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Madden v. Midland Funding, LLC

United States Court of Appeals for the Second Circuit

March 19, 2015, Argued; May 22, 2015, Decided

No. 14-2131-cv

Opinion

 [*247]  Straub, Circuit Judge:

This putative class action alleges violations of the Fair Debt Collection Practices Act ("FDCPA") and New York's usury law. The proposed class representative, Saliha Madden, alleges that the defendants violated the FDCPA by charging and attempting to collect interest at a rate higher than that permitted under the law of her home state, which is New York. The defendants contend that Madden's claims fail as a matter of law for two reasons: (1) state5 law usury claims and FDCPA claims predicated on state-law violations against a national bank's assignees, such as the defendants here, are preempted by the National Bank Act ("NBA"), and (2) the agreement governing Madden's debt requires the application of Delaware law, under which the interest charged is permissible.

The District Court entered judgment for the defendants. Because neither defendant is a national bank nor a subsidiary or agent of a national bank, or is otherwise acting on behalf of a national bank, and because application of the state law on which Madden's claims rely would not significantly interfere with any national bank's ability to exercise [**3]  its powers under the NBA, we reverse the District Court's holding that the NBA preempts Madden's claims and accordingly vacate the judgment of the District Court. We leave to the District Court to address in the first instance whether the Delaware choice-of-law clause precludes Madden's claims.

The District Court also denied Madden's motion for class certification, holding that potential NBA preemption required individualized factual inquiries incompatible with proceeding as a class. Because this conclusion rested upon the same erroneous preemption analysis, we also vacate the District Court's denial of class certification.

BACKGROUND

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786 F.3d 246 *; 2015 U.S. App. LEXIS 8483 **

SALIHA MADDEN, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. MIDLAND FUNDING, LLC, MIDLAND CREDIT MANAGEMENT, INC., Defendants-Appellees.

Subsequent History: As Corrected May 27, 2015.

Later proceeding at Midland Funding, LLC v. Madden, 136 S. Ct. 1484, 194 L. Ed. 2d 547, 2016 U.S. LEXIS 2039 (U.S., Mar. 21, 2016)

US Supreme Court certiorari denied by Midland Funding, LLC v. Madden, 136 S. Ct. 2505, 195 L. Ed. 2d 839, 2016 U.S. LEXIS 4211 (U.S., June 27, 2016)

On remand at, Summary judgment granted, in part, summary judgment denied, in part by, Class certification granted by Madden v. Midland Funding, LLC, 237 F. Supp. 3d 130, 2017 U.S. Dist. LEXIS 27109 (S.D.N.Y., Feb. 27, 2017)

Motion granted by, Settled by, Costs and fees proceeding at, Dismissed by In re Midland Funding, LLC Interest Rate Litig., 2019 U.S. Dist. LEXIS 156255 (S.D.N.Y., Sept. 10, 2019)

Prior History:  [**1] Appeal from the United States District Court for the Southern District of New York. No. 7:11-cv-08149 — Cathy Seibel, Judge.

Disposition: Appeal from an order of the United States District Court for the Southern District of New York (Cathy Seibel, Judge), holding that the plaintiff's claims are preempted by the National Bank Act, denying class certification, and granting judgment in favor of the defendants. We hold that non-national bank entities are not entitled to protection under the National Bank Act from state-law usury claims merely because they are assignees of a national bank.

Accordingly, we REVERSE the District Court's holding as to National Bank Act preemption, VACATE the District Court's judgment and denial of class certification, and REMAND for further proceedings consistent with this opinion.

CORE TERMS

national bank, district court, preemption, entity, card, collection, powers, Terms, state law, preempted, assignees, interfere, non-national, subsidiaries, regulations, Cardholder, state-law, vacate, OCC, class certification, originating, third-party, assigned, parties, denial of class certification, charge interest, expiration date, federal law, third party, gift card

Banking Law, Types of Banks & Financial Institutions, National Banks, General Overview, Constitutional Law, Supremacy Clause, Federal Preemption, Supreme Law of the Land, Interest & Usury, Affiliates & Subsidiaries, Loans, Bank Powers