The Court ended the 2017/18 Term with a flurry of diverse procedural and substantive decisions:

Were two captured chimpanzees entitled to habeas corpus relief?  Did the copying of an idea on a computer hard drive constitute a criminal act?  Did the New York City Commission on Human Rights meet its burden of proving undue hardship by substantial evidence in denying a petition for the installation of a wheelchair-accessible entrance to an apartment?  May a plaintiff asserting a claim for misappropriation of a trade secret recover damages measured by the costs  the defendant avoided due to its illegal activity?  Must a vacancy increase be included when calculating the legal regulated rent under the Rent Stabilization Law?  Was the Department of Environmental Conservation authorized to unilaterally remediate a threat of release of hazardous waste on a neighboring property?  Does New York State’s borrowing statute for the statute of limitations apply when the parties agreed that their agreement will be enforced according to New York law?  Is an action brought by the Attorney General under the Martin Act governed by the three-year or six year statute of limitations?  And is denial of a non-party’s motion to quash a subpoena in a criminal proceeding directly applicable?

Is a non-human animal entitled to relief by writ of habeas corpus?  Answer:  Leave to appeal denied.  The Court of Appeals (over a vigorous dissent) did not answer the question on the merits.

Matter of Nonhuman Rights Project, Inc. v. Lavery, 2018 NY Slip Op 03309 (May 8, 2018)

The Nonhuman Rights Project brought a habeas corpus proceeding on behalf of Tommy and Kiko, two captive chimpanzees that were confined by their owners to small cages in a warehouse and a cement storefront in a crowded residential area.

Supreme Court declined to sign orders to show cause to grant the chimpanzees habeas relief.  The First Department affirmed.

The Nonhuman Rights Project sought leave to appeal to the Court of Appeals. The Court of Appeals denied the application; however, concurring with the denial on procedural grounds but “dissenting” on the merits, Judge Fahey, addressed the merits noting that “denial of leave to appeal is not a decision on the merits[.]”. Judge Fahey framed the issue as: “Should such a being be treated as a person or as a property, in essence a thing?”.

The Appellate Division reasoned that chimpanzees are not persons because they lack “the capacity or ability…to bear legal duties, or to be held legally accountable for their actions”. Judge Fahey countered that:  “even if it is correct, however, that nonhuman animals cannot bear duties, the same is true of human infants or comatose human adults, yet no one would suppose that it is improper to seek a writ of habeas corpus on behalf of one’s infant child…or a parent suffering from dementia.”.

Judge Fahey rejected the Appellate Division’s conclusion that a chimpanzee cannot be considered a “person” as based upon nothing more than a premises that a chimpanzee is not a member of the human species. According to Judge Fahey:

• The better approach in my view is to ask not whether a chimpanzee fits the definition of a person or whether a chimpanzee has the same rights and duties as a human being, but instead whether he or she has the right to liberty protected by habeas corpus.  That question, one of precise moral and legal status, is the one that matters here.

Concluding that:

• The reliance on a paradigm that determines entitlement to a court decision based on whether the party is considered a “person” or relegated to the category of a “thing” amounts to a refusal to confront a manifest injustice.  Whether a being has the right to seek freedom from confinement through the writ of habeas corpus should not be treated as a simple either/or proposition. The evolving nature of life makes clear that chimpanzees and humans exist on a continuum of living beings. Chimpanzees share at least 96% of their DNA with humans. They are autonomous, intelligent creatures.  To solve this dilemma, we have to recognize its complexity and confront it.

Does the copying of an idea embedded on a computer hard drive, by uploading proprietary source code to a computer server, constitute the criminal making of a tangible reproduction or representation of secret scientific material?  Answer:  Yes.

People v. Aleynikov, 2018 NY Slip Op 03174 (May 3, 2018)

Sergey Aleyniko was employed at Goldman Sachs as a computer programmer working on the firm’s high-frequency trading software. High-frequency trading “uses sophisticated, electronic  trading tools, proprietary strategies, and computer algorithms to perform market data calculations and trade securities at very rapid speeds.”  The computer codes for Goldman’s high-frequency trading system was the key to successful trading in a very-competitive market. Aleyniko had complete access to Goldman’s high-frequency trading system’s source code (“computer instructions written in a human-readable programming language”).  Goldman employees were not permitted to remove a copy of source code from the company’s network and signed confidentiality agreements acknowledging that any software they were creating was the property of the firm.

