Greater Chautauqua Federal Credit Union v. Quattrone

USDC SDNY

DOCUMENT

ELECTRONICALLY FILED

UNITED STATES DISTRICT COURT DOC #:

SOUTHERN DISTRICT OF NEW YORK DATE FILED: 4/28/2022

GREATER CHAUTAUQUA FEDERAL CREDIT

UNION, individually and on behalf of all others

similarly situated, BOULEVARD FEDERAL

CREDIT UNION, individually and on behalf of all

others similarly situated, GREATER NIAGARA

FEDERAL CREDIT UNION, individually and on

behalf of all others similarly situated,

Plaintiffs,

-against- 1:22-cv-2753 (MKV)

HON. LAWRENCE K. MARKS, in his official OPINION AND ORDER

capacity as Chief Administrative Judge of the Courts, GRANTING PRELIMINARY

SHERIFF JAMES B. QUATTRONE, in his official INJUNCTION

capacity as Sheriff of Chautauqua County, New

York, SHERIFF JOHN C. GARCIA, in his official

capacity as Sheriff of Erie County, New York,

SHERIFF MICHAEL J. FILICETTI, in his official

capacity as Sheriff of Niagara County, New York,

and LETITIA JAMES, in her official capacity as

Attorney General of the State of New York,

Defendants.

MARY KAY VYSKOCIL, United States District Judge:

For more than forty years, interest on money judgments in New York has accrued at the

rate of nine percent per year. Last December, Governor Kathy Hochul signed into law the Fair

Consumer Judgment Interest Act, N.Y. Leg. 2021-2022 Reg. Sess., S.5724A § 1, A6474A § 1

(the “Amendment”), which reduces the interest rate on money judgments for consumer debt to

two percent per year. The Amendment applies both prospectively and retroactively to judgments

unsatisfied at the time the law goes into effect at the end of this month.

Plaintiffs, New York credit unions, are judgment creditors who, as of the beginning of

April 2022, collectively are due over a million dollars in post-judgment interest on unpaid

judgments for consumer debt. Plaintiffs challenge the retroactive applicability of the

Amendment as an unconstitutional taking in violation of the Fifth Amendment, and as violative

of their substantive due process rights guaranteed under the Fourteenth Amendment, pursuant to

42 U.S.C. § 1983. Plaintiffs seek a preliminary injunction prohibiting the Defendants, state

officials in their official capacity, from implementing or enforcing the retroactive applicability of

the Amendment.

After receiving briefing from all parties, on April 20, 2022, the Court held a hearing on

the requested emergency relief. For the foregoing reasons, Plaintiffs’ request for a preliminary

injunction is denied with respect to Defendant Judge Marks, and granted with respect to the

sheriff Defendants.1

BACKGROUND

In considering a motion for a preliminary injunction, the Court may rely on affidavits,

depositions, and sworn testimony. See Mullins v. City of New York, 626 F.3d 47, 51-52 (2d Cir.

2010). Federal Rule of Evidence 201 also authorizes the Court to “judicially notice a fact that is

not subject to reasonable dispute because it (1) is generally known within the trial court’s

territorial jurisdiction; or (2) can be accurately and readily determined from sources whose

accuracy cannot reasonably be questioned.” The Court considers at this stage the Parties’

pleadings and affidavits submitted in connection with the pending motion,2 and the New York

Civil Practice Law and Rules.

1 Plaintiffs did not seek injunctive relief with respect to the Attorney General in their request for a preliminary

injunction. Discussed infra at 9, the Court does not address the Attorney General for purposes of the present

injunctive relief.

2 Plaintiffs initiated this action by contemporaneously filing the Complaint [ECF No. 1] (“Compl.”), a Proposed

Order to Show Cause [ECF No. 10], and a Memorandum in Support [ECF No. 11] (“Pls. Mem.”). The

Memorandum in Support was accompanied by three declarations from the CEO or Manager of the Plaintiff credit

unions. [ECF No. 12-1] (“Haaksma Decl.”); [ECF No. 12-2] (“Zasucha Decl.”); [ECF No. 12-3] (“Heim Decl.”).

The Sheriff Defendants opposed Plaintiff’s application [ECF No. 33] (“Defs. Mem.”) and filed an accompanying

declaration by the Chief of the Civil Enforcement Division of the Erie County Sheriff’s Office [ECF No. 33-1]

I. NEW YORK JUDGMENTS AND INTEREST RATES

This matter involves post-judgment interest accrued on money judgments under New

York law. Compl. ¶ 30; Pls. Mem. at 2. The entry of judgments is governed by the New York

Civil Practice Law and Rules, which provides that a “judgment is entered when, after it has been

signed by the clerk, it is filed by him.” N.Y. C.P.L.R. § 5016(a). Thereafter, the clerk of the

court records the judgment in a “judgment-book,” which the clerk maintains. N.Y. C.P.L.R.

§ 9702(1); David D. Siegel, New York Practice § 418 (6th ed. 2018). The judgment becomes

enforceable at the time of entry. See Siegel, New York Practice § 485. The New York Civil

Practice Law and Rules further provide that “[e]very money judgment shall bear interest from

the date of its entry [and] [e]very order directing the payment of money which has been docketed

as a judgment shall bear interest from the date of such docketing.” N.Y. C.P.L.R. § 5003.3

Since 1981, the New York Legislature has determined that interest should accrue at nine percent

per year. See N.Y. C.P.L.R. § 5004; 1981 N.Y. Laws, ch. 258, § 2; Siegel, New York Practice

§ 412 (“[I]n 1981, the [interest] rate was raised to 9%, where it still stands now.”).

A judgment creditor—the party to whom a money judgment is owed—can seek in a

myriad different ways to enforce a judgment once entered: the judgment may be executed against

the debtor’s real or personal property, N.Y. C.P.L.R. §§ 5202, 5230; the debtor’s income may be

garnished, N.Y. C.P.L.R. § 5231; or an installation payment order may be entered by a court of

competent jurisdiction, N.Y. C.P.L.R. § 5226. The judgment creditor may pick whichever

method of enforcement he or she wishes. See Siegel, New York Practice §§ 485, 494. Where the

(“Grasso Decl.”). Judge Marks joined the arguments made by the Sheriff Defendants, and filed an opposition [ECF

No. 43] (“Marks Opp.”) and accompanying declaration [ECF No. 44] (“Marks Decl.”). Plaintiffs then filed a short

reply brief in response to the Sheriff Defendants’ opposition. [ECF No. 42] (“Pls. Reply”).

3 The entry of the judgment and the docketing of the judgment are two related but distinct steps. In the context of

money judgments, “[w]hen the clerk files the judgment-roll upon entering the judgment, she must also docket the

judgment” in a docket book. Siegel, New York Practice § 421; see N.Y. C.P.L.R. §§ 5017-18.

judgment creditor elects to satisfy the debt out of the real or personal property of the debtor, an

execution of the judgment must be issued. See N.Y. C.P.L.R. § 5230. That execution “may be

issued from the supreme court, county court or a family court, in the county in which the

judgment was first docketed, by the clerk of the court or the attorney for the judgment creditor as

officer of the court”. N.Y. C.P.L.R. § 5230(b). The execution is then issued “to the sheriffs of

one or more counties of the state,” who serve as enforcement officers for the courts. Id.; Siegel,

New York Practice § 495 (C.P.L.R. § 5230 “which, by its address to the ‘sheriff’ as the

enforcement officer, manifests its preoccupation with the supreme court and the county courts,

for both of which the sheriff acts as the enforcement official.”). The execution must contain,

inter alia, “the date that the judgment or order was entered, the court in which it was entered, the

amount of the judgment or order and the amount due thereon and it shall specify the names of the

parties in whose favor and against whom the judgment or order was entered.” N.Y. C.P.L.R.

§ 5230(a).

II. THE AMENDMENT

On December 31, 2021, Governor Kathy Hochul signed into law the Fair Consumer

Judgment Interest Act. N.Y. Leg. 2021-2022 Reg. Sess., S5724A § 1, A6474A § 1. That law

retains the now-familiar nine percent post-judgment interest rate, except where the judgment

derives from “an action arising out of a consumer debt where a natural person is a defendant.”4

Amendment § 1. With respect to a judgment that arises out of a consumer debt action, the

Amendment provides that:

the annual rate of interest . . . shall be two per centum per annum (i) on a judgment

or accrued claim for judgments entered on or after the effective date of the chapter

4 The Amendment defines consumer debt as “any obligation or alleged obligation of any natural person to pay

money arising out of a transaction in which the money, property, insurance or services which are the subject of the

transaction are primarily for personal, family or household purposes, whether or not such obligation has been

reduced to judgment, including, but not limited to, a consumer credit transaction.” Amendment § 1(b).

of laws of two thousand twenty-one which amended this section, and (ii) for interest

upon a judgment pursuant to section five thousand three of this article from the date

of the entry of judgment on any part of a judgment entered before the effective date

of the chapter of the laws . . . which amended this section that is unpaid as of such

effective date.

