In Bureau of Consumer Fin. Prot. v. Fair Collections & Outsourcing, No. GJH-19-2817, 2020 U.S. Dist. LEXIS 223797, at *14-21 (D. Md. Nov. 30, 2020), Judge Hazel found constitutional ratification after SCOTUS’ decision in Seila Law v. CFPB, 140 S.Ct. 2183 (2020).

The Court next turns to a question left unanswered by Seila Law: whether the current CFPB Director properly ratified the enforcement action. Ratification is a principle drawn from agency law in which an agent originally acted without authority, but the principal later approves of the agent’s prior unauthorized acts such that they remain in effect. See GDG Acquisitions LLC v. Government of Belize, 849 F.3d 1299, 1310 (11th Cir. 2017) (noting that ratification assumes that the agent “did not have actual authority at the time he acted”); Wilkes-Barre Hosp. Co. v. NLRB, 857 F.3d 364, 371 (D.C. Cir. 2017) (explaining role of principal that ratifies prior unauthorized acts of agent). In the context of administrative agencies, actions have been ratified when the leadership of an agency acted without authority, but leadership with proper authority later affirmed the action. See, e.g., Wilkes-Barre Hosp. Co. v. NLRB, 857 F.3d 364, 371 (D.C. Cir. 2017); Legi-Tech, 75 F.3d at 709; Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 796 F.3d 111, 124 (D.C. Cir. 2015); Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1191 (9th Cir. 2016); see also Restatement (Second) § 93(3) (“The affirmance can be made by an agent authorized so to do.”). Several circuits have also considered whether an individual can “self-ratify” an action—that is, whether a specific person can ratify an action that he or she had initially taken before a constitutional defect has been remedied—and have found those ratifications can be effective. See, e.g., Advanced Disposal Servs. E., Inc. v. NLRB, 820 F.3d 592, 602-03 (3d Cir. 2016); CFPB v. Gordon, 819 F.3d 1179, 1185-86, 1190-91 (9th Cir. 2016); Wilkes-Barre Hosp. Co., LLC v. Nat’l Labor Relations Bd., 857 F.3d 364, 372 (D.C. Cir. 2017).  In order for a ratification to be valid, the principal, here, the CFPB, must have had the ability to do the act both at the time it was done and at the time of ratification. 513 U.S. 88, 98 (1994); see also Consumer Fin. Prot. Bureau v. Gordon, 819 F.3d 1179, 1191 (9th Cir. 2016); State Nat’l Bank of Big Spring v. Lew, 197 F. Supp. 3d 177, 184 (D.D.C. 2016) (“[I]t is the principal, the CFPB, who must at all times have the authority to take the challenged action.”); see also Gordon, 819 F.3d at 1191. Defendants claim the CFPB lacked the ability to file this case both at the time it did so and at the time of ratification. The Court will consider each argument.  First, Defendants argue that because the defect at issue was “structural,” it infected the entire agency, and thus the CFPB lacked authority to initiate the enforcement action in the first place. Therefore, Defendants contend, ratification cannot cure the defect. In making this argument, Defendants attempt to distinguish this case from those in which ratification was found effective, arguing those cases involved defects that were “limited to an individual’s appointment” and rendered only the agent without authority, not the agency as a whole. See ECF No. 22 at 4 (“This defect [in Gordon] only concerned the authority of the Director as the Bureau’s agent and not the authority of the Bureau itself.”).  The Court finds that Defendants’ emphasis on the distinction between “appointment” and “structural” defects obscures the key inquiry—the CFPB’s authority at the time of the enforcement action. Indeed, the delineation between appointment and structural defects does not find support in prior case law, which conflates the two, describing Appointments Clause problems as structural and rejecting arguments that this meant ratification was impossible. See, e.g., Fed. Election Comm’n v. Legi-Tech, Inc., 75 F.3d 704, 708 (D.C. Cir. 1996) (discussing the “effects of the unconstitutional structure of the FEC” and finding “Legi-Tech’s contention that the FEC’s reconstitution and ratification is not an effective remedy because separation of powers is a ‘structural’ constitutional defect that necessarily voids all prior decisions is overstated”); Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 796 F.3d 111, 123 (D.C. Cir. 2015) (noting that “an Appointments Clause violation is a structural error”).  Moreover, while Gordon, Wilkes Barre, and others indeed center on invalid recess appointments that can plausibly be said to “involve[] defects limited to the method by which a particular individual was appointed to an otherwise unchallenged office,” ECF No. 22 at 4, Legi-Tech and Intercollegiate Broad. Sys. involve defects that are broader and more “structural” than defendants acknowledge. Legi-Tech involved a finding that “the presence of the two congressional officers as non-voting ex officio members of the FEC violated the Constitution” and that “the FEC is unconstitutionally composed.” 