No case has come to the Court's attention in which a private cause of action for commercial bribery has been implied under this statute. In the absence of any guidance from state courts, federal courts are hesitant to imply private rights of action from state criminal statutes. See Agresta v. Goode, 797 F. Supp. 399, 409 (E.D. Pa. 1992); Agnew v. City of Bryan, Civ. A. No. H-84-4407, 1986 WL 15158, at *1 (S.D. Tex. Dec. 23, 1986) ("Plaintiff . . . has not cited any authority to support a private cause of action under [certain] sections of the Texas Code of Criminal Procedure, and the Court finds none.").
Moreover, courts should consider whether a private right of action is necessary to protect the intended beneficiaries of a statute when determining whether to imply a private right of action. Cort v. Ash, 422 U.S. 66, 78-81, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975) (discussing factors federal courts consider in determining whether a private right of action should be implied under federal criminal statute). There is no reason to imply a private action under this penal statute because if Plaintiffs' allegations have merit, they will be entitled to recovery on their common law claims for breach of fiduciary duty.
There is no private right of action under the Texas Commercial Bribery statute, and the Plaintiffs' claims under this statute are dismissed.
The Complaint asserts a claim under the Texas Usury Statute, in that the Defendant Millennium, in behalf of Mellon and the related lenders and Integrated and its affiliates, charged a usurious rate of interest on the Notes with which the Plaintiffs purchased their investments. Specifically, the Plaintiffs allege that the Notes called for 12% annual interest, and allowed for a 2% per month default fee, totaling 24% per annum. In addition, the Plaintiffs allege that Defendants Millennium, acting as agent for Mellon and pursuant to the overall plan and conspiracy, charged late fees. The combination of these charges, the Plaintiffs allege, were in excess of 36% per annum and therefore violated Tex. Rev. Civ. Stat. art. 5069-1.01 et seq. (Pls.' Mem. at 22.) The Plaintiffs further assert that, even if the New York usury laws were applied, the rates charged by the Defendants on the Notes would exceed the 16% limit set forth in N.Y. Gen. Ob. L. § 5-501.
As an initial matter, the Court must apply New York law to the Plaintiffs' usury claims. In a transferred federal action involving state law claims, the law of the transferor forum applies in the transferee court to the state law claims. Van Dusen v. Barrack, 376 U.S. 612, 11 L. Ed. 2d 945, 84 S. Ct. 805 (1964); In re Energy Sys. Equip. Leasing Secs. Litig., 642 F. Supp. 718, 744 (E.D.N.Y. 1986).
Under Texas choice of law principles, if the parties have by contract selected the law of a foreign state, the law of such foreign state will govern their dispute so long as there is a reasonable relationship between such foreign state and the transaction at issue. Davidson Oil Country Supply Co. v. Klockner, Inc., 908 F.2d 1238, 1248 (5th Cir. 1990); Woods-Tucker Leasing Corp. v. Hutcheson-Ingram Dev. Co., 642 F.2d 744, 749-50 (5th Cir. 1981). The chosen forum lacks a reasonable relation to the transaction if it "has no normal relation to the transaction." Davidson, 908 F.2d at 1248 n.29.
The investments at issue in the present case bear a reasonable relation to New York. As determined by this Court in an action involving another Integrated-sponsored partnership, New York "is the center of gravity of the hundreds of limited partnerships sponsored by Integrated." 600 Grant St. Assocs. Ltd. Partnership v. Leon-Dielmann Invest. Partnership, 681 F. Supp. 1062, 1064 (S.D.N.Y. 1988) (denying motion of Texan limited partners to dismiss or transfer).
In the present case, the Plaintiffs executed subscription documents and Notes that expressly provided that they would be governed by New York law. Accordingly, this Court will apply the laws of New York to the Plaintiffs' usury claims. See Davidson, 908 F.2d at 1248 (New York, rather than Texas, usury law applicable where subject contract provided that New York law governed the transaction); Woods-Tucker, 642 F.2d at 749-50 (Mississippi, rather than Texas usury law applies to transaction even though Texas had most significant contacts with transaction).