Aleyniko was paid $400,000 by Goldman in 2008; however, in spring of 2009 he accepted an offer of employment at Teza Technologies as the head of infrastructure and system architect with an annual compensation of $1.2 million.  Teza planned to develop a high-frequency trading infrastructure and software from scratch.

On his last day of employment at Goldman, Aleyniko uploaded, to a “subversion” repository on a remote server in Germany, a large quantity of Goldman’s high-frequency trading source code.  Shortly thereafter, Goldman discovered the unauthorized transfer of “over 13 megabytes of data in one transfer” and “over 4.5 megabytes of data in the other”.  An investigating team identified that Aleyniko’s computer was the device from which the transfers had been conducted.  Aleyniko was arrested on Federal charges on July 3, 2009; waived his Miranda rights; and admitted that he had uploaded the files from his work at Goldman.

A federal jury found Aleyniko guilty as charged.  On appeal, Aleyniko argued that the source code was not a stolen “good” within the meaning of the National Stolen Property Act, and that the code was not “related to a product…used in or intended for use in interstate or foreign commerce” under the Economic Espionage Act.  The Second Circuit reversed, holding that the source code was “intangible property” and therefore not a “good” under the National Stolen Property Act; and held that theft “did not violate the Economic Espionage Act because the source code was not intended for use in interstate or foreign commerce”.

In 2012, Aleyniko was charged in State court with two counts of unlawful use of secret scientific material, and one count of unlawful duplication of computer related material in the first degree.  At the close of the People’s case, Aleyniko moved for an order of dismissal on the grounds that there was not sufficient evidence to show that he had made a tangible reproduction of Goldman’s source code or to show his “intent to appropriate…the use of the code.”  Aleyniko did not dispute that the source code constituted secret scientific material.

The trial court reserved decision; the case proceeded; and the jury found Aleyniko guilty of the unlawful use of secret scientific material; failed to reach a unanimous verdict on the other unlawful use count; and acquitted Aleyniko of unlawful duplication.  Supreme Court granted Aleyniko’s motion for a trial order of dismissal observing that “[t]here was no evidence Aleyniko ever duplicated the source code he downloaded to a piece of paper, any medium where it could be touched or any medium outside a computer or thumb drive.”

The People appealed.  The Appellate Division reinstated the verdict as to the challenged count holding that Aleyniko made a “tangible reproduction or representation of the source code when he uploaded the code to the hard drive of the German server.”

The Court of Appeals affirmed the reversal by the Appellate Division.

The Court of Appeals noted that the term “tangible” is not defined in the statute; and that, in such a case, dictionary definitions serve as “useful guideposts” in determining the words “ordinary and commonly understood meaning.”  Dictionaries gave two meanings of the word “tangible”:  a narrow definition that defines the term as “capable of being touched; affecting the sense of touch; touchable”; and a broader definition meaning either “having or possessing physical form; corporeal” or “substantially real:  material.”  Aleyniko, urged the Court to accept the more restrictive meaning (“touchable”) and asked the Court to conclude that the source code he uploaded was intangible because the code cannot be touched.  Instead, the Court accepted the People’s invitation to use the broader meaning (“material”, or “having physical form”).

The Court then addressed the question of whether Aleyniko had “made a tangible reproduction or representation of the scientific material contained in the source code.”  Thus, the question for the Court was:  “not whether the source code is tangible, but whether [Aleyniko] made a tangible copy or copies of source code when he uploaded source code to a server and downloaded it to his electronic devices” noting that:  “[a] copy of source code may be tangible even if the source code itself is not.”

Based upon the trial evidence, the Court of Appeals sustained the jury verdict concluding that: “viewing the facts in the light most favorable to the People, a rational jury could have found that the “reproduction or representation” that defendant made of Goldman’s source code, when he uploaded it to the German server, was tangible in the sense of “material” or “having physical form.”

The Court also considered the meaning of the words “to appropriate” as used in the Penal Law.  And concluded that “exercising permanent control over another’s property is sufficient to constitute an appropriation.”

Did the New York City Commission on Human Rights correctly conclude that Petitioners failed to meet their burden of proving undue hardship by substantial evidence in denying a petition for an Order directing the installation of a wheelchair-accessible entrance to an apartment by converting a window into a doorway and installing a ramp?  Answer:  Yes, under the facts of this proceeding.

