Greater Chautauqua Federal Credit Union v. Quattrone

Background

Greater Chautauqua Federal Credit Union, Boulevard Federal Credit Union, and Greater Niagara Federal Credit Union sued Sheriff James B. Quattrone, Sheriff John C. Garcia, Sheriff Michael J. Filicetti, and Attorney General Letitia James in their official capacities. The plaintiffs challenged the retroactive application of New York’s Fair Consumer Judgment Interest Act. The Act reduced the default post-judgment interest rate on state-court judgments involving consumer debts from nine percent to two percent and applied both prospectively and retroactively.

The plaintiffs alleged that the retroactive reduction violated the Fifth Amendment’s Takings Clause. In earlier rulings, the court granted a preliminary injunction, declined to dismiss the claims against the Attorney General, dismissed certain due-process and physical-takings claims, and concluded that the plaintiffs had plausibly stated an as-applied regulatory-takings claim. An as-applied challenge argues that a law is unconstitutional because of how it operates against particular plaintiffs, rather than arguing that the law is invalid in every circumstance.

The plaintiffs later moved under Federal Rule of Civil Procedure 23 to certify a class consisting of holders of unpaid judgments arising from consumer debt, as defined by the Act, entered in New York before April 30, 2022. They sought certification under Rule 23(b)(2), which applies when a single injunction or declaratory judgment would provide appropriate relief to the class as a whole.

Timeliness

The court held that the motion was untimely. The plaintiffs filed it more than two years after starting the action, four months after the original fact-discovery deadline, and two months after the extended close of fact discovery. The court also relied on the plaintiffs’ statements during an earlier hearing that they would move immediately for class certification, followed by a seven-month delay after the preliminary injunction was modified.

The court found that the delay was abusive and tactical and that the defendants reasonably claimed prejudice because they had not been able to conduct complete discovery concerning the proposed class. The court explained that delay alone would not necessarily have required denial, because it could have allowed additional discovery, but concluded that the motion also failed on the class-certification requirements.

Rule 23 Requirements

The court found that the proposed class satisfied the implied requirement of ascertainability because its definition used objective criteria and had definite boundaries. The court also found that numerosity was satisfied, noting the plaintiffs’ assertion that the class likely included hundreds or more than a thousand entities and that the Attorney General did not argue that the class was too small.

The court found that commonality was not satisfied. Commonality requires shared questions capable of producing answers that drive resolution of the case. The court reasoned that the plaintiffs’ as-applied regulatory-takings claim required individualized inquiries into each creditor’s financial models, investment-backed expectations, risk tolerance, lending practices, and the economic effect of the Act. The court also rejected the argument that every class member suffered the same injury from a seven-percentage-point reduction because the actual economic impact could differ among creditors.

The court likewise found that typicality was not satisfied. Although the proposed class members challenged the same law under the same regulatory-takings theory, the Penn Central analysis required fact-specific inquiries into the economic effect of the law, each claimant’s reasonable investment-backed expectations, and the character of the government action. The court concluded that the named credit unions’ factual allegations and claimed expectations could not be treated as typical of all proposed class members.

The court found that adequacy of representation was satisfied. It concluded that the named plaintiffs had the same general interest as the proposed class in preventing retroactive application of the Act, had demonstrated the minimum knowledge needed to represent the class, and had no conflicting interests. The court also found that class counsel, Venable LLP, had the necessary experience and qualifications.

Rule 23(b)(2)

The court separately held that the plaintiffs failed to satisfy Rule 23(b)(2). That provision requires the requested injunctive or declaratory relief to be appropriate for every class member. The court reasoned that determining whether the Act caused a regulatory taking would require individualized Penn Central analyses, and those analyses could show that the requested relief was appropriate for only some proposed class members.

The court also considered the defendants’ assertion that the proposed class included creditors that had abandoned collection efforts because debtors had died without assets, declared bankruptcy, or could not be located. If some proposed members were not at risk of injury from the Act, the court stated, classwide injunctive relief would be inappropriate without further individualized analysis.

Disposition

The court denied the motion for class certification. It directed the Clerk of Court to terminate the motion at ECF No. 168. The opinion did not state that the underlying regulatory-takings claim was dismissed or otherwise resolve the ultimate constitutionality question in this order.