author: Hancock, Jr., J. Titone, J.

text:
    In the Matter of Joseph Cahill, Respondent, v Public Service Commission et al., Appellants, and Central Hudson Gas and Electric Corporation, Intervenor-Appellant.
    Argued November 12, 1986;
    decided December 19, 1986

      POINTS OF COUNSEL

      David E. Blabey, Lawrence G. Malone and Leonard Van Ryn for Public Service Commission, appellant.

      John M. Clarke, Gerald M. Oscar and Thomas J. Farrelly for New York Telephone Company, appellant.

      Walter A. Bossert, Jr., Davison W. Grant and Thomas C. Hutton for intervenor-appellant.

      Richard Emery for respondent.
   OPINION OF THE COURT

Hancock, Jr., J.

We hold that acts of the New York State Public Service Commission (PSC) in setting rates which compel a utility customer to pay for charitable contributions made by the utility constitute governmental conduct giving rise to a cognizable claim by that customer that his rights under the First Amendment of the United States Constitution have been violated.

I

In a CPLR article 78 proceeding against the PSC and New York Telephone Company (New York Tel.), petitioner, a customer of New York Tel., seeks to annul two actions of the PSC:

(1) The policy adopted by the PSC in 1970 whereby charitable contributions by utilities are allowed as "proper operating expenses” (New York Tel. Co., case 25155, 10 NY PSC 345, 378, 84 PUR3d 321, 349 [July 1, 1970]) and

(2) The PSC "Opinion and Order Determining Revenue Requirement and Rate Structure” dated June 22, 1984 (opinion No. 84-16) specifically authorizing New York Tel. to charge its ratepayers, including petitioner, for charitable donations of approximately $3,000,000 in 1984, and establishing rates to be paid by customers for service which are based on the inclusion of these contributions as operating costs.

Petitioner, a Catholic, alleges that as a consequence of the PSC policy and rate order he is compelled to contribute to "religious institutions” espousing beliefs inconsistent with his own, to charities supporting "the right to an abortion” contrary to his "moral and religious” beliefs and to causes which he finds objectionable on "personal and political grounds”. "No matter how small a portion of his bill is affected”, he says, he opposes these contributions "as a matter of principle” and he asserts that the PSC has denied him his constitutional rights under the free speech, free exercise and establishment clauses of the First Amendment of the Federal Constitution, citing Abood v Detroit Bd. of Educ. (431 US 209).

In lieu of answering the petition, respondents moved to dismiss (CPLR 7804 [fl; 3211 [a] [7]) contending, among other things, that the utilities’ actions in passing along the cost of charitable contributions were essentially private decisions and that the government’s limited involvement was an insufficient basis for finding a violation of petitioner’s First Amendment rights, citing Jackson v Metropolitan Edison Co. (419 US 345) and Blum v Yaretsky (457 US 991). Special Term rejected respondents’ arguments (128 Misc 2d 510) and the Appellate Division, with a divided court, affirmed, holding that petitioner had adequately stated a "threshold claim of 'State action’ ” by "alleging that the PSC adopted a policy which permitted the costs of charitable donations to be passed along to ratepayers” (113 AD2d 603, 606). The dissenters found that this case fell "squarely under” Blum and Jackson and that petitioner had failed to allege a sufficient nexus between the challenged acts and the State (id., at p 609).

The Appellate Division granted respondents permission to appeal to our court and certified the following question: "Did this court err, as a matter of law, in affirming Special Term’s order which denied respondents’ motions to dismiss the petition?” For reasons which will appear, we hold that the question should be answered in the negative and that the order of the Appellate Division affirmed.

II

The critical issue is whether petitioner’s CPLR article 78 proceeding involves private conduct of a utility in which the State has merely acquiesced, as respondents and the dissenters contend, or governmental conduct of an agency of the State itself. Because it involves the latter we hold that under the controlling authority of Abood v Detroit Bd. of Educ. (431 US 209, supra) the petition states a cognizable claim that the 1970 policy decision and the 1984 rate order of the PSC violate petitioner’s rights under the First and Fourteenth Amendments of the United States Constitution. In Abood, plaintiffs, nonunion teachers, challenged the validity of a union shop clause in the collective bargaining agreement between their employer and the teachers’ union because dues they were compelled to pay were being used by the union for legislative lobbying and for the support of political candidates. The Supreme Court, in holding that plaintiffs’ rights were infringed by being forced to pay a portion of these contributions under threat of loss of their jobs, stated (at pp 235-236):

"[T]he freedom of belief is no incidental or secondary aspect of the First Amendment’s protections:

" 'If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.’ West Virginia Bd. of Ed. v. Barnette, 319 U.S. 624, 642.

"These principles prohibit a State from compelling any individual to affirm his belief in God, Torcaso v. Watkins, 367 U.S. 488, or to associate with a political party, Elrod v. Burns, supra; see 427 U.S., at 363-364, n. 17, as a condition of retaining public employment.

* * *

"We do not hold that a union cannot constitutionally spend funds for the expression of political views, on behalf of political candidates, or toward the advancement of other ideological causes not germane to its duties as collective-bargaining representative. Rather, the Constitution requires only that such expenditures be financed from charges, dues, or assessments paid by employees who do not object to advancing those ideas and who are not coerced into doing so against their will by the threat of loss of governmental employment.” (Emphasis added.)

There is no basis for distinguishing Abood. The acts giving rise to the claims here and in Abood were not the private decisions of the utilities and the union to make charitable and political contributions but the governmental actions in compelling the utility customer here and the nonunion teachers in Abood to pay for them. In Abood the coercion came from the State-sanctioned union shop clause under which nonunion members could be discharged for nonpayment. In this proceeding, the coercion results from the fact that the State establishes the rate that the customer must pay and the rate includes an allowance for the objected to contributions. Because the utility is a monopoly the customer must pay or be deprived of his right to utility service.

The dissent points to no difference between the coercive effect of the PSC rate directives and the coercive effect of the union shop clause in Abood. Instead, for purposes of its argument, it constructs a model of a utility which omits the utility’s distinguishing characteristic as a legalized monopoly —public control. The dissent then analyzes the utility’s behavior "without any governmental intervention at all” (dissenting opn, at pp 278-279) as though it were a private company and readily concludes that "utility companies, like most unregulated business concerns, would simply include in the price for their services the cost of whatever charitable donations they might choose to make”, and that "the PSC has done no more than merely refuse to interfere with what is essentially a private decision.” (Dissenting opn, at p 279.) To reach these conclusions, it must be emphasized, the dissent has assumed the validity of two propositions: that "the regulatory powers of the State [are] not involved in the rate-setting process” (dissenting opn, at p 279) and that the charitable contributions reflected in the rates are "charges in which the PSC has, in the truest sense of the word, merely 'acquiesced’ ” (dissenting opn, at p 278). But these assumptions find no support in law or fact.

A public utility is franchised by the State (Public Service Law §§ 68, 99) to provide services to the public at just and reasonable rates (Public Service Law §§ 65, 91) in exchange for a proper return on its investment (see, Public Service Law § 97; Matter of Village of Boonville v Maltbie, 272 NY 40). Operating as a monopoly (see, People ex rel. New York Edison Co. v Willcox, 207 NY 86, 93-94), it is subject to regulation by the PSC (Public Service Law §§ 66, 94). The PSC oversees the utilities for the public good as an exercise of the State’s police powers (People ex rel. New York Elec. Lines Co. v Squire, 145 US 175) and has exclusive authority to determine just and reasonable rates (Public Service Law § 66 [12]; § 92 [2]). It establishes maximum rates which may not be exceeded (Public Service Law § 65 [1]; § 91 [1]). In fact, no utility may charge more or less than the rates established by the PSC (see, Public Service Law § 66 [12]; § 92 [2]).

Aside from the fallacy of comparing a public utility to a private company because of the utility’s uniquely public character, the analogy which the dissent draws to the decisions of corporate officials of a private company in making charitable contributions (dissenting opn, at p 279) cannot stand for a more basic reason. What is at issue here is not the conduct of the utility officials, but the policy and directives of the PSC in establishing utility rates which include charitable contributions as operating expenses. And in any event the effect of a decision of a private corporation to pass through to its customers the costs of charitable contributions simply cannot be compared with the action of the PSC in setting utility rates which include such contributions. In the case of a private corporation a customer who disapproves has a voice — he may decide not to buy the product. In the case of a utility the customer has no voice — the contribution is locked into the rate approved by the PSC, and the customer must pay or go without service.

For the same basic reason — that this proceeding challenges the public conduct of the PSC and not the private conduct of the utilities — Jackson v Metropolitan Edison Co. (419 US 345, supra) and Blum v Yaretsky (457 US 991, supra) are inapplicable. In Jackson the suit was against the utility and not the Pennsylvania Utility Commission. The basis of the lawsuit was solely the private act of the utility in shutting off electric service, and the court simply dismissed plaintiff’s arguments that that private conduct should be attributed to the State merely because of its role in regulating the utility and in approving the regulations under which the termination was effected. Similarly, in Blum the actions which the nursing home patients sought to attribute to the State were decisions made by "utilization review committees” of private nursing homes to transfer patients to facilities providing less intensive medical care. The court held that these committee decisions did not become State action solely because the nursing homes were subject to State regulation and the State responded to the decisions by adjusting the patients’ Medicaid benefits.

