Authorizes the chief administrator of the courts to establish rules for special proceedings authorized under section 9-518 of the uniform commercial code relating to wrongful financial statements.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8013
SPONSOR: Gabryszak TITLE OF BILL: An act to amend the judiciary law, the penal law and
the uniform commercial code, in relation to financing statements falsely
filed under the uniform commercial code
This measure is being introduced at the request of the Chief Administra-
tive Judge to redress "paper terrorism" against judges and other public
servants committed to harass them or to retaliate against them for
discharge of their official duties. This is a growing problem, not just
here in New York*, but across the Nation. See National Association of
Secretaries of State, "State Strategies to Subvert Fraudulent Uniform
Commercial Code (UCC) Filings: A Report for State Business Filing Agen-
cies," available at http://nass.org/index.php?option
=comcontent&view=article&id=329%3Anews-release-new-ucc-report-aug12&
catid=964%3Auncategorized-news-releases&Itemid=1 (August 27, 2012).
The Uniform Commercial Code ("UCC") Article 9 provides a simple way for
a creditor to record an interest in a debtor's property with the Depart-
ment of State ("DOS"), thereby giving notice of that interest to the
debtor's future creditors. Typically such a recording, termed a "financ-
ing statement" by the UCC, covers property purchased under a security
agreement subject to attachment (e.g., a vehicle), and is necessary for
a creditor to assert a claim. With the rise of the Internet and espe-
cially smart-phones, filers instantly can record financing statements,
which promptly become publicly available by searchable online database.
Using this database, financial institutions, prospective employers and
members of the public can determine whether someone has debts recorded
against him or her, and assess whether he or she may be a sound credit
risk.
This UCC recording system, however, has been subject to much abuse.
Often, members of separatist groups asserting sovereign status, prison
inmates and others believing themselves to be victims of unjust govern-
ment action use the system to retaliate against or harass the government
officials behind that action. They do this by filing fraudulent financ-
ing statements against those officials thereby potentially creating
serious personal financial difficulties for them. Such "paper terrorism"
can take a variety of forms. These often include the filing of outright
false financing statements, asserting claims that do not in fact exist.
in New York, in particular, they also may include statements asserting
infringement of a copyright enjoyed in one's name.** Moreover, whatever
form the fraudulent filing takes, it invariably runs afoul of the
requirement, under UCC section 9-509(a), that an alleged debtor author-
ize the filing of a financing statement memorializing a claim against
him or her.
Under the UCC as now written, there is no easy means by which to deter
or otherwise prevent such abuse. The DOS must accept each financing
statement filed for recording and subsequently make it available for
public viewing. The result: once a fraudulent financing statement is
recorded - and if sufficient on its face when filed, it must be recorded
- that statement can raise red flags that substantially prejudice the
availability or price of credit, complicate employment prospects and
sully a public servant's reputation.
To combat this abuse, this measure proposes amendments to the Penal Law
and to the UCC. The former (see bill section three) would amend section
175.35 of the Penal Law (entitled "Offering a false instrument for
filing in the first degree") to make it a class E felony offense to
commit the existing class A misdemeanor offense of Offering a False
Instrument for Filing in the Second Degree (see Penal Law § 175.30)
through the knowing filing of a fraudulent UCC financing statement that
identifies the debtor as a State or local officer under section two of
the Public Officers Law, or a judge or justice of the Unified Court
System, where that fraudulent filing is "in retaliation for the perform-
ance of official duties" by the affected public servant. This amendment
is similar to Federal law making it a serious Federal offense "to file,
in any public record or in any private record which is generally avail-
able to the public, any false lien or encumbrance against...the property
of (a Federal judge or Federal law enforcement officer), on account of
the performance of official duties by that individual, knowing or having
reason to know that such lien or encumbrance is false ..." See 18 USC §
1521 (establishing the Federal offense of Retaliating Against A Federal
Judge or Federal Law Enforcement Officer By False Claim Or Slander Of
Title).
The UCC amendments proposed by this measure (see bill section four)
would create a court procedure to summarily invalidate fraudulent liens.
Under this procedure, a State or local public employee or criminal
defense lawyer who has represented the filer in criminal court - listed
as the debtor in a financing statement containing a false statement or
false information - may under certain circumstances commence a special
proceeding for the expungement or redaction of the financing statement.
