New York Court Enforces Choice of Law Provision Despite State Usury Law

An alternative small business lender provided a loan to a business. The business later filed suit against the lender in an attempt to void the loan agreement. The business alleged that the agreement violated New York’s criminal usury statute.  The agreement contained a choice of law provision which provided that the transaction would be interpreted and governed by Utah state law.

The lender filed a motion to dismiss the complaint arguing in part that the agreement’s choice of law provision was enforceable and that under Utah state law the loan was not usurious. The court agreed, stating,

Hornbook law holds that Courts must enforce choice-of-law provisions, at least if there is a reasonable connection between the law chosen and one of the parties. Here, defendants, one of which is located in Utah, and the transaction, which defendants claim, without contradiction, was “made” in Utah, obviously have a strong connection to Utah. Thus, the choice-of-law provision is enforceable, and the agreement is not void based on New York’s usury law.

As a result, the court granted the lender’s motion and dismissed the case.

Parry v Retail Capital LLC, 2017 N.Y. Misc. LEXIS 154, 2017 NY Slip Op 30082(U)

About Patrick Siegfried

Patrick Siegfried is the author of the Usury Law Blog. Patrick is a practicing attorney in Bethesda, Maryland. Patrick’s work focuses on issues regarding alternative small business financing. He can be reached at psiegfried@usurylawblog.com

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