Matter of Marine Holdings, LLC v. New York City Comm. on Human Rights, 2018 NY Slip Op 03303 (May 8, 2018)

Marine Holdings challenged a determination by the Commission ordering the installation of a wheelchair-accessible entrance to an apartment by converting a window into a doorway and installing a ramp.  A hearing was conducted before an administrative law judge. The Commission, rejecting the ALJ’s report and recommendation, concluded that petitioners failed to meet their burden of proving undue hardship.

Marine Holdings commenced an Article 78 proceeding against the New York City Commission on Human Rights. Supreme Court denied the petition concluding that the Commission’s “determination that [petitioners] did not establish the affirmative defense of undue hardship based upon structural infeasibility [was] supported by substantial evidence in the record”.

The Appellate Division reversed, holding that the petition “should have been granted in its entirety” because “the record did not contain any substantial evidence rebutting the petitioners’ showing that it would be structurally infeasible to install a handicapped accessible entrance to [the tenant’s] apartment.”

The Court of Appeals, split 4-2, reversed, holding that:

• The Commission considered evidence presented at the hearing that petitioners had carried out a window-to-door conversion elsewhere in petitioners’ residential complex, similar to that proposed as a feasible reasonable accommodation by an architect retained by petitioners and by an architect who testified for respondents. No evidence was presented that this prior window-to-door conversion had imposed any hardship on petitioners, and substantial evidence supports the determination that petitioners did not prove that the proposed conversion would require alterations significantly different from the previous one.  The Commission could rationally conclude that petitioners failed to carry their burden of proving that the proposed accommodation would cause undue hardship in the conduct of their business.

Judge Garcia, joined by Judge Feinman, dissented in an Opinion that is substantially longer than the majority’s unsigned, memorandum.  The dissent, after discussing the procedural and evidentiary record in great detail, was critical of the majority for essentially ignoring the “undue hardship” language of the statute simply because the proposed accommodation was theoretically possible.  Judge Garcia noted that while “it is ‘possible’ for petitioners to construct an entirely new building to accommodate the tenants,” that would not be a reasonable accommodation.  The dissent concluded “[j]udicial review of the Commission’s determination is certainly limited, but it is not meaningless, especially given the Commission’s broad enforcement powers.”

Whether, under New York law, a plaintiff asserting claims of misappropriation of a trade secret, unfair competition, and unjust enrichment can recover damages that are measured by the costs the defendant avoided due to its unlawful activity?  Answer:  No.

E.J. Brooks Co. v. Cambridge Sec. Seals, 2018 NY Slip Op 03171 (May 3, 2018)

TydenBrooks, the largest manufacturer of plastic indicative security seals in the United States, acquired Stoffel’s fully-automated process for manufacturing such seals.

Several TydenBrooks employees “defected” to Cambridge, a competitor, and took the confidential process with them.  TydenBrooks sued the firm employees in the United States District Court for the Southern District of New York for common law misappropriation of trade secrets, unfair competition and unjust enrichment.  A jury found Cambridge liable on all three counts.

TydenBrooks sought to measure damages on the so-called “avoided costs” theory – an amount equal to the difference between the costs Cambridge actually incurred in using the misappropriated process and the costs that Cambridge would have incurred in developing such process on its own.  The Court charged the jury under the “avoided costs” theory.  And the jury returned a verdict of $1.3 million in compensatory damages to each of the three claims.  Punitive damages were not awarded.

Upon appeal, the Second Circuit noted that “neither [the Second Circuit] nor the New York courts appear to have approved the specific type of award in this case[.]”.  The Second Circuit certified the measure of damage questions to the New York Court of Appeals.

The Court of Appeals, in a 4-3 decision, noted at the outset, that “[t]he ‘fundamental purpose’ of compensatory damages is to have the wrongdoer ‘make the victim whole’[.]”.  And that “damages cannot be remote, contingent or speculative.  They need not be immediate, but need to be so near to the cause only that they may be reasonably traced to the event…” “[t]he standard is not one of ‘mathematical certainty’ but only ‘reasonable certainty’[.]”.

The Court held that “damages in unfair competition cases should correspond to ‘plaintiff’s losses [that] were a proximate result of defendant’s conduct'[.]”.  CSS was found liable to TydenBrooks under a “misappropriation theory” of unfair competition pursuant to which “a party is liable if they unfairly exploit “the skill, expenditures and labors” of a competitor[.]”.

