Earlier this month, we wrote about how 28 U.S.C. 2642 might provide a statute of limitations in those cases where the Consumer Financial Protection Bureau (CFPB) alleges that none applies. As we described, the CFPB has taken the position that no statute of limitations applies to administrative enforcement cases that it brings, and that there is no statute of limitations applicable to some enforcement cases it brings in federal district court, either. A skeptical member of the D.C. Circuit questioned the agency about this issue during oral argument in PHH Corporation’s appeal of a CFPB administrative enforcement order, suggesting (although the parties had not argued the point) that 28 U.S.C. 2642 may be applicable. That statute provides that “[e]xcept as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise” is generally subject to a five-year statute of limitations.
What qualifies as a “civil fine, penalty, or forfeiture, pecuniary or otherwise” is thus one of the determinants of whether Section 2642’s statute of limitations applies. On May 26, the Eleventh Circuit addressed this very issue in a case involving a Securities and Exchange Commission (SEC) enforcement action, SEC v. Graham, No. 14-13562, slip op. (11th Cir. May 26, 2016). Graham involved an SEC action challenging conduct more than five years old and seeking declaratory and injunctive relief, as well as disgorgement, repatriation of assets, and civil money penalties. Id. at 3. The district court dismissed the SEC’s complaint on the grounds that Section 2642 precluded all the remedies the SEC sought.
The Eleventh Circuit affirmed in part and reversed in part, finding that some, but not all, of the remedies were barred by Section 2642. The key distinction in the Eleventh Circuit’s view was whether a particular remedy was backward-looking or forward-looking. Thus, the court held that the SEC’s claim for injunctive relief was not subject to Section 2642 because “[i]njunctions . . . typically look forward in time” and therefore do not constitute a “penalty” within the meaning of the statute. Id. at 7. Conversely, because declaratory relief is “backward-looking” and “is intended to punish because it serves neither a remedial nor a preventative purpose; it is designed to redress previous infractions rather than to stop any ongoing or future harm,” such relief was deemed by the court to “fit the definition of a penalty” subject to Section 2642. Id. at 9-11. Similarly, the court concluded that disgorgement was akin to “forfeiture” and thus also subject to Section 2642’s limitations. Id. at 11-14. (Even the SEC acknowledged that its claim for civil money penalties was barred by Section 2642. Id. at 4.)
As demonstrated by Graham, the scope and reach of Section 2642 is still the subject of judicial scrutiny, and not all courts agree on its sweep. Thus, for example, the D.C. Circuit, which has held that certain license suspensions and industry bans are punitive remedies subject to Section 2642, see Johnson v. SEC, 87 F.3d 484, 491 (D.C. Cir. 1996); Proffitt v. FDIC, 200 F.3d 855, 861 (D.C. Cir. 2000), has suggested in language that is arguably dicta that disgorgement and restitution are not, Johnson, 87 F.3d at 861. In the likely event that Section 2642 is held to apply to the CFPB, the further evolution of the law in this area, including in cases involving other agencies, is likely to play an important role in defining the scope of remedies that the CFPB can seek in cases based on older conduct. Indeed, given the broad range of remedies available to the CFPB, one would expect that the case law will impact how the agency pleads its claims for relief.