In this special proceeding, which is exempt from court filing fees, the
petitioner must plead that the offending financing statement was falsely
filed or amended to retaliate for the petitioner's performance of offi-
cial duties (or, where the petitioner is a lawyer who is not a public
employee, for the petitioner's performance of his or her duties repres-
enting the filer in criminal court); that the financing statement is not
one relating to an interest in a consumer transaction, a commercial
transaction or any other transaction between petitioner and respondent;
that the collateral covered in the financing statement is petitioner's
property; and that prompt redaction or invalidation of the financing
statement is necessary to avert or mitigate prejudice to the petitioner.
Where the court finds that the UCC financing statement at issue was
falsely filed, the court may then direct expungement of the financing
statement or redaction of appropriate portions thereof. In such event,
the court must see that a copy of its order is filed with the Secretary
of State; and, if the wrongful filer is incarcerated, with the head of
the correctional facility. The court also may grant relief authorized by
UCC section 9-625 and bar the respondent wrongful filer from filing
other UCC statements without leave of court.
The special proceeding hereby authorized is narrowly-tailored so as not
to otherwise call liens arising from commercial transactions or other
valid liens into question, alter legitimate UCC incentives or impose
burdens upon commercial enterprises. Moreover, it is carefully drawn to
avoid placing burdens upon the DOS.
Finally, this measure also would direct the Chief Administrative Judge
to adopt rules to govern the special proceeding authorized herein,
including rules permitting the court to empower a referee to hear and
determine the matter so as to minimize delay and assure its expeditious
disposition (see bill section two).
As noted, this is by no means a problem that is unique to our State.
Nor do the remedies proposed by this measure promise total protection
for government officials here. Absent co-ordinated efforts by all states
to identify and rebuff abuse of the UCC recording system, there is noth-
ing New York can do to assure its public servants that they will not be
victims of fraudulent filings in other states. This said, the instant
measure is a significant first step in that it will give law enforcement
authorities the tools needed to discourage fraudulent filings in New
York; and public officials generally, along with certain others who play
an active role in the administration of justice, the means by which to
protect their credit and their good name in the public record.
This measure would have no fiscal impact upon the State or any of its
political subdivisions. Bill sections one, two and four, addressed to
establishment of special proceedings to expunge a wrongfully filed UCC
financing statement, would take effect immediately. Section three,
criminalizing as a felony the wrongful filing of such a statement under
certain circumstances where the alleged debtor is a State or local offi-
cer under the Public Officers Law or a judge or justice of the Unified
Court System, would take effect November first next following the date
on which this measure becomes a law.
LEGISLATIVE HISTORY:
None. New proposal.
*Here in New York we are receiving a growing number of reports of judges
who have been victimized, and we are aware that there are many other
State and local officials, in addition to criminal defense attorneys,
who likewise have been targeted.
**A dubious claim at best: viz., it is legally impossible to assert a
copyright in one's name against its use in a public proceeding.
STATE OF NEW YORK
________________________________________________________________________
8013
2013-2014 Regular Sessions
IN ASSEMBLY
June 14, 2013
___________
Introduced by M. of A. GABRYSZAK -- (at request of the Office of Court
Administration) -- read once and referred to the Committee on Judici-
ary
AN ACT to amend the judiciary law, the penal law and the uniform commer-
cial code, in relation to financing statements falsely filed under the
uniform commercial code
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Legislative findings. The legislature finds that the retal-
2 iatory filing of false financing statements under the uniform commercial
3 code by members of separatist groups against New Yorkers in public
4 service and private service is a growing and pernicious practice. As a
5 result of the proliferation of such filings, the credit of New Yorkers
6 in public service and private service has been impaired solely because
7 they were doing their jobs on behalf of the citizens of the state. It is
8 vital that all appropriate steps be taken to counter this practice.
9 Accordingly, it is the objective of this act to discourage the filing of
10 false financing statements and to provide a meaningful and expeditious
11 remedy for those who have been harmed by such filings. It is also the
12 objective of this measure to declare the state's interest in future
13 effectuation of a second step: careful review of procedures authorizing
14 the filing of financing statements under the uniform commercial code and
15 subsequent modification of laws and procedures as may be necessary to
16 ensure that the public is adequately protected against the kind of
17 retaliatory filing of false financing statements to which this act is
18 addressed.
19 § 2. Subdivision 2 of section 212 of the judiciary law is amended by
20 adding a new paragraph (s) to read as follows:
21 (s) Establish rules for special proceedings authorized by subsection
22 (d) of section 9--518 of the uniform commercial code. Such rules may
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08971-06-3
A. 8013 2
1 authorize the court in which such a special proceeding is pending to
2 order a referee to hear and determine such special proceeding.
3 § 3. Section 175.35 of the penal law, as amended by chapter 99 of the
4 laws of 1998, is amended to read as follows:
5 § 175.35 Offering a false instrument for filing in the first degree.