To bring the case within Jackson and Blum, the dissent, referring to the PSC’s brief (dissenting opn, at p 278), minimizes the function of the PSC in rate setting and characterizes its role as little more than passive acquiescence. Such a narrow view of the PSC’s function, as already noted, is at odds with the broad grant of rate-setting authority vested in the PSC by the Legislature (Public Service Law §§ 66, 72, 91). It also runs counter to our own decisions holding that the function of rate setting is left to the discretion of the Public Service Commission, and that so long as rates are just and reasonable, they may not be set aside (see, Matter of Abrams v Public Serv. Commn., 67 NY2d 205, 211-212; Matter of New York State Council of Retail Merchants v Public Serv. Commn., 45 NY2d 661).

As to petitioner, a customer who must purchase service from a public utility at rates established by the State, the combined effect of the utility’s monopoly status and the rate order is no less coercive than the threat of employment loss in Abood. Like plaintiffs, who had a right to hold their jobs in Abood, petitioner, a member of the public in the utility’s franchised area, has an unquestioned legal right to utility service (Public Service Law §§ 65, 91). Like the plaintiffs in Abood, he must forego that right or be subject to the "compulsory subsidization of ideological activity” condemned in Abood (431 US, at p 237) and its progeny (see, Teachers v Hudson, 475 US 292, 106 S Ct 1066; Ellis v Railway Clerks, 466 US 435; Galda v Bloustein, 686 F2d 159). That petitioner’s proportionate share of the objected to contributions is small is of no moment, "[f]or, whatever the. amount, the quality of [petitioner’s] interest in not being compelled to subsidize the propagation of political or ideological views that [he] oppose[s] is clear” (Teachers v Hudson, 475 US, at p —, 106 S Ct, at p 1075). To petitioner Cahill one salient fact remains: he is compelled to support institutions he opposes on moral and religious grounds because he must subscribe to the utility and pay rates based, in part, on those contributions, or be deprived of his right to electric and telephone service.

We address only the question certified by the Appellate Division. The respondents’ remaining contentions, that the petition should be dismissed due to petitioner’s failure to exhaust administrative remedies, that the petition was not timely commenced, and that petitioner lacked standing to bring the proceeding are not before us. The certified question should be answered in the negative and the order of the Appellate Division should be affirmed, with costs.

Titone, J.

(dissenting). Petitioner commenced this proceeding to challenge a decision of the Public Service Commission (PSC) that allows utility companies to pass along a portion of the cost of their charitable donations to their ratepayers. His challenge is based on the claim that the decision impairs petitioner’s and other ratepayers’ Federal First Amendment rights to freedom of expression and worship by requiring them to contribute indirectly to charitable groups espousing views antithetical to their own. However we may feel about the wisdom of the PSC’s policy, we conclude that the State’s regulatory involvement in the cost pass-along that petitioner finds offensive is an insufficient basis for finding that his rights have been impaired by the actions of a governmental entity. Accordingly, we dissent and vote to reverse the Appellate Division order.

The Public Service Commission decision that is challenged here was actually made in 1970. Prior to 1970, the PSC exercised its regulatory authority over utility rates by requiring the utilities’ shareholders to absorb the cost of charitable contributions rather than passing those costs along to the consumer in the form of increased prices for utility service. The PSC rescinded this policy in 1970 and replaced it with a ruling allowing utilities to recover from ratepayers a portion of their charitable contribution costs calculated by a formula based on the individual utility’s adjusted pre-1970 level of expenditure (New York Tel. Co., case 25155, 10 NY PSC 345, 84 PUR3d 321, 349-350). This change in policy reflected the PSC’s view that charitable contributions can be a legitimate business expense that ought to be recognized as a form of overhead. In its ruling, the PSC stated that "it is not our function to screen lists of contributions, to pick out the good from the bad,” but it further noted that it was "prepared to examine carefully claims for charitable contributions” and would disallow such claims "if the amounts are excessive in total or if the donees as a group are not relevant to the civic responsibilities of the public utility” (New York Tel. Co., 10 NY PSC, at p 379, 84 PUR3d, at p 349). In accordance with this policy, the PSC, in June of 1984, approved a request by the New York Telephone Company to include in its rates to consumers part of the cost of its contributions to several thousand charitable organizations. Petitioner thereafter commenced the present CPLR article 78 proceeding, arguing that the PSC’s actions in approving the pass-along violated both the establishment and freedom of expression clauses in the First Amendment of the Federal Constitution. Petitioner’s constitutional claim is based largely on the Supreme Court’s decision in Abood v Detroit Bd. of Educ. (431 US 209), in which the court held that forced indirect contributions to political groups in the form of mandatory agency-shop dues violates an employee’s right to freedom of expression. In Abood, however, the dues payments were mandated by a collective bargaining agreement between the union and a governmental employer and were enforced by that employer’s coercive power to discharge those who did not wish to participate. Thus, there was no doubt in Abood that the constitutional violation complained of was the product of State action.

Here, in contrast, the question of the State’s involvement is very much in dispute. Although petitioner insists that his quarrel is solely with the policy decision of the PSC, a governmental entity, it is apparent that the real source of his aggrievement is the action of the private utility, which, through the inherently coercive power of its status as a monopoly provider, is forcing him to make indirect contributions to charities he finds objectionable. Consequently, although the majority concludes otherwise, Abood is manifestly not controlling here. What is more in point is the body of case law that addresses the problem of when the actions of a private entity may fairly be said to constitute "State action.”

It is beyond question that the First and Fourteenth Amendments, upon which petitioner’s claim depends, provide "no shield against merely private conduct, however * * * wrongful” (Shelley v Kraemer, 334 US 1, 13; see, Hudgens v NLRB, 424 US 507; SHAD Alliance v Smith Haven Mall, 66 NY2d 396). Rather, those amendments protect only against those infringements of liberty that may in some sense be said to emanate from the actions of the State (see, Jackson v Metropolitan Edison Co., 419 US 345). It has been candidly acknowledged that "the question whether particular conduct is 'private,’ on the one hand, or 'state action,’ on the other, frequently admits of no easy answer” (Jackson v Metropolitan Edison Co., supra, at pp 349-350). Nonetheless, there are a number of previously applied standards that provide us with some guidance.

First, the fact that the private concern is heavily regulated by government is not alone sufficient to render the conduct of that private entity "State action” (Jackson v Metropolitan Edison Co., supra, at pp 350-353; see, Blum v Yaretsky, 457 US 991). While the actions of private concerns having these characteristics may "more readily be found to be 'state’ acts” than will the actions of others, there must still be a "sufficiently close nexus between the State and the challenged action * * * so that the action * * * may be fairly treated as that of the State itself’ (Jackson v Metropolitan Edison Co., supra, at p 351). Significantly, this "nexus” cannot be established by simply showing that the private entity provides an essential public service or has a monopoly on the market, where the service in question is not one that the State would traditionally provide (id., at pp 351-353).

A sufficient nexus may be demonstrated where the private action in question was compelled or directed by the State (see, Blum v Yaretsky, supra, at pp 1004-1005; Jackson v Metropolitan Edison Co., supra, at p 457). Alternatively, "State action” may be found to exist where the State "has exercised coercive power or has provided significant encouragement” so that the private choice may be deemed to be effectively that of the State (Blum v Yaretsky, supra, at p 1004; see, Flagg Bros, v Brooks, 436 US 149, 166). What is made absolutely clear by the case law, however, is that the State’s mere acquiescence in the conduct of a regulated private entity does not transform an essentially private choice into a governmental action (Blum v Yaretsky, supra, at pp 1004-1005; Jackson v Metropolitan Edison Co., supra, at p 357; see, Montalvo v Consolidated Edison Co., 92 AD2d 389, affd on opn below 61 NY2d 810).

In this case, petitioner argues that the charitable contribution pass-along has the earmarks of State action because the combination of the State’s intensive involvement in rate-setting and the utilities’ status as franchised monopoly providers results in his having to make forced contributions under the State’s sponsorship. In this respect, however, petitioner’s argument is no different in substance from that made by the dissenters and explicitly rejected by the majority in Jackson v Metropolitan Edison Co. (supra, at pp 351-352, 360-364 [Douglas, J., dissenting], at pp 366-373 [Marshall, J., dissenting]). Indeed, the majority’s conclusion that "the combined effect of the utility’s monopoly status and the rate order is no less coercive than the threat of employment loss in Abood” is virtually indistinguishable from Justice Douglas’ argument that State action should be found to exist because "in the aggregate” such factors as Metropolitan Edison’s State-authorized monopoly, its unilateral control over an essential public service and the "framework of extensive state supervision and control” warranted that conclusion (id., at pp 361-362 [Douglas, J., dissenting]). While it is true that, as a practical matter, the utilities’ monopolistic status gives them a power to coerce that is equal in some respects to the coercive power of government, that circumstance alone does not transform what has traditionally been a private activity into a governmental one. Accordingly, although the coercion present in Abood is analogous to the coercion present here, the fact remains that in this case, unlike in Abood, the coercion is an unfortunate byproduct of private, not State, action.

