New York Court of Appeals: People v. Solomon

This case dealt with the question of whether a lawyer can, with the consent of his client, represent both his client, and, in an unrelated matter, one of the prosecution’s witnesses against his original client. The defendant in this case, Solomon, was charged with raping his daughter over a four year period.  The lawyer that was representing the defendant also represented Kuebler, one of the police officers who had interviewed the defendant after his arrest.  Prior to the trial, the attorney informed the judge that he represented Kuebler in an unrelated civil matter, but that the defendant had been informed of the situation and had consented to the representation.  The judge asked the defendant if it was correct that he consented to the representation, which the defendant affirmed.  Kuebler testified at trial that, in an interview, the defendant had confessed to having sex with his daughter at least once.  The attorney for the defendant, and for Keubler in the second matter, was able to cross-examine Kuebler at trial.  The defendant was convicted.  After the trial, the defendant appealed on the ground that the lawyer’s conflict had denied him effective assistance of counsel.

The Court of Appeals held that the defendant was denied effective assistance of counsel.  In a criminal matter, the defendant may waive an attorney’s conflict, “but only after an inquiry has shown that the defendant ‘has an awareness of the potential risks involved in that course and has knowingly chosen it.’”  People v. Gomberg, 38 N.Y.2d 307, 313-314, 342 N.E.2d 550, 554 379 N.Y.S.2d 769, 775 (1975).  The consent in this case was inadequate where the inquiry into the nature of the defense counsel’s simultaneous representation was not even placed on the record.  However, the Court explained, inadequate representation is not enough to require reversal.  There must also be an actual conflict of interest, not just a potential conflict of interest.

A potential conflict of interest may arise when an attorney represents co-defendants or both a client and a prosecution witness.  However, in neither case will there be an actual conflict of interest, per se.  An actual conflict of interest arises when the conflict has a “‘substantial relation to the conduct of the defense.’”  People v. McDonald, 68 N.Y.2d 1, 9, 496 N.E.2d 844, 847, 505 N.Y.S.2d 824, 827 (1986).  It is not necessary to look into the actual quality of the representation, only whether an actual conflict existed.  In this case, the lawyer simultaneously owed a duty of loyalty to both the defendant on trial and to the police officer being cross-examined.  This represented an actual conflict and required reversal.

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20 N.Y.3d 91, 980 N.E.2d 505, 956 N.Y.S.2d 457 (2012).

New York Court of Appeals: In the Matter of Galasso

Respondent, Peter J. Galasso, was a partner at the law firm Galasso & Langione, LLP.  Anthony Galasso, the respondent’s brother, worked as the firm’s bookkeeper and office manager.  Over a period of three years, Anthony Galasso misappropriated funds from and between two different accounts—an escrow account with four million dollars and an Interest on Lawyer Account (IOLA)—after altering the account application to permit him to act as a signator.  The misappropriation was not detected for three years because of minimal oversight over Anthony Galasso’s activities and because of his practice of switching funds back-and-forth between the two accounts, while removing some for himself.  Anthony Galasso pled guilty to grand larceny, and the Nassau County District Attorney’s Office submitted its conclusions to the Grievance Committee that no one else had participated in or knew about the misappropriation.

Nevertheless, the Grievance Committee charged the respondent with ten charges of professional misconduct: four of the charges alleged breach of fiduciary duty to safeguard client funds, three of the charges alleged failure to supervise a nonlawyer employee resulting in misappropriation of client funds, one charge alleged unjust enrichment by use of funds for personal benefit, one charge alleged failure to provide appropriate accounts to clients with respect to escrow funds, and one charge alleged failure to timely comply with the lawful demands of the Committee.  The Special Referee sustained all ten charges, and the appellate division affirmed.  The respondent was suspended from practicing law for two years, resulting in this appeal.

The issue before the Court of Appeals was whether the respondent’s motion to dismiss the ten charges alleging misconduct should have been granted.  The Court held that nine of the ten charges should be affirmed, but modified as to the charge alleging a failure to timely comply with the Grievance Committee’s lawful demands for information.

In affirming the nine charges, the Court first stated that an attorney has a clear duty to safeguard client funds.  The Court stated that an attorney has a fiduciary relationship with the clients, which requires an attorney to act with a “high degree of vigilance” to ensure that the funds placed in escrow are returned to the clients.  Here, the respondent failed to establish adequate procedures to detect misappropriation by placing too much control over the accounts with a non-lawyer.

