February 22, 2019
For successfully defending client CashCall and its sole-shareholder and CEO, J. Paul Reddam in a closely-watched bench trial, with nearly US$300 million at stake in penalties, Los Angeles partner Thomas Nolan earned a place in the Daily Journal’s annual Top Verdicts honor roll.
Filed by the Consumer Financial Protection Bureau (CFPB), the case centered on novel legal theory — that attempting to collect on loans that are void under state law because of state licensing or usury statutes constitutes a federal UDAAP (unfair, deceptive, or abusive acts or practices) violation.
The financial sector closely monitored the CFPB’s enforcement action against CashCall because it set an important precedent related to the overreach of a federal regulatory agency’s enforcement powers. The CFPB’s claims were wholly predicated on violations of state law, notwithstanding that Congress did not incorporate state laws into the Consumer Financial Protection Act.
Led by Nolan, the defense maintained that the CPFB’s enforcement of state violations threatened principles of federalism and disrupted the regulatory domain of states. In addition, the defendants presented credible evidence establishing that CashCall and Mr. Reddam had sought out and relied on legal opinions published by outside regulatory counsel affiliated with a large national law firm.
Following a two-day remedies bench trial, the court issued a strong rejection of the CFPB’s demand that CashCall pay approximately US$287 million consumer restitution and civil penalties as well as denied CFPB’s request for an injunction.