U. S. Supreme Court rules CFPB structure is unconstitutional

Standard

CFPB building

The Supreme Court issued an order on Monday, June 29 holding that the structure of the Consumer Financial Protection Bureau is unconstitutional. But the agency has not been abolished.

In a 5-4 decision authored by Chief Justice John Roberts, the Court held that the agency run by a single director who can be fired by the President only for cause violates the separation of powers doctrine. The agency can be saved simply by striking the for-cause termination provision of the Dodd Frank Act.

There will be no immediate effect because the agency is currently being run by an acting director who has not been confirmed by the Senate. For this reason, the director can be fired by the President without case.

In the case, a California law firm alleged that an investigative demand issued by the CFPB is invalid on the grounds that the CFPB’s structure is unconstitutional.

South Carolina lawyers: We have a new UPL case

Standard

scales of justice small

This blog is about dirt, and the facts of the new unauthorized practice of law case do not involve real estate, but who among us doesn’t like to keep up with what our Supreme Court is thinking about UPL, the topic we believe can make us or break us at any moment?

The case, Westbrook v. The Murkin Group, LLC*, was decided March 18 and involved a Florida company that provides debt collection services in exchange for contingency fees. The Murkin Group advertises itself as having “in-house collection specialists”. Under the terms of its agreement with clients, once an account is turned over to Murkin, the client agrees to cease all communication with the debtor and to allow Murkin to be the sole point of contact. The agreement further authorizes Murkin to forward accounts to an attorney designated by Murkin when legal action is required.

In 2017, Wando River Grill became dissatisfied with its linen supplier, Cintas, and suspended its services. Cintas claimed the suspension constituted a breach of contract and invoked a liquidated damages provision in the contract, seeking more than $8,000 in damages. Cintas hired Murkin to collect the debt.  A South Carolina licensed attorney represented the restaurant in the dispute.

Murkin sent a demand letter, and the parties began to communicate about the dispute via email. Murkin claimed Cintas would waive its damages claim if the restaurant paid a “one-time processing fee for reinstatement”. Murkin prepared and sent the reinstatement agreement to the restaurant with signature lines for the restaurant and “The Murkin Group, on behalf of Cintas Corporation – Charleston, SC.”

The restaurant sent the proposed reinstatement agreement to the Petitioner, its lawyer, Edward Westbrook. Westbrook contacted Murkin and asked to discuss the matter directly with Murkin’s South Carolina counsel. The response was, “Whether or not this gets forwarded to local counsel is a decision which out office will make, with our client, when we feel it appropriate.”

(I can only imagine how that comment was received!)

The dispute continued, and Westbrook emailed Murkin asking for the South Carolina Bar numbers of several Murkin employees. Westbrook then filed a declaratory judgment action pursuant to our Supreme Court’s request that individuals who become aware of UPL bring a declaratory judgment action in the Court’s original jurisdiction.

The Court referred the matter to a special referee who filed a report recommending that the Court find Murkin’s actions constituted UPL.

The Supreme Court held that Murkin engaged in UPL when it interpreted Cintas’ client agreement and gave legal opinions as to what damages were recoverable. It also engaged in UPL when it sought to negotiate the contract dispute and advised Cintas on settlement.

While Murkin characterized its actions as “debt collection”, the Court stated that the true nature of the underlying matter is a contract dispute. The Court enjoined Murkin from engaging in any further such conduct.

 

*South Carolina Supreme Court Opinion 27952 (March 18, 2020).