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A LOAN AGREEMENT WHICH ALLOWS THE LENDER TO CONVERT THE BALANCE TO SHARES OF STOCK AT A FIXED DISCOUNT CAN VIOLATE THE USURY STATUTE, WHICH WOULD THEREBY RENDER THE AGREEMENT VOID AB INITIO (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Wilson, over a partial dissent. answered two questions posed by the Second Circuit in the affirmative. “1. Whether a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law § 190.40, the criminal usury law. 2. If the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law § 190.40, whether the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law § 5-511:”

GeneSYS ID, Inc. (“GeneSYS”) is a publicly held corporation that produces various types of medical supplies. Adar Bays, LLC is a limited liability company based in Florida. On May 24, 2016, Adar Bays loaned GeneSYS $35,000. In exchange, GeneSYS gave Adar Bays a note with eight percent interest that would mature in one year. The note included an option for Adar Bays to convert some or all of the debt into shares of GeneSYS stock at a discount of 35% from the lowest trading price for GeneSYS stock over the 20 days prior to the date on which Adar Bays requested a conversion. Adar Bays could exercise its option starting 180 days after the note was issued and could do so all at once or in separate partial conversions. …

Six months and four days after the note was issued … Adar Bays requested conversion of $5,000 of debt into 439,560 shares of stock. GeneSYS refused … seeking to renegotiate the loan. … GeneSYS was trading for $0.024 per share, the conversion price was $0.011. Adar Bays … sued GeneSYS in the … Southern District of New York for breach of contract. GeneSYS filed a motion to dismiss arguing the contract was void because the loan’s rate of interest, including both the stated interest and conversion option, exceeded the criminal usury rate of 25%. Adar Bays, LLC v GeneSYS ID, Inc., 2021 NY Slip Op 05616 CtApp 10-14-21

 

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DEFENDANT’S WAIVER OF APPEAL WAS UNENFORCEABLE; “DIFFICULTIES” BETWEEN DEFENDANT AND TWO ATTORNEYS ASSIGNED TO REPRESENT HIM DID NOT AMOUNT TO DEFENDANT’S FORFEITURE OF HIS RIGHT TO COUNSEL, AS THE TRIAL JUDGE HAD RULED (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Fahey, reversing the Appellate Division, determined defendant’s waiver of appeal was not valid and the trial judge had violated defendant’s right to counsel by essentially forcing defendant to represent himself after several attorneys had withdrawn. Of all the attorneys who had withdrawn, only two cited difficulties with the defendant. The cited “difficulties” were defendant’s “raised voice” and “lack of cooperation.” There were no allegations of threats or abusive conduct. The other attorneys had withdrawn citing a conflict of interest, illness and leaving the state:

… [D]efendant’s waiver in the case before us did not contain “clarifying language . . . that appellate review remained available for certain issues” … . Indeed, the written appeal waiver and the colloquy utterly failed to indicate that some rights to appeal would survive the waiver. Moreover, the written waiver implied that defendant was completely waiving his right “to prosecute [an] appeal as a poor person, and to have an attorney assigned” if indigent.

Defendant’s appeal waiver thus mischaracterized the nature of the waiver of appeal by suggesting that the waiver included an absolute bar to the taking of a first-tier direct appeal and the loss of attendant rights to counsel and poor person relief … . * * *

There may be circumstances where a defendant who refuses to cooperate with successive assigned attorneys is ultimately deemed to have forfeited the right to assigned counsel, although such an individual must be afforded the opportunity to retain counsel. … There is record evidence of only two attorneys who asked to be relieved due to difficulties with defendant. … County Court’s own orders relieving Miosek, Taylor, Carlson, and Scott cited conflict of interest, illness, or departure from the state, not attorney-client animosity. Such factors were beyond defendant’s control. People v Shanks, 2021 NY Slip Op 05450, CtApp 10-12-21

 

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PLAINTIFF STATED A CAUSE OF ACTION UNDER THE CORRECTION LAW BY ALLEGING HIS APPLICATION FOR REEMPLOYMENT AFTER COMPLETION OF HIS SENTENCE (60 DAYS INCARCERATION) WAS DENIED SOLELY BECAUSE OF HIS PRIOR CONVICTION (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over a concurring opinion, reversing the Appellate Division, determined plaintiff’s complaint stated a cause of action for discrimination under the Correction Law, which prohibits discrimination based upon criminal convictions in the context of applications for employment. Plaintiff had kept his employer informed of a criminal charge against him which had not yet gone to trial and was told he would not lose his job if he was sentenced to incarceration. Plaintiff was sentenced to 60 days and his employment was terminated:

