Consumer Fin. Prot. Bureau v. RD Legal Funding, LLC (332 F. Supp. 3d 729, 2018)

United States District Court for the Southern District of Illinois 2018-06-21

Banks and Banking Commerce and Trade Internal Revenue Code Money and Finance Transportation

Citations

Full opinion text

Loretta A. Preska, Senior United States District Judge Table of Contents

I. Factual Background...746

a. The NFL Class Members...746

b. September 11, 2001 James Zadroga Victims Compensation Fund Eligible Claimants...747

c. The Purchase Agreements...747

d. Claims Against the RD Entities...748

i. CFPA Claims...748

ii. Claims Arising Under New York Law...748

II. Procedural History...749

III. Legal Standard...751

IV. Discussion...751

a. Federal Jurisdiction...752

i. The RD Entities as "Covered Persons" Under the CFPA...752

1. The NFL Concussion Litigation Settlement Agreement Claims...752

a. The NCLSA's Anti-Assignment Provision...753

b. Legal Standard Regarding the Scope of the Anti-Assignment Provision...753

c. Assignability of "Settlement Proceeds" Versus "Monetary Claims"...755

d. Interpretation of the New York UCC...756

e. The NFL-related Purchase Agreements Are Void...756

2. 31 U.S.C. § 3727 Invalidates the Assignment of Compensation Awards from the VCF...756

a. The Anti-Assignment Act, 31 U.S.C. § 3727...757

i. "Claim Against the United States"...757

ii. Statutory Purpose...759

iii. .. The VCF-related Purchase Agreements Do Not Comply With the Anti-Assignment Act's Requirements...761

3. Eligible Claimants and NFL Class Members "Incur[red] Debt" Through the Purchase Agreements ...761

a. The RD Entities Extend "Credit" and "Service[ ] Loans"...766

4. The RD Entities Are "Covered Persons" Under the CFPA...766

b. Failure to State a Claim Fed. R. Civ. P. 12(b)(6)...767

i. Rule 9(b)'s Heightened Pleading Standard Does Not Apply to Non-Fraud Claims...767

1. "Substantial Assistance" Claims Under the CFPA...769

2. Specificity of Allegations Against Each Defendant Under Rule 8(a)...770 ii. "Substantial Assistance" Liability Under the CFPA...771

iii. Deceptive and Abusive Conduct Under the CFPA...772

1. Counts I, III, IV, V: Deceptive Acts or Practices Under the CFPA...772

a. Count I...773

i. "Substantial Assistance" Claim Against Roni Dersovitz Under Count I...773

b. Count III...774

i. "Substantial Assistance" Claim Against Roni Dersovitz Under Count III...775

c. Count IV...775

i. "Substantial Assistance" Claim Against Roni Dersovitz Under Count IV...776

d. Count V...776

i. "Substantial Assistance" Claim Against Roni Dersovitz Under Count V...777

2. Count II: Abusive Acts or Practices Under the CFPA...777

a. "Substantial Assistance" Claim Against Roni Dersovitz Under Count II...778

iv. State Law Claims...779

1. NYAG's Jurisdiction Over the Purchase Agreements...779

2. Count VI: Claims Under New York Civil and Criminal Usury Laws...780

3. Count VIII: Violation of New York General Obligations Law § 13-101...781

4. Count IX: Violation of New York General Business Law § 349...781

5. Count X: Violation of New York General Business Law § 350...783

6. Count XI: New York Executive Law § 63(12) Fraud...783

c. Constitutional Claims...784

i. History, Liberty, and Presidential Authority...784

ii. CFPB's Notice of Ratification...784

d. Conclusion...785

This is an action by Plaintiffs Consumer Financial Protection Bureau (the "CFPB") and the People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York ("NYAG" or the "Attorney General") (collectively, the "Government"), against Defendants RD Legal Funding, LLC; RD Legal Finance, LLC; RD Legal Funding Partners, LP (collectively, the "RD Entities"); and Roni Dersovitz, the founder and owner of the RD Entities (together with the RD Entities, the "Defendants"). The Government asserts that the Defendants violated certain provisions of the Consumer Financial Protection Act ("CFPA" or the "Act"). NYAG independently asserts that the RD Entities are liable under New York law for the same actions and events that form the basis of the CFPA claims. Defendants move to dismiss the Complaint (ECF No. 1) on three principal grounds. First, Defendants argue that the CFPB is unconstitutionally structured and therefore lacks the authority to bring claims under the CFPA. Second, Defendants contend that the Court lacks federal jurisdiction because the RD Entities are not "covered persons" under the CFPA and therefore do not come within the Act's jurisdictional purview. Third and finally, the RD Entities move to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for relief.

As set out below, because the CFPB's structure is unconstitutional, it lacks the authority to bring claims under the CFPA and is hereby terminated as a party to this action. The NYAG, however, has independent authority to bring claims under the CFPA. The Court concludes that NYAG has alleged plausibly claims under the CFPA and under New York law. Accordingly, Defendants' motion to dismiss the Complaint is denied. (ECF No. 39.)

I. Factual Background

The following facts are drawn from the Complaint, (Complaint ("Compl."), ECF No. 1), the Assignment and Sale Agreements (hereinafter the "Purchase Agreements") attached as exhibits to the Affidavit of Roni Dersovitz, (Affidavit of Roni Dersovitz ("Dersovitz Aff."), Exs. A-1 to A-20, B-1 to B-5, ECF No. 41-1), and the National Football League ("NFL") Concussion Litigation Settlement Agreement ("NCLSA"), (Dersovitz Aff. Ex. 6), which Defendants attached to their motion to dismiss. The allegations in the Complaint are accepted as true for purposes of the instant motion.

The CFPB and NYAG bring this action against the RD Entities and their founder and owner, Roni Dersovitz. (Compl. ¶¶ 15-19.) The RD Entities are companies that offer cash advances to consumers waiting on payouts from settlement agreements or judgments entered in their favor. The Government alleges that Defendants misled these consumers into entering cash advance agreements that the Defendants represented as valid and enforceable sales but, in reality, functioned as usurious loans that were void under state law. (Compl. ¶ 19.)

At issue in this case are two specific groups of consumers (collectively, the "Consumers") with which the RD Entities transacted: (1) class members in the National Football League ("NFL") Concussion Litigation class action ("NFL Class Members" or "Class Members") and (2) individuals ("Eligible Claimants") who qualify for compensation under the September 11th Victim Compensation Fund of 2001 ("VCF"). 49 U.S.C. § 40101.

a. The NFL Class Members

On January 31, 2012, a federal multidistrict litigation was created in United States District Court for the Eastern District of Pennsylvania for lawsuits on behalf of former NFL players who suffer from mild traumatic brain injury due to playing professional football. See Settlement Agreement (hereinafter "Settlement Agreement") Preamble, In re NFL Players' Concussion Injury Litig., MDL No. 2323 (E.D. Pa. Feb. 13, 2015) (ECF No. 6481-1). Defendants in that case, the NFL and NFL Properties LLC, ultimately agreed that settlement of the claims in that complex putative class action was appropriate. Id. Recitals (K). Accordingly, on February 13, 2015, a federal district court in the Eastern District of Pennsylvania approved the NFL Concussion Litigation Settlement Agreement ("NCLSA") between the Class Members, by and through class counsel, and defendants NFL and NFL Properties LLC. Id. Preamble.

