Southern Update-Durham Commercial Capital Corp. v. Ocwen Loan Servicing, LLC, No., 17-15572, 2019 WL 2290886 (11th Cir. May 29, 2019)

Eleventh Circuit held that New York UCC provision does not give rise to a private right of action to a secured party that was not an assignee of an account.  Durham Commercial Capital Corp. v. Ocwen Loan Servicing, LLC, No., 17-15572, 2019 WL 2290886 (11th Cir. May 29, 2019).

By: Jeff Duston (King & Spalding)

A secured party with security interest in accounts receivable brought an action against an account debtor for allegedly continuing to pay creditor despite notice of security interest, with secured party seeking to recover such payments under New York Uniform Commercial Code (UCC) § 9-406(a) providing that account debtor could not discharge obligation by paying assignor of account after notice of assignment. The United States District Court for the Southern District of Florida (the “District Court”) denied the account debtor’s motion for judgment as matter of law, and a jury returned verdict in secured party’s favor. The account debtor appealed, arguing that statutory subsection relied upon by secured party did not give private right of action to secured party that was not also assignee of the account.

The U.S. Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”) agreed—holding that the New York UCC subsection providing that the account debtor could not discharge an obligation by paying an assignor of the account after notice of assignment did not give private right of action to a secured party that was not also an assignee of the account.  Under New York law, a statute may either expressly provide or fairly imply a private right of action. The Eleventh Circuit determined that the statute did neither for secured parties—finding that conclusion dispositive. Accordingly, the Eleventh Circuit reversed the District Court’s holding.