The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
CHATTANOOGA DIVISION
CAREY V. BROWN, )
)
) 1:20-CV-00164-DCLC
Plaintiff,
)
)
vs.
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MERRICK GARLAND1, Attorney General )
)
of the United States of America, and
)
REGINA LOMBARDO, Acting Director of
)
the Bureau of Alcohol, Tobacco, Firearms
)
and Explosives,
)
)
Defendants. )
MEMORANDUM OPINION AND ORDER
Defendants Merrick Garland, in his official capacity as Attorney General of the United
States, and Regina Lombardo, in her official capacity as the Acting Director of the Bureau of
Alcohol, Tobacco, Firearms, and Explosives, filed a Motion to Dismiss [Doc. 10] and
memorandum in support [Doc. 11] pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff
Carey Brown responded in opposition [Doc. 17] and Defendants replied [Doc. 23]. This motion is
now ripe for resolution.
I. BACKGROUND
Plaintiff operated MyCashNow.com and made loans to individuals in New York with an
1 Plaintiff initially sued former Attorney General William P. Barr in his official capacity.
Merrick Garland is his successor and is automatically substituted in former-Attorney General
Barr’s place. Fed.R.Civ.P. 25(d) provides that “An action does not abate when a public officer
who is a party in an official capacity … ceases to hold office while the action is pending. The
officer's successor is automatically substituted as a party. Later proceedings should be in the
substituted party's name….”
annual percentage rate of over twenty-five percent per annum [Doc. 1, ¶ 13-15]. In New York, it
is a crime for an unlicensed lender to charge more than twenty-five percent per annum on any loan,
pursuant to N.Y. Penal Law § 190.42 [Id. at ¶ 16]. Plaintiff pled guilty to one count of criminal
usury in the first degree in the state of New York, which is a class C felony and punishable by up
to fifteen years in prison [Id. at ¶¶ 16-17].
Plaintiff contends his felony usury conviction does not prohibit him from possessing
firearms under 18 U.S.C. § 921(a)(20)(A), which excludes certain felonies from being considered
a “crime punishable by imprisonment for a term exceeding one year.” He seeks declaratory and
injunctive relief [Id. at ¶ 34].2 Defendants argue Plaintiff’s complaint should be dismissed because
his usury conviction is not the type of offense that falls within the § 921(a)(20)(A) exception and
he is, accordingly, prohibited from possessing any firearms under § 922(d)(1) and (g)(1) [Docs.
10, 11].
II. STANDARD OF REVIEW
Under Fed.R.Civ.P. 12(b)(6), the Court may dismiss an action for failing to state a claim
upon which relief can be granted. Fed.R.Civ.P. 8(a)(2) requires the complaint to contain a “short
plain statement of the claim showing that the pleader is entitled to relief.” A motion to dismiss
under Rule 12(b)(6) requires the Court to construe the allegations in the complaint in the light most
favorable to the plaintiff and accept all the complaint’s factual allegations as true. Meador v.
Cabinet for Human Res., 902 F.2d 474, 475 (6th Cir. 1990). However, the plaintiff must allege
2 Alternatively, Plaintiff raises two constitutional challenges to the enforcement of § 922(g)
against him because of his New York conviction. First, if his conviction is not an exempted felony
conviction under § 921(a)(20)(A), then §§ 922(g)(1) and (d)(1) create unconstitutional distinctions
between classes of individuals, in violation of the Fifth Amendment’s Due Process clause [Doc.
1, ¶¶ 36, 40]. Second, Plaintiff alleges that §§ 922(g)(1) and (d)(1) violate his Second Amendment
“right to keep and bear arms” [Id. at ¶ 44].
facts that, if accepted as true, are sufficient “to raise a right to relief above the speculative level,”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and to “state a claim to relief that is
plausible on its face.” Id. at 570; see also Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).
III. ANALYSIS
Federal law prohibits any person who has been convicted of “a crime punishable by
imprisonment for a term exceeding one year” from possessing firearms or ammunition. 18 U.S.C.
