author: RAWLINSON, Circuit Judge:

text:
    CONSUMER FINANCIAL PROTECTION BUREAU, Petitioner-Appellee, v. GREAT PLAINS LENDING, LLC; Mobiloans, LLC; Plain Green, LLC, Respondents-Appellants.
    No. 14-55900
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted June 6, 2016, Pasadena, California
    Filed January 20, 2017
    Neal Kumar Katyal (argued), Frederick Liu, and Morgan L. Goodspeed, Hogan Lovells US LLP, Washington, D.C., for Respondents-Appellants.
    Kristin Bateman (argued) and Lawrence DeMille-Wagman, Attorneys; John R. Coleman, Assistant General Counsel; To-Quyen Truong, Deputy General Counsel; Meredith Fuchs, General Counsel; Consumer Financial Protection Bureau, Washington, D.C.; for Petitioner-Appellee.
    Before: FERDINAND F. FERNANDEZ, JOHNNIE B. RAWLINSON, and CARLOS T. BEA, Circuit Judges.
   OPINION

RAWLINSON, Circuit Judge:

Appellants Great Plains Lending, LLC, Mobiloans, LLC, and Plain Green, LLC (collectively, Tribal Lending Entities) appeal from the district court’s decision compelling the Tribal Lending Entities to comply with civil investigative demands (investigative demands) issued by Appellee Consumer Financial Protection Bureau (Bureau). The Tribal Lending Entities maintain that they are not subject to the Bureau’s jurisdiction because the entities were created and operated by several recognized tribes, and are thereby cloaked in tribal sovereign immunity. The Tribal Lending Entities assert that, because the Consumer Financial Protection Act of 2010 (the Act) defines the term “State” as including Native American tribes, the Tribal Lending Entities, as arms of sovereign tribes, are not required to comply with the investigative demands. We disagree with the argument made by the Tribal Lending Entities that the inclusion of tribes in the Act’s definition of “State” impliedly excludes the Tribal Lending Entities from regulation under the Act, and therefore AFFIRM the decision of the district court enforcing the investigative demands.

I. BACKGROUND

This appeal stems from the creation of several Tribal Lending Entities as for-profit lending companies by the Chippewa Cree, Tunica Biloxi, and Otoe Missouria Tribes (collectively, Tribes). The Tribes established regulatory frameworks for consumer lending by these Tribal Lending Entities.

In addition to regulation by the Tribes, the Tribal Lending Entities came to the attention of the Bureau, which initiated an investigation into the Tribal Lending Entities by serving investigative demands. The Bureau explained that:

The purpose of this investigation is to determine whether small-dollar online lenders or other unnamed persons have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing, provision, or collection of small-dollar loan products, in violation of Section 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 5536, the Truth in Lending Act, 15 U.S.C. § 1601, the Electronic Funds Transfer Act, 15 U.S.C. § 1693, the GrammLeach-Bliley Act, 15 U.S.C. §§ 6802-6809, or any other Federal consumer financial law. The purpose of this investigation is also to determine whether Bureau action to obtain legal or equitable relief would be in the public interest.

The Tribes directed the Tribal Lending Entities not to respond to the investigative demands, and informed the Bureau that it lacked jurisdiction to investigate lending entities created and operated by the Tribes. Rather, the Tribes offered to cooperate with the Bureau as co-regulators of consumer lending services.

When the offer of cooperative regulation was rejected by the Bureau, the Tribes petitioned the Bureau to set aside the investigative demands. The Bureau denied the Tribes’ petition, and sought enforcement of the investigative demands in federal court. The district court then issued an order to show cause as to why the Tribal Lending Entities should not comply with the investigative demands.

Relying primarily on our ruling in Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113, 1115 (9th Cir. 1985), the district court concluded that the Act, as an act of general applicability, was enforceable against the Tribal Lending Entities. The district court rejected the Tribal Lending Entities’ reliance on the holding in Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 780, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) that the statutory definition of the term “person” typically excludes “the sovereign.” The district court noted the unlikelihood that Stevens overruled subsequent Ninth Circuit authority restating the holding in Coeur d’Alene. Instead, the district court found it persuasive that “[t]he Stevens and Coeur d’Alene presumptions have ... existed side by side for decades” without so much as a suggestion of “an inescapable conflict between them.” The district court reasoned that the cases were indeed reconcilable because the Supreme Court had not definitively held that the holding in Stevens applied to actions brought by the federal government against “the sovereign.”

The district court was also not swayed by the Tribes’ argument that, because the Act treats the states and tribes as co-regulators, Congress did not intend to vest authority in the Bureau to regulate tribal entities in the absence of cooperation with tribal regulators. The district court emphasized that:

textually, the [Act] is not silent with respect to Indian tribes_The exclusion of statutes that are not silent with respect to Indian tribes is intended to avoid undermining the expressed intent of Congress. Congress does not express such intent by merely mentioning Indian tribes as sovereign regulators, while remaining silent on whether the unrelated provision at issue is also intended to regulate Indian tribes.
Put simply, there is no provision of the [Act] that expressly or impliedly suggests that the defined terms “persons” and “States” are mutually exclusive. Accordingly, the provision creating the Bureau’s authority to investigate “persons” is silent with respect to the tribes.

Finally, the district court referenced the lack of any convincing legislative history bearing on the issue.

Following the district court’s denying the Tribal Lending Entities’ petition to set aside the Bureau’s investigative demands, the Tribal Lending Entities filed a timely notice of appeal.

II. STANDARD OF REVIEW

We review de novo whether the Bureau plainly lacked jurisdiction to issue the investigative demands. See Nat’l Labor Relations Bd. v. Chapa De Indian Health Program Inc., 316 F.3d 995, 997-98 (9th Cir. 2003).

III. DISCUSSION

A. The Bureau’s Jurisdiction to Investigate the Tribal Lending Entities’ Activities

Consistent with their argument before the district court, the Tribal Lending Entities contend on appeal that the Act does not confer authority upon the Bureau to investigate tribal entities. The Tribal Lending Entities repeat their assertion that the Act limits the Bureau’s authority to “persons,” which excludes sovereign entities. The Tribal Lending Entities add that Congress did not intend for the definition of “person” to encompass tribal entities because the Act explicitly includes tribes in the definition of “State” in 12 U.S.C. § 5481(27).

Before we address the merits of the Tribal Lending Entities’ arguments, a delineation of the Act’s statutory framework is in order. Pursuant to the expressed statutory purpose of the Act:

The Bureau shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.

12 U.S.C. § 5511(a). The “primary functions” of the Bureau include “collecting, investigating, and responding to consumer complaints,” and, to accomplish its objectives, “[t]he Bureau is authorized to exercise its authorities under Federal consumer financial law” to ensure that “consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination.” 12 U.S.C. § 5511(b), (c)(2). In terms of its enforcement authority,

Whenever the Bureau has reason to believe that any person may be in possession, custody, or control of any documentary material or tangible things, or may have any information, relevant to a violation, the Bureau may, before the institution of any proceedings under the Federal consumer financial law, issue in writing, and cause to be served upon such person, a civil investigative demand requiring such person to—(A) produce such documentary material for inspection and copying or reproduction in the form or medium requested by the Bureau; (B) submit such tangible things; (C) file written reports or answers to questions; (D) give oral testimony concerning documentary material, tangible things, or other information; or (E) furnish any combination of such material, answers, or testimony.

12 U.S.C. § 5562(c) (emphasis added). The Act defines “person” as “an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative, organization, or other entity.” 12 U.S.C. § 5481(19).

The Act also addresses the role “States” may play in supporting the goals of the Act. The Act defines “State” to include “any State, territory, or possession of the United States” including “any federally recognized Indian tribe, as defined by the Secretary of the Interior ...12 U.S.C. § 5481(27), and compels the Board to “coordinate with ... State regulators, as appropriate, to promote consistent regulatory treatment of consumer financial and investment products and services.” 12 U.S.C. § 5495. Under the Act, States are also authorized to “bring a civil action” to enforce provisions of the Act. The only entities excluded from the enforcement authority of the state are national banks and federal savings associations. 12 U.S.C. § 5552(a)(2)(A). No entities are expressly excluded from the enforcement authority of the Bureau. See 12 U.S.C. § 5481(6) (defining “covered person” without exception).

Because the Act by its terms- applies broadly and without exception, it is properly characterized as a law of general applicability. See Federal Power Commission v. Tuscarora Indian Nation, 362 U.S. 99, 80 S.Ct. 543, 553, 4 L.Ed.2d 584 (1960). We have consistently held that similar laws of general applicability govern tribal entities unless Congress has explicitly provided otherwise. Most notably, in Coeur d’Alene, we considered whether the Occupational Safety and Health Act (OSHA) applied to tribal entities. See 751 F.2d at 1114-15. We observed that OSHA’s definition of “employer” as an “organized group of persons engaged in a business affecting commerce who has employees” encompassed a tribal farm operating as a commercial enterprise. Id. at 1115 n.l (alteration omitted). We recognized that “Congress expressly excluded only the United States or any State or any political subdivision of a State from the broad definition of employer in the Act.” Id. (citation and internal quotation marks omitted). We explained that:

No one doubts that the Tribe has the inherent sovereign right to regulate the health and safety of workers in tribal enterprises. But neither is there any doubt that Congress has the power to modify or extinguish that right. Unlike the states, Indian tribes possess only a limited sovereignty that is subject to complete defeasance....

Id. at 1115 (citations omitted). We emphasized that “[m]any of our decisions have upheld the application of general federal laws to Indian tribes; not one has held that an otherwise applicable statute should be interpreted to exclude Indians_” Id. (citations omitted). As a result, we eschewed “the proposition that Indian tribes are subject only to those laws of the United States expressly made applicable to them.... ” Id. at 1116. At the same time, we recognized the following three exceptions to enforcement of generally applicable laws against tribes:

A federal statute of general applicability that is silent on the issue of applicability to Indian tribes will not apply to them if: (1) the law touches exclusive rights of self-governance in purely intramural matters; (2) the application of the law to the tribe would abrogate rights guaranteed by Indian treaties; or (3) there is proof by legislative history or some other means that Congress intended the Taw not to apply to Indians on their reservations.

Id. (citation, alterations, and internal quotation marks omitted). “In any of these three situations, Congress must expressly apply a statute to Indians before we will hold that it reaches them.” Id. (emphasis in the original).

