## Facts

- Chance Edward Gordon, a California attorney, operated a loan-modification and related legal-services business for distressed homeowners.
- After restrictions on advance fees for loan-modification services, Gordon created a “Pre–Litigation Monetary Claims Program” in which consumers paid a flat fee for purported legal “products” (e.g., demand letters and draft complaints).
- Gordon also used an attorney–client “pro bono” agreement promising certain mortgage-related legal services “free of charge,” but only if the consumer first paid for the Program.
- Gordon hired a marketer to send direct-mail solicitations to distressed homeowners, including a mailer titled “Notice of HUD Rights.”
- The “Notice of HUD Rights” mailer used a Washington, D.C. return address and language implying a governmental or HUD connection despite no such affiliation.
- The Consumer Financial Protection Bureau (CFPB) brought an enforcement action alleging unfair or deceptive acts or practices under the Consumer Financial Protection Act (CFPA) and violations of Regulation O (the Mortgage Assistance Relief Services Rule).
- The district court granted summary judgment for the CFPB, ordered monetary relief measured by Gordon’s unjust gains (including money from satisfied customers), and entered an injunction that included a time-limited restriction on practicing law in specified areas.
- On appeal, Gordon challenged (1) the CFPB’s authority based on the prior recess appointment of Director Richard Cordray, (2) liability on the merits, (3) the scope of monetary relief, and (4) the injunction.

## Issues

1. Whether the CFPB lacked authority to sue because the enforcement action began under a Director later determined to have been unconstitutionally recess-appointed, and whether later ratification cured any defect.
2. Whether undisputed evidence established, as a matter of law, that Gordon’s marketing and fee practices were deceptive and violated the CFPA and Regulation O.
3. Whether the monetary award improperly included receipts attributable to conduct occurring before the relevant CFPA and Regulation O effective dates.
4. Whether the district court abused its discretion in imposing injunctive relief, including restricting Gordon’s practice in certain areas.

## Decision

- The Ninth Circuit affirmed in part and vacated and remanded in part.
- The court held the CFPB had authority to proceed because Director Cordray’s later valid appointment and ratification cured any constitutional defect tied to the earlier recess appointment.
- The court affirmed summary judgment on liability, concluding Gordon’s solicitations and “pro bono” structure were deceptive and violated the CFPA and Regulation O.
- The court vacated and remanded the monetary judgment because the calculation may have included revenue from conduct predating the applicable provisions’ effective dates.
- The court affirmed the injunction as within the district court’s equitable discretion based on the record and risk of future consumer harm.

## Legal Principles

- A government enforcement action initiated under a defect in an official’s appointment may be validated through ratification when a properly authorized official, with knowledge of the material facts, adopts the prior action.
- Marketing that implies government affiliation, including implied HUD affiliation, can be deceptive under the CFPA when likely to mislead targeted consumers.
- Characterizing services as “pro bono” while conditioning the promised services on payment of upfront fees can be deceptive, and may violate Regulation O’s limits on advance fees for mortgage assistance relief services.
- Later written agreements do not necessarily cure earlier deceptive solicitations when the consumer’s decision and payment were induced by the earlier misrepresentations.
- Monetary relief under the CFPA and related regulations must be limited to conduct occurring within the period when the relevant provisions were effective; an award must not rest on pre-effective-date receipts.

## Conclusion

The Ninth Circuit upheld the CFPB’s authority based on post-appointment ratification and affirmed liability and injunctive relief for deceptive mortgage-relief marketing practices, but required recalculation of monetary relief to ensure it covered only receipts tied to conduct occurring after the relevant provisions took effect.


Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179 (9th Cir. 2016)