Further, the fact that the PSC plays a vital role in the rate-setting process does not render the billing practices of the utilities the equivalent of "State action.” The PSC was created by the Legislature to oversee utilities precisely because their monopoly status would otherwise enable them to engage unfettered in rate-setting and other practices inimical to the public welfare. Having undertaken to regulate utilities, however, the State did not thereby become the initiator of the utilities’ actions.

It is true that providers of gas, electric and telephone services are not permitted to charge more than the PSC permits (see, Public Service Law § 65 [1]; § 91 [1]), and once the permissible rates are established, the utilities are not free to charge their customers less (Public Service Law § 66 [12]; § 92 [2]). However, the process by which those rates are established amply demonstrates that it is the utility, and not the PSCj which is the initiator of the disputed pass-along decision. As described in the PSC’s brief, the process consists, in simplified form, of the utility’s submitting a schedule of "revenue requirements” calculated on the basis of anticipated operating expenses. The PSC reviews these schedules and determines which items of projected expenses should be disallowed. The remaining "revenue requirements” then become the basis of the rates the utilities’ customers pay. Manifestly, these are charges in which the PSC has, in the truest sense of the word, merely "acquiesced” by failing to disallow them.

When examined closely, petitioner’s claim amounts to nothing more than a contention that the State has refused to interfere with the utilities’ decisions to pass along their charitable contribution costs to their customers, the ratepayers. There is no allegation that the PSC has compelled this activity, and, indeed, there could be none. Nor can there be any colorable claim that the activity by which petitioner feels himself aggrieved is, overtly or covertly, coerced by the State, since it is virtually inconceivable that the coercive powers of the government would be necessary to induce private concerns such as the utilities involved in this case to pass along their costs rather than absorbing those costs themselves.

Indeed, the key to analysis in a case such as this is to subtract the government from the equation and then consider what the behavior of the private entity would be without any governmental intervention at all. As the Supreme Court has stated, "[t]he nature of governmental regulation of private utilities is such that a utility may frequently be required by the state regulatory scheme to obtain approval for practices a business regulated in less detail would be free to institute without any approval” (Jackson v Metropolitan Edison Co., supra, at p 357). Here, if the regulatory powers of the State were not involved in the rate-setting process, utility companies, like most unregulated business concerns, would simply include in the price for their services the cost of whatever charitable donations they might choose to make. By allowing these utilities to engage, to a limited extent, in a business practice that they would naturally have pursued if there had been no State involvement at all, the PSC has done no more than merely refuse to interfere with what is essentially a private decision.

To be sure, one of the motivating factors behind the PSC’s change in policy may well have been a desire to spur utilities to make charitable donations and thereby contribute to the public welfare (see, New York Tel. Co., 10 NY PSC, at pp 378-379, 84 PUR3d, at pp 349-350, supra). This underlying intention, however, does not constitute the type of "significant encouragement” that will convert the private decision at issue here into a governmental one (cf. Blum v Yaretsky, supra, at pp 1008-1009, n 19). Indeed, while the PSC may have intended to encourage private contribution, an activity which is itself unobjectionable, it has done nothing afiirmatively to encourage the utilities to pass along the attendant costs to their customers. Again, that is a decision which the PSC has merely approved or, more specifically, failed to interdict.

We note in closing that there is no allegation, in either the pleadings or the papers submitted on the dismissal motion, that the PSC has actually engaged in a qualitative review of the donees the utilities select as the objects of their generosity. In contrast, the PSC has asserted that it has never required utilities to make charitable contributions or to select particular organizations for the contributions they choose to make. Further, the PSC has alleged that it has never interfered with a utility’s choice of donees, although in 1970 it indicated that it might do so. Had it done so, our disagreement with the majority might not have been as acute.

In sum, it is evident that the PSC is not the source of petitioner’s grievance and, consequently, we cannot agree that his rights under the First and Fourteenth Amendments have been violated. While the PSC has the power to, and in fact has in the past, forbid the practice to which petitioner objects, its refusal to exercise its authority in that manner now does not imbue the utilities’ conduct with the characteristics of "State action.” Thus, while reasonable minds may differ as to the wisdom of the PSC’s policy of nonintervention in this area, it cannot be said that Federal constitutional rights are implicated. Inasmuch as we are bound by Supreme Court precedent in interpreting the Federal Constitution, we can reach no other conclusion than that the petitioner’s proper remedy, if remedy there should be, rests with the Legislature, which has the authority to direct the PSC in the use of its regulatory powers (see, e.g., Public Service Law § 91 [2] [b]).

Accordingly, we would reverse the order of the Appellate Division and dismiss the petition in its entirety.

Judges Meyer, Simons, Kaye and Alexander concur with Judge Hancock, Jr.; Judge Titone dissents and votes to reverse in a separate opinion in which Chief Judge Wachtler concurs.

Order affirmed, etc.

      .Prior to 1970 the PSC refused to allow inclusion of charitable contributions as operating expenses on the grounds that they were "not necessary to the conduct of business and that they [were] made at the sole discretion of Company officers to donees of their choosing.” (New York Tel. Co., case 25155 [July 1, 1970], at p 378.) The 1970 policy allows charitable contributions as "proper operating expenses” provided they are "not excessive in total” and that the donations are not irrelevant to the "civic responsibilities” of the utilities. Future allowances are to be measured from pre-1970 contribution levels.

      .Central Hudson Gas and Electric Corporation, which supplies electricity to petitioner, was granted permission to intervene in this proceeding, and joined in the PSC’s motion to dismiss the petition.

      .We note that the current policy of the PSC in permitting utilities to include charitable contributions as costs conflicts with judicial decisions in other jurisdictions holding similar pass-through provisions unlawful as involuntary levies on ratepayers (see, e.g., Pacific Tel. & Tel. Co. v Public Utils. Commn., 62 Cal 2d 634, 401 P2d 353 [1965]; Chesapeake & Potomic Tel. Co. v Public Serv. Commn., 230 Md 395, 187 A2d 475 [1963]; Illinois Bell Tel. Co. v Illinois Commerce Commn., 55 Ill 2d 461, 303 NE2d 364 [1973]; State ex rel. Laclede Gas Co. v Public Serv. Commn., 600 SW2d 222, 229 [Mo 1980], appeal dismissed 449 US 1072 [1981]).

      .Justice Stevens in Teachers v Hudson (475 US 292, —, 106 S Ct 1066, 1075), stressing the point that "[t]he amount at stake for each individual dissenter does not diminish [his] concern”, writes: "In Abood, we emphasized this point by quoting the comments of Thomas Jefferson and James Madison about the tyrannical character of forcing an individual to contribute even 'three pence’ for 'the propagation of opinions which he disbelieves’ ”.

      .Petitioner has not asserted any claim that his rights under our State Constitution (NY Const, art I, § 8) have been violated (compare, SHAD Alliance v Smith Haven Mall, 66 NY2d 496, with Sharrock v Dell Buick-Cadillac, 45 NY2d 152).

      .Contrary to the majority’s view, that petitioner initially named the PSC and not the utility as the party defendant is of no consequence. In determining whether a claimed deprivation of a constitutional right involves an action by the State or merely a private decision, we look to the substance of the claim and not to the status of the party who has been sued (see, Blum v Yaretsky, 457 US 991, 1003).

      .Contrary to the majority’s assertion (majority opn, at p 271), we do not advance the PSC’s noninvolvement in rate-setting'as a "valid proposition” that requires "support in law or fact.” Rather, we merely posit that noninvolvement hypothetically, as a means of demonstrating that, despite the majority’s suggestion to the contrary (at p 273), the utilities’ power to charge rates for their services is not derived from the PSC, but rather is a natural incident of their status as owners of those services.

        .To the extent that private business concerns choose to make such donations out of their profits, it may be that they do so because of their belief that the market will not tolerate an increased price for their goods or services. Of course, utilities generally do not need to make such sensitive price calibrations, since their services are public necessities and the consumer simply cannot take his business elsewhere. Thus, to a large extent, utilities are free, in the absence of regulation, to pass along many types of business expenditures that other corporations would elect to absorb. This circumstance, however, is a by-product of utilities’ status as monopolies, and not a result of any governmental intervention.

      .Although Special Term indicated that petitioner had made such allegations, our own review of the papers does not bear out this conclusion. Indeed, in the briefs petitioner submitted in response to the dismissal motion, he acknowledged that the "recipients are selected solely at the discretion of the utility” and that "it is the express policy of the PSC not to regulate or screen the contributions or their recipients.”


source: Caselaw Access Project

author: Titone, J.

license: Public Domain

text:
    In the Matter of Continental Bank International, Appellant, v City of New York Department of Finance, Respondent.
    Argued January 5,1987;
    decided February 19, 1987

      POINTS OF COUNSEL

      Edward W. Keane, Willard B. Taylor, H. Rodgin Cohen and Theodore Edelman for appellant.

      Frederick A. O. Schwarz, Jr., Corporation Counsel (Joseph V. Hamilton, Jr., Edith I. Spivack, Gale Zareko and James F. Eller of counsel), for respondent.

      Richard C. Pugh, Jo-Ann Horn and Michael G. DeAngelis for Security Pacific International Bank and others, amici curiae.

   OPINION OF THE COURT

Titone, J.

