Parallax Health Sciences, Inc. v. EMA Financial, LLC
- Robert Lehrburger
- 1:20-cv-02375-LGS-RWL
- U.S. District Court · Southern District of New York
- 2
In Parallax Health Sciences v. EMA Financial, Judge Lehrburger withdrew part of an earlier recommendation about New York usury law, leaving the rest unchanged.
Parallax Health Sciences, Inc. and EMA Financial, LLC; the ruling withdraws only part of an earlier recommendation and leaves the remainder unchanged.
What happened
In Parallax Health Sciences, Inc. v. EMA Financial, LLC, Magistrate Judge Robert W. Lehrburger addressed an earlier recommendation concerning Parallax’s motion to vacate a default judgment. Neither party objected, and the district judge had not yet ruled on the recommendation.
The recommendation said the debt instruments were not usurious because Nevada law applied and usury was not a defense to enforcement there. It also said, as an additional observation, that the instruments were not usurious under New York law, even though they included convertible option rights. A new Second Circuit decision, relying on a New York Court of Appeals ruling, said that the value of floating-price convertible options must be included when calculating interest under New York’s usury limit.
Judge Lehrburger withdrew the portion of the recommendation discussing whether New York law would also support the result. He left the remainder of the recommendation unchanged. The opinion does not state that the district judge had yet adopted or rejected the recommendation.
The detailed version
- Parallax Health Sciences, Inc. v. EMA Financial, LLC · No. 1:20-cv-02375-LGS-RWL
- Robert Lehrburger
- Mar. 16, 2022
Background
On February 24, 2022, Magistrate Judge Robert W. Lehrburger issued a Report and Recommendation concerning Parallax Health Sciences, Inc.’s motion to vacate a default judgment. The deadline for objections passed without either party filing objections. The district judge had not yet acted on the Report and Recommendation.
Change in Relevant Law
On March 15, 2022, the Second Circuit issued a decision in Adar Bays, LLC v. GeneSYS ID, Inc. The decision reported that the New York Court of Appeals had held that the value of floating-price convertible options must be included when determining whether interest on a loan exceeded New York’s statutory usury limit.
The earlier Report and Recommendation concluded, in part, that the debt instruments were not usurious because Nevada law applied and usury was not a defense to enforcement under that law. It also stated, as dicta—an observation not necessary to the recommendation’s result—that the notes were not usurious under New York law even though they included convertible option rights. The court stated that this additional New York-law discussion might no longer be correct after Adar Bays.
Ruling
Judge Lehrburger withdrew the portion of the Report and Recommendation beginning on page 26 with the paragraph starting, “Second, even if New York law did apply ...,” through the end of the first full paragraph on page 27. The remainder of the Report and Recommendation remained unchanged and unaffected by Adar Bays. The opinion does not state the district judge’s ultimate action on the Report and Recommendation.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.