Ninth Circuit Upholds Action Against Attorney

(CN) — The Ninth Circuit upheld a $11 million judgment against an attorney who took advantage of desperate homeowners despite questions raised about the timing of the claims against him.

Chance Gordon is a California attorney who provided home loan modification services to struggling homeowners.

When California law changed to prohibit charging up-front for home loan modification services, he created a "pre-litigation monetary claims program," and charged for legal "products" to help homeowners in their disputes with mortgage lenders.

Under this scheme, homeowners received "pro bono" legal services only if they paid for Gordon's program. These were the same services that he previously charged for up-front.

Gordon advertised his program with mailers sent to distressed homeowners that resembled federal government mailers about government programs for affordable housing.

The Consumer Financial Protection Bureau filed an enforcement action against Gordon accusing him of illegally receiving up-front payments for mortgage relief services, misrepresenting the material aspects of his services, and failing to make proper disclosures to consumers.

Gordon is the same attorney who sued the Better Business Bureau in 2010, claiming that he did not deserve the organization's "F" rating.

A federal judge found for the agency, and ordered Gordon to disgorge $11 million, finding that his "products" often left his clients in a far worse position with their lenders, and misrepresented that he was somehow affiliated with the government.

But Gordon asserted that the agency lacked authority to bring the action against him because its director, Richard Cordray, was unconstitutionally appointed by President Obama in January 2012 while Congress was on recess.

Obama appointed three individuals to the National Labor Relations Board the same day, and these appointments were invalidated by the Supreme Court in 2014.

However, the Supreme Court's reasoning does not apply to Cordray, who was re-nominated by Obama in 2013, and confirmed by the Senate later that year, a divided Ninth Circuit ruled Thursday.

"The initial invalid appointment of Cordray is not fatal to this case," Judge John Owens said, writing for the 2-1 majority. "The subsequent valid appointment, coupled with Cordray's August 30, 2013 ratification, cures any initial Article II deficiencies."

The panel also affirmed the ruling against Gordon on the merits.

"The CFPB submitted testimony from John Gearries, the office manager at Gordon's law firm, stating that he believed that Gordon reviewed all the marketing materials, that Gordon approved the use of the scripts read by sales representatives, and that he had forwarded marketing materials to Gordon for his review on at least one occasion," Owens said.

This evidence is only contradicted by Gordon's own self-serving affidavit, which lacks supporting evidence, the 33-page opinion states.

Judge Sandra Ikuta dissented, saying she would find Cordray lacked authority to bring the enforcement action because he was not legally appointed when the action commenced. "The majority's view of jurisdiction reduces to zero the 'irreducible constitutional minimum of standing,' and vitiates the standing requirement's vital role in preventing 'the judicial process from being used to usurp the powers of the political branches.' I decline to participate in this power grab," Ikuta said.

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