The question before us is whether an international bank chartered by the Federal Government pursuant to the Edge Act (12 USC §§ 611-632), having a home office in another State and a branch office in New York City is immune from New York taxation. Inasmuch as we conclude that Edge Act banks are not Federal instrumentalities entitled to constitutional immunity from State tax and Congress has not clearly prohibited such a tax, we hold that Edge Act bank branches are not immune from nondiscriminatory State taxation.

I.

In 1919, Congress authorized the incorporation of international banks to be chartered by the Federal Government (12 USC §§ 611-632 [Edge Act]) in response to a perceived need to supply international credit and to secure foreign trade markets for domestic exports (Note, Constitutional and Statutory Analysis of State Taxation of Edge Act Corporate Branches, 51 Fordham L Rev 991, 995). Edge Act banks were to provide general banking services for international transactions, establish overseas branches, receive deposits in the United States only when incidental to international business transactions and invest in the stock of certain other corporations engaging in business abroad (12 USC § 615).

The Federal Reserve Board, the regulating authority, apparently interpreted the authorization of Edge Act bank branches and agencies in "foreign countries, their dependencies or colonies, and in the dependencies or insular possessions of the United States, at such places as may be approved by the Federal Reserve Board” (12 USC § 615 [b]) to prohibit domestic branches. Thus, in 1920, the Board promulgated a regulation prohibiting them (reg K, 12 CFR 211.6 [a] [1978]). As a result of this regulatory posture, petitioner’s parent corporation, Continental Illinois National Bank and Trust Company, owned three separately incorporated Edge Act banks with home offices in New York, Miami and Houston.

Through the International Banking Act of 1978, Congress amended the Edge Act in a general attempt to expand the powers of Edge Act banks to mobilize and apply resources to aid in an increase of American trade. The act also contained a specific instruction to the Federal Reserve Board to "review and revise its rules, regulations, land interpretations * * * to eliminate or modify any restrictions, conditions, or limitations” which inhibited the bank’s competitive position in international finance (92 US Stat 608). In response to this general mandate, the Board revised regulation K (12 CFR 211.4 [c], 44 Fed Reg 36007 [1979]) to allow Edge Act banks to establish branch offices within the United States.

Petitioner is a corporation which was organized under the Edge Act in 1980, with its home office in Chicago, Illinois. In 1980, petitioner established its New York City branch office and, since then, petitioner has established branch offices in a number of large cities throughout the United States. When petitioner was incorporated, the parent’s separately incorporated Edge Act banks were liquidated and replaced by branch offices of petitioner.

While the Edge Act banks were separately incorporated in each State, the banks did not dispute the right of the City of New York to tax the corporations. Section 627 of the Edge Act clearly authorizes such State taxation of an Edge Act bank by the State in which its home office is located. Upon the advent of the Edge Act bank domestic branch office, however, petitioner challenged the city’s power to tax branch offices and refused to pay respondent’s financial corporation tax. Respondent determined that petitioner owed deficiencies, penalties and interest, for the periods of September 1, 1980 to December 31, 1980 and January 1, 1981 to December 31, 1981, in the total amount of $6*075,329.35.

Petitioner commenced this proceeding pursuant to CPLR article 78 challenging respondent’s ability to tax a branch office of an Edge Act bank. The proceeding was transferred to the Appellate Division, First Department, by the Supreme Court, New York County (CPLR 7804 [g]). The Appellate Division confirmed the determination, without opinion. Petitioner then appealed to this court on constitutional grounds (CPLR 5601 [b] [1]). We now affirm.

II.

Petitioner urges that 12 USC § 627 reflects a congressional intent to prohibit taxation of these new branch offices of Edge Act banks. Alternatively, petitioner argues that the Edge Act banks are Federal instrumentalities like national banks, and, therefore, are not subject to State taxation absent express congressional authorization. For the following reasons, neither of these contentions is meritorious.

A.

It is beyond dispute that Congress has the power to grant or withhold immunity from tax it deems necessary to further the purposes of Federal legislation (Washington v United States, 460 US 536, 546; United States v New Mexico, 455 US 720, 737; Carson v Roane-Anderson Co., 342 US 232, 234; Tribe, American Constitutional Law § 6-28, at 391; 1 Rotunda, Nowak and Young, Constitutional Law § 3.3, at 211). Although 12 USC § 627 authorizes nondiscriminatory taxation of Edge Act banks by the home office State, there is no plain authorization or prohibition of taxation by States of branch offices. Petitioner asks us to conclude that this omission was an expression of congressional intent to prohibit taxation of the branches. We reject this argument and, instead, examine the historical setting of section 627 to determine Congress’ intent in view of the statute’s facial ambiguity with respect to State taxation of branch offices.

Inasmuch as the statutory scheme of the Edge Act did not authorize branch offices within the United States (see, 12 USC § 615 [b]) and the possibility of such offices was decried by some of the original enactors (58 Cong Rec 7856-7857), it stands to reason that the authorization of full nondiscriminatory taxation by the home office State (12 USC § 627) was not an expression of immunity for then nonexistent branch offices. Instead, congressional debate indicated a purpose to subject Edge Act banks to State taxation (58 Cong Rec 4969). It is true, as petitioner notes, that some of the debaters analogized to the treatment of national banks, but their comments, read in context, appear to have arisen from a mistaken notion that national banks were subject to State tax (see, e.g., 58 Cong Rec 4969, 8108; Note, Constitutional and Statutory Analysis of State Taxation of Edge Act Corporate Branches, 51 Fordham L Rev 991, 1002-1003). Moreover, Congress’ failure to amend 12 USC § 627 to expressly permit States to tax Edge Act bank branch offices after the act was amended by the International Banking Act of 1978 is not instructive. Since the enactment permitted the Federal Reserve Board to design a mechanism to accomplish this and it was not until 1979 that the Federal Reserve Board amended regulation K allowing branch offices, Congress’ inaction in 1978 cannot be interpreted as an expression of immunization of branches from State taxation. In short, an intention of Congress to deny the State’s power to tax Edge Act bank branches cannot be inferred from the language of the statute, which is at best ambiguous on that subject, or from the surrounding debates which indicate only an intent to subject Edge Act banks to State taxation.

B.

The remaining question is whether Edge Act banks are Federal instrumentalities because of their similarity to national banks and, thus, immune from State taxation. Almost from their inception, national banks were considered Federal instrumentalities exempt from tax (M’Culloch v Maryland, 4 Wheat [17 US] 316). The dispute spawning the M’Culloch doctrine, grounded on the supremacy clause (US Const, art VI, cl 2), involved a Maryland tax imposed upon banks not chartered by the State’s Legislature which placed the Second Bank of the United States in an inferior position to State banks. Noting that "the power to tax involves the power to destroy” (id., p 431), Chief Justice Marshall, writing for a unanimous court, concluded that States did not have the power to tax the Federal Government or its instrumentalities to the limits of the States’ discretion. After M’Culloch, national banks survived numerous attacks on their State tax-exempt status (see, e.g., Owensboro Natl. Bank v Owensboro, 173 US 664).

When the Federal Reserve Board took over many of the governmental functions of the national banks, once again, the banks’ tax-exempt status was questioned (Agricultural Bank v Tax Commn., 392 US 339). The court specifically declined to reach, as unnecessary, the issue whether today national banks should be considered nontaxable as Federal instrumentalities, because of pertinent legislation in the banking field (id., p 341). Thus, the recent tax-exempt status of national banks rested on a decision by Congress that they should not be taxed by the States. Moreover, effective in 1976, Congress removed this exemption (12 USC § 548). The argument that Edge Act banks are Federal instrumentalities because they are analogous to national banks, is, therefore, problematic.

While Congress may expressly designate an entity exempt from tax (see, Agricultural Bank v Tax Commn., 392 US 339, 341, supra; Graves v New York ex rel. O’Keefe, 306 US 466, 476), a court may also conclude that a body is a Federal instrumentality constitutionally immune from State taxation. The Supreme Court has recently expressed that tax immunity is appropriate only in the narrow instance "when the levy falls on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned” (United States v New Mexico, 455 US 720, 735, supra). In Department of Employment v United States (385 US 355), the court concluded that the Red Cross was such an instrumentality and not subject to State tax. While the court then stated that there was no precise test for a Federal instrumentality, the decisive features noted were that Congress chartered the Red Cross subject to governmental supervision and regular audit, that the principle officer and 7 of 49 Governors were appointed by the President and that the organization was indispensable to the workings of the Armed Forces, the provision of disaster relief from the Federal Government to the States and the performance of the Nation’s commitments pursuant to treaties (id., p 359). Of equal importance were the factors that the Red Cross received substantial material assistance from the United States Government and that the President and Congress acted in reliance on the Red Cross’ status as an arm of the Government (id., pp 359-360; see also, Standard Oil Co. v Johnson, 316 US 481).

In contrast, corporations whose only function was to service governmental atomic research centers for their management, procurement and maintenance needs were held not to be Federal instrumentalities in United States v New Mexico (supra; see also, United States v Boyd, 378 US 39). The essential nature of these functions to the Federal Government is beyond question. However, the Supreme Court specifically stressed that the professional interests of the contractors and the Federal Government were not congruent (455 US, p 740). The contractors’ profit seeking separated them sufficiently from the Government that State taxation was considered inoffensive to the notion of Federal supremacy (id., p 741).