The majority rejected that measure of damages and held that:  “a plaintiff…may not elect to measure its damages by the defendant’s avoided costs in lieu of its own losses”.

The Court addressed the issue of whether trade secret damages may be measured by avoided costs. In this regard, the Court held that “damages in trade secret actions must be measured by the losses incurred by the plaintiff, and that damages may not be based on the infringer’s avoided development costs.”

The Court held that “plaintiff’s injury in trade secret misappropriation  cases includes the loss of “competitive advantage over others…by virtue of its exclusive access” to the secret[.]”.

The Court finally addressed whether “avoided costs” may be awarded as compensatory damages in an unjust enrichment action.  And concluded that “costs and expenses that otherwise would have been payable to third parties, those avoided third-party payments do not constitute funds held by the defendant ‘at the expense of’ the plaintiff”.  Accordingly, “a plaintiff bringing unjust enrichment action may not recover as compensatory damages the costs that the defendant avoided due to its unlawful activity in lieu of the plaintiff’s own losses”.

Judge Wilson, joined by Judges Rivera and Fahey, vigorously dissented at length. The dissenters believed that their colleagues had failed to live up to the high standard set forth by the Court by Benjamin Cardozo. Of importance to practitioners and damages experts will be the dissenter’s view that New York law now differs from “the widespread use of avoided-cost damages under the Restatement (Third) of Unfair Competition and the laws of other states.”

Whether the 20% vacancy increase should be included when calculating the legal regulated rent for purposes of determining whether the subject apartment had reached the $2,000 deregulation threshold in the Rent Stabilization Law?  Answer:  The vacancy increase must be included in that calculation.

Altman v. 285 W. Fourth LLC, 2018 NY Slip Op 02829 (April 26, 2018)

Richard Altman subleased an apartment from Keno Rider, who had lived in the apartment since 1993 under a rent-stabilized lease with a prior landlord.  In 2005, Altman and the prior landlord entered into a stipulation of settlement in a non-payment proceeding pursuant to which Rider would surrender all rights to the apartment and the landlord would deliver a new lease to Altman. And Altman executed a document stating that the apartment was not rent stabilized.  Later that year, the landlord removed the apartment from registration with the Division of Housing and Community Renewal based upon “high rent vacancy”.

285 West Fourth LLC entered into a fair market renewal lease with Altman at a monthly rent of $2,600; and, at the same time, the parties signed an agreement acknowledging that the apartment was not subject to rent stabilization; and Altman agreed to refrain from challenging the non-regulated status of the apartment’ Altman did not challenge the apartment’s deregulated status in a series of nonpayment proceedings from 2008 until early 2014.  In June 2014, Altman brought an action seeking a declaration that the premises were subject to rent stabilization.

The owner counterclaimed; Altman moved to dismiss the owner’s counterclaims; and the owner cross-moved for summary judgment; Supreme Court dismissed the complaint and declared that Altman was not entitled to the protection of rent stabilization.  The Court held that the legal regulated rent – including the 20% vacancy increase – exceeded $2,000.

The Appellate reversed, holding that, although the owner was entitled to a 20% increase for Altman’s initial lease, the increase did not serve to deregulate the apartment because the monthly rent was not over $2,000 at the time the prior tenant vacated the premises.  The matter was remanded to Supreme Court which entered a judgment in Altman’s favor in the amount of more than $165,000, including treble damages and prejudgment interest.

The starting point of the Court of Appeals was that “[u]nder the Rent Stabilization Law, rent-stabilized apartments are subject to certain statutory rent increases, including a 20% increase for a two-year lease upon vacancy[.]”.

The Rent Stabilization Law provides, as follows, for the deregulation of rent stabilized apartments that reach a threshold legal regulated rent:

• [A]ny housing accommodation which becomes vacant on or after [April 1, 1997] and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month; or, for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 and before the effective date of the rent act of 2011, with a legal regulated rent of two thousand dollars or more per month[.]”.