The NFL Class Members at issue in this case are former NFL players who have been diagnosed with neurogenerative diseases such as chronic traumatic encephalopathy ("CTE"), Alzheimer's, or Parkinson's disease and who have received notification of their entitlement to a settlement award under the NCLSA for these injuries. (Compl. ¶¶ 22-23.)

b. September 11, 2001 James Zadroga Victims Compensation Fund Eligible Claimants

In January 2011, President Obama signed the James Zadroga 9/11 Health and Compensation Act of 2010 ("Zadroga Act"), which served to renew the September 11th Victim Compensation Fund of 2001 (the "VCF"). 49 U.S.C. § 40101. Congress created the VCF to provide compensation to individuals and personal representatives of deceased individuals who suffered physical injury or were killed as a result of the September 11, 2001 terrorist attacks or were harmed during the removal of debris immediately following those attacks. Proposed Rule, Federal Register, Vol. 76 No. 119 (Jun. 21, 2011). The Zadroga Act authorizes a Special Master appointed by the Attorney General to carry out the administration of the VCF by enacting substantive and procedural rules, including making determinations as to what award amount an eligible individual ("Eligible Claimant") is entitled to under the VCF. 28 C.F.R. § 104.51.

According to the Complaint, the Eligible Claimants with whom the RD Entities transact have received an award letter from the VCF's Special Master indicating the amount of compensation to which they are entitled under the VCF. (Compl. ¶¶ 22-23); 49 U.S.C. §§ 405(b)(1), 405(c), 406(a). Eligible Claimants who are entitled to compensation include individuals who suffer from respiratory illnesses and cancers related to their exposure to dust and debris at the World Trade Center site as well as from post-traumatic stress disorder, depression, anxiety disorder, and memory loss following the September 11th, 2001 terrorist attacks. (Compl. ¶ 22.)

c. The Purchase Agreements

According to the Complaint, after a Consumer has received final approval and a notice of the award amount to which he or she is entitled, the RD Entities offer to take a security interest in the Consumer's settlement award or a portion thereof (the "Property" or "Property Amount"). (Compl. ¶ 20.) In the contracts that Defendants enter into with Consumers, the RD Entities purport to "acquire the full risks and benefits of ownership of the Property and acquire the full right, title and interest in the Property." (Def. Br. Ex. 1.) In exchange, the RD Entities offer Consumers an immediate "lump sum" cash payment that represents a portion of the total award to which the Consumer is entitled. (Compl. ¶ 24.) In return, the Consumer agrees to repay a larger amount, i.e., the Property Amount, to the RD Entities after receiving its settlement payment. (Id. ) The Purchase Agreements contain a no recourse provision that relieves the Consumer of his or her obligation to repay the RD Entities in the event that the RD Entities are unable to recover the settlement award from the Consumer's third-party obligor, i.e., the NFL Settlement Fund or the VCF. (Def. Br. Ex. 1.)

The RD Entities enter into two types of contracts with Consumers. Under the first, the RD Entities advance a lump sum of cash to the Consumer. The repayment amount that the Consumer owes to RD remains the same, regardless of when the Consumer receives the award from the VCF or the NFL Settlement Fund. (Compl. ¶ 31.) Under the second type of contract, the amount the Consumer repays turns on when the claims administrator disburses the Consumer's award. The longer it takes for the Consumer to receive his or her settlement payment, the more the Consumer owes to the RD Entities. (Id. )

After entering into the Purchase Agreement, Consumers are obligated immediately to forward any monies received from the NFL Claims Administrator or the VCF to the RD Entities until the Consumer has paid off the agreed-upon amount. (Compl. ¶ 26.) After the amount due under the agreement has been paid to the RD Entities, the Consumer is entitled to keep any balance in excess of that amount that he or she receives from the NFL Settlement Fund or VCF Claims Administrator. (Id. )

d. Claims Against the RD Entities

i. CFPA Claims

The Complaint alleges five CFPA claims against the RD Entities: (1) Count I alleges that the RD Entities engaged in deceptive acts or practices, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), by misrepresenting that the Purchase Agreements constituted valid and enforceable assignments and that Dersovitz knowingly or recklessly provided substantial assistance to the RD Entities in carrying out these violations, 12 U.S.C. § 5536(a)(3) (Compl. ¶ 63); (2) Count II alleges that the RD Entities engaged in abusive acts or practices, 12 U.S.C. §§ 5531(d), 5536(a)(1)(B), by misrepresenting that the Purchase Agreements constituted valid and enforceable assignments and that Dersovitz knowingly or recklessly provided substantial assistance to the RD Entities in carrying out these violations, 12 U.S.C. § 5536(a)(3) (Compl. ¶¶ 72-73); (3) Count III alleges that the RD Entities engaged in deceptive acts or practices, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), by misrepresenting that they could "cut through red tape" and expedite a Consumer's award payment when in fact they could not and that Dersovitz knowingly or recklessly provided substantial assistance to the RD Entities in carrying out these violations, 12 U.S.C. § 5536(a)(3) (Compl. ¶ 79); (4) Count IV alleges that the RD Entities engaged in deceptive acts or practices, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), by misrepresenting when the RD Entities would deliver Consumers' cash payments because, in some instances, the RD Entities made payment after the promised payment date, and that Dersovitz knowingly or recklessly provided substantial assistance to the RD Entities in carrying out these violations, 12 U.S.C. § 5536(a)(3), (Compl. ¶ 86); and (5) Count V alleges that the RD Entities engaged in deceptive acts or practices, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B), by collecting on contracts that functioned as loans with usurious interest rates under state law and on which no payment was due, and that Dersovitz knowingly or recklessly provided substantial assistance to the RD Entities in carrying out these violations, 12 U.S.C. § 5536(a)(3). (Compl. ¶ 93.)

ii. Claims Arising Under New York Law

The NYAG brings independently various claims arising under New York law, each of which is asserted against each of the named Defendants: Count IX asserts a claim of deceptive practices under New York General Business Law ("NY GBL") § 349 against all of the named Defendants based on the same alleged deceptive conduct underlying Counts I, III, IV, and V of the Complaint, (Compl. ¶¶ 119-22); Count X asserts a claim of false advertising against all of the named Defendants under NY GBL § 350 based on the RD Entities' alleged misrepresentations that the transactions at issue were sales, not loans, and that the RD Entities had the ability to expedite payment of Consumers' awards when in fact they did not, (Compl. ¶¶ 123-26); Count XI asserts a claim under New York Executive Law § 63(12) for fraudulent conduct based on the same factual allegations underlying Counts I-V of the Complaint (Compl. ¶¶ 127-30); Counts VI and VII allege that, through the Purchase Agreements, Defendants charged Consumers rates of interest that violated New York's civil and criminal usury laws, N.Y. Banking Law § 14-a, and N.Y. Penal Law §§ 190.40 and 190.42, respectively (Compl. ¶¶ 99-105, 106-10); and finally, Count VIII alleges that Defendants violated New York General Obligations Law ("NY GOL") § 13-101 because they entered into contracts that constituted an unlawful assignment of individual claims to recover for personal injuries under New York law. N.Y. Gen. Oblig. Law § 13-101 ; (Compl. ¶¶ 111-18.)