To determine whether Edge Act banks are a Federal instrumentality, a virtual arm of the Government, therefore, it is necessary both to weigh those factors found determinative in Department of Employment v United States (supra, pp 358-359) and to consider, generally, whether those factors demonstrate that the banks are so closely connected with the Government that they cannot realistically be viewed as separate entities (United States v New Mexico, 455 US 720, 735, supra). While it is true that Edge Act banks are chartered by the Federal Government and subject to strict Federal regulation, those characteristics alone are not enough to lead to a conclusion that they should be immune from tax (see Broad Riv. Power Co. v Query, 288 US 178; Railroad Co. v Peniston, 18 Wall [85 US] 5). There is a difference between the strong Federal hand in the internal leadership structure of the Red Cross (Department of Employment v United States, supra) and mere regulatory supervision common to industries from broadcasting to drug manufacturing. Edge Act banks receive no financial assistance from the Federal Government (id., p 359). The Federal Government does not rely on Edge Act banks to perform a traditionally governmental act (id., pp 359-360). Rather, the Government relies upon the banks’ separate profit motivation which propels the banks toward a mutually satisfactory end. It is this parting of the purpose (United States v New Mexico, supra) and the lack of nearly all of the traits found determinative in Department of Employment v United States (supra) that lead us to conclude that Edge Act banks are not Federal instrumentalities entitled to constitutional immunity from tax.

III.

Absent congressional action or the clearest constitutional mandate, a State’s power to tax may not be denied (United States v New Mexico, 455 US 720, 738, supra, quoting Michelin Tire Corp. v Wages, 423 US 276, 293). In the absence of both or any evidence that the city’s taxation scheme is discriminatory (see, Washington v United States, 460 US 536, 542; Memphis Bank & Trust Co. v Garner, 459 US 392, 397), the city’s tax must be upheld.

Accordingly, the judgment of the Appellate Division should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Hancock, Jr., and Bellacosa concur.

Judgment affirmed, with costs.

      .Edge Act (§§ 611-632) banks were authorized by Congress to provide general banking services for international transactions. A fuller discussion of the nature of these banks begins in section I, infra.

      .Section 627 provides: "Any corporation organized under the provisions of sections 611-631 of this title shall be subject to tax by the State within which its home office is located in the same manner and to the same extent as other corporations organized under the laws of that State which are transacting a similar character of business. The shares of stock in such corporation shall also be subject to tax as the personal property of the owners or holders thereof in the same manner and to the same extent as the shares of stock in similar State corporations.”

      .The City of New York imposes a financial corporation tax in the following terms: "For the privilege of doing business in the city in a corporate or organized capacity, a tax, computed under section R46-37.5, is hereby annually imposed on every banking corporation for each of its taxable years, or any part thereof’ (Administrative Code of City of New York § R46-37.1 [a]).


author: Hancock, Jr., J.

text:
    The People of the State of New York, Respondent, v Kermit Buford, Appellant. The People of the State of New York, Respondent, v Jeffrey Smitherman, Appellant.
    Argued February 9, 1987;
    decided March 24, 1987

      POINTS OF COUNSEL

      Roger D. Olson and Philip L. Weinstein for appellant in the first above-entitled action.

      John J. Santucci, District Attorney (Emil Bricker of counsel), for respondent in the first above-entitled action.

      Andrea Hirsch and Philip L. Weinstein for appellant in the second above-entitled action.

      Mario Merola, District Attorney (Debra Ann Urbano and Billie Manning of counsel), for respondent in the second above-entitled action.
   OPINION OF THE COURT

Hancock, Jr., J.

In each of these appeals from criminal convictions defendant argues that he was deprived of his constitutional and statutory rights to a jury trial when the trial court applied an improper standard in excusing a sworn juror during the trial, over his objection. We hold that in each case there should be a reversal and a new trial.

People v Buford

During defendant Buford’s trial on charges of murder, second degree, and criminal possession of a weapon, fourth degree, the court instructed the jurors several times that if they saw anything improper, they were to report it. In a break in the testimony, the forewoman of the jury saw two prosecution witnesses leave the courthouse, enter a car, and drive off together. She approached the court clerk, described what she had seen, stated that she was concerned that there might be a conspiracy, and asked whether the witnesses’ conduct was improper. The clerk assured her that the conduct was not improper but informed the Trial Judge of the juror’s concerns.

Following a motion by the prosecutor to have the forewoman excused from the jury, the court held an in camerá hearing. The ensuing colloquy took place:

"The Court * * * Let me ask you this: Would anything that you saw affect your deliberations one way or the other?
"Forewoman: No I don’t think so.
"The Court: You could still be fair to both sides?
"Forewoman: Yes.
* * *
"Prosecutor: Let me ask you this: Do you think that it would affect your ability to look at this case or do you think that — I am not being critical, but I have to know this — I understand that you wanted to know if there was any indication that there was a conspiracy.
"Honestly, is that in your mind right now that there might be some kind of conspiracy between the two of them?
"Forewoman: There was, then, but it didn’t bother me any more. After I asked the clerk, she said all right. They talk to each other.
"Prosecutor: Do you think that you might, now, because you know something, you have seen something which as you were told there is nothing wrong with that, but you know something that the other jurors don’t know. Do you think that might in some way affect your ability to look at it the same way that they do?
"Forewoman: I don’t think so.
"The Court: Is there anything that you would like to say?
"Defense Attorney: No, if you can judge the case fairly on the facts.
"Forewoman: Yes.”
Over defendant’s objections the court granted the prosecutor’s motion to excuse the forewoman stating that:
"After deliberation, it is the opinion of the Court that there might possibly be some inability on the juror’s part in failing to deliberate in an appropriate manner.
"I think that justice would be served on both sides by excusing her. Her responses while she indicated that she thought she could be fair, she was hesitant and her first reaction being that there was a conspiracy, I am not certain that she is going to be able to fully divest her mind from that, and so I will excuse her.” °

The forewoman was replaced on the jury by the first alternate and the trial continued. The jury found defendant guilty of murder, second degree, in connection with his participation in the stabbing death of Charles Zorse.

People v Smitherman

Defendant Smitherman was a passenger in a taxicab which was stopped by plainclothes police officers. When the officers approached the taxicab, defendant leaned forward, opened the rear passenger door, and left the cab. One of the officers saw a revolver on the floor of the cab where appellant had been sitting. Subsequently defendant was indicted on the charge of criminal possession of a weapon, third degree.

At trial, during the prosecution’s case a police officer testified that defendant was wearing a bulletproof vest at the time of his arrest. Defendant, testifying on his own behalf, explained that he was wearing the bulletproof vest because a few weeks earlier a friend had been shot and killed. The shooting had occurred while he was talking to his friend and, as a result, he feared for his safety. Following the conclusion of defendant’s direct testimony, one of the jurors asked to speak with the Trial Judge. The juror informed the court that she had personal knowledge of the shooting of defendant’s friend. She stated that although she did not witness the event, she was in the neighborhood when it occurred and had "follow[ed] the case”.

The court and the attorneys then questioned the juror in camera. Initially, the juror stated that she believed that her knowledge of the incident could affect her judgment because she knew that defendant was telling the truth about the shooting and could believe his reason for wearing the bulletproof vest. The court reminded her that jurors are not to form or express any conclusions or opinions as to the merits of the case until all the evidence has been submitted. What occurred next we quote from the record:

"The Court: Do you think you could listen to all of the evidence and render a fair judgment, considering all of the evidence as produced in this case?
"Juror No. 8: Yes.
"The Court: That is basically what we are asking you to do. Now, what we’re also asking you to do is, in addition, to keep an open mind and not discuss the case, not express or form any opinions, also not to discuss the case among yourselves.
"Juror No. 8: Well, we haven’t done that.
"The Court: Do I have your assurance that if you remain with the jury at least from this point on, further, that you will not discuss—
"Juror No. 8: No, I will not discuss anything with them.
"The Court: And you will continue to listen to all of the testimony, and keep an open mind until such time as you are instructed on the law?
"Juror No. 8: Yes. Until I am instructed, yes.
* * *
"Prosecutor: You have indicated you were present when you heard about the location [sic]
"You also indicated this is going to have an affect on your ability to evaluate this statement.
"Juror No. 8:1 am saying, I can understand why that vest— that is what I am saying, because I do know what happened.
"Prosecutor: And the fact that you know what happened, is that going to have some affect on your ability to sit on that jury and listen to the testimony fairly and judge the case being presented?
"Is it going to have an affect on you?
"Juror No. 8: I can listen to the evidence. I just want you to know what I am feeling.
* * *
"Juror No. 8: I feel comfortable. I wanted you to know, okay! I don’t know whether that was the wrong feeling or not, or whether I should have kept it to myself — I’ve never really done this before. I don’t know whether he had something to do with it.
"The issue is, did he possess that gun, so, I really don’t know whether he possessed it or not. I am just talking about the issue with that thing, you know, that I could sort of understand that, because I was around the neighborhood that day.
"Prosecutor: Let me ask you this: If, after this case is over and it is time for deliberations, do you think that in your heart, right now, if you found that I have proved, beyond a reasonable doubt, that he possessed that gun, do you think that the fact that you have knowledge about this incident, is that going to have an affect on you?
"Juror No. 8: If you have proved it, no, definitely not, beyond a reasonable doubt.
"Prosecutor: Will your ability to evaluate whether I proved it be affected by this incident?
"Juror No. 8: Not if you have proved it beyond a reasonable doubt. I don’t see any problem with that, or even if he did — I know what a reasonable doubt is. I assume when you do it, you have to use the evidence there, and it is not on emotion.”
The prosecution moved to have the juror excused. In granting the prosecutor’s request, the trial court noted:
"The Court in observing, [the juror], and listening to her, was struck by her apparent effort to be fair and honest. But the Court is also cognizant of the statements which do go each way, and the danger that her experience might have a special impact on her over/and above the information and experience of the other eleven jurors.
"As a rule whenever a juror has — or potential juror has particular knowledge about anything in a case, that juror must be excused, or the subject of a successful challenge for cause.
"Here, the issues are a bit more subtle.
"The Court is also concerned with the impact that is felt by all may result and might affect her differently than the other eleven jurors. It is possible that during deliberation other things might be recalled by the juror who is trying to be fair and honest.”