We have consistently applied Co-eur d’Alene and its progeny to hold that generally applicable laws may be enforced against tribal enterprises. See Solis v. Matheson, 563 F.3d 425, 432 (9th Cir. 2009) (observing that “[ojther cases have similarly affirmed the application of OSHA, the Employee Retirement Income Security Act (ERISA), and the Americans with Disabilities Act (ADA) to tribal businesses”) (citations omitted). In keeping with our precedent, we similarly conclude that the Consumer Financial Protection Act, a law of general applicability, applies to tribal businesses like the Tribal Lending Entities involved in this appeal. See Chapa De, 316 F.3d at 1002.

Relying on Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000), the Tribal Lending Entities contend that our precedent departs from the United States Supreme Court’s holding that the statutory term “person” generally excludes sovereign entities, such as states and Native American tribes. In Stevens, the Supreme Court considered “whether a private individual may bring suit in federal court on behalf of the United States against a State (or state agency) under the False Claims Act.” Id. at 768, 120 S.Ct. 1858 (citation omitted). The Supreme Court reasoned that, in considering application of the False Claims Act to “any person,” the Court was required to take into account its “longstanding interpretive presumption that ‘person’ does not include the sovereign.” Id. at 780, 120 S.Ct. 1858 (citations omitted). The Supreme Court added that “[t]he presumption is particularly applicable where it is claimed that Congress has subjected the States to liability to which they had not been subject before.” Id. at 780-81, 120 S.Ct. 1858 (citations and internal quotation marks omitted). However, “[t]he presumption is, of course, not a hard and fast rule of exclusion, but ... may be disregarded only upon some affirmative showing of statutory intent to the contrary.” Id. at 781, 120 S.Ct. 1858 (citations and internal quotation marks omitted). The Supreme Court observed that, in “another section of the [False Claims Act] ... which enables the Attorney General to issue civil investigative demands,” the statute includes a provision “expressly defining ‘person’ for purposes of this section to include States ...” Id. at 783-84, 120 S.Ct. 1858 (citations and footnote reference omitted). But, the False Claims Act also imposes punitive damages “which would be inconsistent with state qui tarn liability in light of the presumption against imposition of punitive damages on governmental entities....” Id. at 784-85, 120 S.Ct. 1858 (citation and footnote reference omitted); see also Will v. Michigan Department of State Police, 491 U.S. 58, 67-68, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989) (holding that a state is not a “person” under 42 U.S.C. § 1983 because “[i]t is an established principle of jurisprudence that the sovereign cannot be sued in its own courts without its consent....”) (citation and internal quotation marks omitted).

At first blush, the Tribal Lending Entities’ reliance on Stevens, a decision predating our precedent focusing on the general applicability of the law in question, has surface appeal. However, the “equivalence” provision in the Consumer Financial Protection Act only provides definitional guidance for later references in the statute to the term “State.” This “equivalence” provision simply clarifies that the term “State” includes “any federally recognized Indian tribe, as defined by the Secretary of the Interior ...” 12 U.S.C. § 5481(27). It does not expressly provide that tribes are excluded from the definition of “person” or from the Bureau’s enforcement authority under the Act. In sum, the Tribal Lending Entities’ interpretation of the equivalence provision reads far too much into a simple definition. We are not persuaded at this stage of the litigation that we should intervene to nullify the Bureau’s issuance of investigative demands specifically provided for in the Act on the basis that jurisdiction is “plainly lacking.” Chapa De, 316 F.3d at 1002.

Furthermore, none of the three Coeur d’Alene exceptions to the enforcement of generally applicable laws against Indian tribes apply in this case. See 751 F.2d at 1116. It is undisputed that the Tribal Lending Entities are engaged in the business activity of small-dollar lending over the Internet, reaching customers who are not members of the Tribes, or indeed, have any relation to the Tribes other than as debtors to the Tribal Lending Entities. Thus, the first Coeur d’Alene exception— whether “the law touches exclusive rights of self-governance in purely intramural matters”—does not apply. Coeur d’Alene, 751 F.2d at 1116 (internal quotation marks omitted). Unlike the activities of the Housing Authority at issue in EEOC v. Karuk Tribe Housing Authority, 260 F.3d 1071 (9th Cir. 2001), the small-dollar lending activities in this case do not touch upon purely intramural matters involving self-governance. The Tribal Lending Entities do not argue that the second exception— covering situations in which the application of a statute would abrogate Indian treaty rights—applies in this case, so we do not address it here.

With respect to the third exception, the Tribal Lending Entities’ assertion that the Act’s legislative history supports a finding of lack of jurisdiction is unpersuasive. In considering the Coeur d’Alene exception concerning legislative history, we have explained that for the exception to apply, “there must be proof that Congress intended the statute not to apply to Indians on their reservations.” Chapa De, 316 F.3d at 1000-01 (citation, alteration, and internal quotation marks omitted). We rejected the tribe’s reliance on the legislative history of the National Labor Relations Act (NLRA) because that history failed to reflect that “Congress intended the NLRA not to apply to Indian tribes” or to the particular activities of the tribal entity at issue. Id. at 1001. Ultimately, we determined that despite the existence of one out-of-circuit case offering some support for the tribe’s position, the tribe nevertheless failed to demonstrate that jurisdiction was “plainly lacking.” Id. at 1002 (emphasis in the original).

Here, the Tribal Lending Entities maintain that Congress’ decision to include tribes within the definition of “State” and not the definition of “person” reflects an intent to exclude tribes from the Bureau’s enforcement purview. See H.R. Rep. No. 111-370, 2009 WL 4724255. However, these attenuated references do not demonstrate that jurisdiction is “plainly lacking” or that “Congress intended the [Act] not to apply to Indian tribes, or to [the tribes’] activities.” Chapa De, 316 F.3d at 1001-02. At best, the referenced report reflects only the addition of tribes to the definition of “State,” without any expressed intent to cloak the tribes with immunity from enforcement of the Act as a generally applicable congressional enactment. See H.R. Rep. No. 111-370, 2009 WL 4724255, at *36. In addition, the lack of immunity is particularly evident in this case because “Indian tribes do not ... enjoy sovereign immunity from suits brought by the federal government.” Karuk Tribe, 260 F.3d at 1075 (citation omitted).

The Tribal Lending Entities also failed to persuasively establish that Congress intended to exclude tribes from enforcement of the Act by virtue of the promotion of cooperation between the States and the federal government. The statutes relied upon by the Tribal Lending Entities do not reflect mutual exclusivity of the Bureau’s investigative authority and the States’ potential co-regulator status. For example, 12 U.S.C. § 5495 instructs the Bureau to coordinate with “State regulators, as appropriate ...” (emphasis added). Similarly, in support of the Act’s promotion of “consistent regulatory treatment,” id., 12 U.S.C. § 5512(c)(6)(C)(i) provides that “a State regulator ... having jurisdiction over a covered person ... shall have access to any report of examination made by the Bureau with respect to such person ...” These coordination provisions of the Act in no way restrict the Bureau’s jurisdiction to investigate covered entities simply because the States have a measure of co-regulatory status. Indeed, the Act limits the extent of the States’ co-regulatory authority. By way of example, 12 U.S.C. § 5552(b)(1)(A) forbids a State from initiating independent court proceedings against a covered entity. Instead, the State must consult with the Bureau and “timely provide a copy of the complete complaint to be filed and written notice describing such action or proceeding to the Bureau ...” Upon receiving the requisite notice, the Bureau may “intervene in the action as a party,” “remove the action to the appropriate United States district court,” and “be heard on all matters arising in the action ...” 12 U.S.C. § 5552(b)(2)(B). Moreover, with absolutely no mention of States or tribes, the Act limits investigative powers, such as issuance of investigative demands and subpoenas, to the Bureau. See 12 U.S.C. § 5562(b)-(c).“

The Tribal Lending Entities also argue that limitations upon the Bureau’s enforcement authority vis-a-vis the States under 12 U.S.C. § 5517 demonstrate that Congress did not intend to include States or tribal entities within the definition of “person.” However, § 5517 does not bolster the Tribal Lending Entities’ argument, as it merely reflects that when Congress intended to limit the Bureau’s authority, it did so explicitly. With great specificity, 12 U.S.C. § 5517 delineates that the Bureau lacks authority over merchants and retailers of nonfinancial services and goods, see id., § 5517(a); real estate brokerage activities, see id., § 5517(b); modular home retailers and manufactured home retailers, see id., § 5517(c); tax preparers and accountants, see id., § 5517(d); the practice of law, see id., § 5517(e); and persons regulated by state insurance and securities commissions. See id., § 5517(f), (h). Section 5517 also excludes persons regulated by the Commodities Futures Trading Commission and the Farm Credit Administration. See id., § 5517(j)-(k). Notably absent from these extensive exclusions is any mention of tribal corporate entities. We are persuaded by these provisions that, had Congress intended to exclude tribal entities from the Bureau’s enforcement purview, it would have done so explicitly as it did with other entities.

Davis v. Pringle, 268 U.S. 315, 45 S.Ct. 549, 69 L.Ed. 974 (1925) does not compel a contrary conclusion. In that case, the Supreme Court rejected the United States’ priority claim under the Bankruptcy Act then in effect. See id. at 318-19, 45 S.Ct. 549. The Supreme Court stated that the United States was not entitled to priority for its bankruptcy claim because Congress could not have “intended to smuggle in a general preference by muffled words at the end” of a statutory provision. Id. at 318, 45 S.Ct. 549. The Supreme Court noted the “conspicuous mention of the United States ... at the beginning of the section and the grant of a limited priority!!.]” Id. The Supreme Court also observed that “[e]lsewhere in cases of possible doubt when the Act means the United States it says the United States.... ” Id. The Supreme Court did not confront or address the exclusion by implication argument raised by the Tribal Lending Entities in this appeal. Rather, in Davis, the Supreme Court construed a statute that specifically mentioned the United States relative to the substantive provisions of the bankruptcy priority framework. See id. That circumstance is vastly different from relying on the Act’s definitional provisions to cloak tribal corporate entities with sovereign immunity merely because tribes are mentioned in the Act’s definition of “States.” In any event, the general statutory interpretation approach expounded in Davis does not in any way undermine our binding precedent that laws of general applicability may be enforced against the tribes unless Congress expressly provides otherwise. See Coeur d’Alene, 751 F.2d at 1115-16.