The Plaintiffs' specific claim of usury is that "defendants have charged usurious interest on the investor notes through the demands of Millennium made in 1991." (Compl. at P 19.) Thus, the Plaintiffs' usury claim pertains only to the Madison and Mid-Atlantic Notes, in as much as the Notes relating to Satellite "A," Satellite "B," and Cablevision were paid in full by 1989 (Jacobs Aff. P 12.)
Under New York law, the maximum rate of interest permitted to be charged is sixteen percent. N.Y. Gen. Ob. L. § 5-501; N.Y. Banking L. § 14-a(1). In this case, the basic interest rates under the Notes for each of the Plaintiffs' investments is less than 16%. Any penalty interest rates or late fees assessed against the Plaintiffs do not constitute usury, since New York's usury statutes do not apply to defaulted obligations. Manfra, Tordella & Brookes, Inc. v. Bunge, 794 F.2d 61, 63 n.3 (2d Cir. 1986); Bruce v. Martin, 845 F. Supp. 146, 1994 U.S. Dist. LEXIS 1986 (S.D.N.Y. 1994). Consequently, the Plaintiffs' usury claims are dismissed.
Declaratory Judgment Regarding the Investor Notes
The Complaint also requests a judgment declaring the Notes void and without obligation on the Plaintiffs because Mellon is not a holder in due course of the Notes.
For the reasons discussed above, the Notes are governed by New York law. To qualify as a holder in due course under New York law, the holder must take a note for value, in good faith and without notice of any defense against or claim to it by any person. N.Y.U.C.C. § 3-302. "Good faith" is defined as "honesty in fact in the conduct or transaction concerned." N.Y.U.C.C. § 1-201(19). A holder has "notice" only of those claims or defenses of which it has actual knowledge or "knowledge of such facts that his action in taking the instrument amounts to bad faith." N.Y.U.C.C. § 3-304(7); See Hartford Accident & Indem. Co. v. American Express Co., 74 N.Y.2d 153, 162, 544 N.Y.S.2d 573, 542 N.E.2d 1090 (1989). Otherwise stated:
Holders in due course are to be determined by the simple test of what they actually knew, not by speculation as to what they had reason to know, or what would have aroused the suspicion of a reasonable person in their circumstances.
Hartford Accident & Indem. Co., 74 N.Y.2d at 163.
"A party challenging the good faith and lack of notice of a holder bears a substantial burden. Complaints based on such allegations must be dismissed unless there exist 'material issues of fact . . . which are "genuine and based on proof, not shadowy and conclusory statements."'" Fidelity Bank, N.A. v. Avrutick, 740 F. Supp. 222, 236 (S.D.N.Y. 1990) (quoting First International Bank v. L. Blankstein & Son, 59 N.Y.2d 436, 465 N.Y.S.2d 888, 892, 452 N.E.2d 1216 (1983)); see also Ecoban Capital, Ltd. v. Ratkowski, 712 F. Supp. 1120, 1123 (S.D.N.Y. 1989) (conclusory allegations attacking holder in due course status are insufficient), aff'd, 909 F.2d 1472 (2d Cir. 1990); Union Bank of India v. Seven Seas Imports, Inc., 727 F. Supp. 125, 130 (S.D.N.Y. 1989); Chemical Bank of Rochester v. Haskell, 51 N.Y.2d 85, 92-94, 432 N.Y.S.2d 478, 411 N.E.2d 1339 (1980).
In defense of their claim, the most that Plaintiffs allege is that:
As prearranged, Integrated and affiliates caused the holders (i.e., the specific investment partnership or device) to borrow funds from Mellon (or other) lenders and the investor notes were used as collateral therefor; Mellon was acting for itself and undisclosed other financial institutions in providing the additional financing for the borrower with full knowledge that such funds were for the benefit of the excessive profits, front loads, fees and commissions. . . .