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Bear Stearns Complaint Stated a Cause of Action for Indemnification and Should Not Have Been Dismissed

In a full-fledged opinion by Judge Graffeo, the Court of Appeals reversed the Appellate Division and allowed a suit by Bear Stearns against its insurers (which had denied coverage) to go forward.  In response to a Security and Exchange Commission (SEC) investigation into late trading and market timing activities, Bear Stearns agreed to pay a 160-million-dollar disgorgement fee.  Bear Stearns then sought indemnification from the defendant insurance companies.  The complaint, which had been dismissed, alleged that 140 of the 160 million constituted profits that flowed to Bear Stearns’ customers, not funds improperly acquired by Bear Stearns. The Court of Appeals determined that it could not be discerned from the SEC order alone whether or not the funds were deemed improperly acquired by Bear Stearns.  Therefore the complaint stated a cause of action:

In the context of these dismissal motions, we must assume Bear Stearns’ allegations to be true unless conclusively refuted by the relevant documentary evidence, in this case, the SEC order. Contrary to the Insurers’ position, the SEC order does not establish that the $160 million disgorgement payment was predicated on moneys that Bear Stearns itself improperly earned as a result of its securities violations. Rather, the SEC order recites that Bear Stearns’ misconduct enabled its “customers to generate hundreds of millions of dollars in profits.” Hence, at this CPLR 3211 stage, the documentary evidence does not decisively repudiate Bear Stearns’ allegation that the SEC disgorgement payment amount was calculated in large measure on the profits of others.  JP Morgan Securities, Inc v Vigilant Insurance Company, No 113, CtApp 6-11-13

 

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Proper Procedures for Handling Pro Se Motions to Withdraw Guilty Pleas (Alleging Coercion by Defense Counsel) Explained

The Court of Appeals considered two cases in which, after pleading guilty, the defendant made a pro se motion to withdraw the plea, claiming coercion and undue pressure by defense counsel. In both cases the sentencing judge asked for the defense attorney’s position on the pro se motion, which forced both attorneys to take a position adverse to the client’s, which, in turn, required the assignment of new counsel.  The Court explained how the situation should be handled:

…[W]hen a motion to withdraw a plea is patently insufficient on its face, a court may simply deny the motion without making any inquiry. When certain actions or inaction on the part of defense counsel are challenged on the motion, it may very well be necessary for defense counsel to address the matter when asked to by the court. When doing so, defense counsel should be afforded the opportunity to explain his performance with respect to the plea …, but may not take a position on the motion that is adverse to the defendant …. At that point, a conflict of interest arises, and the court must assign a new attorney to represent the defendant on the motion. People v  Mitchell …, Nos 116, 117, CtApp, 6-11-13

 

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Beating of Child Combined with Two-Hour Delay in Seeking Help Constituted Depraved Indifference

The Court of Appeals, in a full-fledged opinion by Judge Pigott which addressed both the proof requirements for depraved indifference murder and ineffective assistance of counsel, determined that the brutal beating of a 15-month-old baby combined with the failure to summon assistance for 2 hours met the criteria for depraved indifference to human life.  The Court found that the facts proved a brutal course of conduct over a prolonged or extended period of time.  In explaining the operative principles, Judge Pigott wrote:

This appeal is governed by the requirement that, in proving the existence of “circumstances evincing a depraved indifference to human life,” the People must show that, at the time the crime occurred, defendant had a mens rea of “utter disregard for the value of human life” …. Put simply, the People must prove that defendant did not care whether his victim lived or died … . Additionally, the People must prove a second mens rea, namely recklessness. * * *

A brutal course of conduct against a vulnerable victim occurring over a prolonged or extended period of time is more likely to be associated with the mental state of depraved indifference to human life than brutality that is short in duration and is not repeated. This is because the actor had the opportunity to regret his actions and display caring, but failed to take the opportunity. In the present case, defendant argues that his course of conduct against the child was not prolonged. But defendant’s argument focuses exclusively on the duration of his physical assault on the child, which may have been brief. However, this argument ignores the evidence that, by his later inaction “ his failure, over some two hours, to seek medical attention for the child “ defendant turned a brutal assault into a brutal and prolonged course of conduct against a vulnerable victim.  People v Barboni, 102, CtApp, 6-11-13

 