The first alternate replaced the juror and the trial continued. The jury returned a verdict of guilty on the charge of criminal possession of a weapon, third degree.

I

A defendant has a constitutional right to a trial by a "particular jury chosen according to law, in whose selection [the defendant] has had a voice” (People v Ivery, 96 AD2d 712; People v West, 92 AD2d 620, 622 [Mahoney, P. J., dissenting], revd on dissenting opn below 62 NY2d 708; see, NY Const, art I, §2). To protect this constitutional right in criminal cases, the Legislature has enacted several procedural safeguards (see, CPL art 270). Under the statutory scheme, "[i]f at any time after the trial jury has been sworn and before the rendition of its verdict * * * the court finds, from facts unknown at the time of the selection of the jury, that a juror is grossly unqualified to serve in the case * * * the court must discharge such juror” (CPL 270.35 [emphasis supplied]). "This statutory test places a greater burden upon the moving party than if the juror was challenged for cause” (People v Ivery, supra; see, People v Harris, 84 AD2d 63, 91, affd 57 NY2d 335, cert denied 460 US 1047). Thus, while a trial court " 'should lean toward disqualifying a prospective juror of dubious impartiality’ ” when a juror is challenged for cause under CPL 270.20 (1) (b) (People v Blyden, 55 NY2d 73, 78; People v Branch, 46 NY2d 645, 651), the standard for disqualifying a sworn juror over defendant’s objection (i.e., "grossly unqualified”) is satisfied only "when it becomes obvious that a particular juror possesses a state of mind which would prevent the rendering of an impartial verdict” (People v West, 92 AD2d 620, 622 [Mahoney, P. J., dissenting], supra).

It has been held that a juror is grossly unqualified and must be discharged where it is discovered during trial that the juror has relations with witnesses of a business (see, People v Meyer, 78 AD2d 662, 664) or intimate nature (see, People v Rentz, 67 NY2d 829, 831) or has an actual bias against a witness. Likewise, a juror who could be a witness on a material element of the crime charged is grossly unqualified (People v Harris, 53 AD2d 1007). For similar reasons, courts have set aside jury verdicts where a juror has performed a "test” to determine the plausibility of a witness’s testimony or has reenacted the crime (see, People v Brown, 48 NY2d 388, 392; People v Crimmins, 26 NY2d 319, 323-324; People v De Lucia, 20 NY2d 275, 279-280). On the other hand, a sworn juror should not be discharged merely because she is irritated with one of the attorneys or disagrees with the way the evidence is presented (see, People v Ivery, 96 AD2d 712, supra; People v West, 92 AD2d 620, 622, supra).

While these and other decisions are of some guidance, each case must be evaluated on its unique facts to determine whether a particular juror must be disqualified under CPL 270.35. In reaching its conclusion, the trial court must question each allegedly unqualified juror individually in camera in the presence of the attorneys and defendant. Counsel should be permitted to participate if they desire. In a probing and tactful inquiry, the court should evaluate the nature of what the juror has seen, heard, or has acquired knowledge of, and assess its importance and its bearing on the case. In this context, the court should carefully consider the juror’s answers and demeanor to ascertain whether her state of mind will affect her deliberations. The trial court’s reasons for its ruling should be placed on the record. In concluding that a juror is grossly unqualified, the court may not speculate as to possible partiality of the juror based on her equivocal responses. Instead, it must be convinced that the juror’s knowledge will prevent her from rendering an impartial verdict.

In each of these cases there was insufficient reason to discharge the juror, over defendant’s objection, as grossly unqualified under CPL 270.35.

II

In People v Buford, the forewoman of the jury merely questioned the propriety of two witnesses talking outside the courtroom and leaving the courthouse later in the same car. Once it was explained to her that such conduct was perfectly proper, she said "it didn’t bother [her] any more”, that she could be fair to both sides, and that she did not think that what she saw would affect her verdict. In view of these responses it was certainly not "obvious that [the forewoman] possessed] a state of mind which would prevent the rendering of an impartial verdict” (People v West, supra, at 622 [Mahoney, P. J., dissenting]) and it was error to discharge her.

Moreover, in discharging the forewoman, over defendant’s objections, on its findings that "there might possibly be some inability” on her part to deliberate fairly and that it was "not certain” that she would disregard her original belief concerning a conspiracy the court unquestionably applied a standard less stringent than the "grossly unqualified” standard established in CPL 270.35.

Ill

In People v Smitherman, the juror initially stated that her independent knowledge of the unrelated shooting and killing of defendant’s friend would affect her deliberations. She then indicated, however, that she understood defendant’s reason for wearing the bulletproof vest was distinct from the issue of whether he possessed the gun, that she would convict defendant if the prosecution "proved it beyond a reasonable doubt”, and that knowledge of the incident would not affect her ability to evaluate whether the prosecution proved its case. Thus, as in People v Buford, the juror’s answers were equivocal. Moreover, the events of which the juror had knowledge (i.e., the shooting and killing of defendant’s friend) pertained to a collateral question not to material facts in issue. The juror’s knowledge of this collateral matter was no greater than what the other jurors had acquired from the evidence in the case and from the facts stipulated by the parties.

From the foregoing, we conclude that as in People v Buford, the court could not have been convinced that this juror was grossly unqualified so as to warrant discharge over defendant’s objection. This conclusion is reinforced by the fact that the court, like the court in Buford, employed a standard other than "grossly unqualified” as required by CPL 270.35. This is apparent from the court’s comments that despite the juror’s attempts to be fair and honest, she must nevertheless be discharged because generally, "whenever a juror has — or potential juror has particular knowledge about anything in a case, that juror must be excused, or the subject of a successful challenge for cause” and because her knowledge "might” affect her differently during deliberations and it was "possible” that she could recall "other things” during deliberations.

We have examined defendant Smitherman’s other contention and conclude it lacks merit.

Accordingly, in each of the cases the order of the Appellate Divisions should be reversed and a new trial ordered.

Chief Judge Wachtler and Judges Simons, Kaye, Titone and Bellacosa concur; Judge Alexander taking no part.

In each case: Order reversed, etc.

      .A stipulation was entered into evidence that defendant’s friend had been shot and killed and that police had arrested a suspect but the Grand Jury had dismissed the charges.

      .Pursuant to CPL 270.20 (1) (b) a challenge for cause may be made on the ground that a juror "has a state of mind that is likely to preclude him from rendering an impartial verdict based upon the evidence adduced at the trial” (emphasis added).

      .Although courts in setting aside a verdict as tainted because of conduct or bias on the part of a juror do not apply the "grossly unqualified” test under CPL 270.35, we find the cases instructive in view of the reluctance of courts to impeach jury verdicts except where there is evidence that the jury was improperly influenced.

      .An in camera inquiry may not be necessary in the unusual case involving an obviously trivial matter where the court, the attorneys, and defendant all agree that there is no possibility that the juror’s impartiality could be affected and that there is no reason to question the juror.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v Willie Nelson, Terry Jones, Carol Rogers, Barbara Chambers and Larry Bobb, Appellants. The People of the State of New York, Respondent, v Michael Tyler, Appellant. The People of the State of New York, Respondent, v Freddy Robinson, Appellant.
    Argued February 11, 1987;
    decided March 24, 1987

      POINTS OF COUNSEL

      Michele Maxian and Caesar D. Cirigliano for appellants in the first above-entitled action.

      Steven C. Krane for appellant in the second above-entitled action.

      Jane K. Falcon and Philip L. Weinstein for appellant in the third above-entitled action.

      Robert M. Morgenthau, District Attorney (Mark Dwyer and John G. Martin of counsel), for respondent in the first above-entitled action.

      Robert M. Morgenthau, District Attorney (John G. Martin and Mark Dwyer of counsel), for respondent in the second above-entitled action.

      John J. Santucci, District Attorney (Gary Seidel and Jeanette Lifschitz of counsel), for respondent in the third above-entitled action.
   OPINION OF THE COURT

Per Curiam.