Finally, relying on County of Yakima v. Confederated Tribes and Bands of Yakima Indian Nation, 502 U.S. 251, 269, 112 S.Ct. 683, 116 L.Ed.2d 687 (1992) and Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 767-68, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985), the Tribal Lending Entities assert that any ambiguity in the Act must be resolved in their favor. The Supreme Court has recognized that, when confronted with two plausible statutory constructions, “our choice between them must be dictated by a principle deeply rooted in this Court’s Indian jurisprudence: Statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.” County of Yakima, 502 U.S. at 269, 112 S.Ct. 683 (citation and alteration omitted). Nevertheless, we have repudiated this presumption in the face of our governing precedent concluding that to apply the presumption to laws of general applicability “would be effectively to overrule, [Coeur d’Alene], which, of course, this panel cannot do.” Chapa De, 316 F.3d at 999 (citation omitted).

At this stage of the proceedings, we conclude that the district court properly held that the Bureau does not plainly lack jurisdiction to issue investigative demands to the tribal corporate entities under the Act. See id. at 1002. Although the Tribal Lending Entities make some appealing arguments, none of the arguments suffices to breach or evade the barrier to their success provided by the Coeur d’Alene revetment.

TV. CONCLUSION

We have consistently held in our post-Stevens precedent that generally applicable laws apply to Native American tribes unless Congress expressly provides otherwise. In the Consumer Financial Protection Act, a generally applicable law, Congress did not expressly exclude tribes from the Bureau’s enforcement authority. Although the Act defines “State” to include Native American tribes, with States occupying limited co-regulatory roles, this wording falls far short of demonstrating that the Bureau plainly lacks jurisdiction to issue the investigative demands challenged in this case, or that Congress intended to exclude Native American tribes from the Act’s enforcement provisions. Neither have the Tribes offered any legislative history compelling a contrary conclusion regarding congressional intent. At this stage of the proceedings, we affirm the district court’s order enforcing the investigative demands against the Tribal Lending Entities.

AFFIRMED.

      . The Act is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. See Title X, Pub. L. No. 111-203, July 21, 2010, 124 Stat 1376.

      . Although the Tribal Lending Entities maintain that the "plainly lacking” jurisdictional standard is inapplicable, we have consistently applied this standard in assessing an agency's jurisdiction at the investigative stage. See EEOC v. Fed. Express Carp., 558 F.3d 842, 848 (9th Cir. 2009), as amended ("Regarding whether Congress has granted the authority to investigate, we have emphasized the strictly limited role of the district court when an agency subpoena is attacked for lack of jurisdiction. As long as the evidence is relevant, material and there is some plausible ground for jurisdiction, or, to phrase it another way, unless jurisdiction is plainly lacking, the court should enforce the subpoena") (citations and internal quotation marks omitted) (emphasis added); see also Gen. Atomics v. U.S. Nuclear Regulatory Comm’n, 75 F.3d 536, 541 (9th Cir. 1996); Marshall v. Burlington N., Inc,, 595 F.2d 511, 513 (9th Cir. 1979), as amended.

      . The Bureau maintains in the alternative that the investigative demands are enforceable because it is unclear if the Tribal Lending Entities are actually arms of the tribe. We conclude that, at this preliminary stage, the record is sufficient to demonstrate that the Tribes have an interest in challenging the investigative demands based on their creation and operation of the Tribal Lending Entities. See Cook v. AVI Casino, Enter. Inc., 548 F.3d 718, 726 (9th Cir. 2008) (concluding that a business was an arm of the tribe because it was created "pursuant to a tribal ordinance ... and the tribal corporation is wholly owned and managed by the Tribe”).

      . In Karuk Tube Housing Authority, 260 F.3d at 1073-74, we applied the Coeur d’Alene framework to the Karuk Tribe Housing Authority, a governmental arm of the Karuk Tribe. A member of the Karuk Tribe filed a complaint with the EEOC, asserting that his employment with the Housing Authority was terminated in violation of the Age Discrimination in Employment Act. See id. at 1074. The EEOC opened an investigation and issued an administrative subpoena seeking employment records from the Karuk Tribe. The Tribe refused to comply, disputing the EEOC's jurisdiction over Indian tribes. See id. at 1074-76. The EEOC petitioned for enforcement of the subpoena, and the district court granted the petition. See id. at 1075. On appeal, we applied the Coeur d’Alene framework, focusing on the first exception in Coeur d’Alene— whether "the law touches exclusive rights of self-governance in purely intramural matters.” Id. at 1079 (citation omitted). We noted that the Housing Authority functioned as an arm of the Karuk Tribe and provided a governmental service—ensuring adequate housing for members of the Karuk Tribe, See id, at 1080. Moreover, the dispute at issue was "purely intramural,” because it was between a member of the Karuk Tribe, and the tribe itself. Id. at 1081. We therefore reversed the district court's decision enforcing the subpoena. See id. at 1083. We considered it relevant that the Housing Authority "is not simply a business entity that happens to be run by a tribe or its members” and that the dispute "d[id] not concern non-Karuks or non-Indians as employers, employees, customers, or anything else." Id. at 1080-81.


source: Caselaw Access Project

author:
FERNANDEZ, Circuit Judge:
      RAWLINSON, Circuit Judge,

license: Public Domain

text:
    IN RE Zafar David KHAN, Debtor, Zafar David Khan, Appellant, v. Kenneth Barton; Thomas Burke; Nancy K. Curry, Chapter 13 Trustee, Appellees. In re Terrance Alexander Tomkow, Debtor, Terrance Alexander Tomkow, Appellant, v. Kenneth Barton, Appellee. In re Terrance Alexander Tomkow, Debtor, Terrance Alexander Tomkow, Appellant, v. Kenneth Barton, Appellee. In re Zafar David Khan, Debtor, Zafar David Khan, Appellant, v. Kenneth Barton, Appellee. In re Terrance Alexander Tomkow, Debtor, Terrance Alexander Tomkow, Appellant, v. Kenneth Barton, Appellee. In re Zafar David Khan, Debtor, Zafar David Khan, Appellant, v. Kenneth Barton, Appellee.
    No. 15-60002, No. 15-60003, No. 15-60004, No. 15-60005, No. 15-60006, No. 15-60007
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted November 9, 2016 Pasadena, California
    Filed January 23, 2017

      Lewis R. Landau (argued), Calabasas, California, for Appellants.
    Patrick C. McGarrigle (argued) and Michael J. Kenney, McGarrigle Kenney & Zampiello APC, Chatsworth, California, for Appellees.
    Before: DIARMUID F. O’SCANNLAIN, FERDINAND F. FERNANDEZ, and JOHNNIE B. RAWLINSON, Circuit Judges.
   Partial Concurrence and Partial Dissent by Judge RAWLINSON

OPINION

FERNANDEZ, Circuit Judge:

Zafar David Khan and Terrance Alexander Tomkow (collectively “Debtors”) appeal the judgment of the Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”), which affirmed the decision of the bankruptcy court that the claim of Kenneth Barton was not subordinated pursuant to the provisions of 11 U.S.C. § 510(b), and converted the Debtors’ Chapter 13 bankruptcy proceedings to Chapter 7 proceedings. We affirm the decision of the bankruptcy court.

BACKGROUND

In 2013, Barton obtained a Superior Court of the State of California (“Superior Court”) judgment against the Debtors and RPost International, Ltd. (“RIL”) for conversion, fraud, breach of fiduciary duty, and violation of California Business and Professions Code Section 17200, based upon Barton’s allegations that the Debtors fraudulently converted his 6,016,500 shares of common stock in RIL.

The Superior Court found that after Barton and the Debtors founded RIL, they each received an initial distribution of RIL stock in 2001. The consideration for the stock “was stated to be unreimbursed expenses and compensation.”

After suffering a stroke, Barton took leave from RIL. Thereafter, the Debtors cancelled Barton’s shares of stock and returned them to the RIL treasury in June or July of 2009. The Superior Court held that the Debtors fraudulently converted Barton’s stock in 2009 and determined that they had forged corporate resolutions in an attempt to support their fraud and either “misplaced or destroyed” the shareholder registry, which was “the best evidence of the issuance of [the] stock.” The Superior Court then ruled that Barton should recover damages and that his 6,016,500 shares should be reinstated. After further hearings, the Superior Court determined Barton should, instead, receive the value of the converted stock. Therefore, it fixed damages for the conversion at $3,850,560, based upon the value of the RIL stock as of June 30, 2009, the date of conversion, which was $0.64 per share. After adjustments, a judgment including $3,840,060 for the converted shares was entered in Barton’s favor.

A few days before the Superior Court intended to determine the value of the RIL stock for the award of compensatory and punitive damages, each of the Debtors had separately filed a Chapter 13 petition for bankruptcy. At the § 341 (creditors meeting) hearing, the Debtors did not give meaningful information regarding their companies’ business transactions, stock valuation, and settlements. And, in their Chapter 13 Schedules, they each reported their RIL stock as having a $0 value and listed Barton’s conversion judgment as having a value of only $100,000 with a “[remainder] unliquidated; pending [the Superior Court] proceedings.” Neither Debtor filed amended schedules or an amended Plan that included the full value of the judgment after it was rendered.

Barton filed a proof of claim in each case and the Debtors objected. They argued that the claims should be mandatorily subordinated under § 510(b), which, they said, would render the claim unenforceable and subject to disallowance under § 502(b)(1). The Debtors also filed separate actions for mandatory subordination and disallowance on the same grounds as those alleged in their objections. The bankruptcy court dismissed the separate actions after the parties litigated the claim objections to resolution because the same result would apply to those actions.

Barton had filed separate motions to convert each case to Chapter 7, arguing that the Debtors acted in bad faith, which was cause to convert under § 1307(c).

After a hearing, the bankruptcy court ruled on the Debtors’ claim objections based on subordination and disallowance and on Barton’s motions to convert. It held that Barton’s claims were not subject to subordination because they were not “for damages arising from the purchase or sale of ... a security.” § 510(b). Rather, the bankruptcy court determined that Barton’s claims were based upon the Superior Court judgment for fraud and conversion. The bankruptcy court did not specifically address the disallowance issue, but did dismiss the Debtors’ separate objections related to that issue. Finally, the court granted Barton’s motions to convert. As to each of the Debtors, it found that “the timing of the filing was intended to defeat the state court action ... [because] it was likely that there was going to be an award of damages that would have put these Debtors outside a Chapter 13.” It also found that the Debtors manipulated the bankruptcy process and concealed assets. The Debtors then appealed to the BAP.

