The New York Attorney General has sent a letter to Judge Preska asking her to clarify her August 23 order granting the CFPB’s request for entry of a Rule 54(b) judgment so that it can appeal her June 21 constitutionality ruling.  In the August 23 order, Judge Preska also denied RD Legal’s request that she certify the remainder of her ruling for interlocutory appeal but granted RD Legal’s request to stay the district court proceedings pending the outcome of the CFPB’s appeal.

In her June 21 ruling, Judge Preska held that that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional, struck the CFPA (Title X of Dodd-Frank) in its entirety, dismissed the CFPB from the case, and allowed the New York Attorney General to proceed with its CFPA and state law claims.  RD Legal had argued that Judge Preska’s dismissal of the CFPB from the case and striking of Dodd-Frank Title X necessitated her dismissal of the NYAG’s CFPA claims against RD Legal.  Accordingly, it had asked Judge Preska to dismiss the NYAG’s federal claims with prejudice and dismiss the NYAG’s state law claims for lack of federal subject matter jurisdiction without prejudice to their being refiled in state court.

Judge Preska’s August 23 order appears to implicitly accept RD Legal’s argument that her constitutionality ruling, if upheld by the Second Circuit, would require dismissal of the NYAG’s CFPA claims.  In its letter, the NYAG asks her to provide answers to three questions that it deems “essential to determining the NYAG’s further conduct in this case.”

The NYAG asks Judge Preska:

  • Whether the NYAG’s CFPA claims remain before the court because it has found that it has jurisdiction to hear those claims
  • Whether, if the court actually dismissed the NYAG’s CFPA claims in its June 21 ruling, the court retained jurisdiction over the NYAG’s state law claims because the claims contain an embedded federal law question (which the NYAG has previously identified to be whether the transactions that RD Legal Funding entered into with consumers entitled to benefits under the September 11th Victim Compensation Fund of 2001 were void under the federal Anti-Assignment Act and therefore loans subject to New York usury law)
  • Whether, even if the court dismissed the NYAG’s CFPA claims and found that it lacked jurisdiction to hear the NYAG’s state law claims based on the existence of an embedded federal law question, the court has nonetheless exercised its jurisdiction to retain supplemental jurisdiction over the state law claims

The NYAG observes that by staying the case as to the NYAG rather than dismissing all of its claims, “it appears that the Court has determined that it retains some jurisdiction over at least some claims.” (emphasis provided).  According to the NYAG, if the court has dismissed the NYAG’s CFPA claims in their entirety, “the NYAG may wish to seek leave to have the dismissal certified for interlocutory appeal in the hopes of having such an appeal consolidated with the CFPB’s so that all CFPA claims in this case might be reviewed at once.”  The NYAG also indicates that if the court has dismissed the NYAG’s CFPA claims entirely but retained jurisdiction over the state law claims, the NYAG may need to “seek vindication of its state law claims in state court” rather than wait for an appeal to be decided because of “the age and ill health of some of the New York residents who are victims in this case.”  Finally, the NYAG indicates that “giving the parties certainty about their positions will facilitate any settlement discussions that may take place during the stay.”