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Second Circuit Gives CFPB Chance to Revive 9/11 Victim Suit

Oct. 30, 2020, 10:04 PM

A federal appeals court revived a fraud case against a legal settlement advance company that the Consumer Financial Protection Bureau says defrauded former NFL players and the families of Sept. 11 terrorist attack victims.

The U.S. Court of Appeals for the Second Circuit on Friday overturned a 2018 lower court ruling that dismissed the CFPB’s enforcement lawsuit against RD Legal Funding LLC after finding that the agency’s independent leadership structure was unconstitutional and unfixable.

The U.S. Supreme Court in June also found the bureau’s leadership structure was unconstitutional, but said the CFPB can continue to exist after severing a Dodd-Frank Act provision that limited the president’s ability to fire the bureau’s director.

In an unpublished opinion, the Second Circuit said the Supreme Court’s ruling in Seila Law v. CFPB superseded the 2018 ruling by Judge Loretta Preska of the U.S. District Court for the Southern District of New York. It remanded the RD Legal case back to the district court.

The appellate panel asked the district court to determine whether CFPB Director Kathleen Kraninger’s decision to ratify the RD enforcement action after the Seila decision was legal, potentially allowing the case to continue.

Counsel for RD Legal and the CFPB declined to comment.

RD Legal, based in Cresskill, N.J., offers advances to consumers entitled to payouts from victim compensation funds or lawsuit settlements.

The CFPB, along with then-New York Attorney General Eric Schneiderman, sued RD Legal in 2017, alleging the company defrauded NFL concussion settlement participants and the families of victims of the Sept. 11 terrorist attacks.

The New York attorney general’s suit against RD Legal is ongoing.

The case is Consumer Financial Protection Bureau v. RD Legal Funding LLC, 2d Cir., No. 18-03156, unpublished 10/30/20

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com

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