The Court also reasoned that there was, at one point, a $5,000 discrepancy in the escrow account.  Respondent allowed Anthony Galasso to resolve the issue.  The Court stated that this type of discrepancy should have been alarming to a reasonably prudent attorney.  Any delegation of authority should have been done with more oversight, but the respondent failed to properly supervise the employee.  Therefore, the disciplinary action was warranted and was sustained for the first nine counts.

Finally, in modifying the last charge of failure to comply, the Court found that there was no evidence to support the charge. When the respondent could not immediately meet the demands, he notified the Committee, explained his reasons why, and stated that he would comply at the earliest opportunity.  The Court found the respondent complied to the best of his ability and remitted the case to the appellate division for it to reconsider whether the suspension imposed was still appropriate.

19 N.Y.3d 688, 978 N.E.2d 1254, 954 N.Y.S.2d 784 (2012)

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4th Department: Burns v. Carballada

Deborah Burns and Bruce Henry were found guilty of violating a Rochester City Code section which held that an owner of property must have a Certificate of Occupancy (“CO”), which must be renewed every six years.  The City relied on the part of the Code that states that the renewal must be made within a period of ninety days prior to expiration of the current CO.  Petitioners’ CO was invalid.

The case had previously been before the appellate division, whereupon the petitioners argued that the Municipal Code Violations Bureau (“Bureau”) did not provide sufficient evidence of the offense.  The court previously held that there was not a substantial evidence issue and remitted.  Upon remittal, the Supreme Court of Monroe County ruled in favor of petitioners, stating that the determinations by the Bureau were arbitrary, capricious, and facially insufficient.  Carballada, the respondent, appealed the judgment in his capacity as the Commissioner of Neighborhood and Business Development of the City of Rochester.

On the facial insufficiency of the Bureau’s determination, the court held that the lower court erred because the issue was never raised in the current petition.  In fact, the petitioners agreed with the respondents that the tickets were facially sufficient.

Therefore, the issue raised on appeal was whether the City’s CO inspection-and-warrant system was unconstitutional as applied.  The City had previously considered that many individuals may not cooperate in the inspection process.  Therefore, a new procedure was established to issue judicial warrants to inspect the premises with no requirement of consent when a warrant is issued.

Previously, the court had rejected a facial constitutional claim for this established procedure, and here, rejected the as applied claim.  The court reasoned that the petitioners did not show that they were actually injured because there was no evidence that they ever applied for a CO and subsequently refused to consent to the inspection.  Further, the court held that consent is not a requirement of the procedure.  An inspection can take place with either consent or a warrant.  Therefore, even had they not consented, the procedure would still have been lawful if a warrant was issued.

The dissent argued that the majority looked at the case in an overly restrictive manner, and that the procedure was unconstitutional because it was performed in an arbitrary and capricious manner.  The dissent agreed with the supreme court’s holding that the Bureau’s action was without a sound basis and was irrational because the Code section that it relied upon was not actually violated.

101 A.D.3d 1610, 956 N.Y.S.2d 357 (4th Dep’t 2012)

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4th Department: People v. Philippe

This case involved an appeal from a conviction for three counts of criminal possession of a forged instrument in the second degree and one count of reckless endangerment in the first degree.  The defendant led law enforcement on a chase in heavy traffic conditions, exceeded the speed limit, ran several red lights, and collided with several vehicles.  The appellate division reversed the conviction on the first three counts and dismissed count four without prejudice.

The defendant, Jeffrey Jean-Philippe, claimed that he was denied a fair trial because the lower court refused to dismiss a juror who was seen falling asleep during trial.  While the lower court attempted to rehabilitate the juror by asking if she had “missed any relevant or important … parts … of the testimony” and if she “heard everything that [she] need[ed] to know thus far,” the appellate division found that this was insufficient.  In the defendant’s case, a dismissal of the juror would have required a mistrial since there were no alternate jurors.  The appellate division held that it is well-established that a juror who has not heard all of the evidence is grossly unqualified to render a verdict, and therefore, the only proper course of action would have been to dismiss the juror.