Amendment § 1. The Amendment specifies that its effective date is April 30, 2022.

Amendment § 7. In sum, as of April 30, 2022, the Amendment lowers the post-judgment

interest rate on consumer debt—both prospectively and retroactively with respect to unsatisfied

judgments—from nine percent to two percent per year.

The Amendment also imposes new obligations with respect to executions and their

issuances. Following the effective date of the Amendment, an execution must state “the

applicable interest rate and the date as of which the new interest rate applies if the interest rate

for consumer debt . . . applies.” Amendment § 4(a). For executions that are “ongoing”—that is,

unsatisfied as of the effective date—“the judgment creditor shall issue an amended execution

within sixty days of the effective date of the chapter of the laws . . . which amended this

subdivision, effective as of the date of the rate change.” Amendment § 4(a). Where the interest

rate on an execution is “ongoing,” the Amendment provides that “the clerk of the court of the

supreme court, county court or a family court, in the county in which the judgment was first

docketed, or the attorney for the judgment creditor as officer of the court, shall be authorized to

issue an amended execution to the sheriffs of one or more counties of the state and shall issue an

amended execution within sixty days of the effective date of the chapter of the laws . . . which

amended this subdivision, effective as of the date of the rate change.” Amendment § 4(b).

Where the execution is an income execution subject to the interest rate change, the sheriff “shall

[] promptly return[] to the debtor” “any money collected in excess of the judgment amount.”

Amendment § 5(k).

III. THE PARTIES

Plaintiffs Greater Chautauqua Federal Credit Union (“GCFCU”), Boulevard Federal

Credit Union (“BFCU”), Greater Niagara Federal Credit Union (“GNFCU”) are credit unions

located in western New York. Compl. ¶¶ 16-18. All Plaintiffs “offer consumer lending products

including home and auto loans, and personal loans used for individual or family purposes.”

Mem. at 5; Zasucha Decl. ¶¶ 6, 14; Heim Decl. ¶¶ 6, 12; Haaksma Decl. ¶¶ 6, 12. As a result of

their consumer-facing business, Plaintiffs each possess unsatisfied consumer debt judgments.

Compl. ¶¶ 16-18; Zasucha Decl. ¶ 30; Heim Decl. ¶ 29; Haaksma Decl. ¶ 30. GCFU “has

approximately 230 outstanding judgments and is owed approximately $1,300,000, of which

approximately $390,000 is accrued interest.” Haaksma Decl. ¶¶ 30, 35-36. BCFU “has

approximately 115 outstanding judgments and is owed approximately $1,500,000, of which

approximately $530,000 is accrued interest.” Heim Decl. ¶¶ 29, 34-35. GNFCU “has over 110

outstanding judgments and is owed over $1,000,000, of which approximately $360,000 is

accrued interest.” Zasucha Decl. ¶¶ 30, 35-36. Plaintiffs contend that were the Amendment to

go into effect, it would deny them the “significant portion of the accrued interest” on their

unsatisfied judgments. Mem. at 6; Zasucha Decl. ¶ 36; Heim Decl. ¶ 28; Haaksma Decl. ¶ 29.

Plaintiffs also believe that the Amendment would subject them to further hardship because it

would force them to expend resources recalculating accrued interest, and because the lowered

interest rate means “debtors will be less likely to agree to pay off the principal to avoid the

higher interest.” Mem. at 7; Haaksma Decl. ¶ 44; Heim Decl. ¶ 41; Zasucha Decl. ¶ 42.

Plaintiffs assert that the Defendants, the Honorable Lawrence K. Marks, in his official

capacity as Chief Administrative Judge of the New York State Courts, and Sheriffs James B.

Quattrone, John C. Garcia, and Michael J. Filicetti, in their official capacity as Sheriffs of

Chautauqua, Erie and Niagara counties respectively (the “Sheriff Defendants”), “will be

involved in enforcement of the Amendment.” Mem. at 6; Compl. ¶¶ 19-22. According to

Plaintiffs, the Honorable Lawrence K. Marks, as an officer for the State of New York, “ensures

and promulgates policies and management procedures to enforcement agents throughout New

York.” Mem. at 6. The Sheriff Defendants in turn will “ensure that judgment executions are

served on debtors,” calculate the interest on the judgments “in accordance with the legal rate,”

apply payments to outstanding creditor balances, and ensure that “payments are remitted to

judgment creditors.” Mem. at 6.

PROCEDURAL HISTORY

Plaintiffs commenced this action on April 4, 2022 by filing a complaint and

contemporaneous Proposed Order to Show Cause for a Preliminary Injunction [ECF No. 10]

seeking a preliminary injunction enjoining the effective date of the Amendment. The Court

directed Plaintiffs to serve the Defendants pursuant to the Federal Rules of Civil Procedure by

April 6, 2022, at 9:00am. [ECF No. 19]. Plaintiffs served Judge Marks by April 6, 2022, but

stated in a letter to the Court that they were “unable to serve the [Sheriff Defendants],” by

9:00am, and expected service to be completed “prior to the close of business.” [ECF No. 23].

The Court then entered a further order scheduling a hearing on Plaintiffs’ application for a

preliminary injunction, directing Defendants to file any opposition by noon on April 13, 2022,

and ordered Plaintiffs to serve on all Defendants a copy of the scheduling order and the materials

in support of their motion. [ECF No. 24]. Plaintiffs thereafter filed a letter stating that counsel

for the Sheriff Defendants “agreed to accept service by email and additionally executed waivers

of service as to the summons and Complaint, which have been filed by ECF.” [ECF No. 31].

The Sheriff Defendants timely filed an opposition to Plaintiffs’ preliminary injunction

motion. [ECF No. 33]. Judge Marks did not timely file an opposition, but belatedly filed a letter

joining in the Sheriff Defendants’ opposition arguments, and requesting an extension of time to

May 16, 2022 “to submit a combined memorandum of law in opposition to the motion and in

support of Judge Marks’s anticipated motion to dismiss the action.” [ECF Nos. 34]. The Court

denied the request for an extension to May 16, 2022, which would post-date the effective date of

the Amendment, but granted Judge Marks leave to file his submission in opposition. [ECF No.

37]. Thereafter, the Attorney General filed an opposition on behalf of Judge Marks with respect

to Plaintiffs’ application [ECF No. 43] and a declaration in support of his opposition [ECF No.

44], in which he affirmatively states that he has no authority to enforce the Amendment and is an

improper party to this action.5 Plaintiffs concurrently filed a reply to the Sheriff Defendants’

opposition. [ECF No. 42].

The Court held oral argument on Plaintiffs’ Motion for a Preliminary Injunction on April

20, 2022. [ECF No. 49] (“Tr.”). At the hearing, the Attorney General argued on behalf of

Defendant Judge Marks that he was not a proper party to this lawsuit because Judge Marks has

no enforcement role with respect to the Amendment. Tr. at 25:16-27:12. The Attorney General

also appeared through separate counsel as a non-party and reiterated that she would seek to

intervene in this action if it were not dismissed at this stage. Tr. at 44:6-24. As they had in their

written submission, [ECF No. 33], the Sheriff Defendants initially argued at the hearing against

injunctive relief, see Tr. at 31:12-16, 33:12-14, but later clarified that they do not, in fact, oppose

any injunction and would indeed benefit if one were to be entered because it would (in their

view) indemnify them. Tr. at 31:12-13, 40:13-21 (“I would not refuse the injunction. . . . [T]o

the extent there is an injunction, we’re probably the party that walks away the happiest.”). The

5 In the opposition on behalf of Judge Marks, the Attorney General noted that, if the Court did not dismiss the case

at this stage, she would “move to intervene in this action to defend the Act against Plaintiffs’ constitutional

challenge.” Marks Opp. at 1 n.1.