In People v Nelson et al., each of the defendants was charged with jostling (Penal Law § 165.25) in Criminal Court informations. Police officers allegedly observed each of them patting down victims’ pockets, reaching to purposely touch handbags, putting their hands into other people’s pockets or crowding victims or acting as lookouts while their companions took these actions. On defendants’ motions, Criminal Court dismissed the informations, holding the jostling statute void for vagueness. The Appellate Term reversed, denied defendants’ motions to dismiss and reinstated the informations.

Defendant Tyler was convicted of jostling after a jury trial. The evidence presented to the jury indicated that defendant had placed his hands inside two of the pockets of a man who was lying drunk and asleep on a subway platform. The Appellate Term affirmed the conviction, citing People v Nelson.

An officer allegedly observed defendant Robinson patting down two pockets of a sleeping subway passenger, placing his hands inside the man’s pants pocket and attempting to remove money. Criminal Court dismissed the misdemeanor complaint on the ground that the People were required to submit a corroborating affidavit by the victim. The Appellate Term reversed, reinstated the accusatory instrument and remanded the matter for further proceedings.

On appeal, defendants argue primarily that the jostling statute (Penal Law § 165.25) is void for vagueness. In People v Tyler and People v Robinson this issue is not preserved and, thus, our review of the issue is limited to People v Nelson et al.

A vagueness challenge involves a two-part analysis. First, it must be determined whether the statute in question is "sufficiently definite 'to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute’ ” (People v Smith, 44 NY2d 613, 618, quoting United States v Harriss, 347 US 612, 617). Citizens must be afforded fair warning of what is prohibited by law so that they may act accordingly (Grayned v City of Rockford, 408 US 104, 108-109). Second, a statute " 'must provide explicit standards for those who apply them’ so as to avoid 'resolution on an ad hoc and subjective basis, with the attendant dangers of arbitrary and discriminatory application’ ” (People v Smith, supra, at 618, quoting Grayned v City of Rockford, supra, at 108-109). The Constitution abhors a law placing unfettered discretion in the hands of police, prosecutors and juries and allowing punishment of the poor or unpopular on a whim (Kolender v Lawson, 461 US 352, 357-358; Papachristou v City of Jacksonville, 405 US 156). Defendants allege that Penal Law § 165.25 runs afoul of both of these concerns. We disagree.

Unlike statutes which have been declared void for vagueness because they provide insufficient warning to the person of ordinary intelligence (see, e.g., Papachristou v City of Jacksonville, supra), Penal Law § 165.25 clearly delineates specific conduct easily avoided by the innocent-minded. It should present no difficulty for a citizen to comprehend that he must refrain from acting with the intent to bring his hand into the proximity of a stranger’s pocket or handbag unnecessarily. Moreover, contrary to defendants’ claim, the statute is no more difficult to interpret and obey because it does not require larcenous intent. Penal Law § 165.25 prohibits a certain intentional course of conduct regardless of the wrongdoer’s underlying purpose or motive.

Defendants concern themselves with possible applications of the word "unnecessarily” which would be outside the statute’s intended realm, such as tugging on another’s handbag to gain that person’s attention. It has often been said, however, that, except in rare circumstances not relevant here, a vagueness challenge must be addressed to the facts before the court (United States v Mazurie, 419 US 544, 550; United States v Raines, 362 US 17, 20-22; see, Broadrick v Oklahoma, 413 US 601, 610-611). Thus, if the actions of the defendants are plainly within the ambit of the statute, the court will not strain to imagine marginal situations in which the application of the statute is not so clear (Young v American Mini Theatres, 427 US 50, 58-59, reh denied 429 US 873; United States v Powell, 423 US 87, 93). Here, defendants do not, nor could they, argue that their own acts should be interpreted as necessary. Therefore, any element of vagueness in this statute has had no effect on these defendants and they have no standing to complain of it (Young v American Mini Theatres, supra, at 59). This court cannot consider the possibility that the statute may be vague as applied in other hypothetical situations.

Nor does Penal Law § 165.25 encourage arbitrary or discriminatory application. The law, easily followed by most citizens of this State, provides objective criteria which must be observed by a police officer prior to arrest. It is not dependent upon the subjective conclusions of a complainant or an arresting officer as to what is annoying (Coates v City of Cincinnati, 402 US 611; People v New York Trap Rock Corp., 57 NY2d 371) or suspicious (People v Berck, 32 NY2d 567, cert denied 414 US 1093). This is not a statute which casts such a large net that it allows officials to round up those they have concluded to be undesirable (see, e.g., Papachristou v City of Jacksonville, supra). On the contrary, a person may be arrested pursuant to Penal Law § 165.25 if the police have probable cause to believe, based upon observable conduct, that defendant unnecessarily and intentionally placed his hand in the proximity of another’s pocket or handbag.

We have examined the remaining contentions of the defendants in each case and have found those which are preserved to be without merit.

The orders of the Appellate Term should be affirmed.

Chief Judge Wachtler and Judges Simons, Titone, Hancock, Jr., and Bellacosa concur in Per Curiam opinion; Judges Kaye and Alexander taking no part.

In each case: Orders affirmed.

      Penal Law § 165.25 provides:
      "A person is guilty of jostling when, in a public place, he intentionally and unnecessarily:
      "1. Places his hand in the proximity of a person’s pocket or handbag; or
      "2. Jostles or crowds another person at a time when a third person’s hand is in the proximity of such person’s pocket or handbag.”


text:
    Anna Rufino, as Guardian ad Litem of Neil Rufino, et al., Plaintiffs, v United States of America, Defendant.
    Decided March 24, 1987

      APPEARANCES OF COUNSEL

      Charles Kramer for plaintiffs.

      Rudolph Giuliani, United States Attorney (Steven Dvorkim of counsel), for defendant.
   OPINION OF THE COURT

Per Curiam.

In an exercise of this court’s discretion under section 500.17 of the Rules of the Court of Appeals (22 NYCRR 500.17), we decline to accept the two questions certified to us by the United States Court of Appeals for the Second Circuit in this action under the Federal Tort Claims Act.

We fully appreciate the value of the certification process, in saving "time, energy, and resources and helping to] build a cooperative judicial federalism” (Lehman Bros. v Schein, 416 US 386, 391), by allowing this court in a non-State action to declare the law of the State of New York (see, Kidney v Kolmar Labs., 68 NY2d 343, submitted after certification 808 F2d 955, 957; see generally, Report, Committee on Federal Courts, Analysis of State Laws Providing for Certification by Federal Courts of Determinative State Issues of Law, 42 Rec AB City NY 101 [1987]).

The situation presented, however, raises another consideration. The very questions now tendered for our review were only recently answered by Supreme Court, New York County, in McDougald v Garber (132 Misc 2d 457), and are the subject of an appeal currently going forward in the Appellate Division, First Department. Were we to undertake to answer the certified questions now, by the extraordinary procedure of responding to specific questions from the Federal court rather than deciding a case fully before us for review, we would necessarily affect the ordinary State procedure now in actual progress for the resolution of these issues. In the circumstances, it is unquestionably preferable in the resolution of significant State law issues to secure the benefit afforded by our normal process — the considered deliberation and writing of our intermediate appellate court in a pending litigation. We therefore decline to accept the certified questions.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa concur in Per Curiam opinion.

Acceptance of certification of questions by the United States Court of Appeals for the Second Circuit pursuant to section 500.17 of this court’s Rules of Practice (22 NYCRR 500.17) declined.

      The questions presented are (a) whether "loss of normal pursuits and pleasures of life” or "loss of enjoyment of life” is a separately compensable item of damages apart from other items, such as pain and suffering; and (b) if so, whether a claimant must possess cognitive awareness in order to recover for such a loss. 28 USC § 1346 (b), as interpreted in Hatahley v United States (351 US 173, 182 [1956]), requires that these questions be decided in accordance with the law of the State of New York.


text:
    The People of the State of New York, Respondent, v Otis Stith and Cardell Newton, Appellants.
    Argued February 12, 1987;
    decided March 26, 1987

      POINTS OF COUNSEL

      Isabelle Rawich for Otis Stith, appellant.

      Steven S. Katz for Cardell Newton, appellant.

      Steven F. Lungen, District Attorney (Bonnie M. Mitzner of counsel), for respondent.
   OPINION OF THE COURT

Hancock, Jr., J.

Defendants were arrested and charged with criminal possession of a weapon when police officers discovered a loaded gun in a concededly unlawful search of the cab of a truck tractor following a traffic stop. Later, after it was discovered that the tractor was stolen, defendants were also charged with criminal possession of stolen property. In defendants’ appeals from convictions on both charges, they argue that it was error to deny their motions to suppress the gun. The suppression court and the Appellate Division agreed that the search and seizure were in violation of defendants’ constitutional rights. Nevertheless, both courts, applying the inevitable discovery rule, held that the evidence should not be excluded, reasoning that the gun would inevitably have been discovered during the inventory search following defendants’ arrest when, as would shortly have been revealed in a routine registration check, the police learned that the truck was stolen. The sole issue is whether the inevitable discovery exception to the exclusionary rule was properly invoked in these circumstances. Because we conclude that it was not, the order of the Appellate Division should be modified. The convictions for criminal possession of a weapon in the third degree should be reversed, the motions to suppress granted, and the weapon possession count in the indictment should be dismissed. The convictions for criminal possession of stolen property in the first degree should, however, be affirmed.