The statutes do not categorically preclude consideration of a prospective employee’s criminal history and expressly permit the denial of employment or licensing if there is (1) a “direct relationship” between the previous criminal offense and the specific employment or license, or (2) if granting the request for employment or a license “would involve an unreasonable risk” to the property, safety, or welfare “of specific individuals or the general public” (Correction Law § 752). Thus, under the statutory scheme, reliance on a previous criminal offense when denying an application for employment or a license is not necessarily unlawful … . Whether an exception applies depends on factors identified in Correction Law § 753 such as, among other things, the relationship between the specific employment duties and the criminal offense as well as the amount of time that has elapsed since the offense occurred … . Under these provisions, when filling positions, public and private employers must treat job applicants with prior convictions equitably “while also protecting society’s interest in assuring performance [of job duties] by reliable and trustworthy persons” … . * * *

… [P]laintiff alleged that he was terminated for job abandonment soon after he was incarcerated. Applying our liberal standard, the complaint … may be read to allege that, after he completed his sentence, he applied for reemployment … and [defendant] denied the application solely because of the prior conviction. Sassi v Mobile Life Support Servs., Inc., 2021 NY Slip Op 05449, CtApp 10-12-21

 

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NYC’S RIGHT OF WAY LAW CRIMINALIZES ORDINARY NEGLIGENCE WHEN A VEHICLE STRIKES A PEDESTRIAN OR A BICYCLIST WHO HAS THE RIGHT OF WAY; THE LAW IS NOT VOID FOR VAGUENESS, PROPERLY IMPOSES ORDINARY NEGLIGENCE AS THE MENS REA, AND IS NOT PREEMPTED BY OTHER LAWS (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over a concurring opinion, determined New York City’s “Right of Way Law,” which criminalizes ordinary negligence when a vehicle strikes a pedestrian or bicyclist who has the right of way, is constitutional and is not preempted by other laws. Both defendants were convicted under the Right of Way Law (NYC Administrative Code 19-190), a misdemeanor. The defendants unsuccessfully argued (1) the law is void for vagueness; (2) ordinary negligence cannot constitute the mens rea for a criminal act; and (3) the law is preempted by the Penal Law and the Vehicle and Traffic Law:

Article 15 of the Penal Law lists and defines four “culpable mental states”—”intentionally,” “knowingly,” “recklessly,” and “criminal negligence” … . However, strict liability is also contemplated by article 15: “[t]he minimal requirement for criminal liability is the performance by a person of conduct which includes a voluntary act or the omission to perform an act which [such person] is physically capable of performing,” and, “[i]f such conduct is all that is required for commission of a particular offense, . . . such offense is one of ‘strict liability'” … . * * *

The provisions of the Penal Law “govern the construction of and punishment for any offense defined outside” of the Penal Law, “[u]nless otherwise expressly provided, or unless the context otherwise requires” (Penal Law § 5.05 [2]). The two key provisions at issue, Penal Law § 15.00 (Culpability; definitions of terms) and § 15.05 (Culpability; definitions of culpable mental states), expressly provide otherwise by making clear that they are “applicable to this chapter” only. Further contradicting defendants’ interpretation of article 15 is the legislature’s own use of an ordinary negligence mens rea for offenses defined outside the Penal Law. For example … Vehicle and Traffic Law § 1146 and Agriculture and Markets Law § 370—which were enacted after the relevant provisions in article 15 of the Penal Law—both employ an ordinary negligence standard for imposing criminal liability. People v Torres, 2021 NY Slip Op 05448, CtApp 10-12-21

 

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A FOREIGN CORPORATION WHICH REGISTERS TO DO BUSINESS IN NEW YORK CONSENTS TO THE SERVICE OF PROCESS IN NEW YORK BUT DOES NOT CONSENT TO THE GENERAL JURISDICTION OF NEW YORK (CT APP). ​

The Court of Appeals, in a full-fledged opinion by Judge Singas, over a two-judge dissent, determined that a corporation registered to do business in New York consents to the service of process in New York, but not to general jurisdiction in New York. The underlying lawsuit stemmed from a car accident in Virginia. Both Ford and Goodyear were sued. Neither the car or the tire were made or sold in New York:

Aybar [the New York resident who drove the car] purchased the vehicle in New York from a third party. Ford did not sell the vehicle in this state in the first instance, nor did Ford design or manufacture the vehicle here. Similarly, Goodyear designed, manufactured, and initially sold the tire in other states. It is undisputed that Ford was incorporated in Delaware and maintains its principal place of business in Michigan and that Goodyear was incorporated and has its principal place of business in Ohio. At all relevant times, Ford and Goodyear were registered with the New York Secretary of State as foreign corporations authorized to do business in this state and had appointed in-state agents for service of process in accordance with the Business Corporation Law. * * *