The court also agreed with the defendant that the evidence presented at trial was legally insufficient to support his conviction for count four.  The court pointed out that to be guilty of reckless endangerment in the first degree it must be proven that the defendant acted under “circumstances evincing a depraved indifference to human life,” N.Y. Penal Law § 170.25, yet evidence of that was not presented at trial.  While the defendant ran multiple traffic lights and collided with several cars, this was not enough to show the required depraved indifference to human life necessary to support a conviction of reckless endangerment in the first degree.  The court dismissed count four of the indictment without prejudice.  In addition, the court rejected the defendant’s argument that the three counts relating to a forged instrument were multiplicitous.

101 A.D.3d 1582, 956 N.Y.S.2d 709 (4th Dep’t 2012).

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New York Court of Appeals: Hudson Valley Federal Credit Union v. New York State Department of Taxation and Finance

The issue before the Court of Appeals was whether mortgages issued by federal credit unions were subject to the New York state mortgage recording tax (“MRT”) under article 11 of the Tax Law.  The plaintiff, Hudson Valley Federal Credit Union (“Hudson Valley”), sought a declaratory judgment against the New York State Department of Taxation and Finance (“State”) claiming that Hudson Valley was not required to pay a MRT.  Hudson Valley offered two bases for its claim.  First, the Federal Credit Union Act (“FCUA”) exempts federal credit unions from state taxation.  Second, federal credit unions are instrumentalities of the United States and are immune from state taxation.  The supreme court granted the State’s motion to dismiss.  The appellate division affirmed.  The Court of Appeals held that federal credit unions are not exempt or immune.

First, the Court considered Hudson Valley’s claim that it was exempt from the MRT based on the language of the FCUA.  The Court considered the general rule that courts strictly construe federal tax exemptions of state taxing authority and decline to extend exemptions beyond express provisions.  The Court then looked to acts of Congress dealing with tax exemptions of mortgages.  It found that other acts explicitly stated that a tax on mortgages was exempt.  Here, the Court held that if Congress intended for mortgages to be included as an exemption, it would have explicitly included that language in the statute.  The absence of such language was held to show an intent that mortgages were not exempt from taxation.

The Court further stated that the term “property” does not include mortgages within its definition.  The Court looked at the legislative history of the FCUA, finding that when the act was created and amended, federal credit unions did not have the authority to issue mortgage loans.  Therefore, when federal credit unions were given the authority to issue mortgages, Congress would have amended the statute to include mortgages within the definition.

Hudson Valley further claimed that the MRT went against the purpose of the statute and will cause serious financial problems.  The Court rejected this argument and stated that the tax will not drive them out of business.  Further, the Court stated, Congress expanded the powers of credit unions so that they can offer more services and serve a larger area.  Contrary to Hudson Valley’s implication, the Court found that there has been growth in the number of federal credit unions rather than a decrease.

The Court also dismissed Hudson Valley’s second main claim that it is a federal instrumentality entitled to exemption because it is so closely connected to the government that they cannot be viewed as separate entities.  The Court rejected this argument by stating that the credit unions are private associations chartered under federal law that are wholly-owned and managed by their members.  The unions elect the board members and have a significant amount of autonomy in running the union.  The Court held that the credit union was not a federal instrumentality entitled to exemption.

The dissent rejected the majority’s interpretation of the FCUA statute, stating that the language of the statute provides federal credit unions with an exemption from all taxes except in two instances: real property and personal property.  In prior cases, the Court had determined that the MRT was an excise tax on the privilege of transferring title.   Therefore, the federal credit unions would be exempt from paying the MRT because they do not fall within the real or personal property exception.  The dissent examined case law, finding that “all taxation” meant “all direct taxation.”  Therefore, the dissent concluded, the credit union was exempt.

The dissent stated that, in examining the statute, if Congress had included mortgages, it would have created a third exception, rather than the two that are explicitly stated.  Since Congress did not include this term, the majority’s reasoning inferred an additional exception, which was not within the Court’s authority.  The dissent would find that Hudson Valley is required to pay the tax under the statute because the MRT does not fall under the real or personal property exception.

20 N.Y.3d 1, 980 N.E.2d 473, 956 N.Y.S.2d 425 (2012)

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New York Court of Appeals: People v. Garcia

The Court in this case considered whether a police officer must have reasonable suspicion to ask the occupants of a lawfully-stopped vehicle whether they possess any weapons.  The Court extended its holding from Debour and Hollman (holding that the common law right of inquiry by an officer requires reasonable suspicion that criminal activity is afoot) by holding that an officer must have reasonable suspicion to inquire whether there are weapons in a car.

