RD Legal Funding has submitted a letter to Judge Preska asking her to dismiss all of the federal claims of the New York Attorney General (NYAG).  The letter was sent in response to Judge Preska’s July 25 order in which she set an August 13 deadline for RD Legal Funding to submit a filing on jurisdictional issues.

In its letter, RD Legal Funding states that the NYAG’s federal claims are brought pursuant to Dodd-Frank Section 1042, which authorizes state attorneys general to file civil actions in federal court to enforce the provisions of the CFPA, including its “UDAAP” provisions prohibiting unfair, deceptive, or abusive acts or practices.

However, in her June 21 decision, Judge Preska, having found that the CFPB’s “for cause” removal structure was unconstitutional, struck all of Title X in its entirety, including Section 1042, rather than just sever the for-cause removal provision.  Accordingly, RD Legal Funding requests in its letter that the federal claims in the case be dismissed with prejudice and the state law claims be dismissed without prejudice to their being refiled in state court.

It also asks the court to then enter judgment against the CFPB and NYAG “allowing the Court’s June 21, 2018 Order to be appealed, if appropriate, in its entirety.”  Presumably, the CFPB and NYAG would appeal the constitutionality ruling and RD Legal Funding would appeal the conclusion that the transactions at issue were disguised loans.  As discussed in a prior blog post, we think the court’s logic was erroneous on the loan recharacterization question.