Sherriff Defendants did, however. voice concerns about notice to the sheriffs in the other 59

counties of New York, who are not parties to this action. Tr. at 38:6-11.

After the hearing, Plaintiffs filed an amended complaint [ECF No. 47], which added the

Attorney General of the State of New York as a defendant. The Attorney General’s time to

respond has not yet run. In the interim, the Attorney General filed a letter arguing that she was

not a proper party to the suit, and that Plaintiffs do not have a likelihood of success on the merits

of their Takings Clause claim. [ECF No. 53]. Plaintiffs responded to the Attorney General’s

letter, arguing that she is a proper party and that she could be enjoined from enforcing the

Amendment on Plaintiffs’ current application. [ECF No. 54].

Because the pending Motion for a Preliminary Injunction, predating the amended

complaint, does not seek relief against the Attorney General, the Court does not consider at this

time whether she is a proper party or whether injunctive relief is appropriate with respect to her.

In determining whether a preliminary injunction is warranted, the Court considers, among other

factors, the balance of the equities with respect to the parties before the Court. See Yang v.

Kosinski, 960 F.3d 119, 127 (2d Cir. 2020). The Amendment will go into effect at the end of this

month. Given such imminency, the Court can consider the case with respect to the parties before

the Court at the time the injunction was sought.

LEGAL STANDARD

“A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter

v. Natural Resources Defense Council, Inc., 555 U.S. 7, 24 (2008). To “obtain a preliminary

injunction against governmental action taken pursuant to a statute, the movant has to demonstrate

(1) irreparable harm absent injunctive relief, (2) a likelihood of success on the merits, and (3)

public interest weighing in favor of granting the injunction. The movant also must show that the

balance of equities tips in his favor.” Yang, 960 F.3d at 127 (internal quotation marks and

alterations omitted). Where, as here, “governmental policies [are] implemented through

legislation or regulations developed through presumptively reasoned democratic processes”

those policies “are entitled to a higher degree of deference and should not be enjoined lightly.”

Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Fin. Servs., 769 F.3d 105, 110 (2d Cir.

2014) (citation omitted). Therefore, to show a “likelihood of success” Plaintiffs “must establish

a clear or substantial likelihood of success on the merits.” Sussman v. Crawford, 488 F.3d 136,

140 (2d Cir. 2007) (internal quotation marks omitted).

DISCUSSION

At the preliminary injunction hearing, the Court raised with the Parties possible issues

with respect to sovereign immunity. The Sheriff Defendants also argue in their opposition that

the alleged injury is not fairly traceable to them or to Judge Marks. In connection with his

opposition, Judge Marks submitted evidence that he has no role with respect to the challenged

Amendment. See Marks Decl. ¶ (“I have neither responsibility for, nor the authority over,

implementation or enforcement of the Act”); Marks Decl. ¶ 10 (“Neither the clerks nor sheriffs

are under my administrative control or direction with respect to these matters”). The Court will

first address sovereign immunity and standing because those issues implicate the Court’s subject

matter jurisdiction. Thereafter, the Court analyzes whether a preliminary injunction is

warranted.

I. SOVEREIGN IMMUNITY DOES NOT BAR THIS SUIT

WITH RESPECT TO THE SHERIFF DEFENDANTS

The Eleventh Amendment provides that “[t]he Judicial power of the United States shall

not be construed to extend to any suit in law or equity, commenced or prosecuted against one of

the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”

U.S. Const. amend. XI. In essence, the Eleventh Amendment “effectively places suits by private

parties against states outside the ambit of Article III of the Constitution,” In re Charter Oak

Assocs., 361 F.3d 760, 765 (2d Cir. 2004), unless Congress has abrogated a state’s sovereign

immunity or that immunity has been waived by the state. Pennhurst State Sch. & Hosp. v.

Halderman, 465 U.S. 89, 99 (1984). Plaintiffs bring their claims pursuant to 42 U.S.C. § 1983.

That provision provides, in relevant part, that “[e]very person who, under color of any statute,

ordinance, regulation, custom, or usage, of any State . . . subjects, or causes to be subjected, any

citizen of the United States . . . to the deprivation of any rights, privileges, or immunities secured

by the Constitution and laws, shall be liable to the party injured.” 42 U.S.C. § 1983. It is settled

law that New York has not waived its Eleventh Amendment immunity to suit in federal court,

and Congress did not abrogate immunity in enacting 42 U.S.C. § 1983. See Rodriguez v. New

York, 2017 WL 8777374, at *2 (S.D.N.Y. Nov. 28, 2017) (citing Trotman v. Palisades Interstate

Park Comm’n, 557 F.2d 35, 40 (2d Cir. 1977)).

However, under the so-called Ex parte Young doctrine, a plaintiff’s claim may proceed

against state officials, notwithstanding the Eleventh Amendment, when he, “(a) alleges an

ongoing violation of federal law and (b) seeks relief properly characterized as prospective.” See

In re Deposit Ins. Agency, 482 F.3d 612, 618 (2d Cir. 2007) (quotation marks and citations

omitted); Ex parte Young, 209 U.S. 123 (1908).

The Ex parte Young doctrine applies to this suit against Judge Marks and the Sheriff

Defendants in their official capacity. Plaintiffs seek prospective relief in the form of an

injunction, preventing the Defendants (state officials) from enforcing the Amendment. See Hutto

v. Finney, 437 U.S. 678, 690 (1978) (“[S]tate officers are not immune from prospective

injunctive relief.”). Plaintiffs sufficiently seek to challenge what they characterize as a

threatened violation of federal law—an unconstitutional taking of their vested interest in accrued

post-judgment interest—currently signed into law and effective at the end of this month, i.e., the

Amendment. KM Enters. v. McDonald, 2012 WL 4472010, at *10 (E.D.N.Y. Sept. 25, 2012),

(“Certainly, the requirement of an ongoing and continuous violation of federal law need not

mean that the Commissioner be in the midst of a current misapplication of federal law against the

particular plaintiff initiating the suit. Such a decree would essentially render Ex parte Young a

nullity.”), aff’d, 518 F. App’x 12 (2d Cir. 2013); Vickery v. Jones, 100 F.3d 1334, 1346 (7th Cir.

1996) (“[T]he [Ex parte Young] exception permits relief against state officials only when there is

an ongoing or threatened violation of federal law.”) (emphasis added); see also Charles A.

Wright & Arthur R. Miller, Federal Practice & Procedure § 3566 (3d ed. 2008) (“[T]he best

explanation of Ex parte Young and its progeny is that the Supremacy Clause creates an implied

right of action for injunctive relief against state officers who are threatening to violate the

federal Constitution and laws.”) (emphasis added).

The Ex parte Young doctrine requires that the state officials sued have some nexus to the

challenged violation of federal law, such as a duty to enforce the statute. See Ex parte Young,

209 U.S. at 156-57 (the defendant state officer “must have some connection with the

enforcement of the act, or else [the plaintiff] is merely making him a party as a representative of

the state, and thereby attempting to make the state a party.”); Okpalobi v. Foster, 244 F.3d 405,

416 (5th Cir. 2001) (en banc). “That a government official must have a connection to the

allegedly unconstitutional government act makes sense, for [a]n injunction may issue only in

circumstances where the state official has the authority to perform the required act.” Nassau &

Suffolk Cnty. Taxi Owners Ass’n v. New York, 336 F. Supp. 3d 50, 68 (E.D.N.Y. 2018). But “it

is not necessary that the officer’s enforcement duties be noted in the act,” In re Dairy Meat

Convenience Stores, Inc., 411 F.3d 367, 373 (2d Cir. 2005). Rather, the connection “can be

found implicitly elsewhere in the laws of the state . . . so long as those duties have the same

effect as a special charge in the [challenged] statute.” Okpalobi, 244 F.3d at 419 (quotation

omitted); see also Ex parte Young, 209 U.S. at 158-59 (proper suit requires a “special relation”

between the defendant and enforcement of the challenged statute). An officer’s “significant

[oversight] responsibilities” may “create the requisite connection to the illegal act.” In re Dairy

Meat Convenience Stores, Inc., 411 F.3d at 373.

The Sheriff Defendants are clearly connected to the enforcement of the Amendment for

purposes of the Ex parte Young doctrine. For example, the Amendment requires that “if a

judgment creditor issues an amended execution . . . because the applicable interest rate

changes . . . the sheriff shall serve a copy of the income execution within forty-five days after an

income execution is delivered to the sheriff.” Amendment § 5(j). The Amendment further states

that it is “the duty of the sheriff to whom such income execution shall be delivered” to “account

for and pay over to the person entitled to all monies collected thereon.” Amendment § 5(k).

