On Cloaking Devices And Usury: Lender Can Be Sued If It Uses Corporate Shell To Cloak A Personal Loan As A Business Loan

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Star Trek (pd)Cloaking devices are common in sci-fi movies like Star Trek and Star Wars. They are used to render an object, usually a spaceship, invisible to nearly all forms of detection. Although scientists are apparently working to make real-life cloaking devices, at this point they exist only in the movies and, apparently, in New Jersey courts, at least according to the Appellate Division in Amelio v. Gordon.

In Amelio, plaintiff owed an apartment building in Hoboken. He approached defendants about obtaining a loan to finish renovations on three units in the building, along with the common areas. Plaintiff claimed that defendants instructed him to create a corporate entity to obtain the loan. Plaintiff did as he was instructed, and formed a limited liability company, which obtained the loan from defendants. Plaintiff, who was identified as the managing member of the limited liability company, signed the loan documents on behalf of the company.

Plaintiff later sued, arguing that the fees and interest payments under the loan exceeded the amounts allowable under New Jersey's usury laws. He also claimed that defendants fraudulently convinced him to create a limited liability company and have that entity obtain the loan, just so they could charge him usurious fees and interest. Plaintiff sued in his individual capacity, not on behalf of the limited liability company. On the day of trial, defendants argued that the complaint had to be dismissed because plaintiff lacked standing to sue since the company was the borrower, not plaintiff. With little explanation, the trial court granted the motion and dismissed the complaint. Plaintiff appealed. 

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New Jersey Supreme Court: Cell Phone Users Have Privacy Interest In Cell Phone Location Information

by:  Peter J. Gallagher

 

The New Jersey Supreme Court ruled today that police cannot access the location information revealed by your cell phone without first acquiring a warrant based on probable cause.  In State v. Earls, police were investigating a string of burglaries.  A court-ordered trace of a cell phone stolen in one of the burglaries led them to an individual at a bar in Asbury Park who told them that his cousin had sold him the phone.  The individual also told police that his cousin was involved in the burglaries and kept the stolen items in a storage locker that was rented by his cousin or his cousin’s girlfriend.  The next day, police located the girlfriend, went with her to the locker, and found various stolen items.  The next day, police learned that the girlfriend had disappeared, and that defendant had threatened her when he learned that she was cooperating with police.   After obtaining an arrest warrant for defendant, police began to search for him.  As part of this search, the police contacted T-Mobile to obtain information about the location of a cell phone that they believed defendant had been using.  This information eventually led them to a motel where defendant and his girlfriend were staying. 

Defendant was arrested and eventually indicted on several charges stemming from the burglaries.  He moved to suppress evidence seized at the motel where he was apprehended.  The trial court denied the motion, holding that police should have obtained a warrant before tracking defendant’s phone, but that the information was nonetheless admissible under the emergency aid exception to the warrant requirement (the emergency being the threat to defendant’s girlfriend’s safety).  Defendant pled guilty but appealed the suppression ruling.  The Appellate Division affirmed, but on different grounds, holding that defendant had no reasonable expectation of privacy in his cell phone location information. 

The Supreme Court reversed.  It began by discussing the advances in cell phone technology that now make it possible for providers to pinpoint the location of a cell phone within a matter of feet, and the fact that details about the location of a cell phone can provide an intimate picture of an individual’s personal life by revealing where people go and with whom they affiliate.  Under New Jersey law, individuals do not lose their right to privacy simply because they have to provide personal information like this to third parties to obtain services.  Thus, cell phone users reasonably expect that the private information that they (or, perhaps more accurately, their phones) transmit to cell phone providers about their location will remain private:

[C]ell phones are not meant to serve as tracking devices to locate their owners wherever they may be.  People buy cell phones to communicate with others, to use the Internet, and for a growing number of other reasons. But no one buys a cell phone to share detailed information about their whereabouts with the police . . . Citizens have a legitimate privacy interest in such information. Although individuals may be generally aware that their phones can be tracked, most people do not realize the extent of modern tracking capabilities and reasonably do not expect law enforcement to convert their phones into precise, possibly continuous tracking tools.

Accordingly, before police can obtain this information from a cell phone provider, they must obtain a warrant based on a showing of probable cause or qualify for an exception to the warrant requirement. 

In its decision, the Supreme Court noted that federal courts are split on whether a warrant is required before police can obtain information about an individual’s cell phone location.  However, it also noted that the New Jersey Constitution generally provides greater protection against unreasonable searches and seizures that the Fourth Amendment.  This decision further emphasizes the differences between New Jersey law and federal law, particularly as it relates to information that is revealed to third parties.