§ 922(g)(1). Certain felony convictions, however, do not trigger this prohibition on firearm
possession. See 18 U.S.C. § 921(a)(20)(A). Those felonies include “any Federal or State offenses
pertaining to antitrust violations, unfair trade practices, restraints of trade, or other similar offenses
relating to the regulation of business practices.” Id. The issue in this case is whether a conviction
for criminal usury in the first degree under New York Penal Law § 190.42 is the type of offense
that falls within the exclusion provided by § 921(a)(20)(A) and not trigger the prohibition on
firearm possession.
To answer this question, the Court begins with the text of 18 U.S.C. § 921(a)(20)(A). It
enumerates four types of offenses that do not trigger the prohibition on possessing firearms: (1)
antitrust violations, (2) unfair trade practices, (3) restraints of trade, and (4) other similar offenses
relating to the regulation of business practices (“the business practices clause”). While none of
these are specifically defined, they all share a common characteristic of adversely effecting
competitors or consumers. See United States v. Meldish, 722 F.2d 26, 27-28 (2d Cir. 1983).
As Defendants argue, courts that have addressed the scope of § 921(a)(20)(A) have looked
to the underlying elements of the predicate offense to determine whether it has an adverse effect
on competition or consumers. In Meldish, the Second Circuit analyzed a conviction for importing
merchandise into the United States by using false custom declarations. It found the conviction
was not an unfair trade practice because it “in no way depends upon whether it has an effect on
competition or consumers.” Id. at 28. Its focus was only on the elements of the predicate offense
to determine whether that offense had an anti-competitive effect. Id. The Fifth Circuit also
required an effect on competition or consumers. See Dreher v. United States, 115 F.3d 330, 332-
33 (5th Cir. 1997). In Dreher, the Court analyzed a conviction for mail fraud and found it did not
qualify “[b]ecause [such] violations … in no way depend on whether they have an effect upon
competition.” Id. In United States v. Schultz, 586 F.3d 526, 530 (7th Cir. 2009), the Seventh
Circuit held that “to determine whether Schultz's previous conviction is excluded under the §
921(a)(20)(A) exclusion, we focus on the elements of the predicate conviction.”
Similarly, the Eight Circuit also found that “implicit in the term ‘unfair trade practices’ is
the requirement of an adverse economic effect on competition or consumers.” United States v.
Stanko, 491 F.3d 408, 415-16 (8th Cir. 2007). But in analyzing the reach of § 921(a)(20)(A), the
Court did not exclusively focus on the elements of the predicate offense. Instead, it examined both
“the purpose and elements of the statute of conviction.” Id. at 415. It found that the primary
purpose of the underlying offense was “to protect public health” and not to protect competition or
consumers. Id. at 417. It also examined the elements of the underlying offense to determine
whether it had “an economic effect on competition or consumers.” Id. at 418. It did not.
Therefore, the offense was not an excluded felony under § 921(a)(20)(A).
The Government argues that the Court should only examine the elements of the underlying
predicate offense to determine whether it adversely effects competition or consumers. 3 If the
underlying offense does not have as an element a requirement of proof of an adverse effect, then
it does not fit the exception. The Court declines to limit its analysis to only the elements of the
3 The Sixth Circuit has not addressed this issue.
predicate offense. The better approach, as employed by the Court in Stanko, is to include both the
primary purpose of the statute at issue and its elements in determining whether the offense fits
within § 921(a)(20(A). The reason is because both the statute’s primary purpose and its elements
provide insight into whether the predicate offense fits within § 921(a)(20)(A). As the district court
noted in Reyes, “[t]he common thread between the enumerated offenses is that they are commercial
crimes intended to address economic harm to competitors or consumers – not that they require
proof of such harm as an element of the offense.” Reyes v. Sessions, 342 F. Supp. 3d 141, 147
(D.C. Dist. 2018). “The fact that a business practices offense does not have as an element proof
of harm to consumers or competition…cannot definitively determine that it is not within the
business practices exception in § 921(a)(20)(A).” Id. at 150-51. Moreover, relying solely on the
elements of the predicate offense would require “a predicate offense to pass a test that the
enumerated offenses themselves do not meet.” Id. at 151.4 That inconsistency simply does not
support restricting the analysis to only the elements. Both the primary purpose and its elements
should be examined.
