It appears that Acting Director Mulvaney’s BCFP is about to settle a case that former Director Cordray’s CFPB filed in 2015 against D&D Marketing, which allegedly engages in lead generation for payday, tribal, and offshore lenders under the name T3 Leads. Based on the docket, the case appears to have been in active, heated litigation from the time it was filed until just recently. So, it is not clear why the BCFP would suddenly change course and settle the matter. The widest-reaching issue in the case is whether the CFPB can continue to litigate against an entity in a circuit where its structure has been deemed unconstitutional.
In November 2016, the District Court Judge assigned to the T3 Leads case, Judge Philip Gutierrez, ruled on the motion to dismiss filed by T3 Leads. The court held that “the combination of the power accorded to the CFPB Director and the limitations on the President’s removal powers violate Article II of the Constitution” but that “these constitutional concerns do not prevent the CFPB from prosecuting this case and do not warrant dismissal of the Complaints.” In reaching this conclusion, the Court adopted the reasoning of the panel decision of the D.C. Circuit in the PHH case, which held that the proper remedy for the constitutional violation was to strike the for-cause removal provision rather than dissolve the BCFP entirely.
Shortly after the District Court reached this decision, in December 2016, T3 Leads asked that the district court allow it to file an interlocutory appeal to the Ninth Circuit on several questions, including whether Judge Gutierrez correctly ruled with respect to the CFPB’s ability to continue prosecuting the case in light of its constitutionally deficient structure. The BCFP opposed T3 Leads’s petition for interlocutory appeal. In March 2017, Judge Gutierriez ruled on that motion, allowing the interlocutory appeal to proceed on the constitutional question alone. In May 2017, the Ninth Circuit granted the petition for interlocutory appeal.
Thereafter, the parties continued to actively litigate the district court case while at the same time pursuing the interlocutory appeal before the Ninth Circuit. On July 25, 2018, the Ninth Circuit announced that the interlocutory appeal was being “considered for an upcoming oral argument.” That same day, the BCFP and T3 Leads filed the notice of prospective settlement indicating that they had reached a tentative agreement and were likely to settle the matter.