On August 18, 2022, Justice Cohen of the New York County Commercial Division issued a decision in GS Capital Partners, LLC v. FTE Networks, Inc., 2022 NY Slip Op. 22286, holding that the Court of Appeals’ decision in Adar Bay regarding the application of New York’s usury laws applies retrospectively, explaining:
In Adar Bays, the Court of Appeals held that (1) 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 when applying the usury law, NY Penal Law § 190.40, and (2) that a contract is void ab initio if it violates the usury law. The PHSC, Inc. decision cites Adar Bays for the proposition that a criminally usurious loan is void and unenforceable.
Plaintiff’s reliance on Gurnee to limit the applicability of Adar Bays is misplaced. In Gurnee, the Court of Appeals held that its decision Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 454 [1980] concerning the term first party benefits as used in the Insurance Law should be applied retroactively to all cases not barred by the statute of limitations. The Court of Appeals noted that a change in decisional law usually will be applied retrospectively to all cases still in the normal litigating process. As an exception to this general rule, however, where there has been such a sharp break in the continuity of law that its impact will wreak more havoc in society than society’s interest in stability will tolerate a court may direct that the new pronouncement operate prospectively alone. The Court of Appeals stated it is important to emphasize that Kurcsics did not establish a new principle of law. It merely construed a statute that had been in effect for a number of years. The Adar Bays decision did not establish a new principle of law, but instead construed a statute that has been in effect for many years. Nor did the court suggest that its opinion should be given only prospective effect. Accordingly, there is no basis for the Court to find that Adar Bays is inapplicable to the present case.
(Internal quotations and citations omitted).