That same provision also requires that “if a judgment creditor issues an amended

execution . . . because the applicable interest rate changes . . . any money collected in excess of

the judgment amount shall be promptly returned to the debtor [by the sheriff].” Id. Indeed, the

Sheriff Defendants’ own opposition underscores their involvement with the enforcement of the

Amendment because the sheriffs “carry out the statute in terms of the interest rate as dictated by

the Legislature.” Defs. Mem. at 18. The Sheriff Defendants further agreed at the hearing on

Plaintiff’s motion that they have a duty to enforce the Amendment. See Tr. at 31:3-6 (the Sheriff

Defendants take houses, businesses, income, and homes on behalf of judgment creditors).

The Court is not convinced on the record before it for purposes of this motion, however,

that the Honorable Lawrence K. Marks, in his official capacity as Chief Administrative Judge for

the New York State Unified Court System, has the requisite connection to the Amendment for

the Ex parte Young doctrine to apply. Plaintiffs argue without support that Judge Marks “ensures

and promulgates policies and management procedures to enforcement agents and clerks

throughout New York, including policies and procedures concerning the entering and execution

of judgments.” Pls. Mem. at 6. Plaintiffs therefore contend generally that because he “oversees

the day-to-day administration and operation of the courts [he] therefore has overall responsibility

for ensuring that the Amendment is implemented according to law.” Pls. Mem. at 8.

By its plain language, the Amendment does not require anything from Judge Marks. The

Amendment contemplates that the state court clerks will, inter alia, “issue an amended execution

to the sheriffs of one or more counties of the state and shall issue an amended execution within

sixty days of the effective date of the chapter of the laws . . . which amended this subdivision,

effective as of the date of the rate change.” Amendment § 4(b). In opposing Plaintiffs’ motion,

Judge Marks filed an affidavit stating in no uncertain terms that he “ha[s] neither responsibility

for, nor the authority over, implementation or enforcement of the [Amendment],” that “[n]either

the clerks nor sheriffs are under [his] administrative control or direction,” and that as he is “not a

proper party to the action, as there is no relief that the Court might grant, should plaintiff prevail,

that [he] would be authorized under New York State law to provide.” Marks Decl. ¶¶ 6, 9-12.

At the hearing, Plaintiffs argued that Judge Marks has a general responsibility to enforce

the Amendment pursuant to New York Codes, Rules, and Regulations Title 22 Section 80.1. Tr.

8:4-12. That section states, in relevant part, that the “Chief Administrator [of the Courts] enforce

and supervise the execution of the standards and administrative policies established, approved

and promulgated pursuant to article VI, section 28(c) of the Constitution.” But such a

generalized obligation to “supervise” is insufficient for purposes of the Ex parte Young doctrine

to apply. See McCluskey v. Comm’r of Nassau Cnty. Dep’t of Soc. Servs., 2013 WL 4780954, at

*8 (E.D.N.Y. Sept. 5, 2013) (“While plaintiff has stated that the [state official] is responsible for

the overall operation of [the state agency], this allegation, standing alone, is insufficient to

demonstrate that the [state official] had a direct connection to, or responsibility for, the alleged

illegal action”) (internal quotation marks, alteration, and citation omitted).

Moreover, the Ex parte Young doctrine requires “both a particular duty to enforce the

statute in question and a demonstrated willingness to exercise that duty.” Citizens Union of City

of New York v. Attorney General, 2017 WL 2984167, at *4 (S.D.N.Y. June 23, 2017) (emphasis

altered) (quoting Kelly v. New York State Civil Serv. Comm’n, 2015 WL 861744, at *3 (S.D.N.Y.

2016), aff’d sub nom. 632 F. App’x 17 (2d Cir. 2016)). At this stage, Plaintiffs have not

identified anything in the record indicating that—to the extent Judge Marks actually has the

power to enforce the Amendment—he has demonstrated a willingness to exercise that duty.

Accordingly, the Court cannot grant any injunctive relief to Plaintiffs with respect to Judge

Marks because, on the present record, he is not a proper party against whom injunctive relief

may be granted. Because injunction relief against Judge Marks is not proper on the present

record, the Motion is denied with respect to Defendant Judge Marks.

II. PLAINTIFFS HAVE STANDING TO SUE THE SHERIFF DEFENDANTS

“To establish standing under Article III of the Constitution, a plaintiff must demonstrate

(1) that he or she suffered an injury in fact that is concrete, particularized, and actual or

imminent, (2) that the injury was caused by the defendant, and (3) that the injury would likely be

redressed by the requested judicial relief.” Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1618

(2020). To have standing to obtain injunctive and related declaratory relief from the

Government, a plaintiff “must show a likelihood that he will be injured in the future” by the

conduct he seeks to enjoin. Shain v. Ellison, 356 F.3d 211, 215 (2d Cir. 2004). The Sheriff

Defendants argue that the injury asserted by the Plaintiffs is not fairly traceable to them. Defs.

Mem. at 18. “The traceability requirement for Article III standing means that the plaintiff must

demonstrate a causal nexus between the defendant’s conduct and the injury,” either direct or

indirect. Rothstein v. UBS AG, 708 F.3d 82, 91 (2d Cir. 2013). The traceability requirement is a

“lesser burden” than proximate cause. Lerner v. Fleet Bank, N.A., 318 F.3d 113, 122 n.8 (2d Cir.

2003). “[W]hen a plaintiff brings a pre-enforcement challenge to the constitutionality of a

particular statutory provision, the causation element of standing requires the named defendants to

possess authority to enforce the complained-of provision.” Bronson v. Swensen, 500 F.3d 1099,

1110 (10th Cir. 2007); see Okpalobi, 244 F.3d at 426. For substantively the reasons the Court

identifies in the context of the Eleventh Amendment, Plaintiffs’ injury is fairly traceable to the

Sheriff Defendants: as they concede, the Sheriff Defendants are charged with dispositive roles in

enforcing judgments, Defs. Mem. at 18, Tr. at 31:3-6, and therefore enforcing the Amendment.

See Citizens for Equal Prot. v. Bruning, 455 F.3d 859, 864 (8th Cir. 2006) (traceability satisfied

where state officials had “some connection with the enforcement” of a state law for purposes Ex

parte Young).6 As a result, Plaintiffs have standing to sue the Sheriff Defendants.

III. THE JUDGMENT DEBTORS ARE NOT NECESSARY PARTIES

As a further preliminary matter, the Sheriff Defendants argue that this action should be

dismissed because “a remedy cannot be granted to the Plaintiffs without the joinder of the

judgment debtors.” Defs. Mem. at 15. If necessary parties are not joined to this action, the

Court may not reach the merits or grant the requested preliminary injunction. See Sunset

6 Because Judge Marks has no nexus to the Amendment or its enforcement, no injury is fairly traceable to Judge

Marks on the current record. See Rothstein, 708 F.3d at 91.

Homeowners Ass’n v. Difrancesco, 386 F. Supp. 3d 299, 306 (W.D.N.Y. 2019) (collecting

cases).

Federal Rule of Civil Procedure 19(a) governs the “required joinder” of parties. Fed. R.

Civ. P. 19. Joinder of a party under Rule 19 entails a two-step analysis, pursuant to which the

Court considers (1) whether the absent party belongs in the suit, i.e., qualifies as a “necessary”

party under Rule 19(a), and (2) whether joinder of the absent party is feasible and will not

deprive the Court of subject matter jurisdiction. Viacom Int’l, Inc. v. Kearney, 212 F.3d 721,

724-25 (2d Cir. 2000).

Rule 19(a) establishes two broad categories of a “required party.” First, under Rule

19(a)(1)(A), a party is required if “in that person’s absence, the court cannot accord complete

relief among existing parties.” Second, under Rule 19(a)(1)(B), a party is required if:

that person claims an interest relating to the subject of the action and is so situated

that disposing of the action in the person’s absence may: (i) as a practical matter

impair or impede the person’s ability to protect the interest; or (ii) leave an existing

party subject to a substantial risk of incurring double, multiple, or otherwise

inconsistent obligations because of the interest.

