Greater Chautauqua Federal Credit Union v. Quattrone

Background

New York’s Fair Consumer Judgment Interest Act reduced the default post-judgment interest rate for state-court judgments involving consumer debts from nine percent to two percent. The Act applies prospectively to judgments entered after April 30, 2022, and retroactively to interest on unpaid portions of judgments entered before that date.

Greater Chautauqua Federal Credit Union, Boulevard Federal Credit Union, and Greater Niagara Federal Credit Union hold hundreds of consumer judgments. They sued state officials, including sheriffs and the New York Attorney General, asserting constitutional claims based on due process and the Takings Clause. They sought to stop retroactive enforcement of the Act.

In an earlier round of this case, the court issued a preliminary injunction—a temporary order restricting enforcement of the law—against the sheriffs. The injunction barred them from enforcing the Act retroactively against all judgment holders, not just the three credit unions. The court later dismissed the due-process and physical-taking claims but allowed the credit unions’ regulatory-taking claim to proceed. A regulatory-taking claim alleges that government regulation went too far in reducing the value of property. The credit unions clarified that they were asserting an as-applied challenge, meaning a challenge based on how the law affects them in their particular circumstances, rather than a facial challenge to the law in all circumstances.

Motion to Modify the Injunction

The Attorney General moved to modify the preliminary injunction so that it would protect only the three named credit unions. The credit unions opposed the motion, and the sheriffs also opposed it, arguing that a narrower injunction would create an administrative burden by requiring them to apply different interest rates to different creditors.

The court held that the standard for modifying a preliminary injunction differs from the stricter standard applicable to a final injunction. Under the governing Second Circuit precedent, a court has discretion to modify preliminary relief as the case develops. The court rejected the credit unions’ argument that the Attorney General had to show a significant change in law or facts.

Court’s Reasoning

The court explained that injunctive relief generally should not burden defendants more than necessary to fully protect the plaintiffs. It had issued the original broad injunction at the beginning of the case, before receiving the benefit of the full complaint and adversarial briefing. As the litigation developed, the credit unions clarified that their remaining claim was an as-applied regulatory-taking claim.

The court reasoned that the regulatory-taking claim requires a fact-specific review of matters such as the regulation’s economic effect, interference with reasonable investment-backed expectations, and the character of the government action. Because those facts concern the named credit unions, the court concluded that the injunction should be limited to them.

The court also emphasized that no class had been certified. Although the complaint was styled as a class action and included class allegations, the credit unions had not moved for class certification. The court stated that extending the injunction to people who were not parties would effectively provide class-wide relief without requiring the plaintiffs to satisfy the legal requirements for class certification.

Disposition

The court GRANTED the Attorney General’s motion to modify the scope of the preliminary injunction. The injunction is limited to Greater Chautauqua Federal Credit Union, Boulevard Federal Credit Union, and Greater Niagara Federal Credit Union. The order did not decide the ultimate merits of the regulatory-taking claim.