MEDIA

December 11, 2015

Identity Theft and Hacking Cases; Equal Pay Action Proceeds

Published in: New York Law Journal | volume 254

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 Jack B. Weinstein declined to dismiss the main claims of a U.S. citizen unjustly detained as an alien for over two years by U.S. Immigration and Customs Enforcement. Judge Dora L. Irizarry granted the government’s application to admit at a criminal trial certain Rule 404(b) evidence relating to defendant’s recent prior conviction. Judge Sandra J. Feuerstein sustained a complaint alleging violations of the Equal Pay Act. And Judge I. Leo Glasser rejected the government’s application for a criminal forfeiture money judgment where defendant himself got no financial benefit from the crime.

Citizen Detained as Alien

In Watson v. The United States, 14 CV 6459 (EDNY, Sept. 29, 2015), Judge Weinstein denied the government’s motion to dismiss or for summary judgment as to the principal claims of a U.S. citizen wrongly detained as an alien.

Plaintiff Davino Watson was a 23-year-old with an 11th-grade education when, in May of 2008, officials of the U.S. Immigration and Customs Enforcement (ICE) detained him. Watson had just successfully completed a “Shock Incarceration Program,” following his conviction in New York state court for the attempted sale of cocaine. Contending that he was not a U.S. citizen, ICE detained Watson for over two years and subjected him to continuous removal proceedings.

Watson was born in Jamaica to unwed parents. His father moved to the United States in 1998 (with Watson, as a lawful permanent resident, in his custody), and became a naturalized U.S. citizen in 2002. ICE’s initial investigation had failed to discover his father’s naturalization and, after learning of it, ICE continued with removal proceedings, and denied Watson a “Certificate of Citizenship” for another two years.

Watson repeatedly asserted his citizenship, which was denied by ICE and, initially, by an immigration judge. He received appointed counsel during an appeal to the U.S. Court of Appeals for the Second Circuit and, in subsequent proceedings, his citizenship was recognized in November 2013. He filed his complaint on Oct. 31, 2014, asserting claims against the government for: 1) Fourth Amendment/substantive due process violations; 2) procedural due process violations; 3) false imprisonment; 4) malicious prosecution; and 5) negligence.

The government sought to dismiss the third through fifth claims, brought under the Federal Tort Claims Act, 28 U.S.C. §§2671, et seq. (FTCA), as time-barred because not brought within two years of accrual. Weinstein rejected the government’s contention that these claims accrued when Watson was first detained. To the extent they had accrued earlier than two years prior to filing, the court found equitable tolling to be appropriate.

Watson had vigorously asserted his citizenship in the face of persistent (though ultimately abandoned) denials by ICE and an immigration judge; he lacked education and legal training; he had no counsel for much of the period in question and limited access to legal resources; and he suffered from depression and drug addiction as a result of his ordeal. These factors justified tolling the statute until he was advised of his rights under the FTCA by his appointed counsel in July 2014. Slip op. 28-32.

Weinstein also rejected the government’s argument that Watson’s negligence claims lacked the “private analogue” in relevant state law required by 28 U.S.C. §1446(b)(1). ICE’s failure to issue a Certificate of Citizenship “once it discovered that [Watson] was a United States citizen” was analogous to “failure to act” negligence claims recognized by New York law. If ICE “were a private entity and had knowledge of a condition which it could eliminate and which would foreseeably cause harm to a specific individual, then its failure to avoid the harm by reasonable means would be an actionable negligence.” Slip op. 36.

Watson’s malicious prosecution claim was barred by 28 U.S.C. §2680(h), which carves out such claims from the FTCA’s consent to suit.

Rule 404(b)

In United States v. Roberts-Rahim, 15 CR 243 (EDNY, Oct. 22, 2015), Judge Irizarry granted the government’s in limine motion, over defendant’s objection, in a case alleging identity theft and passport fraud.

The superseding indictment alleged that, in January 2015, defendant applied for a U.S. passport using a false name, date of birth and Social Security number; and that he knowingly used another person’s means of identification “without lawful authority.” In August 2015 the government moved in limine to admit evidence that (1) defendant obtained a fraudulent New York State driver’s license, which he used as identification in applying for a passport with identifying information from another person—specifically, his half-brother; and (2) defendant had been convicted in an earlier case in the Eastern District of New York and surrendered his passport as a condition of release on bond, with a warning from the court not to apply for a new passport, but nevertheless applied for a new passport while awaiting sentence.

The government also moved to preclude any defense evidence or argument at trial that defendant’s half-brother had consented to use of his identity.

It was 10 days after pleading guilty in the earlier unrelated case, and while he was awaiting sentence, that defendant allegedly applied for the passport at issue here.

In the instant case, Irizarry granted the government’s in limine motion to admit evidence at trial, pursuant to Federal Rule of Evidence 404(b), that defendant had recently been convicted and surrendered his passport in a separate case, where this evidence bore on knowledge, intent and absence of mistake in connection with the pending charges of passport fraud, 18 U.S.C. §1542, and aggravated identity theft, 18 U.S.C. 1028A.

In Irizarry’s view, this evidence was admissible under Rule 404(b) other than for the impermissible purpose of showing defendant’s criminal propensity. Here, the proffered facts are “highly probative” to show that defendant “possibly needed” a new passport to avoid his impending sentence in the other case. “That possible motive…bears heavily” on knowledge and intent in this case. As the record suggests, moreover, defendant may argue that his half-brother had applied for the passport or that some other inadvertence led to the false information in the passport application. “As such, the fact that Defendant had surrendered his passport as a condition of his release on bail, and explicitly was warned not to apply for a new passport, could be highly relevant to establishing an absence of mistake.” Slip op. 9-10.

