Maddox v. Bank of N.Y. Mellon Tr. Co.
19 F.4th 58
| 2d Cir. | 2021Background
- Sandra Maddox and Tometta Maddox Holley paid off a mortgage in early October–November 2014; BNY Mellon did not record the mortgage satisfaction with the Erie County Clerk until September 22, 2015 (≈11 months later).
- New York law (R.P.L. §275; R.P.A.P.L. §1921) requires presentation of a certificate of discharge within 30 days of payoff and makes the mortgagee liable to the mortgagor for escalating statutory penalties for late filing (up to $1,500).
- The Maddoxes sued BNY Mellon to recover the statutory penalty and to pursue class relief; BNY Mellon moved for judgment on the pleadings arguing lack of Article III standing (no concrete injury).
- The district court denied the motion, finding a material risk of harm from the delayed recording and certifying the standing question for interlocutory appeal; the Second Circuit affirmed and remanded for further proceedings.
- The Second Circuit held that state legislatures may create legally protected interests whose violation can supply Article III injury-in-fact, and that the Maddoxes plausibly alleged concrete and particularized harms (reputational injury and a material risk to credit/borrowing capacity) from the late recording.
- Judge Jacobs dissented, arguing no concrete injury to these plaintiffs (emphasizing the statutes’ recordkeeping purpose, the absence of realized or plausible risk to the plaintiffs, and New York’s bar on class recovery of statutory penalties).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state legislatures can create legally protected interests whose invasion supports Article III standing | State statutory rights (like timely satisfaction recording) create legally protected interests that federal courts can enforce | Some statutory violations do not create federal Article III injuries; courts must apply Spokeo limits | Yes: state legislatures may create such rights, subject to the same federal limitations applied to federal statutory rights |
| Whether the Maddoxes have Article III injury-in-fact from BNY Mellon’s delayed recording | The delay caused reputational harm and a material, particularized risk of credit impairment and reduced borrowing capacity during the ~10-month wrongful period | No concrete or particularized injury occurred; at most a remedied procedural violation (insufficient under Spokeo) | Yes: alleged concrete and particularized harms (reputational injury and material risk to credit/borrowing) satisfy injury-in-fact |
| Whether the satisfaction statutes are substantive or procedural and effect on standing | Statutes protect substantive interests (clouded title, reputation/credit) so violation alone is a concrete injury; if procedural, the violation still created a material risk of harm | The statutes are primarily remedial/recordkeeping (procedural), and plaintiffs must show additional concrete harm | Court: statutes are plausibly substantive; but even if procedural, the alleged material risk of harm suffices for standing |
| Whether state limitations on class recovery or small statutory penalty undermine standing or federal class claims | Plaintiffs may seek statutory penalties and pursue class relief in federal court under federal rules/CAFA | State law bars class recovery of statutory penalties and penalty amounts are arbitrary/unrelated to concrete harm | Court: state choices about class recovery do not negate Article III injury; class-certification and other jurisdictional matters remain for district court to decide |
Key Cases Cited
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (framework for concreteness and intangible injuries)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements)
- Strubel v. Comenity Bank, 842 F.3d 181 (2d Cir. 2016) (applying Spokeo to informational statutes and ‘‘material risk’’ analysis)
- Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75 (2d Cir. 2018) (procedural statutory violation presenting a risk of harm can support standing)
- Nicklaw v. CitiMortgage, Inc., 839 F.3d 998 (11th Cir. 2016) (contrary view on standing for similar recording-statute claims)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) (federal courts may allow class actions despite state procedural limits)