II. Procedural History

The instant case has a circuitous history in this Court. In January 2017, RD Legal Funding, LLC filed a complaint against the CFPB in the Southern District of New York seeking relief in the form of, inter alia, a declaration that the purchase of legal receivables from customers are true sales and that, therefore, RD Legal Funding, LLC's business is not within the CFPB's jurisdiction. RD Legal Funding, LLC v. Consumer Fin. Prot. Bureau, No. 17-cv-00010 (LAP) (S.D.N.Y.) (ECF No. 1); (Def. Br. 7.) According to Defendants, RD Legal Funding, LLC filed that action in response to civil investigative demands ("CID") that the CFPB served on RD Legal Funding, LLC as well as a formal request from the CFPB to depose an RD Legal Funding, LLC representative in connection with the CFPB's investigation of the RD Entities. (Def. Br. 6.)

Two days after filing suit in federal court against the CFPB, RD Legal Funding Partners, LP and RD Legal Funding, LLC filed a similar suit in New York state court against NYAG seeking a declaration that the VCF Purchase Agreements are true sales. RD Legal Funding, LLC, et al. v. Schneiderman, et al., No. 17-cv-00681 (LAP) (S.D.N.Y.) (ECF No. 1).

Following RD Legal Funding, LLC and RD Legal Funding Partners, LP's actions against the CFPB and NYAG in this Court and New York state court, the CFPB and NYAG filed this enforcement action against the RD Entities on February 7, 2017. (ECF No. 1.) On May 15, 2017, the RD Entities moved to dismiss the Complaint on several grounds, including lack of federal jurisdiction due to the CFPB's unconstitutional structure, the CFPB's lack of jurisdiction over the RD Entities as "covered persons" under the CFPA, and for failure to state a claim on which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 39.)

In July 2017, class counsel for the NFL Class Members requested that this Court allow it to file an amicus brief in opposition to the RD Entities' motion to dismiss or, in the alternative, that determination of the validity of the assignment provisions in the NFL Purchase Agreements be referred to United States District Court for the Eastern District of Pennsylvania. (ECF No. 45.) Class counsel stated that it believed referral of this question to the Eastern District of Pennsylvania would be appropriate because that court has continuing jurisdiction over the administration and interpretation of the NCLSA. (Id. ); see also Settlement Agreement § 27.1 ("The Court retains continuing and exclusive jurisdiction over this action including jurisdiction over ... all Settlement Class Members...."). Class counsel explained that referral of this question would ensure uniformity of adjudication through "a single up-or-down ruling that [would] apply not only to Defendants in this action but also to other potential lenders to class members who might assert the same defense." (Id. ) Because interpretation of the NCLSA's terms falls squarely within "the administration and interpretation of the [NCLSA]" and referral would promote judicial economy, this Court concluded that referral of the anti-assignment clause question to the Eastern District of Pennsylvania was appropriate. (ECF No. 59.) On September 15, 2017, this Court referred the assignment question to the Honorable Anita B. Brody in the Eastern District of Pennsylvania, who was presiding over the NFL Concussion Litigation. (ECF No. 60.)

On December 8, 2017, Judge Brody issued an Explanation and Order which concluded that the anti-assignment clause in the NFL Concussion Litigation Settlement Agreement "unambiguously prohibits" NFL class members "from assigning or attempting to assign any monetary claims [under the NFL Settlement Agreement]," thereby rendering "any such purported assignment ... void, invalid and of no force and effect" under New York law. See Explanation and Order (hereinafter, "Explanation and Order"), In re NFL Players' Concussion Injury Litig., No. 2:12-md-2323-AB (E.D. Pa. Dec. 8, 2017) (ECF No. 9517) (citing Neuroaxis Neurosurgical Assocs., P.C. v. Costco Wholesale Co., 919 F.Supp.2d 345, 352 (S.D.N.Y. 2013) ). In New York, an anti-assignment clause is enforceable only if it contains "clear, definite and appropriate language" restricting the assignment of money due under the contract. Allhusen v. Caristo Constr. Corp., 303 N.Y. 446, 103 N.E.2d 891, 893 (1952) ; Neuroaxis Neurosurgical, 919 F.Supp.2d at 352. Under this framework, Judge Brody concluded that the term "relating to" in the NCLSA's anti-assignment clause, which prohibits Class Members from assigning claims "relating to the subject matter of the Class Action Complaint," encompassed assignment of Class Members' claims to settlement awards under the NCLSA. See Explanation and Order at 3, 4 n.6. In reaching this conclusion, Judge Brody concluded that the phrase "relating to" in the NCLSA's anti-assignment clause was "sufficiently express" under New York law to include assignment of Class Members' claims to settlement awards under the NCLSA. Explanation and Order at 3-4.

As a result of this finding, Judge Brody held that Class Members' Purchase Agreements with the RD Entities were void. Explanation and Order at 5-6. Accordingly, she ordered the NFL Class Members to return to the RD Entities any amount that the RD Entities had already paid them. Id.

On August 1, 2017, after Defendants filed the instant motion to dismiss, the American Legal Finance Association ("ALFA") moved for leave to file an amicus curiae brief in opposition to Defendants' motion to dismiss. The Court granted ALFA's request, and ALFA filed its amicus curiae brief on August 15, 2017. (See Br. for ALFA as Amicus Curiae ("ALFA Br."), ECF No. 56.)

After receiving briefing from all parties on Defendants' instant motion to dismiss, the Court requested supplemental briefing from the parties on February 23 and 28, 2018, on two legal questions pertaining to the VCF Purchase Agreements. (ECF Nos. 71, 72.) The first question asked what the effect of the underlying agreement between the Defendants and Eligible Claimants would be if the Court were to conclude that the assignments in the VCF Purchase Agreements were impermissible pursuant to the Anti-Assignment Act, 31 U.S.C. § 3727. As a follow-on to the first inquiry, the Court also asked how the effect of any such underlying agreement between Defendants and Eligible Claimants would impact the Government's assertion of jurisdiction over the RD Entities as "covered persons" under the CFPA. (ECF No. 72.)

