As described here, a federal court this month ruled that the structure of the Consumer Financial Protection Bureau is unconstitutional.
The court nonetheless denied the motion to dismiss by litigation funding company RD Legal Funding, because it ruled that the New York Attorney General had authority to challenge the transactions between RD and personal injury victims, including ex-National Football League players.
U.S. District Court judge Loretta Preska also described the circuitous route by which she was asked to address the isuses in the lawsuit. Said the court:
On January 31, 2012, a federal multidistrict litigation was created in United States District Court for the Eastern District of Pennsylvania for lawsuits on behalf of former NFL players who suffer from mild traumatic brain injury due to playing professional football. . . . Defendants in that case, the NFL and NFL Properties LLC, ultimately agreed that settlement of the claims in that complex putative class action was appropriate. . . . Accordingly, on February 13, 2015, a federal district court in the Eastern District of Pennsylvania approved the NFL Concussion Litigation Settlement Agreement (“NCLSA”) between the Class Members, by and through class counsel, and defendants NFL and NFL Properties LLC. . . .
The NFL Class Members at issue in this case are former NFL players who have been diagnosed with neurogenerative diseases such as chronic traumatic encephalopathy (‘CTE’), Alzheimer’s, or Parkinson’s disease and who have received notification of their entitlement to a settlement award under the NCLSA for these injuries. . . .
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The instant case has a circuitous history in this Court. In January 2017, RD Legal Funding, LLC filed a complaint against the CFPB in the Southern District of New York seeking relief in the form of, inter alia, a declaration that the purchase of legal receivables from customers are true sales and that, therefore, RD Legal Funding, LLC’s business is not within the CFPB’s jurisdiction. . . .
Two days after filing suit in federal court against the CFPB, RD Legal Funding Partners, LP and RD Legal Funding, LLC filed a similar suit in New York state court against NYAG seeking a declaration that the VCF Purchase Agreements are true sales. . . .
Following RD Legal Funding, LLC and RD Legal Funding Partners, LP’s actions against the CFPB and NYAG in this Court and New York state court, the CFPB and NYAG filed this enforcement action against the RD Entities on February 7, 2017. . . . On May 15, 2017, the RD Entities moved to dismiss the Complaint on several grounds, including lack of federal jurisdiction due to the CFPB’s unconstitutional structure, the CFPB’s lack of jurisdiction over the RD Entities as ‘covered persons’ under the CFPA, and for failure to state a claim on which relief can be granted . . . .
In July 2017, class counsel for the NFL Class Members requested that this Court allow it to file an amicus brief in opposition to the RD Entities’ motion to dismiss or, in the alternative, that determination of the validity of the assignment provisions in the NFL Purchase Agreements be referred to United States District Court for the Eastern District of Pennsylvania. . . . Class counsel stated that it believed referral of this question to the Eastern District of Pennsylvania would be appropriate because that court has continuing jurisdiction over the administration and interpretation of the NCLSA. . . . Class counsel explained that referral of this question would ensure uniformity of adjudication through ‘a single up-or-down ruling that [would] apply not only to Defendants in this action but also to other potential lenders to class members who might assert the same defense.’ . . . Because interpretation of the NCLSA’s terms falls squarely within ‘the administration and interpretation of the [NCLSA]’ and referral would promote judicial economy, this Court concluded that referral of the anti-assignment clause question to the Eastern District of Pennsylvania was appropriate. . . . On September 15, 2017, this Court referred the assignment question to the Honorable Anita B. Brody in the Eastern District of Pennsylvania, who was presiding over the NFL Concussion Litigation. . . .
On December 8, 2017, Judge Brody issued an Explanation and Order which concluded that the anti-assignment clause in the NFL Concussion Litigation Settlement Agreement ‘unambiguously prohibits’ NFL class members ‘from assigning or attempting to assign any monetary claims [under the NFL Settlement Agreement],’ thereby rendering ‘any such purported assignment . . . void, invalid and of no force and effect’ under New York law. . . . In New York, an anti-assignment clause is enforceable only if it contains ‘clear, definite and appropriate language’ restricting the assignment of money due under the contract. . . . Under this framework, Judge Brody concluded that the term ‘relating to’ in the NCLSA’s anti-assignment clause, which prohibits Class Members from assigning claims ‘relating to the subject matter of the Class Action Complaint,’ encompassed assignment of Class Members’ claims to settlement awards under the NCLSA. . . . In reaching this conclusion, Judge Brody concluded that the phrase ‘relating to’ in the NCLSA’s anti-assignment clause was ‘sufficiently express’ under New York law to include assignment of Class Members’ claims to settlement awards under the NCLSA. . . .
As a result of this finding, Judge Brody held that Class Members’ Purchase Agreements with the RD Entities were void. . . . Accordingly, she ordered the NFL Class Members to return to the RD Entities any amount that the RD Entities had already paid them. . . .
On August 1, 2017, after Defendants filed the instant motion to dismiss, the American Legal Finance Association (‘ALFA’) moved for leave to file an amicus curiae brief in opposition to Defendants’ motion to dismiss. The Court granted ALFA’s request, and ALFA filed its amicus curiae brief on August 15, 2017. . . .
The full opinion is available here: CFPB_v._RD_Legal_Funding_06.2018