We have never conflated statutory consent to service with consent to general jurisdiction, and the fact remains that, under existing New York law, a foreign corporation does not consent to general jurisdiction in this state merely by complying with the Business Corporation Law’s registration provisions. Aybar v Aybar, 2021 NY Slip Op 05393, Ct App 10-7-21

 

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DEFENDANT WAS CHARGED WITH MANSLAUGHTER SECOND BASED ON THE DEATH OF A PERSON TO WHOM DEFENDANT SOLD HEROIN; THE GRAND JURY EVIDENCE DID NOT SUPPORT EITHER THE “RECKLESS” ELEMENT OF MANSLAUGHTER SECOND OR THE “CRIMINAL NEGLIGENCE” ELEMENT OF CRIMINALLY NEGLIGENT HOMICIDE (CT APP).

The Court of Appeals, reversing the Appellate Division, in a full-fledged opinion by Judge Fahey, determined the grand jury evidence did not support the “reckless” element of manslaughter second degree or the “criminal negligence” element of criminally negligent homicide. The charges arose from defendant’s sale of heroin to the decedent, who died of an overdose:

Both recklessness and criminal negligence “require that there be a ‘substantial and unjustifiable risk’ that death or injury will occur; that the defendant engage in some blameworthy conduct contributing to that risk; and that the defendant’s conduct amount to a ‘gross deviation’ from how a reasonable person would act” … . “The only distinction between the two mental states is that recklessness requires that the defendant be ‘aware of’ and ‘consciously disregard’ the risk while criminal negligence is met when the defendant negligently fails to perceive the risk” … . … [T]he underlying conduct for both offenses is the same and involves some degree of risk creation … . … [T]he ” ‘nonperception’ of a risk, even if death results, is not enough”—rather, the defendant must have “engaged in some blameworthy conduct creating or contributing to a substantial and unjustifiable risk of death” … . * * *

The evidence demonstrated that defendant knew that the heroin he sold the decedent was strong and required caution. That the heroin was potent, however, does not equate to a substantial and unjustifiable risk that death would result from the use of the heroin. The coroner, the decedent’s ex-girlfriend, and the other individual who purchased heroin from defendant all testified that it was common knowledge among heroin users that different samples or preparations of heroin had different potencies and that the strength of heroin could vary a great deal among samples. The People’s evidence demonstrated that the decedent, his ex-girlfriend, and the other individual all used the same sample of heroin purchased from defendant before July 22 and survived those encounters. People v Gaworecki, 2021 NY Slip Op 05392, Ct App 10-7-21

 

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THE SUPPRESSION COURT SHOULD HAVE ORDERED A RODRIGUEZ HEARING; THE APPELLATE DIVISION SHOULD NOT HAVE RELIED ON TRIAL TESTIMONY TO OVERCOME THE SUPPRESSION COURT’S ERROR (CT APP).

The Court of Appeals, reversing (modifying) the Appellate Division, determined defendant was entitled to a Rodriguez hearing on whether a witness’s identification of the defendant was confirmatory. The Court of Appeals noted that the Appellate Division should not have relied on trial testimony to overcome the suppression court’s error:

Supreme Court erred in denying defendant’s pretrial request for a hearing pursuant to People v Rodriguez (79 NY2d 445 [1992]), as the prosecutor here offered only bare assurances that the witness was familiar with defendant. Further, the Appellate Division erroneously relied on testimony adduced at trial to overcome the suppression court’s error.

“Thus, the case should be remitted to Supreme Court for a hearing to determine whether the [photographic] identification procedure was confirmatory. If, after that hearing, the court concludes that the People have not sustained their burden, a Wade hearing should be held and further proceedings, including a new trial, should be had as the circumstances may warrant. If the court concludes that a Wade hearing is not required, the judgment[] should be amended to reflect that result” … . People v Carmona, 2021 NY Slip Op 05390, Ct App 10-7-21

 

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GENERAL CRITERIA FOR DENYING, WITHOUT HOLDING A HEARING, A MOTION TO VACATE A CONVICTION ON INEFFECTIVE-ASSISTANCE GROUNDS (CT APP).