Without further detail, the Sheriff Defendants argue that “joinder of the judgment debtors

may not be possible” and therefore “dismissal may be appropriate.” Defs. Mem. at 16; but see

Defs. Mem. at 17 (judgment creditors could be joined as defendant class). Defendants then

argue that the judgment debtors are necessary parties because enjoining the Amendment would

deprive judgment debtors “the benefit of the Act,” because they would “have to pay the [nine-

percent post-judgment interest].” Defs. Mem. at 15-16.

As an initial matter here, joinder to this action of any party would not deprive the Court

of subject matter jurisdiction because this controversy is before the Court by virtue of its federal

question jurisdiction. See Compl. ¶ 13. Moreover, the Sheriff Defendants ignore that the

judgment debtors are presently obligated, under existing law, to pay the principal and accrued

interest on valid and enforceable judgments. The change in legislation would adjust that

obligation retroactively, but it has not yet been adjusted.

The Court concludes that the judgment debtors are not “necessary” parties to this action.

The judgment debtors are not necessary parties under Rule 19(a)(1) because, even in their

absence, the Court could accord complete relief to the Plaintiffs by enjoining the Sheriff

Defendants from enforcing the Amendment during the pendency of this litigation. And, “Rule

19 does not require that a plaintiff bringing an urgent preliminary injunction motion that

implicates the Constitution include every similarly situated person as a party.” Gallagher v. N.Y.

State Bd. of Elections, 477 F. Supp. 3d 19, 39 (S.D.N.Y. 2020). Moreover, where joinder is not

feasible, as the Sheriff Defendants appear to suggest, joinder is a matter of judicial discretion,

and concerns of equity may militate in favor of proceeding in the absence of an otherwise

necessary party. See Walker v. City of Waterbury, 253 F. App’x 58, 62 (2d Cir. 2007) (“District

courts are afforded substantial discretion in weighing the Rule 19(b) factors and in determining

how heavily to emphasize certain considerations in deciding whether the action should go

forward in the absence of someone needed for a complete adjudication of the dispute.”);

Gallagher, 477 F. Supp. 3d at 39 (“Rule 19 of the Federal Rules of Civil Procedure vests the

court with wide discretion in deciding whether to proceed in the absence of necessary parties and

equity would demand that the Court proceed in their absence.”) (internal quotation marks

omitted). Because the judgment debtors are not necessary parties the absence of whom requires

dismissal, the Court turns to the preliminary injunction factors.

IV. PLAINTIFFS ARE ENTITLED TO A PRELIMINARY INJUNCTION

Plaintiffs contend that the injunction factors support the issuance of a preliminary

injunction given the clear likelihood of success on the merits, the irreparable harm they would

suffer if the Amendment were not enjoined, and because Defendants would not be harmed by

any injunctive relief. See Pls. Mem. at 9, 18, 23. The Sheriff Defendants argue that Plaintiffs’

alleged loss is compensable by money damages and that an adequate remedy at state law exists,

and that the balance of equities and public interest factors weigh in their favor. Defs. Mem. at 9-

11, 13. On balance, the Court concludes that Plaintiffs are entitled to a preliminary injunction

refraining the Sheriff Defendants from enforcing the Amendment.

A. Likelihood of Success on the Merits

Plaintiffs challenge the retroactive application of the Amendment on two distinct

theories: the first, that the retroactive effect of the Amendment constitutes an impermissible

taking under the Fifth Amendment without just compensation; the second, that the retroactive

effect of the Amendment violates Plaintiffs’ Fourteenth Amendment rights. Pls. Mem. at 10, 17,

19. Both challenges are brought pursuant to 42 U.S.C. § 1983 (“Section 1983”). Section 1983

“is not itself a source of substantive rights, but a method for vindicating federal rights elsewhere

conferred by those parts of the United States Constitution and federal statutes that it describes.”

Baker v. McCollan, 443 U.S. 137, 144 n.3 (1979); Cornejo v. Bell, 592 F.3d 121, 127 (2d Cir.

2010). To state a claim under Section 1983, Plaintiffs must establish both that the Sheriff

Defendants “deprived [them] of a right ‘secured by the Constitution or laws of the United

States’” and “that they did so ‘under the color of state law.’” Giordano v. City of New York, 274

F.3d 740, 750 (2d Cir. 2001) (quoting Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 49-50

(1999)).

1. The Fifth Amendment Takings Clause Claim

The Takings Clause of the Fifth Amendment, which is made applicable to New York

through the Fourteenth Amendment, Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 536 (2005),

provides that “private property [shall not] be taken for public use, without just compensation.”

U.S. Const. amend. V. Plaintiffs here challenge only the retroactive application of the interest

rate change to unsatisfied judgments, not the prospective change. The Court must first determine

whether, for purposes of the Takings Clause, Plaintiffs have a protected property interest in the

vested post-judgment interest they would lose were the Amendment to go into effect. 1256

Hertel Ave. Assocs., LLC v. Calloway, 761 F.3d 252, 261 (2d Cir. 2014). It is black letter law

that if the Plaintiffs do not have a protected property interest, the Amendment cannot work to

take an interest that does not exist. Id.

a. Post-Judgment Interest is a Constitutionally Protected Property Interest

Plaintiffs have chosen to avail themselves of the federal courts, cloaking this action

challenging a state law in federal Constitutional garb. Thus, whether Plaintiffs—in this federal

action—have a protected property interest is a two-step inquiry. See 1256 Hertel Ave. Assocs.,

LLC, 761 F.3d at 262. First, because the United States Constitution “protects rather than creates

property interests, the existence of a property interest is determined by reference to ‘existing

rules or understandings that stem from an independent source such as state law.’” Phillips v.

Wash. Legal Found., 524 U.S. 156, 164 (1998) (quoting Bd. of Regents of State Colls. v. Roth,

408 U.S. 564, 577 (1972)). Second, though the property interest springs from state law, “federal

constitutional law determines whether the interest rises to the level of a legitimate claim of

entitlement protected by the Due Process Clause.” 1256 Hertel Ave. Assocs., LLC, 761 F.3d at

262 (emphasis in original) (quoting Town v. Castle Rock, Colo. v. Gonzalez, 545 U.S. 748, 756-

57 (2005)). Certainly, Plaintiffs’ money judgments—the principal—are vested rights created by

state law that are entitled to Constitutional protection. Benjamin v. Jacobson, 124 F.3d 162, 176

(2d Cir. 1997) (“It is well-settled that a final money judgment creates a ‘vested right’ and hence a

constitutionally protected property interest.”). But the Amendment does not work to affect

Plaintiffs’ principal. The relevant question for purposes of Plaintiffs’ Takings Clause claim is

therefore whether New York law categorizes post-judgment interest as a property right, and if so,

whether the Constitution would protect that property interest. The Court agrees with Plaintiffs

that post-judgment interest constitutes a protected property interest for purposes of the Fifth and

Fourteenth Amendments. 1256 Hertel Ave. Assocs., LLC v. Calloway, 761 F.3d at 262.

New York state law creates a property right in post-judgment interest. “Interest [for

judgments pursuant to N.Y. C.P.L.R. § 5003] attaches uniformly to all money obligations once

reduced to verdict or judgment” and “runs on the judgment until it is satisfied.” Siegel, New

York Practice § 411. “[T]he common law rule, well established in New York and elsewhere, [is]

that interest follows principal and therefore is the property of the owner of the principal.” Rai v.

WB Imico Lexington Fee, LLC, 802 F.3d 353, 369 (2d Cir. 2015) (internal quotation marks

omitted) (citing New York law).

The Constitution protects Plaintiffs’ property right in accrued post-judgment interest.

“The rule that ‘interest follows principal’ has been established under English common law since

at least the mid-1700’s.” See Phillips, 524 U.S. at 165.; cf. Webb’s Fabulous Pharmacies, Inc. v.

Backwith, 449 U.S. 155, 164 (1980) (the “earnings of a fund are incidents of ownership of the

fund itself and are property just as the fund is property.”). For example, in Phillips, the Supreme

Court determined that interest earned on client funds held in an Interest on Lawyers Trust

Account (“IOLTA”) was “private property” of the owner of the principal for purposes of the

Takings Clause. Id. at 160. Following New York authority and the logic of Phillips, the Court

concludes that post-judgment interest is a protected property interest for purposes of the Fifth

and Fourteenth Amendment. See Phillips, 524 U.S. at 165; Rai, 802 F.3d at 369.

b. The Amendment Constitutes a Regulatory Taking

The Constitutional prohibition on takings for public use without just compensation

extends to two distinct types of takings: physical takings and regulatory takings. Lingle, 544

U.S. at 537; 1256 Hertel Ave. Assocs., LLC, 761 F.3d at 263 (“The Supreme Court has

recognized two branches of Takings Clause cases: physical takings and regulatory takings.”).

