Two Cases Worth Knowing About

June 16, 2014 at 10:30 am Leave a comment

I take a break from writing this blog for one week to go watch a few rounds of the US Open Golf Tournament and all Hell breaks loose. House Majority Leader Eric Cantor loses his job, Baghdad is on the verge of being overrun in a Civil War, the San Antonio Spurs overrun the Miami Heat, and the Rangers get beaten by the Kings.

As I did not make the cut in the Open, it’s time to get back to my day job before more mayhem breaks out. Here are some legal developments that happened the previous week that you may want to take a look at if you haven’t already done so.

Merchants, surcharges and cash discounts

Merchants filed a brief with the Court of Appeals for the Second Circuit responding to an appeal by the NYS Attorney General in a case involving credit card surcharges. ( Expressions Hair Design v. Schneiderman, – F. Supp. 2d -, 2013 WL 5477607, *1 (S.D.N.Y. Oct. 3, 2013)

The antitrust settlement eliminated language from merchant agreements prohibiting credit card surcharges but New York State is one of several states that has a law that bans surcharges on credit card purchases, so the contract change had no impact on New York merchants. Last Fall, a federal district court struck down the statute on First Amendment and vagueness grounds. Merchants claim that there is little practical difference between a cash discount, which is allowed under New York State law, and a surcharge, both of which end up costing a consumer the same amount of money. In its brief appealing the decision New Yorks State argues that the statute in question does not involve the First Amendment at all, but is an appropriate exercise of legislative discretion that benefits consumers.

Since the Association wrote an amicus brief in support of the State, I’ll withhold making editorial comments. Suffice it to say that this case is important not only in New York but as a precedent in the other states that have State level bans on credit card surcharges.  I will keep you updated as this case goes forward.

By the way, I was surprised how many merchants in North Carolina, including my brother-in-law who owns a mill providing high-end pine and my favorite restaurant for authentic pulled-pork sandwiches, choose not to accept credit cards. Is it possible that merchants accept credit cards because it is in their economic interest to do so and not because of alleged anti-trust violations?

Inherited IRA Exempt Asset in Bankruptcy?

A very interesting Supreme Court case decided last week clarified that inherited IRAs are not exempt assets in bankruptcy proceedings. BRANDON C. CLARK ET UX., PETITIONERS v. WILLIAM J. RAMEKER involved a couple who declared Chapter 7 bankruptcy and claimed that $300,000 in assets held in an IRA inherited from the wife’s mother were exempt from creditors. Not so, said the court, which unanimously held that whereas bankruptcy laws are intended to protect the retiree accessing her IRA, or the person saving for retirement, an individual who receives such funds as a result of inheritance is allowed unlimited access to all of the funds and cannot be said to be putting aside money for retirement purposes.

This decision will have its most direct benefit for creditors, including credit unions, seeking to recover funds from bankrupt members.   My guess is that we also will see challenges to New York’s law exempting retirement benefits from levy and restraints. Someone will make the argument that if inherited IRAs are not considered retirement benefits for bankruptcy purposes, then they should not be considered retirement benefits for levy and restraint purposes either. But, for now, the only immediate impact of the Supreme Court’s decision is on bankruptcy proceedings.

On that note, it is nice to be back. You can see I’m rusty with the late blog. I expect to see you all at the Association’s convention later in the week.

Entry filed under: General, Legal Watch. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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