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RD Legal Funding asks for oral arguments as it fights lawsuit from CFPB, N.Y. AG

PHILADELPHIA – The disagreement over funding by third parties continues to play out in an exchange between Pennsylvania and New York federal courts, as one such company defends itself from New York Attorney General Eric Schneiderman and the Consumer Financial Protection Bureau.

RD Legal Funding gives money to plaintiffs who in turn agree to pay the organization back from any monies granted by the court. The company holds that it does not offer loans because if a plaintiff is awarded nothing, the company gets nothing.

However, it faces allegations that it broke lending laws in agreements with 9/11 first responders and NFL concussion victims.

In its defense, it wrote a letter to New York Judge Loretta Preska on Jan. 11, stating that the money it offers is not the same as a loan. 

“Assignments (i.e., true sales) and loans (i.e., extensions of credit), however, are mutually exclusive legal concepts, and the fact that an assignment may be unenforceable because of an anti-assignment provision does not transform that assignment into an extension of credit,” RD’s lawyer Michael Roth wrote.

Eastern District of Pennsylvania Judge Anita Brody recently voided RD's agreements in the NFL concussion litigation.

Roth also noted that in Brody's ruling further backs the organization’s position that they are not in the businesses of offering loans.

“The applicability of the anti-assignment clause would render the agreements ‘void, invalid, and of no force and effect,’ not transform them into a wholly different type of transaction,” he stated.

He also points out a ruling in a different case, which involved RD, came to a different conclusion.

“In the case Peterson v. Islamic Republic of Iran, Case No. 10-cv-04518 (S.D.N.Y.), which concluded that RD Legal’s funding contracts relating to the Marine barracks bombing in Beirut in 1983 are assignment agreements that ‘should not be viewed as loans given, among other considerations, the plain language of the agreements. . ., including that they do not include any references to amounts borrowed, maturity dates or interest, .. . [and] perhaps most significantly, that the transactions were on a non-recourse basis.’ (ECF No. 872, at 49-50),” the letter says.

Roth wrote that the courts should reach the same conclusion.

Finally, he also states that they would like to resume oral arguments in support of their position.

“RD Legal respectfully renews its request for oral argument on its motion to dismiss to address why Judge Brody’s conclusion that the transactions are void under the anti-assignment provision of the NFL Concussion Litigation settlement agreement," the letter says.

The New York Attorney General's Office and CFPB responded in kind with a letter of their own to Preska on Jan. 17.

They claim that the decision of Peterson v. Islamic Republic of Iran, which Roth used in his letter as defense for RD’s position, was mischaracterized.

“RD Legal suggests that in adopting the special master’s report and recommendation, Judge (Katherine B.) Forrest ‘concluded’ that the contracts at issue in Peterson ‘are assignment agreements’ and that the order is relevant to the pending motion to dismiss. It is not," the response letter says.

“Further, Judge Forrest did not rule on the enforceability or validity of the ‘advance company’ contracts in Peterson. Rather, as her order makes clear, ‘the Report does not (and in fact could not) rule on the ultimate validity or enforceability as between the signatories to any of the advance contracts.’” they wrote.

They conclude that the case has no bearing on the motion to dismiss.

“Judge Forrest did not rule on the enforceability or validity of the ‘advance company’ contracts in Peterson. Rather, as her order makes clear, ‘the report does not (and in fact could not) rule on the ultimate validity or enforceability as between the signatories to any of the advance contracts.’”

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