The Court of Appeals then, as follows, parsed the language of the statute:

• The Appellate Division relied on the first clause, which plainly states that the relevant consideration for deregulation purposes is the legal regulated rent “at the time tenant vacated” the apartment.  By contrast, the second clause provides that the key consideration when there is a vacancy is the legal regulated rent, without reference to the rent at the time of the tenant’s vacatur.  Given that the second clause is an alternative to the first (preceded by “or”), it must mean something different from the first clause – i.e., something other than the legal regulated rent at the time the tenant vacated the apartment.  Thus, it is reasonable to read the plain language of the second clause to refer to the legal regulated rent (including the available statutory increases) applicable to the rent after the tenant’s vacancy.

The Court of Appeals then reviewed the legislative history of the enactment and concluded that “the legislative history could not be clearer and leaves no doubt that the legislature intended to include the vacancy increase”.  And concluded that:

• Thus, in the present case, the 20% increase should have been considered in determining the legal regulated rent at the time of the vacancy and, as a result, the subject apartment was properly deregulated in 2005[.]

Is the Department of Environmental Conservation authorized to unilaterally remediate the significant threat of release of hazardous waste on a neighboring property?  Answer:  Yes, under the facts of this case.

Matter of FMC Corp. v. New York State Dept. of Envtl. Conservation, 2018 NY Slip Op 03094 (May 1, 2018)

FMC owned and operated a 103-acre pesticide production facility in Niagara County.

Over almost a century of operation, the facility released significant amounts of hazardous waste.  And many of those wastes migrated onto adjacent properties, including a school, croplands and several hundred residences.  FMC continued to store hazardous wastes and to formulate pesticides on the site.

In 1980, the Department of Environmental Conservation started proceedings to regulate FMC’s activities on the site.  Also in 1980, the DEC listed a portion of the facility on the New York Registry of inactive hazardous waste sites.

In 1980, FMC initiated a permit application process with the DEC.  Thirty-eight years later, the process had not yet resulted in a permit; and, in the interim, the facility continued to operate under an interim status.

In 1991, FMC entered into a consent order that required the company to undertake certain corrective measures.  In 2013, the DEC adopted a final corrective measure.  After a year of negotiations failed, FMC filed an Article 78 proceeding contesting the DEC’s decision.

The Appellate Division rejected three of the four causes of action asserted by FMC.  FMC argued that the decision by the DEC to implement corrective measures unilaterally, rather than through FMC, was arbitrary and capricious.  The DEC’s motion to leave to appeal to the Court of Appeals was granted.

The DEC maintained that it was authorized to undertake corrective measures because FMC had unlawfully disposed of hazardous waste, including through a number of releases between 1980 and the present.  The Court of Appeals rejected the Appellate Division’s holding that FMC was “operating lawfully pursuant to its interim status…at all relevant times”.

The Court of Appeals proceeded to address the following question:  “Did DEC demonstrate a basis for finding that FMC released hazardous waste in violation of [the law]?”.  The Court of Appeals held that the law authorizes unilateral action in every case where the DEC determines that action is cost effective – without first ordering FMC to do so or providing a hearing.

The Court then addressed the question of “whether DEC’s determination to unilaterally implement the corrective measures was a cost effective alternative to ordering FMC to proceed?  Concluding that:

• DEC’s year-long unsuccessful negotiations to obtain FMC’s agreement to perform the work provides record evidence that relying on FMC was not a cost-effective alternative[.]

Does New York State’s borrowing statute for statute of limitations apply when the contracting parties have agreed that their agreement would be “enforced” according to New York law?  Answer:  Yes.

2138747 Ontario, Inc. v. Samsung C&T Corp., 2018 NY Slip Op 04274 (June 12, 2018)

SkyPower Corp., an Ontario renewable energy developer, entered into a non-disclosure agreement with Samsung in connection with the evaluation of a potential transaction.  The non-disclosure agreement allowed Samsung to review SkyPower’s confidential and proprietary information, as well as other standard provisions.  The anticipated transaction never materialized and Samsung subsequently entered into an agreement with the Ontario government for a renewable energy project.  SkyPower alleged that, in connection therewith Samsung made use of its confidential and proprietary information.

Plaintiff (SkyPower’s assignee) sued Samsung in New York for breach of contract and unjust enrichment.  The non-disclosure agreement provided that:  “This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New York.”  In the NDA the parties also agreed that New York State and federal Courts would be the exclusive forum for any litigation.