I

State Troopers Clifford and Figueroa, patrolling New York State Route 17 near Liberty, stopped defendants’ truck tractor for speeding. Clifford asked the driver, defendant Newton, for a driver’s license and registration. Newton produced a Connecticut driver’s license, but was unable to locate a registration for the truck in the piles of papers strewn about the cab. Dissatisfied with Newton’s attempts to find the registration, Clifford ordered Newton out of the truck and climbed in the driver’s side to conduct his own search. Clifford saw a brown vinyl bag on the console between the seats. A logbook portfolio stuck out from an unzippered side pocket of the bag. On removing the portfolio, Clifford noticed the butt of a revolver inside the pocket. The troopers arrested both defendants for criminal possession of a weapon, handcuffed them, put them in the back of the police car, and took them to the Ferndale State Police barracks. On the trip to Ferndale, a radio check showed Newton’s license to have expired and the truck to be stolen. Defendants were then charged with criminal possession of stolen property.

II

The exclusionary rule generally bars "from trial physical, tangible materials obtained either during or as a direct result of an unlawful invasion” (Wong Sun v United States, 371 US 471, 485; see, People v Bethea, 67 NY2d 364; People v Johnson, 66 NY2d 398; People v Bigelow, 66 NY2d 417; People v Gokey, 60 NY2d 309; People v Elwell, 50 NY2d 231; cf., People v Arnau, 58 NY2d 27). A prime purpose of the rule is to deter police misconduct (see, Nix v Williams, 467 US 431, 442-443; People v Bigelow, 66 NY2d 417, 427, supra). It has been recognized, however, "that in some circumstances strict adherence to the Fourth Amendment exclusionary rule imposes greater cost on the legitimate demands of law enforcement than can be justified by the rule’s deterrent purposes” (Brown v Illinois, 422 US 590, 608-609 [Powell, J., concurring in part]). Thus, courts have held that evidence should not be suppressed if knowledge of it "is gained from an independent source” (Silverthorne Lbr. Co. v United States, 251 US 385, 392; People v Arnau, 58 NY2d 27, supra). Similarly, "the detrimental consequences of illegal police action [may] become so attenuated” that the taint of the initial misconduct is dissipated (Brown v Illinois, supra, at 609 [Powell, J., concurring in part]). Sufficient attenuation to avoid application of the exclusionary rule has been found when the linkage between the police misconduct and that evidence is interrupted by intervening events (see, e.g., Wong Sun v United States, supra, at 491; People v Graham, 90 AD2d 198, 200-203, cert denied 464 US 896) or becomes overly extended and weakened by passage of time (see, e.g., People v Minley, 112 AD2d 712, affd 68 NY2d 952; People v Miller, 105 AD2d 1127, 1128; see generally, 3 LaFave, Search and Seizure § 11.4, at 614-621). The question is " 'whether, granting the establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint’ ” (Wong Sun v United States, supra, at 488, quoting Maguire, Evidence of Guilt, at 221 [1959]).

Applying this same rationale courts have refused to suppress evidence if it can be shown by "a very high degree of probability” (People v Payton, 45 NY2d 300, 313, revd 445 US 573, on remand 51 NY2d 169) that the evidence sought to be suppressed would inevitably have been discovered irrespective of the initial wrong. Like the independent source and attenuated connection exceptions to the exclusionary rule, the inevitable discovery exception is based on the perception that in certain circumstances the interest of society is better served by having relevant and material evidence admitted in criminal cases than by deterring police misconduct through the exclusion of evidence unlawfully acquired (see, Nix v Williams, 467 US 431, 442-443, supra).

Although the inevitable discovery rule has for several years been established law in this State (see, People v Payton, supra; People v Fitzpatrick, 32 NY2d 499; cf., People v Knapp, 52 NY2d 689), our court has never applied the rule where, as here, the evidence sought to be suppressed is the very evidence obtained in the illegal search. In People v Fitzpatrick (supra) and People v Payton (supra), as in Nix v Williams (supra), the evidence saved from suppression by the inevitable discovery rule was not evidence illegally obtained during or as the immediate consequence of the challenged police conduct. It was evidence obtained indirectly as a result of leads or information gained from that primary evidence. In Fitzpatrick, for example, the evidence the court declined to exclude was a gun found in a closet as a result of information obtained in an illegally acquired statement. In Payton we applied the rule to information linking the defendant to the murder weapon which was discovered by tracing a sales slip found in the initial illegal search. Similarly, in Nix v Williams the Supreme Court, in adopting the inevitable discovery rule, held that evidence obtained through defendant’s illegally elicited statements (the location of the body of the victim) should not have been suppressed because it would inevitably have been discovered in a search which was already in progress.

When the inevitable discovery rule is applied to secondary evidence, as in Payton, Fitzpatrick and Nix, the effect is not to excuse the unlawful police actions by admitting what was obtained as a direct result of the initial misconduct. It is not . the tainted evidence that is admitted, but only what was found as a result of information or leads gleaned from that evidence. The rationale is that when the secondary evidence would have been found independently in any event, "the prosecution [should not be] put in a worse position simply because of some earlier police error or misconduct” (Nix v Williams, supra, at 443; emphasis in original). In contrast, when the inevitable discovery rule is applied to primary evidence, as was done here, the result is quite different. It is the tainted evidence itself and not the product of that evidence which is saved from exclusion. Permitting its admission in evidence effects what amounts to an after-the-fact purging of the initial wrongful conduct, and it can never be claimed that a lapse of time or the occurrence of intervening events has attenuated the connection between the evidence ultimately acquired and the initial misconduct. The illegal conduct and the seizure of the evidence are one and the same.

In the case before us, the suppression court and the Appellate Division, in holding that the illegally seized weapon should not be suppressed, hypothesized that the gun would inevitably have been discovered through a source that was independent of the initial taint. Viewing the situation at the moment of the illegal seizure, the courts below simply assumed the chain of events which would customarily have been set in motion following defendant Newton’s failure to produce a registration certificate: that a radio check would have revealed that the truck was stolen, defendants would have been arrested, the truck would have been impounded and the gun would have been found in an inventory search.

We hold that applying the inevitable discovery rule in these circumstances, and effecting what would amount to a post hoc rationalization of the initial wrong (see, Nix v Williams, supra, at 448), would be an unacceptable dilution of the exclusionary rule. It would defeat a primary purpose of that rule, deterrence of police misconduct (see, People v Bigelow, 66 NY2d 417, 427, supra). As noted by the Oregon Court of Appeals in State v Crossen (21 Ore App 835, 838, 536 P2d 1263, 1264), in declining to apply the inevitable discovery rule to primary as distinguished from secondary evidence, failing to exclude wrongfully obtained primary evidence "would encourage unlawful searches in the hope that probable cause would be developed after the fact” (see, United States v Massey, 437 F Supp 843, 852-854; Stokes v State, 289 Md 155, 423 A2d 552; State v Williams, 285 NW2d 248, 256-257 [Iowa]; contra, Clough v State, 92 Nev 603, 555 P2d 840; for a discussion of the distinction between primary and secondary evidence, see, 3 LaFave, Search and Seizure § 11.4, at 620-628).

The People’s argument that defendants lacked standing to contest the lawfulness of the seizure was raised for the first time at the Appellate Division and thus is not preserved for our review. We have examined defendant Newton’s other argument and found it to be without merit.

Accordingly, the order of the Appellate Division should be modified by granting defendants’ motions to suppress the gun, vacating the convictions and sentences for criminal possession of a weapon in the third degree and dismissing that count of the indictment and, as so modified, affirmed.

Chief Judge Wachtler and Judges Simons, Kaye, Titone and Bellacosa concur; Judge Alexander taking no part.

Order modified in accordance with the opinion herein and, as so modified, affirmed.

      The conclusions that the evidence should have been suppressed under the application of the exclusionary rule and that the inevitable discovery exception does not apply rest on our analysis of applicable Federal decisions (see, Nix v Williams, 467 US 431; Brown v Illinois, 422 US 590; Wong Sun v United States, 371 US 471; Silverthorne Lbr. Co. v United States, 251 US 385). We reach the same conclusions by applying the exclusionary rule established under our State law (see, People v Bethea, 67 NY2d 364; People v Johnson, 66 NY2d 398; People v Bigelow, 66 NY2d 417; People v Gokey, 60 NY2d 309; People v Elwell, 50 NY2d 231; cf., People v Arnau, 58 NY2d 27), our New York cases enunciating the inevitable discovery doctrine (see, People v Payton, 45 NY2d 300; People v Fitzpatrick, 32 NY2d 499; cf., People v Knapp, 52 NY2d 689), and non-Federal decisions and other authorities which we find persuasive (see, State v Crossen, 21 Ore App 835, 536 P2d 1263; see also, 3 LaFave, Search and Seizure § 11.4, at 620-628). Our decision to reverse, therefore, while based on our analysis of Federal law rests equally on an "adequate and independent” State ground (Michigan v Long, 463 US 1032, 1041-1042): that defendants’ rights under our State Constitution (NY Const, art I, § 12) were violated.