2024 Year in Review: Major US Supreme Court and Appellate Cases

Looking Ahead to 2025 

The Supreme Court continues to take a close look at major administrative law questions, and its answers have significantly impacted the consumer finance industry. Most notably, in 2024, the Supreme Court overruled the Chevron doctrine, requiring federal courts to interpret ambiguous statutes on their own without deferring to agency interpretations of those statutes. The Supreme Court also resolved a circuit split on the constitutionality of the Consumer Financial Protection Bureau (CFPB), upholding the constitutionality of the CFPB’s funding mechanism and ending speculation that the agency’s previous work could be in jeopardy. The U.S. Courts of Appeals likewise considered issues that will impact the consumer finance industry, including with respect to mass arbitration.

In the News 

US Supreme Court 

Supreme Court Ends Challenges to CFPB’s Funding Mechanism 

In May, the Supreme Court decided CFPB v. Community Financial Services Association of America, Ltd., 601 U.S. 416 (2024), a long-awaited decision concerning the constitutionality of the CFPB. Although Congress funds most federal agencies on an annual basis through congressional appropriations, Congress permits the CFPB to request funds from the earnings of the Federal Reserve System. The trade associations challenged this funding mechanism, contending it undermined the framers’ goals of checks and balances by “allowing the [CFPB] to indefinitely choose its own level of annual funding, subject only to an illusory cap.” The Court concluded that this funding mechanism complied with the Appropriations Clause because Congress authorized the agency to “draw public funds from a particular source.” With this ruling, several federal courts have lifted stays they had previously imposed in cases, including enforcement actions, in which the CFPB is a party.

Supreme Court Clarifies Scope of Organizational Standing 

In June, the Supreme Court decided FDA v. Alliance for Hippocratic Medicine, 602 U.S. 367 (2024). There, plaintiff associations argued they had suffered a concrete injury and thus had standing under Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982), because they had diverted resources in response to a defendant’s actions. The Supreme Court, however, clarified that Havens did not stand for the broad proposition that an association has standing whenever it diverts resources. Instead, the Court clarified that “Havens was an unusual case” in which the defendant’s actions “directly affected and interfered with [the association’s] core business activities,” and the Supreme Court has accordingly “been careful not to extend the Havens holding beyond its context.” Because the Food and Drug Administration’s actions in Alliance for Hippocratic Medicine did “not impose[] any similar impediment” on the plaintiff associations, the Supreme Court declined to extend Havens to this case and ultimately concluded that the plaintiffs lacked standing.

Supreme Court Curtails SEC’s Enforcement Forum Discretion  

In June, the Supreme Court concluded in SEC v. Jarkesy, 144 S. Ct. 2117 (2024), that, pursuant to the Seventh Amendment of the US Constitution, defendants are entitled to a jury trial in an Article III court when the Securities and Exchange Commission (SEC) seeks civil penalties for securities fraud. The Court reasoned that civil penalties were in effect punitive damages and were the type of remedy implicating the Seventh Amendment’s right to a jury trial. Accordingly, if the SEC wants to seek civil money penalties, the agency must bring these actions in federal court instead of adjudicating these matters before its administrative law judges. Although Jarkesy concerned securities fraud, the Court’s decision may have broader implications that call into question the constitutionality of other agencies’ use of internal administrative proceedings to pursue civil remedies, such as the CFPB’s.

Supreme Court Eliminates Chevron Deference

In June, the Supreme Court overruled Chevron deference in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). The Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council had required federal courts to defer to “permissible” agency interpretations of ambiguous statutes, even if the court would have interpreted the statute differently. With Chevron deference’s elimination, federal courts may no longer defer to agency interpretations and must instead exercise their own judgment in determining whether an agency acted within its statutory authority. The Court, however, emphasized that its decision “d[id] not call into question prior cases that relied on the Chevron framework” and that those decisions were still subject to stare decisis. With this ruling, litigants can target agency interpretations for judicial review and could even challenge agency interpretations that courts previously deferred to under Chevron. Similarly, agencies themselves may change their approaches to rulemaking, given that they can no longer rely on Chevron deference in court.

Supreme Court Decides When Right of Action Accrues

In July, the Supreme Court held in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, 144 S. Ct. 2440 (2024), that statutes of limitations for actions against the United States do not begin to run in Administrative Procedure Act suits until the plaintiff is injured by the final agency action. This ruling will permit more suits to go forward that otherwise would have been time-barred.