Three officers pulled over Miguel Garcia’s vehicle for having a defective rear brake light.  Inside the vehicle, the officers found four males, allegedly acting nervous.  One of the officers inquired if anyone in the vehicle had a weapon, to which one passenger admitted that he had a knife.  The passenger placed the knife on the floor of the car, and the officers asked the occupants to step out of the vehicle whereupon each one was frisked.  One officer noticed something that resembled a gun wedged between the car seat and the door.  Once the item was discovered to be an air pistol, the occupants of the car were arrested.  Upon an inventory search, another air rifle was found in the trunk of the car.  The defendant confessed that he was the owner of the items, and he was charged with two counts of misdemeanor possession of an air pistol or rifle.

The defendant moved to suppress the air rifles as evidence, arguing that the officers had no basis for asking about or searching for weapons when the car was stopped.  The trial court granted the motion at first, but reversed upon a motion to reargue.  The State argued that the Court’s ruling that an officer can request occupants to step out of a vehicle without reasonable suspicion should be expanded to permit officers to inquire if anyone inside has a weapon because doing so does not require any greater intrusion.  Upon reversal of the suppression order, the defendant pled guilty and appealed the suppression decision.  The appellate division reversed and vacated the judgment of the defendant.

The Court of Appeals began by explaining that an officer may use precautionary measures without particularized suspicion to direct occupants out of a car.  This principle is an established rule for the protection of police officers.  The Court proceeded to discuss two prior holdings which described the different levels of officer-citizen encounters.  When questioning becomes more pointed and the officer is seeking information about an individual’s wrongdoing, the officer must have a founded suspicion that criminal activity is afoot.

Next, the Court discussed the various policy issues behind the ruling, and considered the importance of promoting predictability and precision in judicial review of search-and-seizure cases, along with the protection of individual rights.   A bright-line rule in this area would better promote these policies.  Therefore, the Court found that Debour and Hollman apply to street encounters and traffic stops, requiring reasonable suspicion to ask if there are any weapons in a vehicle.

The evidence in the record supported the appellate division’s determination that the air rifles should have been suppressed.  However, the case was remanded to the trial court to allow the State to make an alternative argument under the doctrine of inevitable discovery.

20 N.Y.3d 317 (2012)

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4th Department: Gress v. Brown

The New York State Legislature enacted the Buffalo Fiscal Stability Authority Act (“the Act”) in 2003 to respond to Buffalo’s regular and “untenable” reliance upon state aid to stabilize its budget.  Pursuant to the Act, the Buffalo Fiscal Stability Authority (“BFSA”) held power over municipal-employee wages, along with the power to freeze those wages set as part of a collective bargaining agreement (or other similar contracts or interest arbitration awards).

In 2004, the BFSA adopted a resolution which froze all wages, wage rates, and salary levels for all employees in Buffalo, “to the full extent authorized by the Act.”  Buffalo, N.Y., Resolution No. 04 – 35 Wage Freeze, 2 (Apr. 21, 2004), available at http://www.bfsa.state.ny.us/meetings2004/resolutions/res0435.pdf.  The plaintiffs in this case—at-will, seasonal employees of Buffalo’s Public Works Department—commenced this class action against the City and the Mayor, claiming that the BFSA’s actions violated Buffalo’s Living Wage Ordinance by denying them their scheduled wage increases.  Subsequently, they added the BFSA as a defendant to their action and sought a declaratory judgment that the BFSA did not have the authority to freeze their class’s wages.

The BFSA moved for summary judgment, arguing that the plaintiffs’ claim against it was time-barred by C.P.L.R. Article 78’s four month limitation period for administrative determinations.  Both the supreme court and the appellate division rejected this argument.  The Court of Appeals reversed both lower courts.  The Court held that, upon precedent, a statute of limitations for a declaratory judgment should be determined by the “gravamen of the claim or the status of the defendant party.”  Solnick v. Whalen, 49 N.Y.2d 224, 229, 401 N.E.2d 190, 193, 425 N.Y.S.2d 68, 71 (1980).  If a declaratory action, such as the one brought by this class, could have been commenced in an alternative proceeding, then the statutorily provided statute of limitations for that proceeding applies instead of the six-year “catch-all” provision.  In the plaintiffs’ case, the Court found that as their contest was only with the application of the wage freeze to their class through the administrative action (not the wage freeze itself), their challenge should have been raised through a C.P.L.R. Article 78 proceeding within the four month time frame, as the BFSA had claimed.

