Madden v. Midland Funding, LLC, 237 F. Supp. 3d 130

Background

Plaintiff Saliha Madden had a Bank of America credit card account; a 2006 Change in Terms transferred administration to FIA Card Services and included a Delaware choice-of-law clause. FIA later assigned her charged-off debt to Midland Funding; Midland (with servicer MCM) sent collection letters seeking interest at ~32.24% APR.
Madden sued alleging FDCPA violations (for attempting to collect usurious interest), N.Y. GBL § 349 claims, and state usury claims; prior summary judgment was entered after a stipulation but was reversed by the Second Circuit, which left the choice-of-law question for the district court.
Defendants moved for renewed summary judgment arguing Delaware law governs (no usury cap) so New York usury-based claims and FDCPA predicates fail; Plaintiff sought class certification of New York residents who received letters seeking >25% interest.
The court held New York law applies despite the Delaware choice clause because applying Delaware usury law would violate New York’s fundamental public policy against usury; the court concluded New York’s criminal usury cap (25%) applies to defaulted debts for purposes of this dispute and can be a predicate for FDCPA claims.
The court granted summary judgment to defendants on pure state usury causes of action (§ 5-501 and § 190.40) because criminal usury statutes do not create a private cause of action, but denied summary judgment on FDCPA and GBL § 349 claims.
The court certified a limited class: New York residents sent collection letters seeking >25% interest where the underlying card agreements either selected a state law with no usury cap (like Delaware) or selected New York; it created a Rule 23(b)(2) injunctive/ declaratory GBL class and a Rule 23(b)(3) damages class (with FDCPA and GBL subclasses).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does New York or Delaware law govern despite a Delaware choice-of-law clause?	Choice clause should be disregarded because application of Delaware law would offend NY public policy on usury.	Enforce Delaware choice clause; Delaware law permits the charged rate.	New York law governs: applying Delaware usury law would violate NY fundamental public policy against usury.
Does NY criminal usury cap (25%) apply to defaulted obligations and can it predicate FDCPA claims?	NY criminal usury cap applies to defaulted debts and can be used to show defendants were not legally entitled to the interest they sought.	Manfra and some federal cases suggest usury statutes do not apply to defaulted obligations; criminal usury is a criminal statute not enforceable by private parties.	Court concluded NY state decisions (e.g., Emery and progeny) support that the 25% criminal cap limits interest on defaulted debts for these purposes; criminal usury supplies predicate for FDCPA claims, though it provides no private remedy itself.
Can private plaintiffs / federal courts ‘enforce’ NY criminal usury statute?	FDCPA claims need only show whether defendant was permitted by law to collect the amount; private FDCPA suits can predicate liability on state law limits.	Private parties cannot enforce state criminal statutes; federal courts lack power to prosecute crimes.	Private FDCPA claims seeking to show unlawful collection based on criminal usury are permissible; plaintiffs do not seek criminal penalties but to show amounts were not permitted by law.
Is class certification proper (commonality, predominance, manageability) for NY residents sent letters seeking >25%?	Yes — form letters and similar choice-of-law issues yield common questions; class should be limited to agreements selecting no law other than NY or selecting a state with no usury cap.	Individualized choice-of-law and agreement-formation disputes preclude common resolution.	Court certified a narrowed class: members must be NY residents sent letters seeking >25% whose agreements either choose a no-usury-cap state's law or choose NY; both a (b)(2) injunctive/ declaratory GBL class and a (b)(3) damages class (FDCPA and GBL subclasses) were certified.

Key Cases Cited

Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir.) (directs district court to address choice-of-law issue on remand)
Manfra Tordella & Brookes, Inc. v. Bunge, 794 F.2d 61 (2d Cir.) (discusses applicability of usury laws to defaulted obligations; contains influential footnote)
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S.) (summary judgment standard: genuine dispute of material fact)
Celotex Corp. v. Catrett, 477 U.S. 317 (U.S.) (movant’s initial burden on summary judgment)
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (U.S.) (class certification requires common questions capable of classwide answers)
Sykes v. Mel S. Harris & Assocs. LLC, 780 F.3d 70 (2d Cir.) (discusses FDCPA class certification, predominance, and damages formula)