MEDIA

April 7, 2016

Foreclosure, Standard to Expunge Criminal Record, Intervention; Eastern District Roundup

Published in: New York Law Journal | volume 255

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Judge Eric N. Vitaliano, over defendant’s objection, reinstated an order allowing the foreclosure sale of defendant’s home. Magistrate Judge Steven I. Locke saw no basis to expunge a criminal record relating to a 1991 arrest followed by dismissal of the charges. And Judge Joanna Seybert denied intervention as of right to certain non-parties but granted limited permissive intervention in a case involving the East Hampton Airport.

Sale of Residence

In United States v. Chesier, 08 CV 02552 (EDNY, March 18, 2016), Judge Vitaliano withdrew an order of vacatur and reinstated an earlier order approving the foreclosure sale of defendant’s residence.

After the U.S. government filed a tax lien against defendant Pace Chesier’s residence and he defaulted in an action by the United States to recover unpaid taxes, the court entered an order approving a foreclosure sale. Non-party Hyman Chabbott purchased the home from a court-appointed receiver by contract dated May 7, 2012, and the court entered an order that the sale go forward. Chesier obtained a stay of the sale pending appeal and, when that appeal failed, filed a Chapter 13 bankruptcy petition, resulting in a further stay of the sale.

Within days after the bankruptcy was dismissed for failure to meet and comply with certain statutory requirements, Chesier reached an agreement with the government that the tax liability underlying the foreclosure sale had been paid in full. On Jan. 16, 2015, Vitaliano granted Chesier’s application to vacate the order directing that the sale go forward, based on the government’s satisfaction of judgment and Chesier’s representation that “no party objected” to vacatur. That same day, however, Chabbott sought leave to intervene and oppose vacatur. The court granted intervention, and held a hearing on Chabbott’s opposition.

Vacatur was withdrawn because Chabbott was entitled to enforce his rights under the contract of sale. Chesier cited what the court described as an “ancient decision” for the proposition that “a mortgagor of foreclosed property retains an equity of redemption until ‘the sale is made, confirmed, and conveyance delivered.'” Slip op. 5, quoting Nutt v. Cuming, 155 N.Y. 309, 313, 49 N.E. 880 (1898) (emphasis added in slip op.). However, as the court noted, numerous more recent authorities confirmed that “[w]ith or without actual conveyance of title and deed to the purchaser at the foreclosure sale, the happening of the sale is enough under New York law to extinguish any right of redemption….” Slip op. 6 (citing NYCTL 1996-1 Trust v. Moore, 51 A.D.3d 885, 886, 859 N.Y.S.2d 212, 213 (2d Dept. 2008), and collecting cases).

Chesier also argued that allowing the foreclosure sale to go forward after he had satisfied his tax obligations would constitute two satisfactions of the same judgment. The court rejected this argument. The order authorizing the sale specified that the government would not receive any more of the sales proceeds than were required to satisfy its tax lien so, having paid the taxes, Chesier would receive the sale proceeds.

The sale would not be barred on equitable grounds for the additional reason that Chabbott had paid a $100,000 deposit in 2012, and spent over $18,000 in attorney fees, based on his correct belief that his rights had vested upon purchase, regardless of whether or not Chesier later satisfied the tax obligation that had given rise to the order authorizing the sale. Slip op. 7-8.

Expungement of Record

In Mullen v. United States, 12 MC 724 (EDNY, March 18, 2016), Judge Locke found that petitioner had failed to meet the stringent standard required to expunge his criminal record arising from his arrest in 1991 on charges that were dismissed.

In December 1991 petitioner was charged with one count of instigating or assisting escape, 18 U.S.C. ยง752. According to the complaint, petitioner approached a confidential informant (CI) who was related to federal inmate Melendez. Petitioner fraudulently identified himself as a police officer and offered to help arrange a prison escape by Melendez for $6,000. The CI allegedly scheduled a meeting with petitioner to give him a “down payment” of $1,100. At the scheduled meeting, petitioner accepted the payment and was arrested.

Less than a month later, the complaint was dismissed. The reasons for the dismissal are not discussed in the motion papers.

In 2012 petitioner filed the motion here to expunge the record of that case. He explained that, when he was becoming a foster parent, an Administration for Children’s Services supervisor told him “there was something found in [his] record after twenty-one years[.]” He also asserted that, after dismissal of the criminal charges, he returned to school, worked as an optician for the last 20 years and is now starting his own company.

As Locke observed, even assuming the court’s ancillary jurisdiction here, petitioner has not identified extreme circumstances necessary for relief. Though serious adverse consequences can flow from arrest records, courts generally deny motions to expunge based on employment difficulties. “Nevertheless, a concession of innocence paired with a demonstrated hardship may warrant expungement of an arrest record.” Slip op. 5.

