United States Court of Appeals for the Second Circuit held Last month, state legislatures may create enforceable interests that are upheld by Article III, subject to certain federal restrictions, on an interlocutory appeal against a plea for written pleadings in a case involving alleged class action against a bank for alleged violations of the Law Of New York on the registration of the repayment of the mortgage. The court ruled that the alleged violations of New York law constituted specific harm to the plaintiffs in the form of damage to reputation and credit restrictions.
The New York State Mortgage Satisfaction Act requires mortgage lenders to record the satisfaction of the mortgage within thirty days of the borrower’s payment. Failure to comply with this requirement entails “liability of the creditor to the mortgagor” for an increase in the damage established by law in amounts depending on the delay in filing an application.
In this case, the bank allegedly did not record the satisfaction of the plaintiffs’ mortgage in the amount of more than $ 50,000 for almost eleven months after receiving full payment.
In considering whether the plaintiffs are eligible to sue the bank under Article III in an interlocutory appeal, the Court of Appeal ruled that state legislatures may create “enforceable interests” whose breaches satisfy the Article III requirements for actual damage that the plaintiffs in this case argued that the damage was in fact sufficient to satisfy the requirements of Article III. In its analysis, the court reasoned, based on Supreme Court precedent, that a state legislature, such as Congress, may recognize legitimate interests whose violations resemble those traditionally recognized in common law. The court noted that the New York Mortgage Repayment Registration Act creates a “legally protected interest,” and that violation of this law entails “specific” harm, regardless of whether those laws create “substantive” or “procedural” rights.
The court also ruled that the plaintiffs’ complaint supported the plausible conclusion that the bank’s breach damaged their financial reputation during the nearly ten-month non-compliance period and created a material risk of causing particular harm to the plaintiffs during this time by reducing their creditworthiness and limiting their creditworthiness. The judge, who disagreed, noted that the commission’s finding on financial reputation was inconsistent with how mortgages were reported to credit bureaus.