75 F.3d at 706-07. Intercollegiate Broad. Sys., involved officers who were appointed by the Librarian of Congress and were not removable without cause, thus rendering them improperly appointed principal officers. 796 F.3d at 115. Nevertheless, ratification was permitted in both cases, meaning these broader, structural defects did not void the agencies’ authority.  Finally, Defendants’ appointments/structural distinction minimizes the significance of the appointment violations they reference. The recess appointments found unconstitutional in Gordon and Noel Canning, 705 F.3d 490, 493, 514 (D.C. Cir. 2013), aff ‘d, 573 U.S. 513, 557 (2014), for example, were not deemed impermissible simply because they violated the courts’ ideals of procedural propriety, but because they implicated the same concerns at issue here—they threatened the carefully crafted balance between the executive and legislative branches. Additionally, that certain cases “involved defects limited to the method by which a particular individual was appointed,” ECF No. 22 at 4, does not mean the defect was confined to that individual alone. Instead, those defects, like the one at issue here, raise concerns precisely because of the control the leader exercises over the agency’s actions. This is true whether the agent is improperly appointed or improperly removable. It is therefore not clear why, according to Defendants, ratification would be permissible in certain cases “where the defect is limited to an individual’s appointment,” and thus “‘address[ ] situations in which an agent was without authority at the time he or she acted,'” id. (quoting CFPB v. RD Legal Funding, LLC, 332 F. Supp. 3d 729, 785 (S.D.N.Y. 2018)), but not here, where the defect was limited to an individual Director’s insulation from removal.  The important determination is whether Seila Law, read as a whole, dictates that the CFPB lacked authority during the time in which it was led by an improperly removable Director. It does not. The holding in Seila Law did not affect the CFPB’s authority—only that of its Director. Indeed, the Supreme Court stated, if “the offending removal provision means the entire agency is unconstitutional and powerless to act, then a remand would be pointless,” 140 S. Ct. at 2208, before finding, to the contrary, “the removal provision can be severed from the other statutory provisions relating to the CFPB’s powers and responsibilities” and remanding the case to the Ninth Circuit, id. at 2209. The problem was the Director, and that problem was severable, leaving the agency and its authority intact. The Supreme Court proceeded to determine: “[t]he provisions of the Dodd-Frank Act bearing on the CFPB’s structure and duties remain fully operative without the offending tenure restriction.” Id. That it found they remained operative, rather than merely becoming so in the wake of the Supreme Court’s decision, suggests that Seila Law did not find the agency had been acting without authority in the time that the removal procedures for Director violated the Constitution. In sum, because the constitutional violation was limited to the removability of the Director, and not the authority of the agency as a whole, and because the Supreme Court found the defect severable, the CFPB was not acting without authority at the time the enforcement action at issue was initiated. . . . Having determined  that the CFPB had authority to initiate the enforcement action on September 25, 2019, the Court turns to its authority to ratify the prior action. According to Defendants, the Director’s ratification of the enforcement action was invalid because it was “premature,” as the Seila Law judgment had not yet issued, only the opinion. ECF No. 19 at 16. The Court need not decide this question, as even if the Notice of Ratification was filed prematurely, Plaintiff’s continued prosecution of this case after the Supreme Court’s judgment issued reflects “the principal’s assent (or conduct that justifies a reasonable assumption of assent) to be bound by the prior action of another person or entity,” which is sufficient to ratify the prior acts. See Henderson v. United Student Aid Funds, Inc., 918 F.3d 1068, 1073 (9th Cir. 2019) (citing Restatement (Third) of Agency § 4.01)). And, of course, if Defendants were right that the initial ratification was premature and thus improper, Plaintiff could simply ratify the enforcement action tomorrow with the same result. Nevertheless, because the CFPB had authority to ratify the enforcement action, the ratification was proper.

In Bureau of Consumer Fin. Prot. v. Citizens Bank, N.A., No. 20-044 WES, 2020 U.S. Dist. LEXIS 224401, at *21-26 (D.R.I. Dec. 1, 2020), Judge Smith reached the same conclusion.