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Conviction for Selling T-Shirts without a Vendor’s License Upheld—Constitutional Expression vs. Commercial Enterprise

The defendant was convicted of “unlicensed general vending” for selling t-shirts in New York City without a vendor’s license. In his defense the defendant argued that the vending of t-shirts with artistic images on them was constitutionally protected expression. The Court of Appeals affirmed the conviction and the determination below that the purpose of the sale was primarily utilitarian as opposed to expressive.  Judge Smith dissented because the t-shirts had been destroyed and the Court could not determine their expressive nature.  In describing the appropriate analysis as explained in a Second Circuit case, the Court of Appeals wrote:

…[T]he Second Circuit found that the relevant inquiry is whether the vendor is “genuinely and primarily engaged in artistic self-expression or whether the sale of such goods is instead a chiefly commercial exercise” … . The Court recognized that certain items, including apparel, could simultaneously contain potentially expressive and non-expressive components and, in that situation, a reviewing court must determine which purpose — expression or utility — is dominant… .  People v Lam, 95, CtApp, 6-11-13

 

Loan Agreement Constituted a “Building Loan Contract” within Meaning of Lien Law/Only “Construction Funds” Subject to Subordination Penalty

In a full-fledged opinion by Judge Read, with a concurrence/dissent by Judge Graffeo, the Court of Appeals hashed out the priority of liens, including mechanic’s liens, to be satisfied after the foreclosure on a 10 million dollar construction project in Syracuse.  The Court determined that a loan agreement constituted a “building loan contract” within the meaning of Lien Law section 22, and that only the “construction funds,” as opposed to the total mortgage, were subject to the statutory subordination penalty.  Altshuler Shaham Provident Funds, Ltd v GML Tower, LLC, No 115, CtApp, 6-11-13

 

Petitioner Did Not Demonstrate Diminution in Value Related to Presence of Lead Paint Re: Tax Assessments

In affirming the tax assessment of residential properties in Syracuse, the Court of Appeals, in a full-fledged opinion by Judge Rivera, determined that the petitioner did not make a sufficient showing of the diminution of property values by the presence of lead paint:

In this Real Property Tax Law article 7 proceeding challenging the tax assessments of certain residential properties located in Syracuse, New York, petitioner contends that the trial court erred by failing to consider the impact of contamination — specifically, lead paint — upon the market value of the properties. We hold that petitioner failed to rebut the presumption of validity that attaches to the tax assessments of the properties by the City of Syracuse. That is, petitioner failed to proffer substantial evidence demonstrating a diminution in market value to his properties caused by the mere presence of lead paint. * * *

Where the trial court declined to credit petitioner’s appraisal reports, and the record does not demonstrate a diminution in market value caused by environmental contamination or hazards, petitioner failed to meet his burden and there is no basis to disturb the presumption of validity in the City’s favor. Matter of Roth v City of Syracuse, No 110, CtApp, 6-11-13

 

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“Substantial Factor in Producing the Injury” Jury Instruction (Re: Causation) Did Not Reduce Plaintiff’s Burden of Proof

In attempting to intubate an 83-year-old woman who was unresponsive, a doctor perforated her esophagus making it necessary that she be fed through a tube for the remaining three years of her life.  In affirming the plaintiffs’ verdict, the Court of Appeals determined that the trial court’s jury charge did not improperly reduce plaintiffs’ burden of proof on the issue of causation in this medical malpractice action. The jury was told defendant’s negligence caused the injury if it was a substantial factor in producing the injury:

It is well settled that a “plaintiff must generally show that the defendant’s negligence was a substantial factor in producing the injury” to satisfy “the burden of proving a prima facie case” in a medical malpractice action…. Here, the trial court recited the proximate cause charge directly from the PJI and explicitly instructed the jury as to plaintiffs’ burden of proof in the case. The court charged the jury using the language from PJI 2:70, as follows: “An act or omission is regarded as a cause of an injury if it was a substantial factor in bringing about the injury. That is, if it had such an effect in producing the injury that reasonable people would regard it as a cause of the injury.” Further, at the outset of the charge, the court instructed the jury that “the burden of the proof in this case rests with the plaintiffs,” and made clear that the plaintiffs had to establish by a preponderance of the evidence defendants’ negligence. Taking this jury charge as a whole, we do not find support for defendants’ contention of an improper alteration of the causation standard or plaintiffs’ burden of proof ….  Wild v Catholic Health System…, No 97, CtApp, 6-6-13