The BAP affirmed the bankruptcy court’s subordination determination, but on different grounds. It determined that § 510(b) did not “apply in an individual debtor case.” Khan I, 523 B.R. at 183. The BAP also affirmed the bankruptcy court’s refusal to disallow Barton’s claims because they were not subject to subordination and, even if they were, “there [was] no basis for claims disallowance under § 502(b)(1).” Id. at 182. Lastly, the BAP held that the bankruptcy court did not abuse its discretion when it found bad faith and converted the cases from Chapter 13 proceedings to Chapter 7 proceedings. Id. at 185-87. These appeals followed.

JURISDICTION AND STANDARDS OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1).

“We review decisions of the BAP de novo.” Aalfs v. Wirum (In re Straightline Invs., Inc.), 525 F.3d 870, 876 (9th Cir. 2008). “This court independently reviews the bankruptcy court’s rulings on appeal from the BAP.” Miller v. Cardinale (In re DeVille), 361 F.3d 539, 547 (9th Cir. 2004). ‘Because we are in as good a position as the BAP to review bankruptcy court rulings, we independently examine the bankruptcy court’s decision, reviewing the bankruptcy court’s interpretation of the Bankruptcy Code de novo and its factual findings for clear error.’ ” Id. “[We] accept findings of fact made by the bankruptcy court unless [those] findings leave the definite and firm conviction that a mistake has been committed by the bankruptcy judge.” Aalfs, 525 F.3d at 876 (internal quotation marks omitted).

“We review for abuse of discretion the bankruptcy court’s ultimate decisions ... to convert [the cases] from Chapter 13 to Chapter 7.” Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 771 (9th Cir. 2008). A court abuses its discretion when it makes “a factual finding that was illogical, implausible, or without support in inferences that may be drawn from the facts in the record.” United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc). We “review the bankruptcy court’s finding of bad faith for clear error.” Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1222-23 (9th Cir. 1999).

DISCUSSION

We will first consider the Debtors’ assertion that the bankruptcy court and the BAP erred when they determined that § 510(b) did not apply. Thereafter, we will consider their argument that those courts should not have determined that the conversion of their proceedings from Chapter 13 to Chapter 7 was appropriate.

I. Subordination of Barton’s Claims

Section 510(b) requires that claims for damages “arising from the purchase or sale” of a “security of the debtor or of an affiliate of the debtor” shall be subordinated to certain other claims or interests. As already noted, the bankruptcy court determined that the section did not apply because Barton’s claims did not arise from the purchase or sale of a security. The BAP affirmed the bankruptcy court on the basis that the section did not apply because the Debtors were individuals. See Khan I, 523 B.R. at 183-84. However, after the BAP ruled, we held that § 510(b) does apply when debtors are individuals and in doing so we specifically disagreed with Khan I. See Liquidating Tr. Comm. of the Del Biaggio Liquidating Tr. v. Freeman (In re Del Biaggio), 834 F.3d 1003, 1010 (9th Cir. 2016). That effectively overturned the basis of the BAP’s decision, and we now make that explicit by rejecting the BAP’s contrary decision.

Nevertheless, we affirm the bankruptcy court’s decision on the basis stated by that court, that is, we agree that Barton’s claims did not arise out of a purchase or sale of securities. No doubt Barton did purchase securities in RIL in 2001 shortly after RIL was founded. Also, we assume that RIL is an affiliate of the Debtors. However, Barton’s claims against the Debtors do not arise from his purchase of RIL securities. Rather, they are based upon the judgment entered against the Debtors by the Superior Court on account of their actions many years later (2009) when they fraudulently converted Barton’s stock.

Of course, we have given a broad interpretation to the “arising from” language of the statute. For example, in Del Biaggio, we found a sufficient nexus to a purchase and sale where the claimant (Freeman) had been fraudulently induced by the individual debtor to invest in an affiliate of the debtor. We pointed out that “Freeman’s claim is really no claim at all but for his investment in [the affiliate].” Del Biaggio, 834 F.3d at 1009. In fact, Freeman’s claim was not for misrepresentations as such, but for the investment he made in “detrimental reliance on those misrepresentations.” Id. And what he sought “corresponded] exactly to the amount he invested.” Id.

The case at hand is quite different from Del Biaggio because here what Barton seeks has nothing to do with his investment, other than the fact that he had purchased the now-purloined securities many years earlier. And the damages he sought were not remotely related to the purchase; they were simply a judgment measured by the value of the converted property when the conversion took place.

We recognize that in other cases, where no actual purchase or sale had been consummated, we found that claims, nevertheless, arose from a purchase or sale transaction. See, e.g., Pensco Tr. Co. v. Tristar Esperanza Props., LLC (In re Tristar Esperanza Props., LLC), 782 F.3d 492, 496-97 (9th Cir. 2015) (the claim arose out of a failed agreement by the debtor to purchase claimant’s stock); Am. Broad. Sys., Inc. v. Nugent (In re Betacom of Phoenix, Inc.), 240 F.3d 823, 829-31 (9th Cir. 2001) (a merger fell through so no ultimate sale took place, but claim still arose from a sales transaction). While those cases do bespeak a broad interpretation of “arising from,” there is a limit to the reach of § 510(b), which stops short of encompassing every transaction that touches on or involves stock in a corporation. That is well explicated in Racusin v. Am. Wagering, Inc. (In re Am. Wagering, Inc.), 493 F.3d 1067 (9th Cir. 2007).

In Racusin, the claimant was promised that due to past services he would be paid, in part, with common stock of the company upon completion of a common offering or initial public offering. Id. at 1070. When the contract was breached, he sued the company and others for damages. Id. The district court determined that Racusin should receive shares of stock, and he appealed. Id. He did so on the basis that he did not want stock; he wanted damages. We agreed with him. Id. Thus, we “remanded the case to the district court to calculate the monetary value of the .,. shares.” Id. The amount was determined, the debtors quickly filed for bankruptcy, Racusin filed a claim, and the debtors asserted that § 510(b) required subordination. Id. We disagreed. Id. at 1071. We pointed out that Racusin did not seek to be, and was not, a shareholder. Rather, the value of the stock was just the measuring stick for determining the “compensation owed for services he performed pursuant to a contract that the debtors breached.” Id. at 1073. Thus, he was a true creditor rather than an equity investor in a “now-

bankrupt corporation.” Id.; see also In re Angeles Corp., 177 B.R. 920, 926 (Bankr.C.D. Cal. 1995) (debtor had committed bad acts after claimant’s purchase of securities was complete, and claims did not arise from the purchase), aff'd, 199 B.R. 220 (B.A.P. 9th Cir. 1996).

Here, Barton sought and obtained damages. Even though his damage award for conversion was based on the value of the securities at the time of conversion, his action did not arise out of the purchase of the securities and the risks that the purchase might entail. It arose out of the Debtors’ conversion of the securities many years later. The value of the securities at the date of conversion was the measuring stick.

Moreover, the oft-quoted rationales for the § 510(b) subordination requirement do not apply here. Primarily, the separate wrongdoing of the Debtors had no connection to the purchase or sale of Barton’s shares of stock in RIL; nor did the judgments against the Debtors that form the basis for Barton’s bankruptcy claims arise from a purchase or sale. In any event, the risk that those who purchase or sell stock (investors in a corporation) assume and expect to take is not that the shares themselves will later be stolen outright by other individuals. Nor, to the extent it applies at all, does the equity cushion rationale affect our decision here. Even if the Debtors’ creditors did, somehow, rely upon the equity contributed by RIL’s investors, that does not touch upon the separate torts committed by the Debtors in this case.

In short, the bankruptcy court did not err when it refused to subordinate Barton’s claims pursuant to § 510(b).

II. Conversion of Chapter 18 Proceedings to Chapter 7 Proceedings

The Debtors also assert that the bankruptcy court clearly erred when it found bad faith, and abused its discretion when it converted their Chapter 13 proceedings to Chapter 7 proceedings. We disagree. The bankruptcy court was required to and did consider “the totality of the circumstances.” Eisen v. Curry (In re Eisen), 14 F.3d 469, 470 (9th Cir. 1994) (per curiam) (internal quotation marks omitted). However, the Debtors point to the factors we outlined in Leavitt, 171 F.3d at 1224. Those are:

(1) whether the debtor misrepresented facts in his petition or plan, unfairly manipulated the Bankruptcy Code, or otherwise filed his Chapter 13 petition or plan in an inequitable manner;
(2) the debtor’s history of filings and dismissals;
(3) whether the debtor only intended to defeat state court litigation; and
(4) whether egregious behavior is present.

Id. (citations, internal quotation marks, and brackets omitted). The bankruptcy court was well aware of those factors, and declared that the second factor did not cut against the Debtors. It did, however, find manipulation of the bankruptcy proceedings (first factor) and interference with the state proceedings (third factor). Moreover, although it did not specifically mention the egregiousness of the Debtors’ behavior, it plainly thought that the behavior was quite troubling at the very least (fourth factor). The BAP agreed with the bankruptcy court’s analysis. See Khan I, 523 B.R. at 185-87.

The Debtors attack those determinations and concentrate a good deal of their firepower on Leavitt’s third factor. Leavitt, 171 F.3d at 1224; see also Chinichian v. Campolongo (In re Chinichian), 784 F.2d 1440, 1445 (9th Cir. 1986). They focus on the word “only” and take that to mean that defeating state court litigation had to be the sole motive, but we have not so treated it. For example, in Leavitt itself we decided that avoidance was merely the “primary” motive. Leavitt, 171 F.3d at 1225; see also Eisen, 14 F.3d at 470 (if only intent is to defeat state com't litigation, that is bad faith); Chinichian, 784 F.2d at 1445 (multitude of factors showed bad faith, including the real purpose of the filing). The Debtors do not appear to recognize that the factors are simply factors to consider and that not every one of them must be met. That rather blinds them to the overarching requirement that what matters is “the ‘totality of the circumstances.’ ” Eisen, 14 F.3d at 470; see also Ho v. Dowell (In re Ho), 274 B.R. 867, 877 (B.A.P. 9th Cir. 2002) (a court must decide “ ‘in the light of all militating factors’ ”). The BAP recognized that. See Khan I, 523 B.R. at 185. As the BAP put it: “Even if a debtor presents more than one purpose for filing, the third Leavitt factor does not fail to support cause if the other purpose also reflects bad faith. And, once again, the third factor is considered in a totality of the circumstances context.” Id. at 186.