At this stage, defendant opposed only the motion to admit evidence relating to the prior conviction and surrender of his passport in that proceeding. The court also explained its reasons for granting two other in limine motions by the government that the defense did not oppose.

Only the fact of defendant’s bail status and conviction, not the details of that offense, would be admissible. “The danger of unfair prejudice at trial will be further mitigated by an appropriate limiting instruction…” Slip op. 10.

As to the use of his half-brother’s identity to get a driver’s license, which was used in turn for the new passport application, Irizarry concluded:

[A]lthough evidence relating to the driver’s license, and the manner in which Defendant allegedly obtained it, would be admissible under Rule 404(b), that evidence is admissible even outside the scope of Rule 404(b) because it is inextricably intertwined with the charged offenses and is part of the res gestae.

Slip op. 8.

In precluding any evidence or argument that the half-brother had consented to defendant’s use of his identity, the court found that, “[b]ased upon the plain language of §1028A,” the half-brother’s “consent or non-consent has no bearing on whether Defendant used his identity ‘without lawful authority.'” Slip op. 14.

Equal Pay Act

In Lenzi v. Systemax, 14 CV 7509 (EDNY, Oct. 26, 2015), Judge Feuerstein denied defendants’ motion to dismiss a complaint alleging federal Equal Pay Act and state equal pay violations based on lower amounts paid to plaintiff as compared to her five male peers.

Plaintiff Danielle Lenzi began work at defendant Systemax, Inc., in February 2008 and was promoted to Vice-President of Risk Management in January 2011, becoming the only woman on the executive management team. As VP Risk Management, plaintiff reported to defendant Lawrence Reinhold, Executive Vice-President and CFO.

Plaintiff’s performance reviews indicated that she performed her duties proficiently and had recouped more than $20 million from insurance companies for Systemax. Plaintiff has B.A., B.S., J.D. and L.L.M. degrees. At the time of her termination in June 2013, her base salary was $191,000, less than similarly situated male department heads. She also received smaller bonuses, stock options and car allowances.

The male department heads all had fewer academic credentials than plaintiff, yet earned salaries ranging from $251,200 to $308,000. Each had similar responsibilities managing departments within Systemax, reported to Reinhold and worked in the same office in Port Washington, N.Y.

In January 2013, plaintiff complained to Reinhold in a series of emails about the compensation discrepancy, adding that she was the only vice-president not allowed to use the “executive officer” title. On March 29, 2013, she sent an email to defendant Chairman and CEO Richard Leeds, complaining about her title and the discrepancy in compensation. On April 9, plaintiff was demoted and subjected to restrictions regarding her work hours. In June the company conducted an internal audit of her business expense report from an April conference. She agreed to pay certain expenses, but was told to resign and when she refused was placed on administrative leave. After complaining to the human resource department that Systemax’s actions were retaliatory, she was terminated on June 26, 2013.

Feuerstein found that plaintiff had stated a claim under the Equal Pay Act, a strict liability statute that “prohibits employers from discriminating ‘between employees on the basis of sex’ by paying different wages for ‘equal work on jobs the performance of which requires equal skill, effort, and responsibility.'” Slip op. 7. The two jobs do not have to be identical, but must be “substantially equal.” The complaint contained “specific, nonconclusory allegations that she was paid less than the other five male department heads at Sytemax’s Port Washington headquarters.” Slip op. 8. The alleged similarities between Lenzi’s job and those of her male peers were adequate to support a reasonable inference that her work was substantially equal to one or more of her male comparators. Feuerstein concluded: “Plaintiff has alleged specific facts to support her claims of unequal pay and that her job content encompasses the ‘same ‘common core’ of tasks’ as that of her male comparators.” Slip op. 9 (citations omitted).

Plaintiff also adequately pleaded retaliation. Her complaints to her immediate superior and the company CEO, via email, stating that her pay should be comparable to that of her male colleagues, along with her complaint to human resources of retaliation, “were not insufficient as a matter of law to place defendants on notice that plaintiff was asserting her legal rights under federal law.” Slip op 10.

Hacking Case

In United States v. Dobruna, 12 CR 300 (EDNY, Sept. 28, 2015), Judge Glasser denied the government’s request for entry of a $14 million forfeiture money judgment against defendant, because the government had failed to show that defendant had received any benefit from his criminal conduct.

Defendant pleaded guilty to a single count of bank fraud in July 2014. In June 2015, the court sentenced him to 50-months’ imprisonment and imposed restitution in the amount of $14 million. Defendant had been charged with participating in the February 2011 hacking of a database containing debit and credit card information linked to JP Morgan Chase accounts from Feb. 26 to 28, 2011. Conspirators withdrew $14 million of funds from accounts around the world. In his plea agreement, defendant agreed to forfeit an amount of money to be determined at sentencing: The government requested a forfeiture money judgment of $14 million.

The purpose of criminal forfeiture of property is to strip the offender of the fruits of his criminal conduct and to make breaking the law unprofitable. The amount of forfeiture is based on a defendant’s gains. The government must show a defendant’s gains by a preponderance of the evidence. Here, as Glasser determined, the government presented no evidence that defendant had personally derived any gain from his criminal conduct. Although defendant transmitted account and credit card information to the hacker and the hacker used that information to steal money from JP Morgan, defendant did not receive any of the money from the JP Morgan accounts. Thus, defendant did not benefit by transmitting information to the hacker and there was nothing to forfeit. Forfeiture here “would be a brutum fulmen” (literally, “a harmless thunderbolt”), defined by Black’s Law Dictionary as “an empty threat.” Slip op. 4.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.