We previously reported that the Connecticut Attorney General, on behalf of the Attorneys General of Indiana, Kansas and Vermont, (the “state AGs”) had filed a joint motion to intervene in a CFPB enforcement action against Sprint to request a Consent Order modification permitting unused settlement funds to be paid to the National Association of Attorneys General (“NAAG”).  Under the proposed modification, the undistributed settlement funds would be used by NAAG for the purpose of developing the National Attorneys General Training and Research Institute Center for Consumer Protection (“NAGTRI”).  We subsequently reported that the CFPB and the DOJ had been directed to state, in separate submissions, their positions with respect to the state AGs’ modified proposal to redirect $14 million of the unused settlement funds from the U.S. Treasury to NAAG and to redirect the remaining $1.14 million to a community organization that provides internet access to underprivileged high school students.

In its Memorandum on the Joint Motion to Intervene to Modify Stipulated Final Judgment and Order, the CFPB stated that the Consent Order should not be modified because Fed. R. Civ. P. 60(a) “does not, in the Bureau’s view, provide grounds for the proposed modification.”  Rule 60(a) permits a court to “correct a clerical mistake or a mistake arising from an oversight or omission” in a judgment, order or other part of the record.

The Bureau also noted in its submission that it had not proposed to apply the unused settlement funds to other equitable relief reasonably related to the allegations set forth in the complaint and therefore the Consent Order provision authorizing alternative uses of that nature was not at issue.  The Bureau concluded its submission by stating that it would direct the Defendant to pay the unused settlement funds to the U.S. Treasury if the Court declined to modify the Consent Order.

In a separate submission titled “Statement of Interest of the United States of America,” the DOJ initially asserted that the motion to intervene should be denied as untimely.  It then proceeded to argue that Rule 60(a) is limited to modifications that implement the result intended by the court when the order was entered, and does not allow changes that alter the original meaning of the judgment.  The DOJ further noted that the state AGs had not identified any clerical error or mistake arising from an omission or oversight.  Instead, the DOJ noted, the provision at issue requiring that unused settlement funds be deposited in the U.S. Treasury as disgorgement “is a standard term that appears in numerous CFPB consent orders.”  Finally, the DOJ asserted that “[n]othing in the Consent Order suggests that NAGTRI or NAAG is an intended beneficiary” and, as the Court itself had noted, the proposed modification “seeks to alter the Consent Order in a fundamental way by redirecting elsewhere” unused settlement funds of $15.14 million that would otherwise be deposited in the U.S. Treasury.

The DOJ concluded its submission with observations relating to the Miscellaneous Receipts Act.  Specifically, the DOJ noted that, “while [its] Statement of Interest is submitted on behalf of the United States as a whole, the CFPB is submitting a separate response opposing modification of the Consent Order.”  As a result, and in view of the fact that it believed there is no ground under Rule 60(a) to permit the proposed modification, the DOJ suggested that the Court need not address the issue of whether the proposed modification would implicate the Miscellaneous Receipts Act.

The DOJ noted, however, that “because the funds at issue have been constructively received by the United States, the Miscellaneous Receipts Act in any case would preclude the CFPB from directing the funds anywhere but the U.S. Treasury, including to NAAG or NAGTRI.”  “If NAAG wishes to fund its program with federal dollars,” the DOJ remarked, “it may seek a Congressional appropriation, but no portion of the Redress Amount may be diverted for that purpose.”

The state AGs and the Defendant may file responsive memoranda by May 24, 2017.  We will continue to monitor developments in this case.