332 F. Supp. 3d 729
S.D. Ill.2018Background
- CFPB and New York Attorney General sued RD Legal entities and founder Roni Dersovitz for marketing "purchase" agreements to NFL concussion class members and September 11 VCF awardees that the government alleges were in fact credit transactions (loans) with usurious/invalid terms.
- RD entered into "Purchase Agreements" purporting to assign future settlement or VCF award proceeds to RD in exchange for lump‑sum advances and included no‑recourse language; RD demanded direct payment from fund administrators.
- Judge Brody (E.D. Pa.) construed the NFL Concussion Settlement Agreement's anti‑assignment clause to bar assignment of class members’ monetary claims and held RD’s NFL purchase agreements void; this Court adopted that ruling.
- The Court found the VCF assignments also barred by the federal Anti‑Assignment Act, 31 U.S.C. § 3727, because VCF awards are claims against the United States and the Purchase Agreements did not satisfy § 3727’s requirements.
- Because the assignments are void as to third‑party obligors, the Court concluded the transactions created creditor‑debtor relationships (equitable liens/loans), making RD a "covered person" under the CFPA; the Complaint plausibly alleged CFPA deceptive and abusive practices and individual "substantial assistance" liability against Dersovitz.
- The Court dismissed CFPB as a plaintiff for constitutional reasons (structure/for‑cause removal), but held NYAG retains independent authority to pursue CFPA and state claims; overall motion to dismiss was denied as to NYAG/CFPA claims brought by the State.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CFPB constitutional authority to sue | CFPB can bring enforcement actions under CFPA | CFPB is unconstitutionally structured (single‑Director for‑cause removal) and lacks authority | Court held CFPB unconstitutional and terminated CFPB as party, but NYAG retains independent CFPA authority |
| Are RD "covered persons" under CFPA (extend credit/service loans)? | Because assignments are void, transactions function as extensions of credit and RD services/collects on loans → covered persons | Transactions are true sales; no debt incurred so CFPA doesn’t reach them | Court held assignments void; the agreements create debtor‑creditor relations (equitable liens) so RD are "covered persons" |
| Validity of NFL assignments under NCLSA anti‑assignment clause | N/A (government relies on settlement construction) | RD: clause is not sufficiently specific to bar assignment of settlement proceeds | Court adopted E.D. Pa. (Brody): anti‑assignment clause unambiguously bars assignments “relating to” the class action subject; NFL purchase agreements void |
| Validity of VCF assignments under federal Anti‑Assignment Act (31 U.S.C. § 3727) | VCF awards are claims against the United States and thus barred from assignment absent § 3727 compliance | RD: § 3727 only bars substantive claims, not proceeds; assignments are permissible/equitable arrangements | Court held VCF awards are claims against the U.S.; § 3727 applies and purchase agreements did not meet its requirements → assignments void as to the United States |
| Failure to state CFPA/state claims; individual liability for "substantial assistance" | Complaint alleges deceptive/abusive acts and Dersovitz knowingly/recklessly provided substantial assistance | RD invokes Rule 9(b), lumping, insufficient specificity, and says transactions are lawful sales | Court declined to apply Rule 9(b) to CFPA/NYAG consumer claims, found pleading adequate on deceptive/abusive counts and for Dersovitz substantial‑assistance liability; complaints survive |
| State law claims (usury, GBL § 349/350, GOL § 13‑101) | NYAG alleges transactions functioned as loans with usurious rates and unlawful assignments of personal‑injury claims; consumer‑oriented deception alleged | RD: transactions are sales, not loans; insufficient NY nexus | Court found NYAG adequately pleaded usury, GBL § 349/350 consumer‑oriented deceptive practices, and GOL § 13‑101 violations; supplemental jurisdiction exercised |
Key Cases Cited
- Allhusen v. Caristo Constr. Corp., 303 N.Y. 446 (N.Y. 1952) (anti‑assignment clauses are enforceable only if they contain clear, definite language)
- Neuroaxis Neurosurgical Assocs. v. Costco Wholesale Co., 919 F.2d 345 (2d Cir. 1990) (interpretation of anti‑assignment language under New York law)
- Kim v. United States, 806 F.3d 1161 (9th Cir. 2015) (Anti‑Assignment Act analysis; assignments of claims against the United States)
- Hobbs v. McLean, 117 U.S. 567 (1886) (a claim against the United States is a right to demand money from the United States)
- Martin v. National Surety Co., 300 U.S. 588 (1937) (post‑payment equitable recognition of assignments; Anti‑Assignment Act purpose)
- Saint John Marine Co. v. United States, 92 F.3d 39 (2d Cir. 1996) (Anti‑Assignment Act may render assignments void as to the government but enforceable inter partes as equitable liens)
- SEC v. DiBella, 587 F.3d 553 (2d Cir. 2009) (elements for aiding and abetting liability: primary violation, knowledge, substantial assistance)