Samsung alleged that the claims were time barred pursuant to Ontario’s two-year statute of limitations.  Plaintiff relied upon New York’s general six-year statute of limitations for breach of contract actions.  The parties agreed that the claims accrued on September 26, 2009; that the action was timely under New York law; and was time barred under Ontario law.  They also agreed that use of the word “enforced” indicated the intent that New York procedural law apply.

Supreme Court dismissed the claims as time barred.  And the Appellate Division affirmed.

CPLR § 202 provides as follows:

An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.

At the outset, the Court of Appeals noted the general rule that:

When a nonresident sues on a cause of action accruing outside New York, CPLR 202 requires the cause of action to be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued.

The Court of Appeals briefly summarized the conflicting contentions:

The parties agree that plaintiff’s claims asserted on behalf of SkyPower accrued in Ontario. Application of the borrowing statute would therefore require plaintiff’s action to be timely under Ontario’s two-year statute of limitations. Plaintiff contends, however, that the [agreement’s] broad contractual choice-of-law provision encompasses a choice of New York’s procedural law, including New York’s general six-year statute of limitations in CPLR 213 (2), to the exclusion of CPLR 202[.]

The Court pointed out the long history of the borrowing statute from its original enactment in 1902.  It also noted that statute of limitations are procedural, not substantive.  Concluding that:

Plaintiff argues that because the contract in this case specified that it would be “enforced” according to New York law, the parties intended to apply New York’s procedural law except for its statutory choice-of-law provisions, which, plaintiff alleges, includes CPLR 202. We conclude, however, that the mere addition of the word “enforced” to the [agreement’s] choice-of-law provision does not demonstrate the intent of the contracting parties to apply solely New York’s six-year statute of limitations in CPLR 213 (2) to the exclusion of CPLR 202. Rather, the parties have agreed that the use of the word “enforced” evinces the parties’ intent to apply New York’s procedural law. CPLR 202 is part of that procedural law, and the statute therefore applies here.

The Court of Appeals declined to address whether a contractual provision seeking to avoid application of CPLR 202 would run afoul of CPLR 201, GOL § 17-103 or New York’s public policy against contractual extensions of the statute of limitations before accrual of the cause of action.

Is an action brought by the Attorney General under the Martin Act governed by the three-year or six-year statute of limitation?  Answer:  The three-year statute of limitations controls.

People v. Credit Suisse Sec. (USA) LLC, 2018 NY Slip Op 04272 (June 12, 2018)

After investigation, the New York Attorney General sued Credit Suisse and affiliated entities in November, 2012 for violations of the Martin Act in 2006 and 2007 in connection with the sale of residential mortgage-backed securities.  Credit Suisse moved to dismiss the complaint based upon the three-year statute of limitations covering “actions to recover upon a liability, penalty or forfeiture created or imposed by statute”[.]

Credit Suisse moved to dismiss the complaint.  The Attorney General asserted that the claims, pleading elements of common law fraud, were governed by the six-year statute of limitations and were timely filed.  Supreme Court denied the motion, concluding because “Executive Law § 63(12) and Martin Act cases based on investor fraud were governed by the six-year statute of limitations of CPLR 213”…The court reasoned “that the essence of plaintiff’s claims under both Executive Law § 63(12) and the Martin Act is that defendants made false representations in order to induce investors to purchase their securities . . . [and] thus seek to impose liability on defendants based on the classic, longstanding common-law tort of investor fraud”[.]

The Appellate Division affirmed, with two justices dissenting, on the grounds that, in its prior holding in State of New York v. Bronxville Glen I Assocs. (181 A.D.2d 516 [1st Dept 1992]) “[applied] a six-year statute of limitations to Martin Act claims, noting that the language in Executive Law § 63(12) parallels that of the Martin Act, and concluding that “both the Martin Act and section 63(12) target wrongs that existed before the statute’s enactment, as opposed to targeting wrongs that were not legally cognizable before enactment[.]”

The Court of Appeals summarized the test for determining whether the three-year statute of limitations applied:

CPLR 214(2) does not automatically apply to all causes of action in which a statutory remedy is sought, but only where liability would not exist but for a statute’…Thus, CPLR 214(2) does not apply to liabilities existing at common law which have been recognized or implemented by statute’…When this is the case, the Statute of Limitations for the statutory claim is that for the common-law cause of action which the statute codified or implemented.

