NY Court Sacks CFPB As Unconstitutional

June 28, 2018 at 9:13 am 2 comments

Image result for quarterback sackI think I’ve died and gone to heaven.

Today’s blog gives me the opportunity to write about two things I almost love talking about as much as I love my own family: football and the constitutionality of the CFPB. Last Thursday, a Federal District Court Judge for the Southern District of New York ruled that the CFPB was unconstitutional because of its appointment structure. It dismissed a lawsuit brought against a company which it alleged was swindling NFL players out of settlement money. The ruling means that there is now a split among courts as to the constitutionality of the CFPB, increasing the likelihood that this issue will sooner or later have to be addressed by the Supreme Court and the Justice who ultimately replaces Justice Kennedy.

Consumer Financial Protection Bureau et al. v. RD Legal Funding involved a legal action brought against a company which offers persons lump sum payments in return for the legal rights to their structured settlements. As many of you may know, in recent years the NFL, its players, lawyers and doctors have reached the remarkable conclusion that playing football is bad for your health. Amazingly, having freakishly fast athletes weighing well over 200 pounds, repeatedly hitting you in the head, causes brain damage and diseases similar to dementia. Next thing they’re going to be telling us is that smoking is bad for our health.

In this case, the CFPB joined by the New York Attorney General was trying to undo an assignment between RD Legal Funding and a group of ex-NFL players who are receiving a structured settlement to resolve claims that the NFL didn’t do enough to protect or warn them against brain damage. RD argued that the court should dismiss the claim brought against it by the CFPB. It argued that under the constitution, the President must have the right to hire and fire the Directors of agencies at will at least when they are not subject to the oversight of a board. Remember that a three judge panel of the Court of Appeals for the District of Columbia in an opinion written by Judge Kavanaugh, reached a similar conclusion only to reverse itself when the case was reargued before the entire court.

Notwithstanding the fact that the DC Court ultimately ruled that the CFPB was constitutional, Judge Loretta Preska ruled that the decenters in that case correctly concluded that “based on considerations of history, liberty, and presidential authority” that the CFPB “is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director.”

If Judge Preska’s ruling is ultimately upheld, it would have even more dramatic consequences for the CFPB that Justice Kavanaugh’s decision would have. He held that the CFPB had the power to save the CFPB by mandating that its Director be subject to at-will removal by the President. In contrast, Judge Preska held that the constitutional defect results in the entire Bureau being unconstitutional. We will have to see if the CFPB appeals this decision and if other courts adopt its logic. Right now it is only binding in Manhattan which contrary to what many Manhattanites believe, is not the center of the Universe.

But even if you dream of a day when the CFPB no longer exists, this case also contains a reminder not to be too happy. Remember, that both the CFPB and New York Attorney General were suing RD Legal Funding. While it’s potentially good news that the constitutionality of the CFPB is once again in doubt, the New York Attorney General was still allowed to go forward with her lawsuit.

Entry filed under: Legal Watch, New York State. Tags: , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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