Petitioner, the court noted, has not identified actual harm. In fact, he has held steady employment for 20 years. Nor has he asserted innocence or claimed that his arrest was improper. “Rather, the criminal complaint was dismissed without prejudice, with no reference to the merits of the charge.” Slip op. 6-7.

Intervention

In Friends of the East Hampton Airport v. The Federal Aviation Administration, 15 CV 441 (EDNY, Feb. 29, 2016), Judge Seybert denied the motions of the Committee to Stop Airport Expansion and the Town of East Hampton to intervene in an action involving the Federal Aviation Administration over use of a local airport, but granted their motions for permissive intervention to the extent each would be permitted to file one brief in connection with any dispositive motions.

In September 2001 the town accepted a federal grant under the Airport Improvement Program for the development of its airport. One of the conditions of the grant was that the town comply with a Public Use Grant Assurance that “the airport will be available for public use on reasonable conditions and without unjust discrimination” for 20 years. In a 2005 settlement of an action by the committee against the FAA and the Department of Transportation, challenging the FAA’s approval of the town’s 2001 airport layout plan, the FAA agreed not to enforce the Public Use Grant Assurance after Dec. 31, 2014 (Settlement Agreement).

In about December 2011, U.S. Rep. Timothy Bishop submitted a list of questions to the FAA administration seeking answers on the FAA’s position “on the legal effect of the 2005 Settlement Agreement on the FAA, and on [the town’s] ability to impose airport access and noise restrictions after December 31, 2014.” Slip op. 4. In 2012, the FAA responded to Bishop’s questions to the effect that: (1) the FAA was legally bound by the Settlement Agreement; (2) the FAA would not enforce certain grant assurances after Dec. 31, 2014; and (3) the Settlement Agreement relieved the town from its obligation to comply with the Airport Noise and Capacity Act of 1990 (ANCA).

Plaintiffs here, various aviation entities that use the airport, sought declaratory and injunctive relief, alleging that the FAA exceeded its statutory authority and violated its statutory obligations by entering into the Settlement Agreement.

Both the committee and the town moved to intervene as of right pursuant to Federal Rule of Civil Procedure 24(a) and, alternatively, for permissive intervention under Rule 24(b). Under Rule 24(a)(2), the first factor, the timeliness of the committee’s motion, was not disputed. Seybert found a closer issue concerning the committee’s interest in the “subject of the action,” defined by the court as “the FAA’s alleged failure to enforce the grant assurances against the Town and its position that the Town need not comply with ANCA[.]” Slip op. 15.

Although the Settlement Agreement constituted a component of the subject matter of the action, the committee still had to show that its interest in the applicability of the Settlement Agreement was “direct, substantial, and legally protectable.” The committee was not a necessary party to the action because the court would be able to grant complete relief in its absence. Any harm to the committee was indirect because it was contingent on a series of events dependent on the actions of others-for example, plaintiffs prevailing in this action and an FAA administrative investigation of grant assurance violations by the town and the FAA finding a violation and taking enforcement action. Slip op. 16-17.

The court did conclude that the committee’s “interest in upholding the Settlement Agreement would be impaired” if plaintiffs succeeded in this action and the committee’s interests were not adequately protected. But none of these factors amounted to a direct interest in the subject matter of the action justifying an intervention as of right. Slip op. 20.

The town similarly failed to establish a direct interest in the action, because its interest was also contingent on a sequence of events. Despite its showing that a favorable judgment would impede its interest and it was not adequately represented, the town’s motion to intervene as of right was denied. Slip op. 20-25.

Under Rule 24(b), permissive intervention is available to anyone who shares a common question of law or fact with the main action. In support of its motion for permissive intervention, the committee “established both that a disposition in favor of Plaintiffs will impede the protection of its interests and that its interests are not being adequately represented.” Slip op. 26. Its claim that the Settlement Agreement is valid “shares common questions of law and fact with this action, namely, whether the FAA is statutorily obligated to enforce the grant assurances and whether the Settlement Agreement is a lawful basis for determining enforcement.” Slip op. 26-27. Nor would intervention by the committee unduly complicate or delay the action. While granting permissive intervention to the committee, the court limited its intervention to filing one brief in connection with any dispositive motions. Slip op. 27.

The court granted the same relief to the town based on its common questions of law, i.e., “whether the FAA is statutorily required to ensure that the Town complies with grant assurances, whether the Settlement Agreement or Bishop Responses provide a lawful basis for the FAA to determine whether grant assurances of complaints will be enforced, and whether the Town is legally required to comply with the ANCA.” Slip op. 28.