RD
Legal Funding submitted a letter motion to the U.S. District Court for the
Southern District of New York asking it to dismiss the New York Attorney
General’s Consumer Financial Protection Act claims against it for lack of
subject matter jurisdiction, based on the court’s June order finding the CFPA
structure unconstitutional.
Constitutionality decision. The AG and Consumer
Financial Protection Bureau sued RD Legal Funding, two other companies, and an
associated individual, claiming that they violated state laws and the CFPA in
the process of exchanging structured settlements for lump-sum payments. The U.S.
district judge decided that the Bureau’s
single-director-removable-only-for-cause structure is unconstitutional, meaning
the Bureau has no authority to sue the company. She also decided that the
organizational section of the CFPA cannot be severed from the remainder of that
Act; as a result, she ruled that the entire CFPA is unconstitutional. However,
the judge then declined to dismiss the suit in its entirety, saying that the
CFPA—which she had said was unconstitutional—allows the AG to bring an enforcement
suit in federal court (Banking
and Finance Law Daily, June 22, 2018).
Joint letter to the court. In a July joint letter to
the court, called for by the judge, the AG interpreted the judge’s order as
striking down the Bureau’s structure but the not entire CFPA. In that way, the
U.S. district judge still would have subject matter jurisdiction over the CFPA
claims and supplemental jurisdiction over the state law claims. RD Legal
Funding, however, indicated that there no longer is a basis for federal
question jurisdiction and that it would address the issue in a separate motion (Banking
and Finance Law Daily, July 11, 2018).
Letter motion. RD Legal Funding’s letter
motion addresses the federal jurisdiction issue. The motion states that the
court’s June order struck each substantive provision of the CFPA that forms the
basis of the AG’s federal claims as well as the statutory provisions of Title X
of the Dodd-Frank Act granting the AG enforcement authority over the CFPA. The
motion noted that, as plaintiff, the AG has the burden to establish subject
matter jurisdiction, and states, "Here, however, the entire basis for the
NYAG invoking federal jurisdiction is Title X of the CFPA, which has been
stricken." RD Legal Funding requests that the federal claims in the case
be dismissed with prejudice, under Rule 12(h)(3) of the Federal Rules of Civil
Procedure, and that the state law claims be dismissed without prejudice to
being refiled in state court.
The
case is No. 17-cv-890.
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