On March 5, 2018, the Government filed a letter in response to the Court's February 23 and 28 orders. (ECF No. 73.) On March 12, 2018, Defendants filed a letter in response to the Government's March 5, 2018 letter addressing these issues. (ECF No. 74.)

III. Legal Standard

In considering a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), a court must "accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor." Phelps v. Kapnolas, 308 F.3d 180, 184 (2d Cir. 2002) (citation and internal quotation marks omitted). Though a court must accept all factual allegations as true, it gives no effect to "legal conclusions couched as factual allegations." Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 35 (2d Cir. 2017) (quoting Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) ). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. This "plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citations omitted). Deciding whether a complaint states a claim upon which relief can be granted is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Rahman v. Schriro, 22 F.Supp.3d 305, 310 (S.D.N.Y. 2014) (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ).

In certain circumstances, the court may permissibly consider documents other than the complaint in ruling on a motion under Rule 12(b)(6). Documents that are attached to the complaint or incorporated in it by reference are deemed part of the pleading and may be considered. In addition, even if not attached or incorporated by reference, a document "upon which [the complaint] solely relies and which is integral to the complaint" may be considered by the court in ruling on such a motion.

Tolliver v. Lilley, No. 12-cv-971, 2014 WL 10447163, at *8, 2014 U.S. Dist. LEXIS 184770, at *21-*22 (S.D.N.Y. Oct. 24, 2014) (citing Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007) ).

IV. Discussion

In addressing the various arguments that Defendants assert in support of dismissal, the Court first addresses Defendants' contention that this Court lacks federal jurisdiction to hear the CFPA claims because the RD Entities are not "covered persons" and thus do not come within the CFPA's jurisdictional reach. Next, the Court addresses Defendants' argument that the Complaint fails to state a claim on which relief can be granted pursuant to Rule 12(b)(6). In line with the doctrine of constitutional avoidance, the Court addresses Defendants' constitutionality argument last.

a. Federal Jurisdiction

i. The RD Entities as "Covered Persons" Under the CFPA

The CFPA regulates "covered person[s] or service provider[s]" who are engaged in "unfair, deceptive, or abusive act[s] or practice[s] under Federal law." 12 U.S.C. §§ 5531(a), 5536(a). The Act defines "covered person" as "any person that engages in offering or providing a consumer financial product or service." 12 U.S.C. § 5481(6)(A). The term "financial product or service" is defined in relevant part as "extending credit and servicing loans." Id. § 5481(15)(A)(i). The CFPA defines "credit" as "the right granted by a person to a consumer to [1] defer payment of a debt, [2] incur debt and defer its payment, or [3] purchase property or services and defer payment for such purchase." Id. § 5481(7).

The Government asserts four claims of deceptive acts or practices and one claim of abusive acts or practices under the CFPA against the RD Entities. Id. §§ 5531(a), 5536(a)(1)(B) ; Id. § 5531(d)(1), (2)(B). Defendants move to dismiss the CFPA deceptive and abusive acts or practices claims on the grounds that the RD Entities are not "covered person[s]" under the CFPA, Id. § 5481(6)(A), and therefore do not come within the Act's jurisdictional reach. (Def. Br. 17.)

The Government asserts that the RD Entities are "covered persons" under the CFPA because they extend "credit" and service loans. The Government alleges that the RD Entities engage in this activity because the assignments in the Purchase Agreements are void. See N.Y. U.C.C. § 9-408(d)(1) ; 31 U.S.C. § 3727 ; (Compl. ¶¶ 19, 43, 52-54, 61-69, 70-77.) In turn, these agreements do not constitute valid sales of Consumers' interest in their settlement awards. (Compl. ¶¶ 19, 43, 61-69, 70-77.) The Government argues that the effect of this is to encumber Consumers with "debt" and an obligation to repay the RD Entities in spite of what the Purchase Agreements say. (Compl. ¶¶ 19, 34-43.)

The RD Entities reject this characterization. They argue that the assignments are legally permissible and therefore effectuate true sales of Consumers' interest in their settlement awards. (Def. Reply 5-6.) Under this approach, the Consumer incurs no repayment obligation in the event that the RD Entities are unable to collect the purchased receivable. (Def. Br. 19.) Therefore, the RD Entities assert that the consumer incurs "no debt," "no repayment obligation," and that "[t]here is certainly no right granted to defer payment of a debt" to the Consumer. (Id. )

Both parties' arguments as to the Government's jurisdiction over Defendants as "covered persons" turns on the validity of the assignments. If the assignments are valid, as Defendants suggest, the entire basis of the Government's jurisdictional theory under the CFPA would fall apart.

Accordingly, in deciding whether the RD Entities are "covered persons" under the CFPA, the Court must first determine whether the assignments embodied in the NFL Purchase Agreements and the VCF Purchase Agreements are valid. 12 U.S.C. § 5481(6)(A).

1. The NFL Concussion Litigation Settlement Agreement Claims

Following the issuance of Judge Brody's Explanation and Order that found the assignments in the NFL Purchase Agreement void based on the NCLSA's anti-assignment provision, Defendants filed a letter in this Court objecting to Judge Brody's conclusion. (See ECF No. 62.) As explained below, the Court rejects Defendants' arguments in support of these objections in all respects. Accordingly, the Court adopts the Explanation and Order's finding that the NCLSA's anti-assignment provision is valid, thereby rendering the assignments in the NFL-related Purchase Agreements void.

a. The NCLSA's Anti-Assignment Provision

The express terms of the NCLSA restrict Class Members' ability to assign their rights or claims "relating to the subject matter of the Class Action Complaint," Explanation and Order at 2 (citing Settlement Agreement (hereinafter "Settlement Agreement") § 30.1, In re NFL Players' Concussion Injury Litig., MDL No. 2323 (E.D. Pa. Feb. 13, 2015) (ECF No. 6481-1) ):

Section 30.1 No Assignment of Claims. Neither the Settlement Class nor any Class or Subclass Representative or Settlement Class Member has assigned, will assign, or will attempt to assign, to any person or entity other than the NFL Parties any rights or claims relating to the subject matter of the Class Action Complaint. Any such assignment, or attempt to assign, to any person or entity other than the NFL Parties any rights or claims relating to the subject matter of the Class Action Complaint will be void, invalid, and of no force and effect and the Claims Administrator shall not recognize any such action.

Settlement Agreement § 30.1 (emphasis added).