Physical takings involve “the direct government appropriation or physical invasion of private

property.” Lingle, 544 U.S. at 537. A physical taking, for purposes of the Fifth Amendment,

“occurs when there is either a condemnation or a physical appropriation of property.” 1256

Hertel Ave. Assocs., 761 F.3d at 263. Regulatory takings, on the other hand, involve

“government regulation of private property [that is] . . . so onerous that its effect is tantamount to

a direct appropriation or ouster.” Lingle, 544 U.S. at 537. Thus, “while property may be

regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Id.

(internal quotation marks omitted) (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415

(1922)); 1256 Hertel Ave. Assocs., LLC, 761 F.3d at 263.

Plaintiffs’ principal argument is that the legislative retroactive reduction in post-judgment

interest is a physical taking. Pls. Mem. at 11; see Pls. Mem. at 16 (arguing, in the alternative, the

“Amendment’s effect on Plaintiffs also constitutes a regulatory taking of private property

without just compensation”); Tr. at 10:3-5. The Sheriff Defendants do not address at all whether

any purported taking by the Amendment should be analyzed as a physical or regulatory taking.

Upon review, the Court concludes that, to the extent the Amendment causes any taking, the

taking would be regulatory in nature. The Amendment at-issue here, which ministerially reduces

post-judgment interest not only prospectively but also retroactively from nine to two percent,

“does not present the ‘classi[c] taking’ in which the government directly appropriates private

property for its own use.” E. Enters. v. Apfel, 524 U.S. 498, 522 (1998). Accordingly, any

taking effectuated by the retroactive application of the Amendment would be regulatory in

nature. See 1256 Hertel Ave. Assocs., 761 F.3d at 263-64.

In most cases, a court determines whether a regulatory action is the functional equivalent

of a classic taking using “essentially ad hoc, factual inquiries, designed to allow careful

examination and weighing of all the relevant circumstances.” Tahoe-Sierra Pres. Council, Inc.

v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322 (2002) (citing factors set forth in Penn

Central Transp. Co. v. New York City, 438 U.S. 104 (1978)) (the “Penn Central factors”). The

Supreme Court has also identified another type of regulatory action which is treated as a

categorical, or per se, taking, without the need to engage in a Penn Central inquiry: a total

regulatory taking. A total regulatory taking occurs under “narrow” circumstances when

“regulations . . . completely deprive an owner of all economically beneficial us[e] of her

property.” Lingle, 544 U.S. at 538 (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019

(1992)). Plaintiffs contend that “[b]ecause the Amendment appropriates the entirety of the

interest that accrued over two percent, it is unnecessary to apply the Penn Central factors.” Pls.

Mem. at 11; but see Pls. Mem. at 16 (citing Penn Central factors in the alternative).

c. The Categorical or Per Se Takings Rule Does Not Apply

Plaintiffs cite the Supreme Court’s decision in Brown v. Legal Foundation of

Washington, 538 U.S. 216 (2003) urging that the Court apply a per se takings analysis here.

That case, the progeny of Phillips, held that a “law that requires [] the interest on [client funds

deposited in an IOLTA account to] be transferred to a different owner for a legitimate public

use . . . could be a per se taking requiring the payment of ‘just compensation’ to the client.”

Brown, 538 U.S. at 240. The issue before the Court here, however, is different in kind than the

issue presented in Brown. The Amendment does not require that the reduction in interest be

transferred to a different owner—or indeed anyone. Instead, the previously accrued interest is

simply reduced, retroactively, by operation of law.

Moreover, the Court is unconvinced by Plaintiffs’ contention that the Amendment here

“denies all economically beneficial or productive use of” their property, a requisite for the

categorical or per se rule to apply. See Pls. Mem. at 11 (emphasis added) (citing Lucas). While

Plaintiffs would be deprived of seven percent of the interest accrued through the effective date of

the Amendment, Plaintiffs retain their property rights in the principal and the two percent interest

that would be unaffected by the Amendment. In other words, Plaintiffs retain some

economically beneficial or productive use of their property—regardless of whether the property

is characterized as the judgment, the principal, or the post-judgment interest. See Tahoe-Sierra,

535 U.S. at 330 (a plaintiff must show no productive or economically beneficial use of his or her

property to sustain a categorical regulatory Takings Clause claim); Sherman v. Town of Chester,

752 F.3d 554, 564 (2d Cir. 2014) (“Anything less than a complete elimination of value, or a total

loss, is a non-categorical taking, which is analyzed under the framework created in [Penn

Central]”) (internal quotation marks omitted). Plaintiffs tacitly recognize this distinction but

simply gloss over its importance. See Pls. Mem. at 11 (“Because the Amendment appropriates

the entirety of the interest that accrued over two percent, it is unnecessary to apply the Penn

Central factors”) (emphasis added).

There is also authority which undermines Plaintiffs’ contention that the categorical

approach applies to property beyond real property. Indeed, the Supreme Court’s “total takings”

jurisprudence, and the application of it by the Circuits, has repeatedly highlighted that it applies

to deprivations of “land.” See Lucas, 505 U.S. at 1016 (“categorical treatment [is] appropriate []

where regulation denies all economically beneficial or productive use of land”); Horne v. Dep’t

of Agric., 576 U.S. 351, 360-362 (2015) (Lucas distinguishes between real and personal

property); Tahoe-Sierra Pres. Council, 535 U.S. at 330 (“The categorical rule that we applied in

Lucas states that compensation is required when a regulation deprives an owner of ‘all

economically beneficial uses’ of his land”); Palazzolo v. Rhode Island, 533 U.S. 606, 618 (2001)

(“Where a regulation places limitations on land that fall short of eliminating all economically

beneficial use, a taking nonetheless may have occurred” depending on the application of the

Penn Central factors); Md. Shall Issue v. Hogan, 963 F.3d 356, 364 n.4 (4th Cir. 2020) (“[T]he

per se regulatory taking in Lucas applies only to real property”); A&D Auto Sales, Inc. v. United

States, 748 F.3d 1142, 1151 (Fed. Cir. 2014) (“The Supreme Court has mainly applied the

categorical test to regulatory takings of real property.”); 1206 Hertel Ave. Assocs., LLC, 761 F.3d

at 264 (“The cases in which the Supreme Court has applied Lucas’ total takings rule have

involved real property.”).

The Second Circuit’s decision in 1256 Hertel Avenue Associations, LLC is informative.

In that case, the lien holder had obtained a judgment lien in the amount of $4,682 against the

debtor’s home. 761 F.3d at 255. After the debtor filed a voluntary petition for relief under

Chapter 7 of the Bankruptcy Code, the debtor sought to avoid the lien under New York’s

homestead exemption. Id. That exemption “protects a debtor’s principal residence from being

used to satisfy a creditor’s judgment up to a statutorily defined maximum value.” Id. When the

lien was perfected, the maximum value was limited to $10,000. Id. By the time the petition was

filed, the exemption’s maximum value had increased to $50,000. Id. at 255-56. While the

petition was pending, intervening New York law increased the exemption to $75,000. Id. The

lien holder urged the bankruptcy court to limit the exception to the maximum value of $10,000 in

place at the time the lien was perfected, rather than the subsequently-increased $75,000

exception amount, arguing that the legislation’s effect of limiting his ability to collect on the

judgment lien would constitute an unconstitutional taking in violation of the Fifth Amendment.

In particular, the lien holder argued that the amended law “deprived it of all economic use of its

judgment lien . . . and that the Court should simply find a per se taking under Lucas and forgo a

detailed analysis of the Penn Central factors.” Id. at 264. While the Second Circuit ultimately

held that no taking occurred because the government “merely adjusted [New York’s] long-

standing statutory protection of debtors’ homesteads to account for modern home values,” the

Second Circuit expressed serious doubt that the total takings rule “should be applied to purported

takings of other types of property [other than real property], such as intellectual property,

personal property, or a security interest.” Id. at 264-265.