We have carefully reviewed the record together with decisions of the bankruptcy court and the BAP, and are satisfied that the evidence fully supports the determinations that there was bad faith and that conversion was appropriate. The highly suspect timing of the Debtors’ Chapter 13 petitions, their failure and refusal to provide financial information critical to the determination of the value of their assets, and their further failure to provide information regarding the movement of funds among their various business entities all combined to justify the conversion decision.

Thus, the bankruptcy court did not clearly err or abuse its discretion.

CONCLUSION

This case presents a saga of picaresque behavior. The Debtors converted Barton’s stock and were required by the Superior Court to pay substantial damages as a result. In the bankruptcy proceedings, their timing was at least suspicious, and they continued their inappropriate behavior by refusing to be forthcoming about the nature and activities of the business entities they controlled. On this record, the bankruptcy court properly determined that Barton’s claims should not be subordinated and that the Chapter 13 proceedings should be converted to Chapter 7 proceedings. We, therefore, affirm the bankruptcy court.

AFFIRMED. Barton shall recover his costs on appeal.

RAWLINSON, Circuit Judge,

concurring in part and dissenting in part:

I agree with the majority that the bankruptcy court acted within its discretion when it converted the debtors’ bankruptcy proceedings from Chapter 13 to Chapter 7. I also join the majority’s conclusion that 11 U.S.C. § 510(b) applies to Debtors who are individuals. However, I dissent from the conclusion of the majority that § 510(b) is inapplicable because the claims of Kenneth Barton did not arise from a purchase or sale of securities. In my view, the opposite conclusion is inescapable-that Barton’s claim did arise from the purchase or sale of a security under § 510(b).

It is undisputed that Barton purchased securities in RPost International, Ltd. It is also undisputed that Debtors impermissi-bly converted Barton’s stock. However, that conversion did not erase the fact that Barton’s subsequent claims against Debtors arose from his previous purchase of securities.

The majority acknowledges that we have consistently interpreted the phrase “arising from” broadly. Majority Opinion, p. 1064. We most recently reiterated that interpretation in Del Biaggio Liquidating Trust v. Freeman (In re Del Biaggio), 834 F.3d 1003, 1009 (9th Cir. 2016) (“[W]e observe that § 510(b)’s arising from language reaches broadly to subordinate damage claims involving qualifying securities.”) (citation and internal quotation marks omitted). We went on to explicate that the “arising from” phraseology is “broader than causation” and is “ordinarily understood to mean ‘originating from,’ ‘having its origin in’ ‘growing out of,’ or ‘flowing from’ or in short, ‘incident to or having connection with.’ ” Id. (citation omitted).

We rejected the creditor’s contention that his claims did not arise from the purchase or sale of securities because the

claimant was indisputably an investor in the debtor’s affiliate. See id. at 1008-09. Rather, we continued to adhere to “one of the general principles of corporate and bankruptcy law” embodied within the text of § 510(b): “that creditors are entitled to be paid ahead of shareholders in the distribution of corporate assets.” Id. at 1008 (quoting Racusin v. American Wagering Inc. (In re American Wagering), 493 F.3d 1067, 1071 (9th Cir. 2007)).

In Del Biaggio, we cited our precedent concluding that a claimant was a shareholder even though the debtor’s defalcation “converted the claimant’s interest from an equity interest to a debt interest before the bankruptcy filing.” Id. at 1009 (quoting Pensco Trust Co. v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza Properties, LLC), 782 F.3d 492, 497-98 (9th Cir. 2015)).

We also referenced American Broadcasting Sys. v. Nugent (In re Betacom of Phoenix, Inc.), 240 F.3d 823, 830 (9th Cir. 2001), as an example of our broad interpretation of § 510(b). See id. We explained that we applied § 510(b) to a damages claim predicated on a “purported breach of contract in a merger agreement” because the claim was “one ‘surrounding’ the sale or purchase of a security of the debtor.” Id. (quoting In re Betacom, 240 F.3d at 829).

In addition, we noted that our broad interpretation of the “arising from” language of § 510(b) is consistent with the interpretations advanced by our sister circuits. See id. (referencing Templeton v. O’Cheskey (In re Am. Hous. Found.), 785 F.3d 143 (5th Cir. 2015); SeaQuest Diving, LP v. S&J Diving, Inc. (In re SeaQuest Diving, LP), 579 F.3d 411, 421-22 (5th Cir. 2009); Rombro v. Dufrayne (In re Med Diversified, Inc.), 461 F.3d 251, 254-55 (2d Cir. 2006)).

The majority also cites our precedent and does not attempt to distinguish it, other than to try to fit the facts of this case within the confines of our decision in American Wagering. See Majority Opinion, pp. 1064-65. However, the fit is cramped and imperfect. Preliminarily, in Del Biaggio, we described our decision in American Wagering as requiring subordination “where there exists some nexus or causal relationship between the claim and the purchase of the securities.” Del Biaggio, 834 F.3d at 1009 (citation and internal quotation marks omitted) (emphasis added). We explained that the facts in American Wagering did not fall within our broad interpretation because, and only because, the claimant’s contract with the debtor was explicitly not for the purchase or sale of securities. See id. Rather, the contract was explicitly for services as a financial advis- or. The resulting agreement stated:

Should [the creditor] bring in a buyer ... said company will be paid a commission based on 5% of the purchase price.

In re Am. Wagering, 493 F.3d at 1069.

Seven months later, another agreement was entered into between the same parties, with the following provision:

[Claimant] has been our financial advis- or for the purpose of an initial public offering ... As compensation he would be paid 4 ½% of the final evaluation in the form of ... common stock and $150,000 cash.

Id. at 1070.

After two years, the debtor filed an action against the creditor seeking to invalidate the contract in its entirety. See id. Following a jury trial, a verdict was rendered in favor of the creditor for “stock ... in an amount equal to 4.5% of $45,000,000 [the final valuation of the common stock] and $150,000 in cash.” Id. Consistent with this verdict, the court awarded the creditor 337,500 shares of stock worth $2,025 million. See id.

The creditor appealed the award, arguing that it was error for the court to award specific performance by way of bestowing stock, when the creditor requested money damages. See id. We agreed and remanded for the court to calculate the monetary equivalent of the 337,500 shares. See Leroy’s Horse and Sports Place v. Racusin, 21 Fed.Appx. 716, 717-18 (9th Cir. 2001). On remand, the creditor was awarded monetary damages of $2,310,000-$150,000 cash plus $2,160,000 (the value of the stock as of the date when the creditor could have sold his shares). See American Wagering, 493 F.3d at 1070.

Shortly after the damages award, the debtor filed for Chapter 11 bankruptcy protection, and sought to subordinate the creditor’s claim pursuant to § 510(b). See id.

As we observed in Del Biaggio, the creditor in American Wagering never sought “to recover an investment loss.” Del Biaggio, 834 F.3d at 1009. Rather, the creditor’s “contract with the debtor merely used stock value as a basis for calculating compensation.” Id. We clarified in American Wagering that the creditor “received a money judgment for services rendered.” 493 F.3d at 1073. We referenced “[o]ur earlier decision” reversing the award of stock to the creditor as making it clear that the creditor’s “underlying claim [was] a debt claim, not an equity claim.” Id. The creditor “did not sue debtors as an equity investor seeking monetary damages for fraud ... related to their mishandling of shareholders’ economic investment.” Id. Instead, the creditor brought his action as an individual who was not compensated as provided in an employment agreement. See id.

In contrast, Barton initially brought his action in state court specifically describing himself as a shareholder who had been wrongfully deprived of his shares by the debtors. In his Third Amended Complaint, Barton asserted that he was issued 6,016,-600 shares of RPost International Limited Stock, that Defendants now owned. Barton alleged that he was “a shareholder,” that he was owed a fiduciary duty of disclosure, and that Defendants wrongfully converted Barton’s shares of stock, causing Barton to suffer damages “[a]s a direct, proximate, and foreseeable result of the taking and conversion of Barton’s shares ...” Third Amended Complaint, Barton v. RPost International Ltd, Case No. YC061581, Superior Court of the State of California for the County of Los Angeles-Southwest District, February 16, 2011, pp. 6-9.

Consistent with Barton’s allegations focusing exclusively on the conversion of his shares, the Superior Court judge continued in the same vein. Indeed, the decision of the state court judge leaves no doubt about the genesis of Barton’s claims. The state court “issuefd] a declaration that Plaintiff Barton was at all relevant times an owner of 6,016,600 common shares ... and that he provided appropriate consideration for said shares of stock....” Statement of Decision, Barton v. RPost International Ltd., Case No. YC061581, Superior Court of the State of California for the County of Los Angeles, August 3, 2012, p. 5. The state court prohibited RPost International “from taking any action to encumber, forfeit, and/or cancel Barton’s shares without having obtained prior written approval from either the court, Barton or his duly authorized counsel.” Id.

The court ordered Defendants to restore the shares of stock to Barton. See id., p. 8. Leaving no doubt that the remedy was intended to restore Barton to the position of shareholder, the state court ordered that Barton “have no role in the management of the company but.... be given reasonable notice of meetings of its shareholders and major transactions.” Id. The state court “encouraged [the parties] to meet and confer to determine, on their own, a purchase price for Barton’s shares of stock so that a potentially uncomfortable relationship, going forward can be avoided.” Id. (emphases added).

The state court’s order unequivocally-restored Barton to his status as a shareholder in RPost International. Unlike the creditor in American Wagering, the record nowhere reflects that Barton objected to the remedy of specific performance. It was only after the punitive damages phase of the trial that the state court awarded the monetary value of the stock to Barton. See Ruling on Punitive Damages and Revisions to Statement of Decision, Barton v. RPost International Ltd,, Case No. YC061581, Superior Court of the State of California for the- County of Los Angeles, June 18, 2013, pp. 1-2. Nevertheless, the state court continued to link its damages award to the conversion of Barton’s shares. See id., p. 2. The court explained that because “the assets and character of RPost International had changed dramatically ... returning the 6,016,500 shares to Mr. Barton would undoubtedly spark an endless round of post-judgment motions and additional lawsuits.” Id. However, the court never strayed from its conclusion that Mr. Barton was entitled to this remedy as a shareholder of RPost International. See id.