The Court begins with the elements of the predicate offense, criminal usury in the first
degree under New York Penal law § 190.42. “A finding of criminal usury requires proof that the
lender (1) knowingly charged, took or received (2) annual interest exceeding 25% (3) on a loan or
forbearance.” Pearl Cap. Rivis Ventures, LLC v. RDN Const., Inc., 54 Misc. 3d 470, 473, 41
N.Y.S.3d 397, 400 (N.Y. Sup. Ct. 2016) (citations and quotations omitted). Under New York
Penal Law § 190.42, a person commits criminal usury in the first degree when he commits criminal
usury but also has either a previous conviction for criminal usury or an attempt or his conduct “was
4 For example, “[m]ost criminal antitrust violations…are considered to be per se harmful to
competition and consumers and require no actual proof of injury.” Reyes, 342 F. Supp. 3d at 150
(citing United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 (1940)).
part of a scheme or business of making or collecting usurious loans.” People v. Valentzas, 517
N.E.2d 198, 199 (N.Y. 1987). What is notably absent from the elements is any adverse impact on
the consumer. The elements do not address it. It is certainly implied but does not require any
affirmative proof. Instead, the offense only requires proof of knowledge, the interest rate
exceeding 25%, and a loan or forbearance. To be sure, usurious loans can be harmful to the
borrower, but proving that harm is not an element of the offense under New York law. The Court
agrees with the Government that criminal usury conviction does not meet the elements test.
That leads to the next issue, the law’s primary purpose. In Reyes, the district court analyzed
convictions for securities fraud and making false filings with the Securities and Exchange
Commission in violation of 15 U.S.C. §§ 78j(b) and 78(ff), falsifying corporate books and records,
and making false statements to auditors. It noted the purpose of the Exchange Act “as a whole
[was] to regulate business practices in order to protect investors—i.e., purchasers of securities in
the securities market—from economic harm.” Reyes, 342 F. Supp. 3d at 153–54. It found that
each of Reyes’s convictions satisfied this primary purpose prong and was excluded from the
definition of “crime[s] punishable by imprisonment for a term exceeding one year.” Id. at 156.
The purpose of criminal usury laws is quite similar to the purpose of the Exchange Act:
protecting borrowers in the case of usury laws, investors in the case of the Exchange Act. Id. The
Second Circuit recently addressed the purpose behind criminal usury laws.
The purpose of usury laws, from time immemorial, has been to protect desperately
poor people from the consequences of their own desperation. Law-making
authorities in almost all civilizations have recognized that the crush of financial
burdens causes people to agree to almost any conditions of the lender and to consent
to even the most improvident loans. Lenders, with the money, have all the leverage;
borrowers, in dire need of money, have none. ... [New York law] protect[s]
impoverished debtors from improvident transactions drawn by lenders and brought
on by dire personal financial stress.
United States v. Moseley, 980 F.3d 9, 21 (2d Cir. 2020), cert. denied, 141 S. Ct. 1442 (2021)
(quoting Schneider v. Phelps, 41 N.Y.2d 238, 243, 391 N.Y.S.2d 568, 359 N.E.2d 1361 (1977)).
The criminal usury statute protects consumers by prohibiting unauthorized lenders from charging
an interest rate on loans at a level the New York legislature has determined to be criminal.5 Its
purpose is to protect consumers by regulating a specific business practice of certain lenders. As
such, its primary purpose is consistent with the types of crimes Congress intended to include within
the definition of § 921(a)(20)(A).
Accordingly, given the primary purpose of the law is to protect consumers, the Court finds
Plaintiff’s predicate conviction for criminal usury in the first degree is excluded from the definition
of a “crime punishable by imprisonment for a term exceeding one year.” 18 U.S.C. §
921(a)(20)(A). Given this ruling, the Court finds it unnecessary to address Plaintiff’s Second
Amendment argument and Fifth Amendment Due Process challenge.
IV. CONCLUSION
For the reasons stated above, Defendant’s Motion to Dismiss [Doc. 10] is DENIED.
SO ORDERED:
s/ Clifton L. Corker
United States District Judge
5 Indeed, loans charging criminal usury interest are not even enforceable in New York. See
Blue Wolf Cap. Fund II, L.P. v. Am. Stevedoring Inc., 105 A.D.3d 178, 184, 961 N.Y.S.2d 86, 90
(2013) (“Since ASI has successfully asserted criminal usury as an affirmative defense, the loan
transaction and the associated note, loan agreement, and collateral agreement are void and
unenforceable).