACICS.” Dkt. No. 26
But, even assuming that Public Data could show that a serious legal question
is involved and that it has a substantial case on the merits, Public Data has not shown
that the balance of equities weighs heavily in favor of granting the stay.
Its strongest argument on the remaining factors may be that “unless a stay is
granted, Public Data will suffer irreparable harm, its appeal will be rendered moot,
and it will be compelled to comply with an overly burdensome production demand for
documents and information to which the [Bureau] is potentially not entitled.” Dkt. No.
29 at 3 of 19. But the alleged irreparable harm to which Public Data points has been
either rejected by the Fifth Circuit or was not asserted or substantiated before this
Court or now on the Stay Application.
As to mootness, the Fifth Circuit previously rejected an “argument that denial
of a stay – i.e., being forced immediately to comply with [administrative] subpoenas [for
documents] – will cause irreparable injury [to the subpoenaed entity] by mooting its
appeal.” United States v. Transocean Deepwater Drilling, Inc., 537 F. App’x 358, 362
(5th Cir. 2013). The Court of Appeals, following Church of Scientology of California v.
United States, 506 U.S. 9 (1992), explained that, “[w]hen documents have been
provided pursuant to a subpoena later found to be unlawful, a court can fashion
‘meaningful relief’ by ordering the documents returned. This is because the owner of
subpoenaed documents retains “an obvious possessory interest in [its] records.” Id.
(citation omitted). As the Bureau argues, this analysis applied equally here.
In Transocean, the Fifth Circuit did note that, “[t]o be clear, Transocean has not
argued that the burden of complying with the subpoenas is an irreparable injury, or
that the absence of a stay will irrevocably deprive it of some other property or liberty
interest.” Id. at 363. And Public Data does argue that “compliance with the [Bureau’s]
CID essentially requires that Public Data compile and produce to the [Bureau]
substantial information on all of Public Data’s employees, contractors, clients,
databases, confidential and proprietary technologies, policies, procedures, products,
and services, as well as its parent and related companies and subsidiaries by June 28,
2017. [Dkt. Nos. 2-2 and 27.] Not only would the compilation and production of all of
this information be unduly burdensome on Public Data, but this is also information
that Public Data contends the [Bureau] is not entitled to as the [Bureau] lacks
jurisdiction over it.” Dkt. No. 29 at 13 of 19.
But Public Data did not ultimately challenge enforcement of the CID in this
Court on grounds of undue burden and has not presented any evidence of the extent
of that alleged burden. And the Bureau responds that, “[a]ssuming this burden is
related to possible economic injury, courts have repeatedly rejected such arguments to
establish irreparable harm.” Dkt. No. 32 at 6 (footnote omitted; citing cases). This
Court is not so sure that, in this context, Public Data could fully recover the economic
costs it would incur to comply with the CID while its appeal is pending. But compliance
with an order on appeal often involves costs and burden and yet this factor does not
automatically weigh in favor of the stay applicant. Where Public Data has not seriously
pressed or substantiated this alleged undue burden, the Court finds that this factor at
the least weighs only somewhat in favor of a stay.
And the other factors do not weigh in favor of a stay. Although Public Data
contends that the Bureau is without jurisdiction or authority to issue the CID in this
case, the Court has concluded that the Bureau’s authority to issue the CID – as
opposed to any authority to undertake an enforcement action against, for example,
Public Data, which the Bureau is seeking information to assess and which was not the
issue before the Court on this petition – is not plainly lacking. Public Data’s arguments
as to this factor all assume that the Court erred in rejecting its challenges to the
Bureau’s investigative authority and depend on its irrelevant assertions that the
Bureau has not received any complaints against Public Data or its business and there
is no pending enforcement action against Public Data. “The ‘injury to the other parties’
and ‘public interest’ factors merge when the Government is the opposing party.”
Transocean, 537 F. App’x at 364 (internal quotation marks omitted). The Court cannot
accept Public Data’s contention that “there are no outstanding matters which would
be affected by a stay of the Court’s Orders” because the Bureau’s investigative inquiry
in the form of the CID at issue here is just such a matter.
The public interest factor is – at best for Public Data – neutral when assessing
Public Data’s assertion of a public interest in “ensuring that governmental agencies do
not unlawfully exceed their granted authority or jurisdiction, and where businesses
and citizens need protection from compelled production of documents and information
to an agency which may not even be entitled to such make such a demand,” Dkt. No.
29 at 16 of 19, against the injury that the Fifth Circuit has explained that “a stay
would work upon the government and the public” where an agency is authorized to
conduct the investigation at issue to accomplish its statutory mission and where
“[d]elaying the subpoenaed documents’ release would impede the accomplishment of
this mission.” Transocean, 537 F. App’x at 364.
“Finally, [Public Data] submits that the public has an interest in having ‘the
appellate courts ... consider[ ] the serious legal questions raised in this case’ – an
interest that cannot be vindicated if its appeal becomes moot. Because [Public Data]’s
appeal will not be mooted by compliance with the [CID], [the Court of Appeals] will
have ample opportunity to consider the legal questions raised in this case.” Id. at 365.
Public Data has not established that the balance of the equities weighs heavily
in favor of granting the stay and therefore fails to satisfy the standard that it has
invoked. And Public Data does not purport to have made a strong showing that it is
likely to succeed on the merits and so also has failed to satisfy its burden under the
traditional test for a stay pending appeal.
For the reasons explained above, the Court DENIES The Source for Public Data,
L.P.’s Stay Application [Dkt. No. 29].
DATED: June 30, 2017
DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE
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