The facts of this case are not even close to those we considered in American Wagering. In that case, the creditor was never a shareholder of the debtor and never sought or accepted specific performance by way of the award of shares. See Am. Wagering, 493 F.3d at 1069-70. The plaintiff in that case steadfastly based his claim on an employment contact that was simply measured by the price of the stock. See id. at 1071 (noting that the original contract “only gave [the creditor] the monetary value of the shares of stock, not the stock itself’). Notably, the plaintiff in American Wagering actually appealed the district court’s decision awarding stock as a remedy. See id. at 1070. In contrast, Barton predicated his entire complaint on his status as a shareholder. No other basis for recovery was ever articulated, and Barton posed no objection when the state court awarded him shares and shareholder rights as a remedy. At bottom, Barton’s claim is closer to the facts of Del Biaggio, where we characterized the damages claim in a similar fraudulent scheme resulting in the loss of equity shares as “clearly one arising from the sale or purchase of securities.” 834 F.3d at 1009. As in Del Biaggio, the damages sought by Barton and awarded by the state court “correspond exactly to the amount [Barton] invested in [RPost International] through his initial purchase of [RPost International] securities ...” Id. As in Del Biaggio, “[Barton’s claim is really no claim at all but for his investment in [RPost International]. Id.

Similar to the majority’s approach, the creditor in Del Biaggio sought to “analogue] his case to the facts of American Wagering.” Id. We rejected the proposed analogy because the creditor in Del Biaggio, like Barton, sought to “recover an investment loss,” id. rather than “valuing] a free-standing injury by reference to a security.” Id. at 1009-10. As in Del Biaggio, without a separate source of injury unrelated to his security holdings, Barton’s “asserted injury is inseparable from his [RPost International] investment.” Id. at 1010.

The majority also relies upon the decision of a bankruptcy court, In re Angeles Corp., 177 B.R. 920, 927 (Bankr. C.D. Cal. 1995) that was summarily affirmed by the Bankruptcy Appellate Panel. See 199 B.R. 220 (B.A.P. 9th Cir. 1996).

The discussion section of Angeles is light on the underlying facts. The court noted only that “it appears that approximately $250 million of money invested by limited partners was lost from inception of the partnerships to the present.” Angeles, 177 B.R. at 924. Addressing the subordination question, the court ruled that “claims alleging misconduct, breach of fiduciary duty, or wrongful acts by Debtor ... in managing the partnerships subsequent to the purchase of the limited partnership interests are not ... subject to subordination ...” Id. at 926 (emphases in the original).

This interpretation ignores the broad language of § 510. See Weissman v. Pre-Press Graphics Co., Inc. (In re Pre-Press Graphics Co., Inc., 307 B.R. 65, 76 (N.D. Ill. 2014) (describing Angeles as “supporting the narrow approach” to interpreting § 510)). It is also directly contrary to more recent precedent. See SeaQuest Diving, 579 F.3d at 418 (involving rescission of creditor’s equity investment subsequent to the purchase); Tristar Esperanza Prop., 782 F.3d at 497 (explicitly rejecting the argument that the subsequent nature of the claim dictates the outcome); Del Biaggio, 834 F.3d at 1007 (addressing a subsequent fraud claim stemming from an equity investment).

In the twenty-plus years that Angeles has been in existence, the case has been widely and roundly criticized. In the case of In re Enron Corp., 341 B.R. 141, 154 (Bankr. S.D.N.Y. 2006), the bankruptcy court questioned whether Angeles “can still be considered good law” in view of “the recent trend in the case law.” The court described Angeles as “embracing a] restricted reading of section 510(b)” that had been “uniformly rejected” in more recent cases, and observed that these more recent cases “explicitly disagree! ] with the legal principles” espoused in In re Angeles. Id. The bankruptcy court expressly referenced our decision in Betacom, noting that the holding in Betacom “eviscerates the logic of Angeles even if the Betacom court did not address [Angeles] directly.” Id. at 155 (citation omitted); see also Frankum v. Int’l Wireless Comm. Hldgs, Inc. (In re Int’l Wireless), 279 B.R. 463, 469 n.2 (D. Del. 2002) (“[T]he validity of ... Angeles in this circuit is suspect ... Accordingly, the Court declines to adopt the rationale[ ] of [Angeles.”]); In re Pre-Press Graphics, 307 B.R. at 77-78 (declaring Angeles “not ... persuasive” and undermined by more recent precedent from the Ninth Circuit); Id. at 76 (“The statutory interpretation set forth in [Angeles] ... has been called into doubt by recent decisions from the Third, Ninth and Tenth Circuits.”) (emphasis added); In re Granite Partners, 208 B.R. 332, 342-43 (Bankr. S.D.N.Y. 1997) (characterizing In re Angeles as “not persuasive”).

Finally, but not incidentally, I disagree with the majority’s conclusion that Barton should not be included within the category of investors who assumed the risk of investment loss. As a shareholder, Barton was the quintessential investor whose fortune was tied to the ups and downs of his investment, including those linked to fraud. See Del Biaggio, 834 F.3d at 1011 (“As an investor, [the creditor] bargained for increased risk in exchange for an expectation in the profits ...” “Congress enacted § 510(b) to prevent disappointed shareholders from recovering their investment loss by using fraud ... to bootstrap their way to parity with general unsecured creditors ... ”) (citation and footnote reference omitted). Unfortunately, Barton is not exempt.

In sum, considering the broad language of § 510(b) and the correspondingly broad interpretation we have consistently applied in our precedent, Barton, a shareholder in the debtor corporation, asserted conversion claims arising from the purchase of his shares. Without a doubt, his claim stemmed directly from the wrongful appropriation of the very shares he purchased. See Del Biaggio, 834 F.3d at 1009. I respectfully dissent from the majority’s contrary conclusion which, in my view, contravenes circuit precedent and the policy underlying § 510(b).

      . Khan v. Barton, (In re Khan) (“Khan I"), 523 B.R. 175, 178 (B.A.P. 9th Cir. 2014).

      . Hereafter all references to section numbers are to sections of Title 11 of the United States Code, unless otherwise indicated.

      . See § 1307(c).

      . §§ 1301-1330.

      . §§ 701-784.

      . In light of our determination that § 510(b) does not apply, we need not consider the Debtors’ assertion that Barton's claims should be disallowed because they were subordinated.

      . More particularly, the section reads as follows:
      For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock.

      . The Debtors alleged that each owned over 20% of RIL. See § 101(2)(B) (defining "affiliate”).

      . See § 510(b).

      . See Betacom, 240 F.3d at 830 (dissimilar risks and equity cushion rationales).

      . See id.; see also Del Biaggio, 834 F.3d at 1010-11.

      . Betacom, 240 F.3d at 830; see also Del Biaggio, 834 F.3d at 1011-12.

      . See Leavitt, 171 F.3d at 1222-23; de la Salle v. U.S. Bank, N.A. (In re de la Salle), 461 B.R. 593, 605 (B.A.P. 9th Cir. 2011).

      . See Rosson, 545 F.3d at 771; see also Hinkson, 585 F.3d at 1263-64.

      . See § 1307(c).

      . Of course, in so doing we have rejected the reasoning of the BAP on the subordination issue.


author: WATFORD, Circuit Judge:

text:
    Michael P. KOBY, an individual; Michael Simmons, an individual; and Jonathan Supler, an individual, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, Bernadette M. Helmuth, Objector-Appellant, United States of America, Intervenor, v. ARS NATIONAL SERVICES, INC., a California corporation; John and Jane Does, 1 through 25, inclusive, Defendants-Appellees.
    No. 13-56964
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted January 7, 2016, Pasadena, California
    Filed January 25, 2017

      Jonathan Taylor (argued) and Deepak Gupta, Gupta Beck PLLC, Washington, D.C.; Donald A. Yarbrough, Fort Lauder-dale, Florida; Steven M. Bronson, The Bronson Firm APC, San Diego, California; for Objector-Appellant.
    Philip D. Stern (argued), Union, New Jersey; Robert E. Schroth, Sr. and Robert E. Schroth, Jr., Schroth & Schroth, San Diego, California, for Plaintiffs-Appellees.
    Sean P. Flynn (argued), Gordon & Rees Scully Mansukhani, Irvine, California; David L. Hartsell, McGuire Woods LLP, Chicago, Illinois; for Defendant-Appellee.
    Brian Wolfman, Institute for Public Representation, Georgetown University Law Center, Washington, D.C.; Ira Rhein-gold, National Association of Consumer Advocates, Washington, D.C.; for Amicus Curiae National Association of Consumer Advocates.
    Before: PAUL J. WATFORD and MICHELLE T. FRIEDLAND, Circuit Judges, and J. FREDERICK MOTZ, District Judge.

       The Honorable J. Frederick Motz, District Judge for the U.S. District Court for the District of Maryland, sitting by designation.

   OPINION

WATFORD, Circuit Judge:

The magistrate judge in this case approved a class action settlement in which the named plaintiffs and class counsel got what they wanted but the remaining four million class members got worthless in-junctive relief. In exchange for receiving nothing of value, the class members gave up their right to assert damages claims against the defendant in any other class action. We are asked to decide two issues: whether the magistrate judge had the authority to exercise jurisdiction without obtaining the consent of all four million class members; and, assuming we get past that issue, whether the magistrate judge abused her discretion by approving the settlement as fair, reasonable, and adequate.

I

The named plaintiffs are Michael Koby, Michael Simmons, and Jonathan Supler. In April 2009 they sued ARS National Services, Inc., a debt collection agency, under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. They alleged that ARS violated §§ 1692d(6) and 1692e(11) of the FDCPA by leaving voice-mail messages in which the callers failed to disclose (1) that they worked for ARS, (2) that ARS is a debt collector, or (3) that the purpose of the call was to collect a debt. The named plaintiffs brought the action on behalf of everyone in the United States who received a voicemail message from ARS which failed to disclose that information. The class consists of some four million people nationwide.

The named plaintiffs requested “maximum statutory damages,” which vary under the FDCPA depending on the nature of the action being brought. In an individual action, a plaintiff may recover any actual damages suffered plus statutory damages up to $1,000. § 1692k(a)(1), (a)(2)(A). In a class action, the named plaintiffs may recover actual damages plus statutory damages up to $1,000, but the damages award for the rest of the class is capped at $500,000 or 1% of the defendant’s net worth, whichever is less. § 1692k(a)(2)(B).