The Court of Appeals, without discussing the facts, laid out the criteria for denying a motion to vacate a conviction on ineffective-assistance grounds without holding a hearing:

… [A] court may deny a CPL 440.10 motion without conducting a hearing if “[t]he motion is based upon the existence or occurrence of facts and the moving papers do not contain sworn allegations substantiating or tending to substantiate all the essential facts” … . Here, County Court did not abuse its discretion in denying defendant’s CPL 440.10 motion without a hearing because, under the circumstances presented, defendant failed to sufficiently allege “‘a reasonable probability that, but for counsel’s [alleged] errors, he would not have pleaded guilty and would have insisted on going to trial'” … . Moreover, defendant failed to otherwise “show that the nonrecord facts sought to be established . . . would entitle him to relief” … . People v Dogan, 2021 NY Slip Op 04956, CtApp 9-14-21

 

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A PSYCHIATRIC EXAM IS A CRITICAL STAGE OF A PROSECUTION AT WHICH DEFENDANT HAS THE RIGHT TO COUNSEL; THE EXCLUSION OF DEFENSE COUNSEL FROM THE EXAM WAS NOT HARMLESS ERROR; CONVICTION REVERSED (CT APP).

The Court of Appeals, reversing defendant’s manslaughter conviction, determined the exclusion of defense counsel from the psychiatric exam by the People’s expert was not harmless error:

After defendant provided timely notice that he intended to present psychiatric evidence at trial, he was twice interviewed by a clinical psychologist engaged by the People (see CPL 250.10 [2], [3]). Although defense counsel was present at the first examination, the expert denied defense counsel admittance to the second examination. Over defense counsel’s objection that defendant’s right to counsel had been violated, the expert’s testimony was admitted at trial. On defendant’s appeal, the Appellate Division affirmed, holding that defendant’s constitutional right to counsel had been violated but that the error was harmless … . …

In Matter of Lee v County Ct. of Erie County (27 NY2d 432 [1971]), we held that defendants’ Sixth Amendment right to counsel applies at pre-trial psychiatric examinations “to make more effective [a defendant’s] basic right of cross-examination” … In Lee, we cited to United States v Wade’s (388 US 218 [1967]) definition of a critical stage of the prosecution as “‘any stage of the prosecution, formal or informal, in court or out, where’ ‘the presence of his counsel is necessary to preserve the defendant’s basic right to a fair trial as affected by his right meaningfully to cross-examine the witnesses against him and to have effective assistance of counsel at the trial itself'” … . We thus held that pretrial psychiatric examinations are a critical stage of the prosecution.

… The People—not the defendant—bear the burden of showing that “there was no reasonable possibility that the trial court’s admission” of that part of the expert’s testimony based on the uncounseled examination “affected the jury’s verdict” … . Under the circumstances of this case, the expert’s testimony at trial was based in part on the examination undertaken in violation of defendant’s constitutional right to counsel, and we cannot say that the error was harmless … . People v Guevara, 2021 NY Slip Op 04955, CtApp 9-9-21

 

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THE NOTICE OF APPEAL WAS TIMELY SERVED BUT WAS NOT TIMELY FILED WITH THE CLERK OF THE COURT; THE 3RD DEPARTMENT DISMISSED THE APPEAL; THE APPELLATE COURT HAS THE DISCRETION TO ALLOW A LATE FILING; MATTER REMITTED (CT APP).

The Court of Appeals, reversing the Appellate Division, determined that, although the pro se inmate-petitioner did not timely file the notice of appeal, the notice was timely served and the Third Department could have exercised discretion to allow a late filing. The matter was remitted because the Third Department’s decision was silent about the reasons for dismissing the appeal:

… [P]etitioner argues that the Appellate Division should have applied a pro se inmate “mailbox rule” to deem the notice of appeal timely filed upon delivery to prison authorities for forwarding to the appropriate court.

CPLR 5515 (1) provides that an appeal is taken when, in addition to being duly served, the notice of appeal is “fil[ed] . . . in the office where the judgment or order of the court of original instance is entered.” The CPLR further clarifies that “papers required to be filed shall be filed with the clerk of the court in which the action is triable” (CPLR 2102 [a]). Thus, by its express terms, the CPLR indicates that filing occurs when the clerk’s office receives the notice of appeal. Indeed, “filing” has long been understood to occur only upon actual receipt by the appropriate court clerk … . A “mailbox rule” for filing would also contravene the clear distinctions between filing and service drawn by the legislature inasmuch as the CPLR directs that, unlike filing, “service by mail shall be complete upon mailing” (CPLR 2103 [b] [2]). .. * * *

… [T]he legislature has given courts the authority to excuse untimely filing under certain circumstances. CPLR 5520 provides that, “[i]f an appellant either serves or files a timely notice of appeal . . . , but neglects through mistake or excusable neglect to do another required act within the time limited, the court from or to which the appeal is taken . . . may grant an extension of time for curing the omission” (CPLR 5520 [a]). Matter of Miller v Annucci, 2021 NY Slip Op 04954, CtApp 9-9-21

 

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