In sum, the categorical rule is inapposite to this case, and the Court therefore turns to the

Penn Central factors to determine whether Plaintiffs are likely to succeed on the merits of their

Takings Clause claim.

d. The Penn Central Factors Weigh in Favor

of Plaintiffs’ Takings Clause Claim

The Supreme Court in Penn Central Transportation Company set forth three factors to

guide the Court’s inquiry as to whether governmental regulation rises to the level of a regulatory

taking: (1) “[t]he economic impact of the regulation on the claimant,” (2) “the extent to which

the regulation has interfered with distinct investment-backed expectations,” and (3) “the

character of the governmental action.” Penn Central Transp. Co. v. New York City, 438 U.S.

104, 124 (1978). “[T]he Penn Central inquiry turns in large part, albeit not exclusively, upon the

magnitude of a regulation’s economic impact and the degree to which it interferes with

legitimate property interests.” Lingle, 544 U.S. at 540. In applying the Penn Central factors, the

ultimate question for the Court is “whether justice and fairness require that economic injuries

caused by public action be compensated by the government, rather than remain

disproportionately concentrated on a few persons.” Kaiser Aetna v. United States, 444 U.S. 164,

175 (1979) (internal quotation marks omitted). The Sheriff Defendants do not address the Penn

Central factors in their opposition.

With respect to the first Penn Central factor, Plaintiffs argue that the economic impact of

the Amendment will be severe. They argue that, as a result of the Amendment as applied

retroactively, they “will lose hundreds of thousands of dollars in expected income” and will be

“forced to make adjustments to their lending practices or otherwise reduce services to the

community,” such as increasing interest rates or offering less loans. Pls. Mem. at 16-17; Heim

Decl. ¶¶ 42-45; Haaksma Decl. ¶¶ 45-47; Zasucha Decl. ¶¶ 43-46.

With respect to the second factor, Plaintiffs contend that, given the long-standing interest

rate in New York, they “had every reason to expect that they would receive the accrued interest

on their judgments”—in place for over forty years—and had made investment and business

decisions based on that expectation. Pls. Mem. at 16-17; Heim Decl. ¶¶ 42-45; Haaksma Decl.

¶¶ 45-47; Zasucha Decl. ¶¶ 43-46. As a result, Plaintiffs argue that they “are being forced by the

Government to bear a significant economic impact for the ostensible benefit of a portion of the

public.” Pls. Mem. at 16.

Finally, the third factor under Penn Central instructs the Court to assess the “character of

the taking.” Under that factor, “a taking may more readily be found when the interference with

property can be characterized as a physical invasion by government, than when interference

arises from some public program adjusting the benefits and burdens of economic life to promote

the common good.” Penn Central, 438 U.S. at 124 (internal citations omitted). As discussed

above, the Amendment does not result in a physical occupation of property, and instead operates

to adjust the interest rate accrued on judgments, to promote what the New York legislature has

determined to be the common good. Here, the character of the challenged action, i.e. the

Amendment, weighs against Plaintiffs because the Amendment is akin to a “public program

adjusting the benefits and burdens of economic life to promote the common good.” Penn

Central, 438 U.S. at 124.

The Court concludes that the first and second Penn Central factors clearly weigh in favor

of the Plaintiffs at this stage. And while the third factor weighs in favor of the Defendants, the

Court balances that factor against the other two. On balance, the Court concludes that Plaintiffs

have demonstrated a likelihood of success on the merits of their Takings Clause claim.

2. The Fourteenth Amendment Substantive Due Process Claim

The Due Process Clause of the Fourteenth Amendment “embodies a substantive

component that protects against certain government actions regardless of the fairness of the

procedures used to implement them.” Bryant v. New York State Educ. Dep’t, 692 F.3d 202, 217

(2d Cir. 2012) (internal citation omitted). In essence, substantive due process protects against

government action that is “arbitrary, conscience-shocking, or oppressive in a constitutional

sense, but not against government action that is incorrect or ill advised.” Cunney v. Bd. of

Trustees of Village of Grand View, N.Y., 660 F.3d 612, 626 (2d Cir. 2011) (internal citation

omitted). In the context of retroactive legislation, the Constitutional due process requirement “is

met simply by showing that the retroactive application of the legislation is itself justified by a

rational legislative purpose.” Pension Benefit Guaranty Corporation v R. A. Gray & Co., 467

U.S. 717, 730 (1984). Indeed, “legislation readjusting rights and burdens is not unlawful solely

because it upsets otherwise settled expectations.” Id. at 729.

The Sheriff Defendants do not address Plaintiffs’ substantive due process claim in their

opposition papers. Plaintiffs argue that the Amendment violates their substantive due process

rights because the retroactive application of the law has no limit, the change in law upsets forty

years of expectations, and lenders will respond to the law by reducing services and products for

consumers (thereby harming them). Pls. Mem. at 18-19.

Plaintiffs also appear to argue that the Amendment violates the Fourteenth Amendment

because it is impermissibly vague. Pls. Mem. at 19 (the statute is “hopelessly vague”). A statute

may be impermissibly vague where “its commands are so vague as really to be no rule or

standard at all.” Ass’n of Int’l Auto Mfrs. v. Abrams, 84 F.3d 602, 614 (2d Cir. 1996) (quoting

Boutilier v. INS, 387 U.S. 118, 123 (1967)).

The legal standards governing Plaintiffs’ substantive due process clause claims pose

difficult burdens to establish a clear likelihood of success on the merits. However, the Court

need not address Plaintiffs’ substantive due process claim because the Court has determined that

Plaintiffs have shown a clear likelihood of success on their Takings Clause claim, and the relief

sought is the same under either claim. See E. Enters., 524 U.S. at 538 (where court determined

Takings Clause violation occurred, it “need not” address due process claim.); Trump v. Int’l

Refugee Assistance Project, 137 S. Ct. 2080, 2087 (2017) (“Crafting a preliminary injunction is

an exercise of discretion and judgment, often dependent as much on the equities of a given case

as the substance of the legal issues it presents.”).

B. Irreparable Harm

The Second Circuit has made clear that a showing of irreparable harm is “the single most

important prerequisite for the issuance” of injunctive relief. Faiveley Transp. Malmo AB v.

Wabtec Corp., 559 F.3d 110, 118 (2d Cir. 2009); see also Wright & Miller, Federal Practice &

Procedure § 2951 (“A demonstration of irreparable injury by the party seeking relief is an

essential prerequisite to a temporary restraining order.”). “To satisfy the irreparable harm

requirement, Plaintiffs must demonstrate that absent a preliminary injunction they will suffer an

injury that is neither remote nor speculative, but actual and imminent.” Grand River Enterprise

Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007) (citing Freedom Holdings, Inc. v.

Spitzer, 408 F.3d 112, 114 (2d Cir. 2005)). Irreparable harm potentially follows only where

money damages are unavailable to redress an injury. New York v. United States Dep’t of

Homeland Sec., 969 F.3d 42, 86 (2d Cir. 2020) (“Irreparable harm is injury that is neither remote

nor speculative, but actual and imminent and that cannot be remedied by an award of monetary

damages.” (internal citation omitted)).

The Court concludes that Plaintiffs have clearly established irreparable harm. An alleged

violation of a Constitutional right can “trigger[] a finding of irreparable harm.” Jolly v.

Coughlin, 76 F.3d 468, 482 (2d Cir. 1996); Floyd v. City of New York¸ 959 F. Supp. 2d 691, 696

(S.D.N.Y. 2013) (“It is well-established that a violation of one’s constitutional rights constitutes

irreparable harm.”). Plaintiffs seek prospective injunctive relief under Section 1983. It is settled

law that a plaintiff suing a state official in his or her official capacity under Section 1983, such as

Plaintiffs here, may be entitled to injunctive relief—but not money damages. Will v. Michigan

Dep’t of State Police 491 U.S. 58, 71 n.10 (1989); see Pennhurst State Sch. & Hosp. v.

Halderman, 465 U.S. 89, 102-03 (1984) (“[W]hen a plaintiff sues a state official alleging a

violation of federal law, the federal court may . . . not . . . award[] retroactive monetary relief”);

Entergy Nuclear Vermont Yankee, LLC v. Shumlin¸733 F.3d 393, 423 (2d Cir. 2013) (irreparable

harm shown where “Entergy would be unable to recover monetary damages from Vermont

because of the Eleventh Amendment”); Ex Parte Young, 209 U.S. 123 (1908) (Eleventh

Amendment bars suits against a state except where state officer in official capacity is sued and

plaintiff seeks prospective injunctive relief).