The Government asserts that the assignments in the NFL Purchase Agreements are void because the NCLSA's express terms prohibit class members from assigning "any rights or claims relating to the subject matter of the Class Action Complaint," which include their interest in their settlement award (or a portion thereof) under the NCLSA. (Compl. ¶ 35) (emphasis added). In response, the RD Entities contend that the NCLSA's anti-assignment provision violates New York's general prohibition of contractual anti-assignment clauses and, therefore, does not prevent the NFL Class Members from assigning their rights to settlement compensation under the NCLSA. (Def. Br. 18-21.)

b. Legal Standard Regarding the Scope of the Anti-Assignment Provision

First, Defendants contend that Judge Brody did not construe the anti-assignment language "narrowly" when interpreting the phrase "relating to" as required under New York law. In particular, they note that the anti-assignment provision does not specifically prohibit Class Members from assigning their right to a settlement award under the NCLSA, and therefore is not "sufficiently express" to be upheld under New York law. (ECF No. 62-4 at 10-17); C.U. Annuity Serv. Corp. v. Young, 281 A.D.2d 292, 722 N.Y.S.2d 236, 236 (2001). Defendants also assert that the anti-assignment provision's reference to "the subject matter of the Class Action Complaint" limits assignment only of Class Members' personal injury claims, not Class Members' rights to settlement awards stemming from a later-dated settlement agreement. (ECF No. 62-1 at 10; ECF No. 62-4 at 12-15; ECF No. 62.)

As a matter of policy, New York generally permits parties to assign their interests unless "the relevant provision of the contract contains 'clear, definite, and appropriate language declaring an assignment invalid.' " Au New Haven, LLC v. YKK Corp., 210 F.Supp.3d 549, 554 (S.D.N.Y. 2016) (quoting Purchase Partners, LLC v. Carver Fed. Sav. Bank, 914 F.Supp.2d 480, 505 (S.D.N.Y. 2012) ). To this end, New York law requires that courts construe contractual anti-assignment language "narrowly." (ECF No. 62) (quoting Au New Haven, 210 F.Supp.3d at 556 ).

It is well-settled that, in interpreting a contract's terms, courts must give effect to the plain meaning of its words or terms. This basic principle encompasses phrases, including "relating to." State v. Philip Morris Inc., 30 A.D.3d 26, 813 N.Y.S.2d 71, 75 (2006) ("The terms 'arising out of,' and most particularly 'relating to,' certainly evince a broad arbitration clause"), aff'd, 8 N.Y.3d 574, 838 N.Y.S.2d 460, 869 N.E.2d 636 (2007).

In relevant part, the term "relate to" is defined as "to have relationship or connection." Relate, Merriam Webster (May 24, 2018), https://www.merriam-webster.com/dictionary/relate. In accord with its dictionary definition, courts in New York have given effect to the plain meaning of the phrase "relating to" when interpreting contracts in the past. See, e.g., Coregis Ins. Co. v. Amer. Health Found., Inc., 241 F.3d 123, 128-29 (2d Cir. 2001) ("The term 'related to' is typically defined more broadly."); Collins & Aikman Prods. Co. v. Bldg. Sys., Inc., 58 F.3d 16, 20 (2d Cir. 1995) (discussing that, in the context of arbitration clauses, the phrase " 'arising out of or relating to th[e] agreement,' is the paradigm of a broad clause").

Rights to settlement awards under the NCLSA indisputably "relat[e] to the subject matter of the Class Action Complaint." As the Explanation and Order correctly notes, monetary awards under the NCLSA would not exist but for the events giving rise to the Class Action Complaint. Explanation and Order at 3-4. The "relationship" or "connection" between rights to settlement awards under the NCLSA and the "subject matter of the Class Action Complaint" is straightforward.

Defendants' repeated reliance on Au New Haven, LLC v. YKK Corp., 210 F.Supp.3d 549 (S.D.N.Y. 2016), does not help them. There, the Court analyzed the term "hereunder" in interpreting the scope of a contractual anti-assignment provision. Id. at 554-56. In conclusion, the Court gave effect to the "plain-language definition" of the word "hereunder" in finding that a patent, though the subject of the licensing agreement at issue, did not originate from the licensing agreement and therefore was not subject to the bar on assignments of any interest "hereunder." Id. 554-55. Similarly here, the Explanation and Order gives effect to the plain meaning of the term "relating to" by employing the same "narrow" interpretation that the Court invoked in Au New Haven. No incongruity exists between the standard that Judge Brody used in interpreting the term "relating to" and the standard in Au New Haven.

In sum, Judge Brody's interpretation of the term "relating to" complies with New York contract law and basic principles of contract interpretation by giving meaning to the plain meaning of the phrase. Accordingly, the Court agrees with the Explanation and Order's conclusion. The NCLSA's terms state clearly that the anti-assignment provision validly applies to the assignment of Class Members' claims to settlement awards under the NCLSA.

c. Assignability of "Settlement Proceeds" Versus "Monetary Claims"

Defendants also assert that Judge Brody's Explanation and Order refers to the assignment of "monetary claims," while the Purchase Agreements at issue purport to assign Class Members' right to "settlement proceeds." (ECF No. 62.) Defendants argue that the Explanation and Order's use of the term "monetary claims" rather than "settlement proceeds" shows that Judge Brody conflated legally distinct concepts under New York law. Specifically, Defendants note that although New York law prohibits the assignment of claims, it does not similarly prohibit the assignment of settlement proceeds. For this reason, Defendants argue that the Explanation and Order's findings, which use the term "monetary claims," are inapplicable to the assignment of "settlement proceeds" at issue in the NFL-related Purchase Agreements. (ECF No. 62); Explanation and Order at 3-4.

Defendants' argument is a combination of mere word mincing and misconstruction of the law. As to misconstruction of the law, the assignments in the NFL-related Purchase Agreements purport to effectuate a transfer of Class Members' full ownership rights and interest in the Property Amount to RD Legal Finance, LLC. (Dersovitz Aff. Exs. B-1 to B-7.) Through these Purchase Agreements, RD Legal Finance, LLC purports to "step into the shoes of the assignor" and obtain the full right to demand direct payment of the Property Amount from NFL Monetary Award Fund through a limited irrevocable power of attorney. (See Dersovitz Aff. Ex. B-5 at 12.) Defendants fail to note that the right to demand direct payment from the NFL Monetary Award Fund in itself is a "claim" that "clearly encompasses a cause of action for nonpayment." Renfrew Ctr. v. Blue Cross Blue Shield of Central N.Y., Inc., No. 94-cv-1527 (RSP/GJD), 1997 WL 204309, at *4 (N.D.N.Y. Apr. 10, 1997). Although the NCLSA does not define the word "claim," the assignment attempts to transfer all of the Class Members' rights and interests in the Property Amount to RD Legal Funding, LLC. (See, e.g., Dersovitz Aff. Ex. B-5.) The RD Entities provide no basis for believing that this bundle of ownership rights includes anything less than the full benefits of ownership, and that includes the right to sue the NFL Monetary Award Fund in the event of nonpayment. Accordingly, Judge Brody's Explanation and Order addresses squarely the scenario at issue in the NFL Purchase Agreements by analyzing the assignment of "monetary claims" under it.

