Comments on Recent Cases: October 2022
Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.
Court Decides Whether PPP Loan Proceeds Are Immune from Judgment Creditors
A creditor can use a judgment to collect money from a debtor after prevailing in litigation. But some money may be exempt from collection.
The state appeals court in Manhattan had to decide recently whether the proceeds of a PPP loan were exempt from collection by a judgment creditor. In that case, the court held that they were not. The debtor argued that federal law limited how PPP funds can be used and satisfaction of a judgment was not one of the permissible uses. But the court held that rule only limited how recipients can use the funds, not how a judgment creditor could use them.
Cases like this illustrate how courts apply the rules to determine what funds may satisfy a judgment.
Court Hears Appeal in Claims Against Lawyers Involved in A Dispute That Began Over a Decade Ago
When people ask me how long a litigation will last, I can never give a certain answer. Among other things, the conduct of the litigants can prolong a case substantially.
For example, the state appellate court in Brooklyn recently heard an appeal brought by a tenant in a building. In 2011 and 2012, the tenant sued an administrator who managed the building’s renovation, alleging he stole money and did a bad job. After he lost, he sued all of the law firms involved in the first case. That second lawsuit went to trial in 2018 and, after he lost, the tenant appealed.
This case illustrates how a dispute that began over a decade ago can persist in the state court system for years because of the persistence of a plaintiff.
Court Holds that Consumer Protection Statute Does Not Protect Corporation Seeking International Tax Advice
Many states have consumer protection statutes that make it easier to sue companies that use deception in selling consumer goods. While the language of these statutes may be broad, courts sometimes interpret them narrowly in litigation.
For example, an energy company recently sued a global tax firm for malpractice. It also brought a claim under New York’s consumer protection law. The state appeals court in Manhattan held that the law is meant to apply to “modest” consumer transactions and not international tax advice to corporations, and so it affirmed dismissal of the claims.
Cases like this illustrate how courts apply consumer protection laws.
Court Holds that Usury Defense Applied in Lawsuit Between Friends
New York courts will generally not enforce loan agreements if the interest rates exceed a maximum “usury” rate. But a plaintiff can argue in litigation that an exception to that rule applies.
The state appellate court in Manhattan recently reversed the trial court’s application of such an exemption. The lender claimed he was a personal friend of the borrower, and so a “special relationship of trust and confidence” existed that should prevent the borrower from raising usury as a defense. The appeals court held that a friendship is not enough, and that the plaintiff needs to allege that he relied upon the borrower’s representations about the legality of the loan or that the borrower have more financial sophistication than the lender.
Cases like this illustrate how New York courts consider usury laws when deciding whether to enforce loan agreements.