In August 2011, after the district court denied ARS’s motion to dismiss the case on the pleadings, the parties began discussing settlement. Around the same time, ARS voluntarily adopted a new, standardized voicemail message which requires its employees to disclose that they work for ARS, that ARS is a debt collector, and that they are calling to collect a debt. The parties agree that this new voicemail message complies with the FDCPA.

Over the course of more than a year, the parties engaged in settlement discussions with the assistance of a magistrate judge. The named plaintiffs and ARS eventually consented to having the same magistrate judge conduct all further proceedings in the case, including the entry of final judgment. The district court entered an order authorizing the magistrate judge to exercise jurisdiction over the case, and she presided over all further proceedings.

In January 2013, following a full-day mandatory settlement conference before the magistrate judge, the parties finally hammered out a deal. Under the terms of the settlement, the parties agreed to seek certification of a nationwide, settlement-only class under Federal Rule of Civil Procedure 23(b)(2). The proposed class consisted of everyone in the United States who between April 2008 and August 2011 received a voicemail message from ARS that failed to identify ARS as the caller, disclose that the call was from a debt collector, or state that the purpose of the call was to collect a debt. (The parties chose those dates because April 2008 is the beginning of the applicable statute of limitations period and ARS ended the alleged FDCPA violations in August 2011, when it adopted the new voicemail message.) Because the class would be certified under Rule 23(b)(2), the parties agreed that no notice of any kind would be sent to the four million class members and that no one would be permitted to opt out of the class.

In terms of monetary payments, ARS agreed to pay each of the three named plaintiffs $1,000, the maximum they could hope to recover under the FDCPA as none of them had suffered any actual damages. ARS represented to the court (although it is unclear whether the magistrate judge took any steps to verify this fact) that its net worth was only $3.5 million,' which meant the other four million class members could collectively recover no more than $35,000. Given the impossibility of distributing less than a penny to each member of the class, ARS agreed to make a $35,000 ey pres award to a local San Diego charity instead. ARS also agreed to pay class counsel the negotiated sum of $67,500 in attorney’s fees.

The four million unnamed class members receive no monetary compensation under the settlement. They are, however, the beneficiaries of a stipulated injunction to be entered against ARS as part of the settlement. The injunction requires ARS to continue using, for a period of two years, the new voicemail message it had already adopted voluntarily back in August 2011. In return for that supposed benefit, the four million class members forfeit the right to seek damages from ARS as part of a class action. The class members retain the right to pursue damages claims against ARS on an individual basis.

As required by the Class Action Fairness Act, see 28 U.S.C. § 1715(b), ARS sent notice of the proposed settlement to the appropriate state and federal officials, none of whom objected to the settlement.

The four million class members did not receive individual notice of the proposed settlement, but qne class member—the appellant in this case, Bernadette Helmuth— filed an objection. She is the named plaintiff in a separate class action against ARS pending in the district court for the Southern District of Florida. Her lawsuit alleges essentially the same FDCPA violations alleged in this case, except that she seeks certification of a much smaller class limited to Florida residents who owed money to a particular creditor on whose behalf ARS was attempting to collect. After the parties agreed to the settlement in this case, ARS asked the district court in-Florida to stay all further proceedings in Helmuth’s case on the ground that, if approved, the settlement would bar her case from proceeding as a class action. The district court in Florida agreed to stay Helmuth’s action pending final approval of the settlement.

In her objection to the settlement, Hel-muth argued, among other things, that the settlement was unfair and unreasonable because class members would be barred from pursuing damages claims as part of a class action but would receive nothing of value in return. (Helmuth did not object to the magistrate judge’s authority to approve the settlement and enter judgment, so we express no view on the propriety of having the same judge who assisted the parties in negotiating a settlement decide whether the settlement should be approved as fair and reasonable.) After conducting a fairness hearing at which Hel-muth’s counsel, ARS’s counsel, and class counsel presented argument, the magistrate judge certified the proposed class under Rule 23(b)(2); approved the settlement as fair, reasonable, and adequate under Rule 23(e)(2); and entered judgment accordingly. Having objected to the settlement in the district court, Helmuth is entitled to challenge the court’s rulings on appeal. See Devlin v. Scardelletti, 536 U.S. 1, 14, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002).

II

Before reaching the merits, we must be sure we have jurisdiction to decide this appeal. That inquiry requires more work here than in most cases. Our jurisdiction is triggered only if the magistrate judge had the authority to enter final judgment under 28 U.S.C. § 636(c). See Anderson v. WoodCreek Venture Ltd., 351 F.3d 911, 913-14 (9th Cir. 2003). Section 636(c) authorizes magistrate judges, “[u]pon the consent of the parties,” to “conduct any or all proceedings in a-jury or nonjury civil matter and order the entry of judgment in the case, when specially designated to exercise such jurisdiction by the district court or courts he serves.” 28 U.S.C. § 636(c)(1). When a magistrate judge is authorized to enter final judgment, “an aggrieved party may appeal directly to the .appropriate United States court of appeals from the judgment of the magistrate judge in the same manner as an appeal from any other judgment of a district court.” § 636(c)(3).

No one disputes that the district court properly designated the magistrate judge to exercise jurisdiction in this case. Nor is there any dispute that the named plaintiffs and ARS consented to the magistrate judge’s exercise of jurisdiction. The only question is whether.the statute required not-just the consent of the named plaintiffs, but also the consent of the four million class members who were not present before the court (we will refer to them as the absent class members). We conclude that the statute requires the consent of the named plaintiffs alone and join three other circuits that have reached the same conclusion. See Day v. Persels & Associates, LLC, 729 F.3d 1309, 1316 (11th Cir. 2013); Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 181 (3d Cir. 2012); Williams v. General Electric Capital Auto Lease, Inc., 159 F.3d 266, 269 (7th Cir. 1998).

As a purely linguistic matter, § 636(c)(1)’s reference to the consent of “the parties” could be read to encompass both the named plaintiffs and the absent class members, for the term does not have a single fixed meaning. In some contexts absent class members are treated as parties, see In re Cement Antitrust Litigation, 688 F.2d 1297, 1307-10 (9th Cir. 1982) (judicial recusal statute), while in other contexts they are not, see Snyder v. Harris, 394 U.S. 332, 340, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969) (diversity jurisdiction statute). As the Supreme Court has observed, absent class members may be treated as parties “for some purposes and not for others.” Devlin, 536 U.S. at 10, 122 S.Ct. 2005.

Viewing § 636(c) as a whole, it seems clear that Congress did not intend absent class members to be treated as parties in this context. In § 636(c)(2), which specifies the procedures for obtaining party consent under (c)(1), the phrase “the parties” is used multiple times in a way that cannot sensibly be read to include absent class members. For example, the provision states that when a magistrate judge has been designated to exercise jurisdiction under (c)(1), “the clerk of court shall, at the time the action is filed, notify the parties of the availability of a magistrate judge to exercise such jurisdiction.” In virtually all class actions, it would be impossible for the clerk of court to issue this notice to absent class members at the time the action is filed. The identities of all absent class members will often not be known until later in the case, after at least preliminary discovery has been conducted. Even if the identities of all absent class members are known at the outset of the case, the clerk would need to compile their names and contact information in order to send the required notice, since that information will not appear in the complaint. And in large class actions, the cost of sending each class member notice of the availability of a magistrate judge would be prohibitive even for the most well-funded district courts. We doubt Congress would have imposed these substantial budgetary and manpower burdens on clerks’ offices across the country without making that intent explicit.

There is an additional reason to believe that Congress intended to require the consent of only the named plaintiffs under § 636(c)(1). As a general matter, the named plaintiffs in a properly certified class action are charged with conducting the litigation on behalf of the class they represent; by definition class actions involve too many plaintiffs to allow each to participate personally. See Fed. R. Civ. P. 23(a)(1). The named plaintiffs serve as representatives of the class and in that capacity are authorized to decide matters of litigation strategy, such as which claims to assert or drop, what discovery to take, what motions to file, and so forth. Deciding whether to consent to a magistrate judge is a matter of litigation strategy of the same order. In fact, it is probably less consequential to the outcome than other decisions the named plaintiffs are ordinarily called upon to make, such as deciding whether to consent to a bench trial or choosing which issues to raise on appeal from an adverse verdict. It would therefore have been sensible for Congress to assume that the named plaintiffs in a class action will decide, on behalf of the absent class members, whether to consent to the jurisdiction of a magistrate judge.

With that issue of statutory interpretation resolved, the jurisdictional analysis is straightforward. Congress has authorized magistrate judges to enter judgment in a class action so long as the named parties to the action have consented, and here the named plaintiffs and ARS have done so. Thus, an appeal from the judgment entered by the magistrate judge may be taken directly to our court “in the same manner as an appeal from any other judgment of a district court.” 28 U.S.C. § 636(c)(3).

The only remaining issue is whether § 636(c) is constitutionally valid. The National Association of Consumer Advocates, appearing as a friend of the court, argues that the statute is unconstitutional, at least as applied to class actions. In its view, § 636(c) violates Article III of the Constitution by-permitting magistrate judges to exercise jurisdiction over class actions without obtaining the consent of each absent class member.

Article III grants judges who wield the judicial power of the United States life tenure during good behavior and a guaranteed salary that may not be diminished. These protections are designed to ensure the independence and impartiality of the judicial officers authorized to decide the merits of a litigant’s case. The Supreme Court has held that litigants in federal court have a personal right, conferred by Article III, to insist upon adjudication of their claims by a judge who enjoys the salary and tenure protections afforded by Article III—protections that magistrate judges lack. Commodity Futures Trading Commission v. Schor, 478 U.S. 833, 848, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986); see Pacemaker Diagnostic Clinic of America, Inc. v. Instromedix, Inc., 725 F.2d 537, 542 (9th Cir. 1984) (en banc). But the personal right to an Article III adjudicator may be waived, and a party’s express or implied consent to adjudication by a magistrate judge constitutes a valid waiver of the right. Roell v. Withrow, 538 U.S. 580, 590, 123 S.Ct. 1696, 155 L.Ed.2d 775 (2003).

