980 F.3d 9
2d Cir.2020Background:
- From 2004–2014 Moseley ran an online payday-loan operation from Missouri using entities in Nevada, Nevis, and New Zealand; loans were typically ≤ $500 and charged $30 per $100 every two weeks (effective APRs up to ~780%).
- Loan contracts contained choice-of-law clauses designating Nevada/Nevis/New Zealand law; operations and employees, however, were physically located in Kansas City, Missouri.
- The business often made loans without borrower consent (employees failed to contact ~70% of borrowers; e-signatures were falsified) and repeatedly debited recurring fees unless borrowers proactively repaid principal.
- Loan documents displayed a “Total of Payments” equal to principal plus a single fee and contained fine-print conditions that effectively made that single-payment schedule illusory for most borrowers.
- Federal indictment (S.D.N.Y.) charged Moseley with RICO (collection of unlawful debt), wire fraud, identity theft, and criminal TILA violations; a jury convicted on all counts; district court sentenced him to 120 months and ordered $49M forfeiture.
- The Second Circuit affirmed, addressing choice-of-law/usury application, due-process fair‑warning, scienter sufficiency for RICO, accuracy of TILA disclosures, evidentiary rulings, and the Guidelines loss calculation.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether New York usury law governs loans to NY borrowers despite contract choice-of-law clauses | Government: New York law applies to protect NY consumers; choice clauses are unenforceable as against NY public policy | Moseley: Enforce choice-of-law clauses (Nevada/Nevis/New Zealand) so NY usury law should not apply | Court: Choice clauses unenforceable for consumer loans; NY has dominant contacts and public‑policy interest, so NY usury law governs |
| Whether RICO prosecution violated due‑process fair‑warning by applying "unlawful debt" when choice clauses appeared to avoid usury law | Gov: RICO's unlawful‑debt definition and NY public‑policy rejection of choice clauses gave fair notice | Moseley: He lacked fair notice that RICO could reach his scheme given contractual designations | Court: No fair‑warning violation; applying RICO here was foreseeable under existing law |
| Whether evidence supports required scienter (awareness of unlawfulness) for RICO unlawful‑debt conviction | Gov: Evidence (Moseley’s admissions, regulatory warnings, counsel warnings, evasive conduct) shows awareness | Moseley: He relied on counsel and lacked awareness/willfulness | Court: Evidence was sufficient for a rational jury to find he knew the lending was unlawful |
| Whether TILA "total of payments" disclosures were accurate | Gov: Disclosures were misleading because they showed only principal + one fee though no scheduled payment reduced principal and recurring fees were expected | Moseley: Disclosures were as accurate as possible given variable future events | Court: Jury reasonably found disclosures misleading; TILA requires disclosure of total under the scheduled payment plan in effect at origination |
Key Cases Cited
- United States v. Grote, 961 F.3d 105 (2d Cir. 2020) (discusses scienter for RICO "unlawful debt" and related payday‑lending prosecutions)
- United States v. Biasucci, 786 F.2d 504 (2d Cir. 1986) (earlier formulation of elements for RICO unlawful‑debt convictions)
- United States v. Lanier, 520 U.S. 259 (1997) (fair‑warning/due‑process standard for novel constructions of criminal statutes)
- Bouie v. City of Columbia, 378 U.S. 347 (1964) (rule that unexpected judicial enlargement of criminal statute can violate due process)
- Int'l Minerals & Res., S.A. v. Pappas, 96 F.3d 586 (2d Cir. 1996) (New York treats express contractual choice‑of‑law as generally determinative unless fraud or public policy intervenes)
- Schneider v. Phelps, 41 N.Y.2d 238 (N.Y. 1977) (explains New York usury statutes reflect a longstanding public policy protecting vulnerable borrowers)