Two days after the decision in Seila Law was issued, Director Kraninger ratified this lawsuit. See Kraninger Decl. 2, ECF No. 18 26-1. Citizens argues that this ratification did not cure the constitutional infirmity underlying this enforcement action. See generally Def.’s Suppl. Br. Though the Seila Law decision is still young, the two courts to address this issue thus far have determined that a CFPB enforcement action pending at the time of Seila Law may continue if the action is ratified by the Director. See CFPB v. Chou TeamRealty LLC, No. 8:20-cv-00043, slip op. at 4 (C.D. Cal. Aug. 21, 2020) (“Any constitutional deficiency regarding the removability issue at the time the Complaint was filed was cured by [severance] coupled with [ratification].”); Mot. Hr’g Tr. 67, CFPB v. LawOffices of Crystal Moroney, P.C., No. 7:20-cv-03240 (S.D.N.Y. Aug. 19, 2020) (“[T]he more efficient and sensible course seems to be to take the ratification of this prior decision at face value and treat that as the adequate remedy for the constitutional violation bearing in mind the discretion the judiciary employs in the selection of remedies.” (citation and quotations omitted)). For the following reasons, this Court agrees; ratification is a sufficient remedy for the constitutional violation. Thus, dismissal is unnecessary. i. Structural Infirmity The Bank’s primary contention is that ratification is insufficient because the constitutional defect identified in SeilaLaw was structural. See Def.’s Suppl. Br. 6-8, 11. Under the generally accepted principles of ratification, an agent cannot ratify a decision unless the principal had capacity to take the action at the time of the original decision. See CFPB v. Gordon, 819 F.3d 1179, 1191 (9th Cir. 2016) (citing Restatement on Agency (Second) § 84(1)).8 Due to this purported structural defect, Citizens argues that the CFPB (as principal) lacked capacity to file the Complaint in January 2020, so the Director (as agent) cannot now ratify it. See Def.’s Suppl. Br. 11. Relatedly, Citizens contends that this purported structural defect stripped the CFPB of its executive branch authority and, in turn, its standing to bring this suit. See id. at 16-17. Furthermore, Citizens argues that if the action can be ratified, the Bank is left with no remedy for being subjected to the enforcement decision of an unconstitutionally insulated director. See id. at 6-7. As Citizens notes, the Court in Seila Law “[held] that the structure of the CFPB violates the separation of powers[.]” Id. at 11 (quoting Seila Law, 140 S. Ct. at 2192). But the Court also expressed concern that striking down the entire CFPA “would trigger a major regulatory disruption and would leave appreciable damage Due to the Court’s determination, explained below, that the constitutional defect primarily affected the directorship, not the CFPB as a whole, the Court need not delve into the more flexible rule from the Third Restatement, which “advises that a ratification is valid even if the principal did not have capacity to act at the time . . . .” CFPB v. Gordon, 819 F.3d 1179, 1191-92 (9th Cir. 2016) (citing Restatement on Agency (Third) § 4.04 cmt. b). to Congress’s work in the consumer-finance arena.” Seila Law, 140 S. Ct. at 2210. Condemning all past (or even just all pending) CFPB actions, without the possibility of ratification, would have a similar effect. Moreover, after crossing out the removal restrictions, the Court concluded that “the CFPB may continue to exist and operate notwithstanding Congress’s unconstitutional attempt to insulate the agency’s Director from removal by the President.” Id. at 2207-08. Had the structure of the CFPB as a whole been unconstitutional, the excision of the for-cause provision would not have fixed the problem. Bigger changes would have been required. This Court thus interprets the Supreme Court’s use of the word “structure” to refer to attributes of the CFPB’s top brass, not deeper issues with the authority or makeup of the Bureau as a whole. In Gordon, the former CFPB Director’s recess appointment was deemed unconstitutional because it was made without the advice and consent of the Senate. See 819 F.3d at 1185-86. The enforcement action at issue had been initiated while the Director’s appointment was invalid, but following his subsequent confirmation by the Senate he ratified all his previous actions. See id. The Court of Appeals for the Ninth Circuit held that “Congress authorized the CFPB to bring the action in question. Because the CFPB had the authority to bring the action at the time [the case was initiated], [the Director’s] ratification, done after he was properly appointed as Director, resolve[d] any Appointments Clause deficiencies.” Id. at 1192 (citations omitted). Similarly, in FEC v. Legi-Tech, Inc., 75 F.3d 704 (D.C. Cir. 1996), the court ruled that the newly reconstituted Federal Election Commission (“FEC”) could ratify the enforcement action of its predecessor, whose make-up had violated separation of powers. See id. at 708. The court rejected the argument made here by Citizens: “Legi-Tech’s contention that the FEC’s reconstitution and ratification is not an effective remedy because separation of powers is a ‘structural’ constitutional defect that necessarily voids all prior decisions is overstated.” Id. “To be sure, Legi- Tech was prejudiced . . . when the FEC brought suit. But . . . the relevant issue is the degree of continuing prejudice now, after the FEC’s reconstitution and ratification, and whether that degree of prejudice – if it exists – requires dismissal.” Id. Lastly, in PHH I the court held the CFPA’s removal restrictions to be unconstitutional. See 839 F.3d at 39. Though the opinion was vacated, its reasoning was largely upheld in SeilaLawSee 140 S. Ct. at 2192; PHH II, 881 F.3d at 77. Of particular relevance here, then-Judge Kavanaugh stated that the “constitutional ruling w[ould] not halt the CFPB’s ongoing operations or the CFPB’s ability to uphold the [district court judgment] against PHH . . . .” PHH I, 839 F.3d at 39. The principles articulated in GordonLegi-Tech, and PHH I fully apply here. “Constitutional litigation is not a game of gotcha against Congress” or the CFPB. Barr v. Am. Ass’n. ofPolitical Consultants, Inc, 140 S. Ct. 2335, 2351 (2020). Because the constitutional deficiency identified in Seila Law concerned only the CFPB’s directorship, and because the deficiency was found to be severable, the CFPB was never divested of its power to act as a principal and its standing as a plaintiff.