Defendants' assertion that the NFL Purchase Agreements are assignments of the "right to settlement proceeds" under the NCLSA is unavailing. Defendants cite Grossman v. Schlosser, 19 A.D.2d 893, 244 N.Y.S.2d 749, 749-50 (1963), in an attempt to illustrate that the NFL Purchase Agreements involve the assignment of "settlement proceeds," a concept that is legally distinct from the assignment of a "claim" for settlement proceeds in New York. In Grossman, the court held that the "assignment of proceeds of a [cause of action for personal injury], prior to its settlement or adjudication, [is] valid and effectual as an equitable assignment against the assignor and his attaching creditor." Id. (emphasis added). This arrangement gives an equitable assignee "no legal estate or interest in the fund" but rather "constitute[s] an equitable lien on the property." Matter of Hoffman, 107 Misc.2d 497, 435 N.Y.S.2d 235, 237 (N.Y. Surr. Ct. 1980) ; see also In re Mucelli, 21 B.R. 601, 603 (S.D.N.Y. 1982) ;

United States v. Colby Academy, 524 F.Supp. 931, 934 (E.D.N.Y. 1981) (holding that settlement proceeds are assignable as "an equitable interest only" and "d[o] not become a legal assignment until the proceeds have come into existence") (applying New York law).

Thus, New York law permits, at most, the creation of an equitable lien on future settlement proceeds. Id."An equitable lien is 'a right ... to have a fund, specific property, or its proceeds, applied in whole or in part to the payment of a particular debt.' " Bank of India v. Weg & Myers, 257 A.D.2d 183, 691 N.Y.S.2d 439, 445 (1999). This framework, however, still does not permit the transfer of an individual's present ownership interest in future receivables for damages to recover for personal injury, which is what the NFL Purchase Agreements attempt to do, albeit unsuccessfully. Id.

In sum, Defendants' arguments that assignments of claims to settlement award funds under the NCLSA are valid are without merit.

d. Interpretation of the New York UCC

New York Uniform Commercial Code ("NY UCC") § 9-408(d)(1) establishes a general bar on anti-assignment clauses limiting the transfer of "general intangibles." N.Y. U.C.C. § 9-408(d)(1). This provision also enumerates certain exceptions to the general rule against such clauses. Id. One such exception applies to "the right to receive compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) and (2), as amended from time to time." Id. Section 104(a) of the Internal Revenue Code excludes certain types of compensation from gross income, including "the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness[.]" 26 U.S.C. § 104(a)(2).

The RD Entities contend that because the NCLSA does not specify whether compensation from it qualifies as excludable income under Section 104, the NY UCC's exception for restrictions on assignments of monetary claims for personal injury settlements does not save the anti-assignment provision as it relates to "proceeds" from settlement of personal injury claims. Id. § 104(a) ; (ECF No. 62.)

It is beyond peradventure that compensation from the NFL Settlement Agreement constitutes "damages ... received ... on account of personal physical injuries" under Section 104 of the Internal Revenue Code. Id. § 104(a)(2). The NCLSA is rooted in the physical injuries resulting from repeated brain injuries that retired NFL players experienced while active in professional football. See Explanation and Order at 4 n.6.

Accordingly, the NY UCC does not invalidate the NFL Settlement Agreement's anti-assignment provision.

e. The NFL-related Purchase Agreements Are Void

In sum, the NCLSA validly prohibits the assignment of NFL Class Members' monetary claims. Therefore, the assignments in the NFL Purchase Agreements are void.

2. 31 U.S.C. § 3727 Invalidates the Assignment of Compensation Awards from the VCF

The RD Entities and the Government disagree over whether federal law prohibits the assignment of compensation that the VCF awards to an Eligible Claimant. On the one hand, the Government argues that the Anti-Assignment Act, 31 U.S.C. § 3727, prohibits assignment of Eligible Claimants' rights to their award amount under the VCF. See 31 U.S.C. § 3727 (" Section 3727" or the "Anti-Assignment Act"); (Pl. Opp. 13-14.) On the other hand, the RD Entities assert that because the Anti-Assignment Act bars only the assignment of a substantive claim against the United States, not the assignment of settlement proceeds, the assignments in the Purchase Agreements are permissible. (Def. Reply 5-6.)

Neither of the parties has cited to, and this Court has not been able to identify, a case addressing whether the Anti-Assignment Act applies to the VCF structure instituted by the Air Transportation Safety and System Stabilization Act, codified at 49 U.S.C. § 40101. For the reasons that follow, the Court concludes that it does.

a. The Anti-Assignment Act, 31 U.S.C. § 3727

Congress initially enacted the Assignment of Claims Act, now known as the Anti-Assignment Act, in 1853. United States v. Kim, 806 F.3d 1161, 1169 (9th Cir. 2015). The Anti-Assignment Act was intended to:

"(1) [T]o prevent persons of influence from buying up claims against the United States, which might then be improperly urged upon officers of the Government, (2) to prevent possible multiple payment of claims, to make unnecessary the investigation of alleged assignments, and to enable the Government to deal only with the original claimant, and (3) to save to the United States defenses which it has to claims by an assignor by way of set-off, counter claim, etc., which might not be applicable to an assignee."

In re Ideal Mercantile Corp., 244 F.2d 828, 831 (2d Cir. 1957) (quoting United States v. Shannon, 342 U.S. 288, 291-92, 72 S.Ct. 281, 96 L.Ed. 321 (1952) ).

To this end, the Anti-Assignment Act, 31 U.S.C. § 3727, imposes restrictions on the assignment of claims against the United States Government. The statute defines an assignment as "a transfer or assignment of any part of a claim against the United States Government or of an interest in the claim" or "the authorization to receive payment for any part of the claim." Id. Section 3727 permits assignments of a claim against the United States only after "[1] [the] claim is allowed, [2] the amount of the claim is decided, and [3] a warrant for payment of the claim has been issued." Id.

i. "Claim Against the United States"

The Anti-Assignment Act restricts the assignment of "claims against the United States." Id. As an initial matter, therefore, the Court must determine whether an Eligible Claimant's entitlement to a monetary award from the VCF is a "claim against the United States." Kim, 806 F.3d at 1170.

Although the Anti-Assignment Act does not define the term explicitly, "[w]hat is a claim against the United Stated is well understood. It is a right to demand money from the United States." Hobbs v. McLean, 117 U.S. 567, 575, 6 S.Ct. 870, 29 L.Ed. 940 (1886). This interpretation accords with the term's dictionary definition, which is "[t]he assertion of an existing right; any right to payment or to an equitable remedy, even if contingent or provisional ... [a] demand for money, property, or a legal remedy to which one asserts a right." Claim, Black's Law Dictionary (10th ed. 2014).