So the question becomes whether Article III categorically prohibits the named plaintiffs from waiving, on behalf of the class members they represent, the right to proceed before an Article III judge. A categorical prohibition of that sort might be warranted if the interests of the named plaintiffs and the absent class members frequently diverged with respect to exercise of the right at issue. But the opposite is true of the right to have a case heard by an Article III judge. To serve as class representatives, the named plaintiffs must have claims that are typical of the claims held by the class, and in conducting the litigation the named plaintiffs must fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(3)-(4). When those requirements are met, the interests of the named plaintiffs and absent class members will almost always be aligned when it comes to deciding whether to consent to a magistrate judge’s jurisdiction. Barring unusual circumstances, the named plaintiffs will have as strong an interest as the absent class members in having their claims adjudicated by an independent and impartial decisionmaker. The named plaintiffs can therefore be expected to protect the absent class members’ interests in the exercise of the right conferred by Article III.

There are constitutional limits, of course, on the named plaintiffs’ authority to waive the rights of their fellow class members, but those limits are imposed by the Due Process Clause, not by Article III. Most fundamentally, as mandated by due process (and enforced through Federal Rule of Civil Procedure 23), the named plaintiffs’ interests must in fact be aligned with those of the class, and the named plaintiffs must adequately represent the interests of the class throughout the litigation. Taylor v. Sturgell, 553 U.S. 880, 900-01, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008); Hansberry v. Lee, 311 U.S. 32, 41-43, 61 S.Ct. 115, 85 L.Ed. 22 (1940). In some instances, absent class members must also receive notice of the action and an opportunity to opt out. Taylor, 553 U.S. at 900, 128 S.Ct. 2161; Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985).

The absent class members in this case were not afforded notice and an opportunity to opt out. But we need not decide whether the Due Process Clause required those protections before the named plaintiffs could waive, on behalf of the class, the right to an Article III adjudicator. Any violation of the absent class members’ due process rights would affect only the pre-clusive reach of the resulting class judgment in subsequent litigation. See, e.g., Hecht v. United Collection Bureau, Inc., 691 F.3d 218, 224-26 (2d Cir. 2012) (lack of notice); Crawford v. Honig, 37 F.3d 485, 488 (9th Cir. 1994) (inadequate representation). Limits imposed by the Due Process Clause on the enforcement of class judgments do not curtail a magistrate judge’s authority under § 636(c) to enter judgment in the first instance—a judgment that at the very least will bind the named parties who consented to the magistrate judge’s jurisdiction. So any due process violation that might have occurred here would not deprive us of jurisdiction to decide this appeal, given that our jurisdiction is keyed to the magistrate judge’s authority to enter final judgment. Moreover, due process issues involving the extent to which the judgment might bind absent class members in future litigation would arise only if we were to uphold the magistrate judge’s order approving the settlement. Because we conclude below that the magistrate judge abused her discretion in entering that order, we are not faced with such due process issues here.

Ill

Under Federal Rule of Civil Procedure 23(e)(2), a district court may approve a class action settlement only after finding that the settlement is “fair, reasonable, and adequate.” When, as here, a class settlement is negotiated prior to formal class certification, there is an increased risk that the named plaintiffs and class counsel will breach the fiduciary obligations they owe to the absent class members. As a result, “such agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e) before securing the court’s approval as fair.” In re Bluetooth Headset Products Liability Litigation, 654 F.3d 935, 946 (9th Cir. 2011). The decision to approve a class action settlement is reviewed for abuse of discretion. Allen v. Bedolla, 787 F.3d 1218, 1222 (9th Cir. 2015).

The magistrate judge abused her discretion by approving the settlement in this case. The settlement should not have been approved for one primary reason: There is no evidence that the relief afforded by the settlement has any value to the class members, yet to obtain it they had to relinquish their right to seek damages in any other class action.

The settlement’s injunctive relief is worthless to most members of the class because it merely dictates the disclosures ARS must make in future voicemail messages for a period of two years. That relief could potentially benefit class members who are likely to be contacted by ARS during the two-year window, but there is an obvious mismatch between the injunc-tive relief provided and the definition of the proposed class. The class was not defined to include those who are likely to be contacted by ARS in the future; it was defined to include those who had suffered a past wrong at ARS’s hands—receiving a voicemail message between 2008 and 2011 that did not disclose certain information about the caller and the purpose of the call. The fact that a class member was a target of collection efforts sometime between 2008 and 2011, however, does not without more establish that he or she would likely be contacted by ARS again after October 2013, when the settlement was approved.

As the proponents of the settlement, ARS and the named plaintiffs bore the burden of demonstrating that class members would benefit from the settlement’s injunctive relief, which required them to show that class members were likely to face future collection efforts by ARS. See In re Dry Max Pampers Litigation, 724 F.3d 713, 719 (6th Cir. 2013). They fell far short of carrying that burden. ARS and the named plaintiffs made no showing that members of the class continued to receive calls from ARS as part of ongoing efforts to collect debts that were by then two to five years old, a proposition doubtful enough that empirical data of some sort would be necessary to substantiate it. Nor did they show that class members were likely to become targets of ARS’s collection efforts in the future. That would happen only if a class member failed to pay another debt, the debt got referred to a collection agency, and ARS turned out to be that agency. While some of the four million class members might find themselves in that predicament during the two-year span of the injunction, nothing in the record indicates that most class members would. In other words, ARS and the named plaintiffs provided no evidence to suggest that many, if any, members of the proposed class would derive a benefit from obtaining the injunctive relief afforded by the settlement.

Even for class members who might become targets of collection efforts by ARS in the future, the settlement’s injunctive relief is of no real value. The injunction does not obligate ARS to do anything it was not already doing. It merely requires ARS to continue using the same voicemail message it voluntarily adopted back in 2011. ARS took that step for its own business reasons (presumably to avoid further litigation risk), not because of any court- or settlement-imposed obligation. ARS would therefore be unlikely to revert back to its old ways regardless of whether the settlement contained the stipulated injunction. See Crawford v. Equifax Payment Services, Inc., 201 F.3d 877, 882 (7th Cir. 2000). To make matters worse, the settlement contained an escape clause that allowed ARS to seek dissolution of the injunction “at any time if there is a change in the law.” Thus, if the litigation risk were reduced by a new court decision or legislative enactment—the only scenario in which ARS might be tempted to resume its prior conduct—ARS could seek to wriggle out of the injunction.

ARS and the named plaintiffs likewise presented no evidence that the absent class members would derive any benefit from the settlement’s cy pres award. Indeed, it is doubtful that the award could be approved under our precedents, which require that cy pres awards be tethered to the objectives of the underlying statutes or the interests of the class members. See Nachshin v. AOL, LLC, 663 F.3d 1034, 1039 (9th Cir. 2011). Here, the award consists of a $35,000 donation to a San Diego veterans’ organization. The San Diego location of the chosen charity has no geographic nexus to the class, which includes four million individuals scattered throughout the United States. Nor was there any evidence that the settlement class is disproportionately composed of veterans. And there was no showing that the work performed by the designated charity would protect consumers from unfair debt collection practices, the objective of the FDCPA. Thus, even putting aside the relatively small size of the cy pres award, we cannot say that this aspect of the settlement provided any material benefit to the class members.

Because the settlement gave the absent class members nothing of value, they could not fairly or reasonably be required to give up anything in return. Yet the settlement requires absent class members to relinquish their right to pursue damages claims against ARS as part of a class action. The parties dispute whether that right has any real value to the absent class members, given the FDCPA’s cap on class action damages. ARS asserts that, with total damages capped at $35,000, none of the absent class members have any hope of obtaining meaningful monetary relief as part of another class action because it would be impossible to define a class small enough to afford individual recoveries of more than a trivial amount. Helmuth asserts, however, that the proposed class in her pending Florida action might contain as few as several hundred members, each of whom could recover meaningful relief of roughly $100.

We need not resolve the parties’ dispute on this point. It is enough to conclude that the waiver of the right to seek damages in future class actions has some value, and it plainly does. Very few class members would bother to file their own individual actions to recover minimal (or non-existent) actual damages and statutory damages capped at $1,000. For small-dollar claims like these, even under a statute with a fee-shifting provision, a class action is often the only realistic means of obtaining any monetary recovery. See Shutts, 472 U.S. at 809, 105 S.Ct. 2965; Crawford, 201 F.3d at 882. Cutting off access to a procedural tool that may offer the only realistic means of obtaining monetary relief deprived the absent class members of something of value here, even if it might be worth relatively little. The fact that class members were required to give up anything at all in exchange for worthless injunctive relief precluded approval of the settlement as fair, reasonable, and adequate under Rule 23(e)(2).

Helmuth challenges the reasonableness of the settlement on other grounds, such as the disparity between what the named plaintiffs got and what the rest of the class members received, and she contends in addition that the class could not be certified under Rule 23(b)(2). In light of our disposition above, we need not address these remaining contentions.

REVERSED and REMANDED.

      . Section 636(c)(2) provides:
      If a magistrate judge is designated to exercise civil jurisdiction under paragraph (1) of this subsection, the clerk of court shall, at the time the action is filed, notify the parties of the availability of a magistrate judge to exercise such jurisdiction. The decision of the parties shall be communicated to the clerk of court. Thereafter, either the district court judge or the magistrate judge may again advise the parties of the availability of the magistrate judge, but in so doing, shall also advise the parties that they are free to withhold consent without adverse substantive consequences. Rules of court for .the reference of civil matters to magistrate judges shall include procedures to protect the voluntariness of the parties' consent.

      . It is true that the consent required under § 636(c)(1) is usually given at the outset of the case before a class has been certified, at which point the named plaintiffs lack the authority to bind the absent class members. See Standard Fire Insurance Co. v. Knowles, — U.S. -, 133 S.Ct. 1345, 1349, 185 L.Ed.2d 439 (2013). That simply means if the class is never certified, the absent class members will not be bound by the named plaintiffs’ decision to grant consent. If the. class is certified and the case proceeds to judgment, however, the named plaintiffs’ litigation-related decisions are no less binding merely because they occurred before the class certification order was entered.

      . The parties overlook the fact that the settlement also waives the absent class members’ right to pursue class action damages for claims under state law, so they have not explored whether state-law analogues of the FDCPA contain similar class action damages caps. In States without such a cap, the right to pursue class action damages under state law could be considerably more valuable than the right to pursue such damages under the FDCPA, as no court of which we are aware has held that the FDCPA’s damages cap preempts state statutes permitting a larger recovery.