Consumer Law

Lawyer ordered to disgorge $11.4M to former clients loses challenge to consumer bureau's power

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A federal appeals court has upheld the authority of the Consumer Financial Protection Bureau in an appeal by a California lawyer ordered to disgorge $11.4 million he collected from underwater homeowners.

The San Francisco-based 9th U.S. Circuit Court of Appeals ruled in a 2-1 decision (PDF) on April 14, the Recorder (sub. req.) reports. The court ruled in an appeal by lawyer Chance Gordon, who was accused of using deceptive marketing materials that misled underwater homeowners about his ability to help them.

A federal judge had granted summary judgment to the CFPB in its civil enforcement action against Gordon. The judge also ordered Gordon to pay $11.4 million in restitution and disgorgement.

The appeals court refused to overturn the grant of summary judgment, though it did remand for a new look at the disgorgement amount. The appellate panel also ruled against Gordon on his claim that the CFPB lacked authority because its director was initially appointed as a result of an invalid recess appointment.

The appeals court noted that CFPB Director Robert Cordray was later renominated and confirmed by the Senate, after which he confirmed the decision to charge Gordon. That “resolves any appointments clause deficiencies,” the 9th Circuit said.

The appeals court remanded for a determination whether it was appropriate to order Gordon to repay any money he collected before enactment of the federal law and regulation he was found to have violated.

The California State Bar has placed Gordon’s license on involuntary inactive status, according to the Recorder. Gordon’s lawyer, Gary Kurtz, did not respond to the Recorder’s request for comment.

The case is Consumer Financial Protection Bureau v. Gordon.

See also: “Is consumer bureau an unconstitutional ‘super executive agency’? DC Circuit panel seems to think so”

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