Applying this definition here, an Eligible Claimant's monetary award from the VCF is a "claim against the United States" because it creates a "right to demand money from the United States" upon Eligible Claimants' receipt of their award letter. Hobbs, 117 U.S. at 575, 6 S.Ct. 870 ; see also Kim, 806 F.3d at 1171 ("An award of statutory attorney's fees is, at base, a right to demand money from the United States."). Although the VCF is a unique, if not unprecedented, legal creature, the Court sees no reason why a monetary award under the VCF is not a "claim against the United States." Hobbs, 117 U.S. at 575, 6 S.Ct. 870 ; see also Kim, 806 F.3d at 1171 (quoting United States v. Gillis, 95 U.S. 407, 413, 24 L.Ed. 503 (1877) ) ("No language could be broader or more emphatic than these enactments. The words embrace every claim against the United States, however arising, of whatever nature it may be, and wherever and whenever presented") (internal quotation marks omitted).

Defendants argue that the Anti-Assignment Act only restricts the assignment of substantive claims against the United States. (Def. Rep. 5.) Applying this principle here, the RD Entities contend that the VCF Purchase Agreements assign Eligible Claimants' right to proceeds from the VCF rather than Eligible Claimants' substantive claims. Therefore, they say, Section 3727 does not bar these assignments. (Def. Reply 5); (ECF No. 74.)

In the same way that the RD Entities misconstrue the legal distinction between the assignment of "claims" and the assignment of "proceeds from claims" with the NFL-related Purchase Agreements, they do so once more here. Courts have held uniformly that an individual's right to receive payment directly from the United States Government is a substantive claim that may not be assigned under the Anti-Assignment Act. SeeKim, 806 F.3d at 1170-71 (citing United States v. Transocean Air Lines, Inc., 386 F.2d 79, 81 (5th Cir. 1967) ; Kearney v. United States, 285 F.2d 797, 800 (Ct. Cl. 1961) ; Pittman v. United States, 116 F.Supp. 576, 580 (Ct. Cl. 1953) ).

Consistent with this interpretation, the Anti-Assignment Act does not restrict a would-be assignor's ability to create a legal obligation to pay a would-be assignee after the United States Government has paid the would-be assignor. In this situation, the would-be assignee could then "enforce[ ]" the agreement "by suit" if the would-be assignor did not "recognize" this agreement "after collection of the money." Nutt v. Knut, 200 U.S. 12, 20, 26 S.Ct. 216, 50 L.Ed. 348 (1906) (emphasis added). Anti-Assignment Act jurisprudence establishes clearly that a party is free to enter into an agreement that legally obligates it with respect to a future payment from the United States Government after the party has received the funds. See, e.g., Martin v. Nat'l Sur. Co., 300 U.S. 588, 595, 57 S.Ct. 531, 81 L.Ed. 822 (1937) (emphasis added) ("After payments have been collected and are in the hands of the contractor or subsequent payees with notice, assignments may be heeded, at all events in equity, if they will not frustrate the ends to which the [statute] was directed."); First Fed. Sav. & Loan Ass'n of Rochester v. United States, 58 Fed.Cl. 139, 157-58 (Ct. Cl. 2003) ("The assignee has no claim against the government. The assignments were of a right to proceeds-a contractual arrangement between private parties."); Saint John Marine Co. v. United States, 92 F.3d 39 (2d Cir. 1996) (holding contractual obligations between private parties regarding proceeds from the United States Government enforceable but assignment as against the United States void); In re Ideal Mercantile Corp., 244 F.2d at 832 (citing McKenzie v. Irving Tr. Co., 323 U.S. 365, 369, 65 S.Ct. 405, 89 L.Ed. 305 (1945) ) (emphasis added)

("[I]t seems clear that an assignment of a claim against the United States is enforceable in many cases as between parties to that assignment, or their successors in interest, after the Government has paid the claim.").

Defendants cite to Saint John Marine for the proposition that the Purchase Agreements are valid because while "the Anti-Assignment Act 'voids the assignment as against the United States, the assignment remains enforceable as between the parties to the contract.' " (ECF No. 74) (citing Saint John Marine, 92 F.3d at 45 ) (emphasis added). It is nose-on-the-face plain that the Court of Appeals did not mean that assignments like the ones at issue here, which purport to transfer all of Eligible Claimants' present rights and interests in a portion of their VCF award, including the right to demand payment directly from the United States Government, are permissible under the Anti-Assignment Act. (See Def. Br. Sec. III(A)(1)(b) ) ("The Assignments Give the RD Entities the Right to Demand Direct Payment from the Holder of the Funds."). Rather, the Court of Appeals was reiterating a well-established legal principle in Anti-Assignment Act case law: an assignment that is void as against the United States under the Anti-Assignment Act "may amount to the creation of an equitable lien when the subject matter of the assignment has been reduced to possession and is in the hands of the assignor." Martin, 300 U.S. at 597, 57 S.Ct. 531. This general principle comports with the Anti-Assignment Act's underlying purpose. "The United States has no need to worry about fraud or any of the other evils associated with the assignment of claims against it once the proceeds of the claims have been reduced to the possession of the purported assignor." Kim, 806 F.3d at 1176-77. After the United States Government has remitted payment to the purported assignor, the Act's protective purpose "is not implicated." Id. at 1177. Therefore, an equitable lien on funds to be received in the future from the United States Government is permissible, but assignment of a right to collect payment directly from the United States Government is not.

In sum, the RD Entities' argument shows too much by arguing that Defendants purport to contract for a full ownership interest in a portion of Eligible Claimants' award, which plainly includes the right to demand payment for that portion directly from the United States Government. (Dersovitz Aff. Ex. A-1 at 16) (letter from RD Entities to VCF Claims Processing Center demanding payment be made directly to RD Entities pursuant to Purchase Agreement); (Def. Br. Sec. III(A)(1)(b) ) ("The Assignments Give the RD Entities the Right to Demand Direct Payment from the Holder of the Funds."). "From the beginning ... the Anti-Assignment Act has been concerned with direct payment of claims." Kim, 806 F.3d at 1176. The Purchase Agreements purport to transfer Eligible Claimants' right to receive payment directly from the United States Government to the RD Entities. This is precisely what the statute governs, and this is not allowed.

ii. Statutory Purpose

Having concluded that an award of compensation under the September 11th VCF constitutes a "claim" within the meaning of the Anti-Assignment Act, the Court must next determine whether application of the Anti-Assignment Act to the VCF's enabling statute would advance the statute's stated objectives before applying it. Saint John Marine, 92 F.3d at 49 ; See N.Y. Guardian Mortgagee Corp. v. Cleland, 473 F.Supp. 422, 434 (S.D.N.Y. 1979) ("[T]here must be some congruence between the Act and its purposes before it is applied.").