 

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HAIL Act Regulating Taxi Cabs and Livery Vehicles in New York City Does Not Violate Home Rule Section of State Constitution

The Court of Appeals, in a full-fledged opinion by Judge Piggot, held that the so-called HAIL Act, which regulates taxi cabs and livery vehicles in New York City, was not an unconstitutional special law in violation of the Home Rule Clause of the New York State Constitution because the statute benefits all New Yorkers, not just New York City residents:

At issue on this appeal is the constitutionality of chapter 602 of the Laws of 2011, as amended by chapter 9 of the Laws of 2012 (“HAIL Act”), which regulates medallion taxicabs (or “yellow cabs”) and livery vehicles, vital parts of New York City’s transportation system. The Act’s stated aim is to address certain mobility deficiencies in the City of New York, namely: the lack of accessible vehicles for residents and non-residents with disabilities; the dearth of available yellow cabs in the four boroughs outside Manhattan (“outer boroughs”), where residents and non-residents must instead rely on livery vehicles; and the sparse availability of yellow cab service outside Manhattan’s central business district. * * *

We conclude that the HAIL Act addresses a matter of substantial State concern. This is not a purely local issue. Millions of people from within and without the State visit the City annually. Some of these visitors are disabled, and will undoubtably benefit from the increase in accessible vehicles in the Manhattan central business district and in the outer boroughs. The Act is for the benefit of all New Yorkers, and not merely those residing within the City. Efficient transportation services in the State’s largest City and international center of commerce is important to the entire State. The Act plainly furthers all of these significant goals. Greater New York Taxi Association v State of New York…, Nos 98, 99, 100, CtApp, 6-6-13

 

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Different Monetary Standards in Wicks Law (Re: Bids for Construction Contracts) for Different Regions of State Did Not Violate Home Rule Section of State Constitution

The Court of Appeals, in a full-fledged opinion by Judge Read, determined that the Wicks Law, as amended, did not violate the Home Rule section of the State Constitution.  The Wicks Law “requires public entities seeking bids on construction contracts to obtain ‘separate specification’ for three ‘subdivisions of the work to be performed’—generally, plumbing, electrical and HVAC…”.  Until 2008 the Wicks Law applied to all contracts which exceeded $50,000.  The 2008 amendment raised the contract-amounts and imposed different thresholds for New York City, Nassau, Suffolk and Westchester Counties, and the 54 remaining counties.  The Home Rule section provides: “(b) Subject to the bill of rights of local governments and other applicable provisions of this constitution, the legislature:  . . .  (2) Shall have the power to act in relation to the property, affairs or government of any local government only by general law, or by special law… .”  There was no attempt to comply with the “special law” requirements.  The Court of Appeals determined that the proper test for determining whether the Home Rule section has been complied with is whether the statute relates primarily to a “matter of State concern:”

“The test is . . . that if the subject be in a substantial degree a matter of State concern, the Legislature may act, though intermingled with it are concerns of the locality… .” * * * This principle controls this case. It can hardly be disputed, and plaintiffs here do not dispute, that the manner of bidding on public construction contracts is a matter of substantial State concern. The existence of the Wicks Law itself for the last century, and of much other legislation governing public contracting (e.g., General Municipal Law § 100-a, [requiring competitive bidding]) attests to this. The very amendments of which plaintiffs complain, though they do not treat all counties alike, unquestionably affect the State as a whole.  Empire State Chapter of Associated Builders and Contractors, Inc…v Smith…, No 101, CtApp, 6-6-13

 

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Substitute Judge Can Rule on Motion Argued Before Another Judge

The full-fledged opinion by Judge Read was succinctly summarized by the Court of Appeals as follows:

We hold that Judiciary Law § 21 does not bar a substitute judge from deciding a question of law presented in a motion argued orally before another judge so long as a transcript or recording of the prior argument is available for review, and “the substitute indicates on the record the requisite familiarity with the proceedings and no undue prejudice occurs to the defendant or the People” …. Put another way, section 21 does not mandate a mistrial or that the pending motion be re-argued orally in front of the substitute judge. People v Hampton, No 92, CtApp, 6-6-13

 

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