By Nicolas G. Keller
On September 12, 2018, Judge Loretta Preska of the District Court for the Southern District of New York dismissed the New York State Attorney General’s (“NYAG”) suit against RD Legal Funding, LLC, and related entities (collectively, “RD Entities”) for allegedly defrauding individuals awaiting payouts from two separate funds—the September 11th Victim Compensation Fund of 2011 (“VCF”) and the fund arising out of the NFL Concussion Litigation Settlement Agreement (“NFL Fund”). The Court’s ruling demonstrates the potentially far-reaching implications of the ongoing debate over the constitutionality of the CFPB’s structure in terms of not only the CFPB’s enforcement actions but also those of state actors.
The lawsuit, commenced jointly by the NYAG and the Consumer Financial Protection Bureau (“CFPB”) in February 2017, alleges that the defendants’ transactions with individuals that the defendants characterized as “purchases” or “assignments” of VCF or NFL Fund payouts are substantively high-interest loans. The CFPB and the NYAG assert that the alleged loans are usurious and violate provisions of the Consumer Financial Protection Act (“CFPA”)—also known as Title X of the Dodd-Frank Act—and various New York state fraud and usury laws.
Nearly three months ago, on June 21, the Court dismissed the CFPB from the suit. The gist of the Court’s holding, which we wrote more about here, was that the CFPB’s structure as an independent agency headed by a single director who can be removed by the President only for cause violates separation of powers. And the Court ruled that the remedy for this constitutional infirmity is to strike the CFPA in its entirety, thereby leaving the CFPB without the authority to bring suit. The Court also noted that:
Vexingly, Defendants do not address the NYAG’s independent authority to bring claims in federal district court under the CFPA, without regard to the constitutionality of the CFPB’s structure. . . . The Government has alleged adequately claims for deceptive and abusive acts or practices under the CFPA, and therefore federal question subject matter jurisdiction over the CFPA claims exists regardless of the constitutionality of the CFPB’s structure.
Amending its June 21 Order, the Court clarified that because “the appropriate remedy for Title X’s unconstitutional for-cause removal provision is invalidating Title X in its entirety, it follows that there is no statute for the NYAG to proceed under and no grant of authority to proceed.” Accordingly, the Court dismissed the NYAG’s federal law claims.
The Court also dismissed the NYAG’s state law claims. The NYAG argued that the Court should hear the remaining state law claims on the basis of federal question jurisdiction because the claims implicate the question of whether the purported assignments of VCF payouts violate the federal Anti-Assignment Act, but the Court rejected this argument, finding that the question does not “implicate broad consequences to the federal system or the nation as a whole” and can be competently addressed by state courts. Additionally, citing “judicial economy, convenience, fairness, and comity[,]” the Court rejected the NYAG’s argument that the Court should use its discretion to exercise supplemental jurisdiction over the remaining state law claims.
The debate over the constitutionality of the CFPB is certainly not over. In fact, given that the CFPB filed a Notice of Appeal on September 14, the issue of the CFPB’s constitutionality is now on appeal before several circuit courts. The NYAG could also appeal Judge Preska’s ruling, and/or it may attempt to pursue its CFPA and state law claims against the RD Entities in state court, likely depending at least in part on its assessment of the probability a state court would stay the case pending the CFPB’s appeal.
 The NYAG and the CFPB also allege that the founder and owner of the RD Entities, Roni Dersovitz, is liable for providing substantial assistance to the RD Entities in carrying out the violations. Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC, No. 17-CV-890 (LAP), 2018 WL 3094916, at *4 (S.D.N.Y. June 21, 2018), appeal docketed, No. 18-2743 (2d Cir. Sept. 17, 2018).
 Order at 6-7, Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC, No. 17-CV-890 (LAP) (S.D.N.Y. Sept. 12, 2018), Doc. No. 105, appeal docketed, No. 18-2743 (2d Cir. Sept. 17, 2018); see RD Legal Funding, LLC, 2018 WL 3094916, at *2.
 RD Legal Funding, LLC, 2018 WL 3094916, at *2.
 Id. at *4.
 Id. at *36 (“Because Plaintiff Consumer Financial Protection Bureau is unconstitutionally structured and lacks authority to bring claims under the CFPA, the Clerk of Court shall terminate Plaintiff Consumer Financial Protection Bureau as a party to this action.”).
 Id. at *35-36.
 Id. at *31.
 Order at 1, RD Legal Funding, LLC, No. 17-CV-890 (LAP) (S.D.N.Y. Sept. 12, 2018), Doc. No. 105.
 Id. at 2-4.
 Id. at 5-6.
 Notice of Appeal, RD Legal Funding, LLC, No. 17-CV-890 (LAP) (S.D.N.Y. Sept. 14, 2018), Doc. No. 108. The RD Entities filed a Notice of Cross-Appeal on September 25. Notice of Cross-Appeal, RD Legal Funding, LLC, No. 17-CV-890 (LAP) (S.D.N.Y. Sept. 25, 2018), Doc. No. 111.
 See, e.g., Order, Consumer Fin. Prot. Bureau v. All Am. Check Cashing, Inc., No. 16-CV-356 (S.D. Miss. Mar. 27, 2018), Doc. No. 236, interlocutory appeal docketed, No. 18-60302 (5th Cir. Apr. 24, 2018); Consumer Fin. Prot. Bureau v. Seila Law, LLC, No. 17-CV-01081-JLS-JEM, 2017 WL 6536586 (C.D. Cal. Aug. 25, 2017), appeal docketed, No. 17-56324 (9th Cir. Sept. 1, 2017); Consumer Fin. Prot. Bureau v. Future Income Payments, LLC, 252 F.Supp.3d 961 (C.D. Cal. 2017), appeal docketed, No. 17-55721 (9th Cir. May 19, 2017); Consumer Fin. Prot. Bureau v. D & D Mktg., Inc., No. CV 15-9692 PSG (EX), 2016 WL 8849698 (C.D. Cal. Nov. 17, 2016), interlocutory appeal docketed, No. 17-55709 (9th Cir. May 18, 2017); CFPB v. CashCall, Inc., No. CV-15-7522-JFW-RAOx, 2016 WL 4820635 (C.D. Cal. Aug. 31, 2016), appeal docketed, No. 18-55479 (9th Cir. Apr. 12, 2018); cf. Order, State Nat. Bank of Big Spring v. Lew, No. 12-1032 (ESH) (D.D.C. Feb. 16, 2018), Doc. No. 78, aff’d sub nom. Order, State National Bank of Big Spring v. Mnuchin, No. 18-5062 (D.C. Cir. June 8, 2018), Doc. No. 1734973, cert. filed (Sept. 6, 2018).