6 A person is guilty of offering a false instrument for filing in the
7 first degree when[,]:
8 1. knowing that a written instrument contains a false statement or
9 false information, and with intent to defraud the state or any political
10 subdivision, public authority or public benefit corporation of the
11 state, he or she offers or presents it to a public office, public serv-
12 ant, public authority or public benefit corporation with the knowledge
13 or belief that it will be filed with, registered or recorded in or
14 otherwise become a part of the records of such public office, public
15 servant, public authority or public benefit corporation[.]; or
16 2. (a) he or she commits the crime of offering a false instrument for
17 filing in the second degree; and
18 (b) such instrument is a financing statement the contents of which are
19 prescribed by section 9--502 of the uniform commercial code, the collat-
20 eral asserted to be covered in such statement is the property of a
21 person who is a state or local officer as defined by section two of the
22 public officers law or who otherwise is a judge or justice of the
23 unified court system, such financing statement does not relate to an
24 actual transaction, and he or she filed such financing statement in
25 retaliation for the performance of official duties by such person.
26 Offering a false instrument for filing in the first degree is a class
27 E felony.
28 § 4. Section 9--518 of the uniform commercial code is amended by
29 adding a new subsection (d) to read as follows:
30 (d) Special proceeding to redact or expunge a falsely filed or amended
31 financing statement. (1) Provided he or she is an employee of the state
32 or a political subdivision thereof, a person identified as a debtor in a
33 financing statement filed pursuant to this subpart may bring a special
34 proceeding against the named filer of such statement or any amendment
35 thereof to invalidate the filing or amendment thereof where such state-
36 ment was falsely filed or amended; except that an attorney who is not an
37 employee of the state or a political subdivision thereof may also bring
38 a special proceeding hereunder where he or she represents or has repres-
39 ented the respondent therein in a criminal court. Such special proceed-
40 ing shall be governed by article four of the civil practice law and
41 rules, and shall be commenced in the supreme court of Albany county, the
42 county of the petitioner's residence or a county within the judicial
43 district in which any property covered by the financing statement is
44 located. No fee pursuant to article eighty of the civil practice law and
45 rules shall be collected in such special proceeding.
46 (2) The petition in a special proceeding hereunder shall plead that:
47 (A) the financing statement filed or amended by the respondent pursu-
48 ant to section 9--509 was falsely filed or amended to retaliate for: (i)
49 the performance of the petitioner's official duties in his or her capac-
50 ity as an employee of the state or a political subdivision thereof, or
51 (ii) in the case of a special proceeding brought by an attorney who is
52 not an employee of the state or a political subdivision thereof, to
53 retaliate for the performance of the petitioner's duties in his or her
54 capacity as an attorney for the respondent in a criminal court; and
A. 8013 3
1 (B) such financing statement does not relate to an interest in a
2 consumer-goods transaction, a commercial transaction, or any other actu-
3 al transaction between the petitioner and the respondent; and
4 (C) the collateral covered in such financing statement is the property
5 of the petitioner; and
6 (D) prompt redaction or invalidation of the financing statement is
7 necessary to avert or mitigate prejudice to the petitioner.
8 (3) If the court makes a written finding that the allegations in para-
9 graph two of this subsection are established, the court shall order the
10 expungement of such statement or its redaction in the public records in
11 the office in which the financing statement is filed, as appropriate,
12 and may grant any additional relief authorized by section 9--625. In
13 such case, the court shall cause a copy of its order to be filed with
14 the secretary of state or other appropriate filing office pursuant to
15 this chapter. Upon a finding that the respondent has engaged in a
16 repeated pattern of false filings as found under this subsection, the
17 court also may enjoin the respondent from filing or amending any further
18 financing statement pursuant to this article without leave of the court.
19 If the respondent is incarcerated at the time the court issues an order
20 containing such an injunction, the court shall cause the head of the
21 correctional facility in which the respondent is incarcerated to receive
22 a copy of such determination. The head of such a facility shall cause a
23 copy of such order to be provided to the respondent. In any instances of
24 the issuance of such an injunction where the respondent has defaulted,
25 the court shall direct service of such injunction upon the respondent.
26 § 5. This act shall take effect immediately; provided that section
27 three of this act shall take effect on the first of November next
28 succeeding the date on which it shall have become a law; provided,
29 further, subdivision 2 of section 175.35 of the penal law, as added by
30 section three of this act, shall apply solely to the filing or amendment
31 of financing statements under subpart 1 of part 5 of article 9 of the
32 uniform commercial code on or after such effective date.