Concluding that:

[T]he Martin Act imposes numerous obligations — or “liabilities” — that did not exist at common law, justifying the imposition of a three-year statute of limitations under CPLR 214(2). The broad definition of “fraudulent practices,” as repeatedly amended by the Legislature and interpreted by the courts, encompasses “wrongs” not cognizable under the common law and dispenses, among other things, with any requirement that the Attorney General prove scienter or justifiable reliance on the part of investors[.]

As to the statute of limitations applicable to Executive Law § 63(12), the Court noted that courts must “look through” that statute.  The lower courts had failed to properly do so to determine that the type of fraud alleged was recognized at common law.  Thus, the Court of Appeals remitted the case to the Supreme Court.

Whether an order granting or denying a non-party’s motion to quash a subpoena issued in the course of a criminal proceeding is directly appealable?  Answer:  The denial to a news reporter of the motion to quash is not directly appealable and the non-party witness must either testify or risk a contempt proceeding.

Matter of People v. Juarez, 2018 NY Slip Op 04684 (June 27, 2018)

Conrado Juarez was charged with one count of second-degree murder for the killing of “Baby Hope”.  Juarez gave a videotape confession to the police in which he admitted that he had committed the crime.

A few days after the confession and subsequent arraignment, while in pre-trial detention, Juarez gave an interview to Frances Robles, a New York Times investigative journalist.  The Times subsequently published robles’ article about the murder in which Juarez offered an account of the child’s death that was inconsistent with his confession.

Supreme Court ordered a Huntley hearing with respect to the confession; and subpoenas sought Robles’ testimony and interview notes.  Robles moved to quash both subpoenas.  Robles asserted that her interview and notes were privileged under the Shield Law within New York Civil Rights Law.  The court granted the motion to quash for the purposes of the Huntley hearing, but subsequently denied the motion to quash in connection with the trial; and instructed Robles to appear in court to testify and to turn over her notes beforehand for in camera inspection.

Robles appended and the Appellate Division reversed, concluding that the People did not overcome the Shield Law’s strong protections by making the required “clear and specific” showing that the disclosure sought was critical or necessary to the People’s proof of a material issue.  The First Department addressed the merits without any discussion as to whether or not the order was non-final and nonappealable, which the People did not raise.

The Court of Appeals, over two strong dissents, reversed in a 4-3 decision.  The majority held that the legislature had not authorized an appeal from such an interlocutory order in a criminal proceeding.

Judge Rivera dissented, concluding that the motion to quash the subpoenas was not a criminal proceeding in respect of which decisions on motions were not appealable; but, instead, was a special proceeding in which interlocutory appeals were permitted.

Judge Rivera asserted that the majority improperly ignored decades of precedent the State’s Constitution and noted:

The problem created by the majority’s ruling here falls particularly harshly on journalists like Robles, whose reputation depends on maintaining confidences in newsgathering. A nonparty journalist is irrevocably aggrieved by the denial of a motion to quash a subpoena, and is forced either to comply with the order and jeopardize the journalist’s reputation or to refuse and risk being held in contempt. Those outcomes are completely avoidable by adhering to this Court’s traditional treatment of motions to quash as civil in nature, and an order denying the motion as final and appealable.

And finding on the merits that:

[T]he People failed to make a clear and specific showing that their case “rises or falls with the admission or exclusion” of Robles’ testimony and notes, and so have not established the “critical or necessary” prong of [the] Civil Rights Law[.]  The People have a video of defendant’s statement to the police, and nothing defendant said after the videotaping, during his pretrial incarceration interview, sheds light on whether his statements as recorded were voluntary or coerced. Moreover, the trial court has already held that the video is admissible, and the jury can watch it and decide for itself what if any probative value to accord defendant’s confession. Since the People failed to carry their burden, the Appellate Division properly concluded that the motion to quash should be granted and I would affirm that court’s order.

Judge Fahey also dissented, stating that:

[T]he State Constitution…leaves no doubt that it necessarily affords a journalist the right to directly appeal from an order denying a motion to quash a subpoena issued in a criminal action, “irrespective of any privileges granted by the Legislature now or in the future” in the Criminal Procedure Law…We need not wait for the legislature to act in order to uphold our tradition “of providing the utmost protection of freedom of the press”[.]

Judge Wilson joined both dissenting opinions, which referred to New York’s long history of protecting freedom of the press dating back to John Peter Zenger’s acquittal in 1735.