In the United States Court of Appeals For the Second Circuit

August Term 2019 No. 18-3023

ADAR BAYS, LLC, Plaintiff-Appellee,

v.

GENESYS ID, INC. FKA RX SALES, INC., Defendant-Appellant.

On Appeal from an Order of the United States District Court for the Southern District of New York.

SUBMITTED: FEBRUARY 26, 2020 QUESTIONS CERTIFIED: JUNE 11, 2020 DECIDED: MARCH 15, 2022

Before: LIVINGSTON, Chief Judge, PARKER, and NARDINI, Circuit Judges.

GeneSYS ID, Inc. appeals from an order of the United States District Court for the Southern District of New York (Andrew L. Carter, Jr., J.), granting summary judgment in favor of Adar Bays, LLC, the holder of a Convertible Redeemable Note securing a loan to GeneSYS. The loan was in default, and the Defendant raised an affirmative defense of usury. The district court held that the Note’s interest rate did not violate the New York State criminal usury law, N.Y. Penal Law § 190.40. On June 11, 2020, we certified two questions to the New York Court of Appeals: (1) whether a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law § 190.40, the criminal usury law; and (2) if the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law § 190.40, whether the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law § 5-511. The New York Court of Appeals answered both questions in the affirmative. Because the New York Court of Appeals stressed that the value of any individual floating-price stock conversion option is a question of fact, we VACATE the district court’s order and REMAND for further proceedings consistent with the New York Court of Appeals’ opinion.

KEVIN KEHRLI, Garson, Segal, Steinmetz, Fladgate LLP, New York, NY, for Plaintiff- Appellee.

JONATHAN URETSKY, Phillipson & Uretsky, LLP, New York, NY, for Defendant- Appellant.

2 WILLIAM J. NARDINI, Circuit Judge:

Defendant-Appellant GeneSYS ID, Inc. (“GeneSYS”) refused to honor the terms of a loan extended to it by Plaintiff-Appellee Adar Bays, LLC (“Adar Bays”), prompting Adar Bays to bring suit for breach of contract. Adar Bays moved for summary judgment and GeneSYS moved to dismiss the complaint on the grounds that the loan was usurious and therefore void. GeneSYS appealed from the district court’s September 20, 2018, order 1 finding that the loan was not usurious under New York law, denying its motion to dismiss, and granting summary judgment in favor of Adar Bays. We certified two questions to the New York Court of Appeals, which has now clarified that (1) the value of a floating-price option entitling a lender to convert some of the loan balance to equity should be included in a

1 The district court did not set out its judgment in a separate document as required by Federal Rule of Civil Procedure 58(a). “Despite the lack of a judgment, this Court has jurisdiction to hear the appeal of the opinion and order, which was a ‘final decision’ within the meaning of 28 U.S.C. § 1291.” Hamilton v. Westchester Cnty., 3 F.4th 86, 90 n.2 (2d Cir. 2021).

3 calculation of a loan’s interest rate when determining if that rate is usurious; and (2) a loan with interest that exceeds New York’s 25% criminal