In passing the Anti-Assignment Act, Congress sought to protect the United States Government by restricting the assignment of claims against it. See Martin, 300 U.S. at 594, 57 S.Ct. 531 ("The provisions of the statute making void an assignment or power of attorney by a Government contractor are for the protection of the Government."). As noted above, Congress sought to limit the United States Government's exposure to three potential liabilities:

"(1) [T]o prevent persons of influence from buying up claims against the United States, which might then be improperly urged upon officers of the Government, (2) to prevent possible multiple payment of claims, to make unnecessary the investigation of alleged assignments, and to enable the Government to deal only with the original claimant, and (3) to save to the United States defenses which it has to claims by an assignor by way of set-off, counter claim, etc., which might not be applicable to an assignee."

In re Ideal Mercantile Corp., 244 F.2d at 831 (quoting Shannon, 342 U.S. at 291-92, 72 S.Ct. 281 ).

In spite of the Anti-Assignment Act's broad language, courts have held the statute inapplicable where enforcement would not advance its underlying purposes. See N.Y. Guardian, 473 F.Supp. at 433-34 ("Despite the broad language of the Act, numerous exceptions to it have been recognized when [its] purposes would not be served."). For example, the Anti-Assignment Act does not bar involuntary assignments that occur by operation of law, Saint John Marine, 92 F.3d at 48, which courts have interpreted to include "corporate mergers, consolidations, and reorganizations," First Fed. Sav. & Loan Ass'n of Rochester, 58 Fed.Cl. at 158. Voluntary assignments for the benefit of creditors, transfers imposed by judicial order, subrogation, and corporate reorganizations that result in a transfer of assets are also situations in which courts have found the Anti-Assignment Act to be inapplicable. Saint John Marine, 92 F.3d at 49 (citing Goodman v. Niblack, 102 U.S. 556, 26 L.Ed. 229 (1880) ; Keydata Corp. v. United States, 504 F.2d 1115 (Ct. Cl. 1974) ; United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 70 S.Ct. 207, 94 L.Ed. 171 (1949) ).

After weighing the relevant factors, the Court concludes that application of the Anti-Assignment Act to 49 U.S.C. § 40101 would further Congress's intent in passing the Act. See N.Y. Guardian, 473 F.Supp. at 434.

First, applying the Anti-Assignment Act to awards under the VCF would allow the United States Government the opportunity, if ever necessary, to set off an Eligible Claimant's award amount against preexisting debts owed to the United States. See Shannon, 342 U.S. at 291-92, 72 S.Ct. 281 ; Kim, 806 F.3d at 1172.

More significantly, however, application of the Anti-Assignment Act to 49 U.S.C. § 40101 limits the possibility of multiple payments of claims, preserves United States Government resources by eliminating the need for diligence to validate an alleged assignment, and streamlines the VCF's administration by requiring the United States Government to interact with only the original claimant. See In re Ideal Mercantile Corp., 244 F.2d at 831. The Special Master of the VCF has previously stated that the potential for fraud is a primary concern in the administration of the Fund. See September 11th Victim Compensation Fund, First Annual Status Report, at 4 (Oct. 2012), https://www.vcf.gov/pdf/VCFStatusReportOct2012.pdf ("As with any government program involving compensation, it is crucial that we implement key protocols to prevent fraud."). As the Special Master has noted, "[t]hese efforts are particularly important given the cap on the total amount of money available for the Fund." Id. Limiting the number of individuals to whom the United States Government makes award payments under the VCF would undoubtedly minimize the potential for fraud.

Accordingly, application of the Anti-Assignment Act to 49 U.S.C. § 40101 and, more specifically, to monetary awards issued under the VCF would further the purposes of the Act. Therefore, the Anti-Assignment Act applies to claims arising under 49 U.S.C. § 40101.

iii. The VCF-related Purchase Agreements Do Not Comply With the Anti-Assignment Act's Requirements

The Anti-Assignment Act allows a party to assign a claim against the United States only if it is made after "[1] a claim is allowed, [2] the amount of the claim is decided, and [3] a warrant for payment of the claim has been issued." 31 U.S.C. § 3727(b).

The RD Entities appear to argue that because they entered into the Purchase Agreements with Eligible Claimants only "after the Special Master's determination of the amount due to the seller, i.e., after the claim had been allowed," (Def. Rep. 6), Defendants have complied with Section 3727's requirements and the assignment is therefore permissible.

Oddly, the RD Entities do not address their compliance with the Anti-Assignment Act's two other technical requirements. 31 U.S.C. § 3727(b) ; Kim, 806 F.3d at 1176. However, this is of no event. The Court of Appeals for the Ninth Circuit has noted that compliance with Section 3727's third requirement, which allows for assignment of claims only after "a warrant for payment of the claim has been issued," is almost impossible given that "the Treasury no longer uses warrants." See 31 U.S.C. § 3727(b) ; Kim, 806 F.3d at 1169. Because the Government may, at its choosing, "waive coverage of the Anti-Assignment Acts," Kim, 806 F.3d at 1169 (quoting Riviera Fin. of Tex., Inc. v. United States, 58 Fed.Cl. 528, 530 (2003) ), the warrant's anachronistic character, coupled with Congress's inaction in updating the statute's language, gives the Government "the power to pick and choose which assignments it will accept and which it will not." Kim, 806 F.3d at 1169-70. Here, there is no indication that the United States Government has waived coverage of the Anti-Assignment Act to 49 U.S.C. § 40101. In addition, neither party has argued that the RD Entities complied with the Anti-Assignment Act's three requirements under Section 3727(b).

Accordingly, because neither the RD Entities nor the Government have argued or alleged facts that the VCF Purchase Agreements comply with Section 3727's requirements, these assignments are void as against the United States under 31 U.S.C. § 3727.

3. Eligible Claimants and NFL Class Members "Incur[red] Debt" Through the Purchase Agreements

After addressing the preliminary issue of whether the VCF and NCLSA permit the assignment of Consumers' claims to settlement awards, which they do not, the Court is able to turn to the crux of the jurisdictional question presented here: whether the Purchase Agreements cause Consumers to incur "debt" such that the RD Entities "extend[ ] credit" within the meaning of a "covered person" under the CFPA. 12 U.S.C. §§ 5481(6) - (7). The RD Entities argue that, even if the assignments are invalid, this fact merely renders the Purchase Agreements void and would not "transform" the Purchase Agreements into extensions of "credit." (Def. Br. 18-21.) In its rather sparse response to this contention, the Government asserts that because the Purchase Agreements are invalid, Defendants functionally offer or provide a credit transaction in which consumers incur debt and defer the right to repay. (Compl. ¶ 19.)

In spite of the puzzling paucity of case law addressing facts similar to those at issue here, the Court agrees ultimately that the assignments in the Purchase Agreements are void as against the third-party obligors, i.e., the VCF Claims Administrator and the NFL Settlement Fund, but give rise to a relationship between Defendants and Consumers in which the RD Entities "extend[ ] credit" and the Con