As such, the unconstitutional deprivation of Plaintiffs’ accrued post-judgment interest

would appear to be uncompensable by money damages. There is clear tension between the

Takings Clause (which contemplates “just compensation”) and the Eleventh Amendment (which

bars money damage suits against state officials). While the Second Circuit has never squarely

answered whether the Eleventh Amendment would bar compensation claims under the Takings

Clause, the “overwhelming weight of authority” suggests that “sovereign immunity trumps the

Takings Clause.” Cmty. Hous. Improvement Program v. City of New York, 492 F. Supp. 3d 33,

40 (E.D.N.Y. 2020); Morabito v. New York, 803 F. App’x 463, 464-65 (2d Cir. 2020) (affirming

decision that Eleventh Amendment bars takings claim); Bldg & Realty Inst. of Westchester &

Putnam Cntys., Inc. v. New York, 2021 U.S. Dist. LEXIS, 174535, at *26-27 (S.D.N.Y. Sept. 14,

2021) (Eleventh Amendment prevails over Takings Clause claim) (collecting cases). In light of

the foregoing, Plaintiffs make a sufficient showing of irreparable harm both because they show a

likelihood of success on their Takings Clause claim, and because money damages would be

unavailable to Plaintiffs in this matter.

The Sheriff Defendants argue that there is no irreparable harm here because New York

state law provides an adequate remedy under New York Civil Practice Law and Rules Section

5240. Defs. Mem. at 11. That provision provides that a “court may at any time, on its own

initiative or the motion of any interested person, and upon such notice as it may require, make an

order denying, limiting, conditioning, regulating, extending or modifying the use of any

enforcement procedure.” That provision provides for so-called “protective orders in the

enforcement of judgments.” Siegel, New York Practice § 522. According to the Sheriff

Defendants, CPLR 5240 allows a “state court to modify all of the judgments enforced at 2%

instead of 9% during the pendency of this action.” Defs. Mem. at 12.

The Court is unconvinced that CPLR 5240 provides an adequate remedy for two reasons.

First, by its plain language, CPLR 5240 is discretionary. See N.Y. C.P.L.R. § 5240 (stating a

court “may . . . make an order . . . .”). Second, the Sheriff Defendants cite no case for the

proposition that CPLR 5240 permits a judgment creditor to recover more interest than that

assessed at the time the judgment is satisfied. The Sheriff Defendants cite the recent decision by

the New York Court of Appeals in Plymouth Venture Partners in support of their contention that

the CPLR provision is available “even after the assets have been transferred to the judgment

creditor.” Mem. at 12 (quoting 2021 N.Y. LEXIS 2577, *12 (2021)). But, as the Court of

Appeals pointed out, “CPLR 5240 grants the courts broad discretionary power to control and

regulate the enforcement of a money judgment under article 52 to prevent unreasonable

annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the

courts.” Id. at *11. The purpose of CPLR 5240 is to “to aid a party inequitably burdened by the

use of enforcement procedures by his adversary and to allow him an opportunity to either meet

his legal obligation or postpone the enforcement of a judgment until such time that its

enforcement is more properly sought.” Kolortron Sys., Inc. v. Casey, 500 N.Y.S.2d 36, 36 (N.Y.

App. 1986) (emphasis added). Plymouth Venture Partners therefore does not stand for the

proposition that CPLR 5240 gives judgment creditors the ability to reopen satisfied judgments to

assess an increase to redress the reduction in statutory interest rate by reason of the Amendment.

Indeed, if that were the case, any judgment creditor could seek to reopen any satisfied judgment

if it wanted to avail itself of a change in interest rate. Further, if any now-unsatisfied judgment is

satisfied during the pendency of this litigation, the judgment creditors would be forced to engage

in seriatim micro-litigation against any number of judgment debtors. This does not seem to be

consistent with the intent of the statute.

C. The Balance of Equities and the Public Interest

In evaluating Plaintiffs’ request for injunctive relief, the Court balances “the competing

claims of injury and must consider the effect on each party of the granting or withholding of the

requested relief,” in addition to “the public consequences in employing the extraordinary remedy

of injunction.” Yang, 960 F.3d at 127.

The Sheriff Defendants contend that the Amendment furthers the “public interest” insofar

as it alleviates burdensome consumer debt. Defs. Mem. at 13-14. The Sheriff Defendants argue

in support of the Amendment that by reducing the interest rate applicable (prospectively and

retroactively) to consumer-debt judgments, consumers will not have to “choose between putting

food on the table and paying off consumer debt.” Defs. Mem. at 14. The Sheriff Defendants

also argue that injunctive relief would place burdens on consumers which could more easily be

borne by the Plaintiffs during the pendency of this litigation. Defs. Mem. at 14.

To be sure, it is a legitimate legislative prerogative to adjust the interest rate applicable to

judgments in the state of New York. However, to do so retroactively, with respect to interest

which has already vested under existing law, raises serious Constitutional concerns. Because the

Court concludes that the retroactive application of the Amendment constitutes a taking, the

public interest prong tips in favor of the Plaintiffs. “The Second Circuit has concluded that,

where a plaintiff alleges constitutional violations, the balance of hardships tips decidedly in the

plaintiff’s favor.” Sajous v. Decker, 2018 WL 2357266, at *13 (S.D.N.Y. May 2018) (citing

Mitchell v. Cuomo, 748 F.2d 804, 808 (2d Cir. 1984)). Indeed, “[n]o public interest is served by

maintaining an unconstitutional policy when constitutional alternatives are available to achieve

the same goal.” Agudath Isr., 983 F.3d at 637 (applying public interest factor). For example, the

Legislature’s claimed goal of alleviating consumer debt is achieved by the prospective portion of

the Amendment—which the Plaintiffs do not challenge. Further, and contrary to the Sheriff

Defendants’ arguments, any harm to the public is minimal where an injunction would do nothing

more than maintain the status quo—in place for more than forty years—during the pendency of

this litigation.

Significantly, in weighing the effect on the parties before the court of granting or

withholding injunctive relief, it is noteworthy that the Sheriff Defendants stated at oral argument

that they would actually benefit from the injunctive relief. Tr. at 31:12-13, 40:13-21 (“I would

not refuse the injunction. . . . [T]o the extent there is an injunction, we’re probably the party that

walks away the happiest.”).

V. A BOND IS NOT NECESSARY IN THIS CASE

Pursuant to Federal Rule of Civil Procedure 65(a), the Court ”may issue a preliminary

injunction . . . only if the movant gives security in an amount that the court considers proper to

pay the costs and damages sustained by any party found to have been wrongfully enjoined or

restrained.” It is unclear what damage Defendants—or indeed judgment debtors—would suffer

by the injunctive relief prohibiting the retroactive enforcement of the Amendment that the

posting of a bond would remedy. The Sheriff Defendants suggest that a bond of “more than $15

million would be needed to enjoin statewide implementation of the Act.” Defs. Mem. at 20. But

the injunction would do no more than maintain the status quo during the pendency of this

litigation. Indeed, according to the Sheriff Defendants, New York state law provides judgment

debtors the ability to seek redress if Plaintiffs receive payments from unsatisfied judgments

during this litigation, but do not ultimately prevail. See Defs. Mem. at 12.

CONCLUSION

The foregoing constitutes the Court’s Findings of Fact and Conclusions of Law pursuant

to Rules 52(a) and 65 of the Federal Rules of Civil Procedure with respect to Plaintiffs’ motion

for a preliminary injunction against Defendant Judge Marks and the Sheriff Defendants. As

noted, the motion is DENIED with respect to Defendant Judge Marks. Plaintiffs’ request for a

preliminary injunction is GRANTED with respect to the Sheriff Defendants. The Court hereby

enjoins the Sheriff Defendants from enforcing the Amendment on a retroactive basis.

Specifically, the Sheriff Defendants are enjoined from refusing to execute an existing judgment

calculated with the interest rate in effect at the time the judgment was obtained, and from

enforcing reduction of the existing interest rate of the judgments entered prior to the effective

date of the Amendment.

At the hearing on Plaintiffs’ motion, the Plaintiffs agreed that, if the Court were to grant

Plaintiffs’ application, they would notify the sheriffs of all counties in New York. Tr. at 49:1-4.

Accordingly, Plaintiffs are directed immediately to provide notice of this Order to all sheriffs of

all sixty-two counties in New York.

SO ORDERED. . .

Date: April 28, 2022 ig Kes ifr

New York, NY MARY VYSKOCIL

United States District Judge

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