The dissent argued that BFSA’s temporal argument did not change the “gravamen” of the action, and therefore, it would “not become a challenge to an administrative determination”—subjecting it to the four month window—“unless there [had been] a final and binding administrative determination” upon the plaintiffs’ claims.

20 N.Y.3d 957, 982 N.E.2d 595, 958 N.Y.S.2d 675 (2012)

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New York Court of Appeals: Bitachatchi v. Board of Trustees of New York City of Police Department Pension Fund

In this case, the Court considered three consolidated appeals, each addressing a police officer that responded to provide assistance at the World Trade Center (“WTC”) following the attacks on September 11, 2001.  The three appeals included two officers who sought Accidental Disability Retirement Benefits (“ADR”), and the surviving spouse of another officer who brought a claim for line-of-duty death benefits.  The issue in all three appeals involved the application of the statutory WTC presumption.  Under this presumption, for the purpose of benefit upgrades, an officer’s disability or death, as a result of a qualifying condition, is presumed to be caused by his or her exposure at the WTC site.  The central issue presented was whether the Board of Trustees of the New York City Police Department Pension Fund (“the Board”) produced competent evidence to rebut the WTC presumption.  The Court held that the Board did not meet its burden of disproving that the officers’ disabilities or deaths were causally related to their work at the WTC.

New York City Police Department officers who become disabled may apply for one of two types of disability benefits.  Ordinary Disability Retirement Benefits (“ODR”) are comprised of a taxable pension and are payable if the officer is “‘physically or mentally incapacitated for the performance of duty and ought to be retired.’”  N.Y.C., N.Y., Administrative Code § 13-251.  Alternatively, ADR benefits include a tax-free pension of three-quarters of the officer’s salary, but require an additional showing that the officer’s disability is the “natural and proximate result of an accidental injury received in … city-service.”  N.Y.C., N.Y., Administrative Code § 13-252.  Where a police officer dies as a result of a work-related accident, the officer’s beneficiaries may recover line-of-duty death benefits equating to the officer’s full salary, as well.  Typically, the officer seeking an upgrade of benefits has the burden of presenting evidence that their benefits should be upgraded to ADR.  However, after September 11th, a new statute was enacted creating a presumption in favor of ADR benefits for those who performed rescue, recovery, or cleanup operations at specified locations.  The statute shifted the initial burden of proving that a claimant’s qualifying condition was not caused by the hazards encountered at the WTC site to the Board.

The Court determined that a decision by the Board that a disability was not caused by a service-related accident would be upheld provided it was supported by “credible evidence” in the record.  Credible evidence “is evidence that proceeds from a credible source and reasonably tends to support the proposition for which it is offered.”  Meyer v. Board of Trustees, 90 N.Y.2d 139, 147, 681 N.E.2d 382, 387, 659 N.Y.S.2d 215, 220 (1997).  The evidence must also be “evidentiary in nature and not merely a conclusion of law, nor mere conjecture or unsupported evidence.”  Id.

In the first two cases, the Court held that the presumption that the officers’ cancerous conditions were caused by their exposure at the WTC site was not rebutted by credible evidence.  Simply referencing “literature” and “copious data” without a foundation upon which the Court could review the matter was insufficient.  The Court rejected the Board’s argument that the cases should be remanded:  “[w]hen the Board fails to rebut the presumption, the WTC statute presumes causation and contemplates the award of ADR benefits—even if the claimant offers no medical proof.”  In the third case, the Board contended that petitioner’s condition was pre-existing and therefore did not qualify under the WTC statute.  Yet, the Court rejected this contention, since the Board failed to preserve the argument that the burden of proof remains with the petitioner to demonstrate that exposure aggravated or exacerbated the pre-existing condition.  The Court held that the Board could not rely on petitioner’s deficiencies to fill its own gap in proof, and therefore, failed to meet its statutory burden.

20 N.Y.3d 268, 982 N.E.2d 600, 958 N.Y.S.2d 680 (2012)

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