Courts of Appeals 

Third Circuit Concludes Securitized Trusts Constitute “Covered Persons”

In March, the Third Circuit concluded in CFPB v. National Collegiate Master Student Loan Trust, 96 F.4th 599 (3d Cir. 2024), that trusts that engage in offering or providing consumer financial products or services constitute “covered persons” subject to the Consumer Financial Protection Act (CFPA). In so holding, the court reasoned that the CFPA explicitly identified trusts as a “person” and thus were subject to the CFPB’s enforcement authority. The Supreme Court denied the trusts’ petition for certiorari in December 2024.

Seventh Circuit Requires Proof of Agreement Before Mass Arbitrations 

In July, the Seventh Circuit considered Wallrich v. Samsung Electronics America, Inc., 106 F.4th 609 (7th Cir. 2024), in which thousands of consumers had filed arbitration claims against Samsung before the American Arbitration Association (AAA). Samsung declined to pay the required administrative filing fees, so the AAA terminated the arbitration proceedings. The consumers then sought to compel arbitration and the payment of the arbitration fees in federal court, which the district court granted. The Seventh Circuit reversed the district court’s decision, reasoning that the consumers failed to prove they had an arbitration agreement because they had not submitted evidence of the existence of such an agreement, such as purchase receipts, confirmation numbers, or declarations attesting under the penalty of perjury to the allegations included in the arbitration demands. The court noted that identifying an arbitration agreement and separately listing alleged consumers without actually linking the consumers to the agreement is not sufficient to show that an arbitration agreement exists. Given the rise in mass arbitrations, the court’s decision may guide not only other courts faced with similar motions to compel arbitration but also parties engaged in mass arbitration in which alleged claimants have not proved the existence of an agreement.

Seventh Circuit Concludes Equal Credit Opportunity Act Protects Prospective Applicants

In July, the Seventh Circuit concluded in CFPB v. Townstone Financial, Inc., 107 F.4th 768 (7th Cir. 2024), that the Equal Credit Opportunity Act authorizes liability for creditors who discourage prospective applicants from pursuing a credit application on a prohibited basis, such as race. This ruling further clarifies the scope of liability for creditors under the act.

Sixth Circuit Continues to Apply TransUnion

In August, the Sixth Circuit in Merck v. Walmart, Inc., 114 F.4th 762 (6th Cir. 2024), considered whether a job applicant had constitutional standing under the informational injury theory when the prospective employer, who revoked his conditional job offer, failed to provide a complete report as required under the Fair Credit Reporting Act. Relying on the Supreme Court’s decision in TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), the court held that the job applicant did not have standing to sue for an informational injury because he failed to establish that he suffered adverse effects from the denial of the information in the complete report.

Ninth Circuit Rejects Attempts to Enforce Mass Arbitration Terms

In October, the Ninth Circuit rejected Live Nation and Ticketmaster’s attempt to enforce their arbitration agreement in Heckman v. Live Nation Entertainment, Inc., 120 F.4th 670 (9th Cir. 2024). The court concluded that the arbitration terms were unconscionable and unenforceable in part because it was “nearly impossible” for customers to avoid retroactive application of modified terms. The Ninth Circuit also objected to the selected arbitration provider’s rules and procedures, describing the rules as “internally inconsistent.” The court also concluded that the provider’s mass arbitration protocol in particular was substantively unconscionable because it provided for bellwether cases the results of which were binding on nonparticipants who had no notice of the bellwether cases and no opportunity to be heard. Although the Ninth Circuit’s decision was in part focused on the specific arbitration provider’s rules and procedures, its decision signals that courts are closely reviewing companies’ attempts to streamline or mitigate against the risk of mass arbitrations.

Fifth Circuit Sets Effective Date for CFPB Payday Lending Rule

After the Supreme Court’s decision in CFPB v. Community Financial Services Association of America, Ltd., 601 U.S. 416 (2024), the case was remanded back to the Fifth Circuit for further proceedings. The Fifth Circuit rendered judgment in favor of the CFPB in June, noting that the Payday Lending Rule is constitutional. In November, the Fifth Circuit clarified that its stay of the compliance date for the Payday Lending Rule would expire at the end of March 2025. Accordingly, although the plaintiff-appellants may seek Supreme Court review again, entities subject to the Payday Lending Rule should prepare for it to go into effect in March.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.