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Gevorkyan v. Judelson

New York Court of Appeals

June 27, 2017

Karine Gevorkyan, et al., Appellants,
v.
Ira Judelson, Respondent.

          Andrew Lavoott Bluestone, for appellants.

          Jonathan Svetkey, for respondent.

          Eric Del Pozo, for amicus curiae New York State Department of Financial Services.

          Brooklyn Defender Services et al.; Legal Aid Society, amici curiae.

          DiFIORE, CHIEF JUDGE

         The United States Court of Appeals for the Second Circuit, by certified question, has asked us whether an entity engaged in the bail bond business may retain the premium paid on a criminal defendant's behalf when bail is denied and the defendant is never released from custody. Inasmuch as the Insurance Law provides that such an entity does not earn a premium for a bail bond if a court refuses to accept the bond following a bail source hearing, we answer in the negative.

         I.

         In 2011, Arthur Bogoraz was indicted on state law fraud charges and bail was fixed at $2 million. Plaintiffs, the wife and family friends of Bogoraz, contacted defendant Ira Judelson, a licensed bail bond agent affiliated with the International Fidelity Insurance Company (International Fidelity), a bail bond surety. Judelson, on behalf of International Fidelity, entered into an indemnity agreement with plaintiffs whereby International Fidelity agreed to underwrite a bail bond to secure Bogoraz's release from custody in exchange for a premium of $120, 560. Plaintiffs promised to indemnify the bond and provide collateral. Shortly thereafter, plaintiffs paid the premium to Judelson, in trust for International Fidelity. Judelson then posted the bail bond with the court in compliance with Criminal Procedure Law § 520.20 (1), which provides:

"[W]hen a bail bond is to be posted in satisfaction of bail, the obligor or obligors must submit to the court a bail bond in the amount fixed, executed in the form prescribed in subdivision two, accompanied by a justifying affidavit of each obligor, executed in the form prescribed in subdivision four."

         The court thereafter ordered a hearing under CPL 520.30, which provides:

"Following the posting of a bail bond and the justifying affidavit or affidavits..., the court may conduct an inquiry for the purpose of determining the reliability of the obligors..., the value and sufficiency of any security offered, and whether any feature of the undertaking contravenes public policy... At the conclusion of the inquiry, the court must issue an order either approving or disapproving the bail."

         The court denied the bail bond at the hearing and the Appellate Division dismissed a writ of habeas corpus on Bogoraz's behalf (People ex rel. Aidala v Warden, Rikers Is. Corr. Facility, 100 A.D.3d 667');">100 A.D.3d 667 [2d Dept 2012], lv denied 20 N.Y.3d 858');">20 N.Y.3d 858 [2013]). Bogoraz never was released and, when plaintiffs requested the return of the $120, 560 premium, Judelson refused.

         Plaintiffs sued Judelson in the United States District Court for the Southern District of New York, asserting diversity jurisdiction. The complaint alleged breach of contract, unjust enrichment, and conversion. After a bench trial, the District Court found that the indemnity agreement permitted Judelson to retain the premium (US Dist Ct, S.D. NY, 13 Civ 8383, Berman, J., 2015). The District Court considered CPL 520.20 and 520.30, but concluded that "New York State practices and statutory guidance are not dispositive" (id.).

         On appeal, the Second Circuit stated that there is a "dearth" of New York legal authority on this subject and that the relevant New York Criminal Procedure Law is "'not dispositive'" (841 F.3d 584, 587-588 [2d Cir 2016]). The court determined that New York Insurance Law § 6804 (a), the provision relating to bail bond compensation, "controls the amount of the premium a bail bondsman may charge, [yet] nothing in that Article sheds light on when that premium is actually earned" (id. at 587 [emphasis in original]). The court concluded that New York State's "interest in regulating the premiums to be received by bail bond agents is clear" and that the New York Court of Appeals, rather than the federal courts, should strike the balance between the State's interests in "secur[ing] compensation for bail bond agents" and ...


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