MEDIA

November 9, 2011

Ineffective Assistance, Title VII, Motion to Suppress, Fraud Allegations

Published in: New York Law Journal | volume 246

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 Joanna Seybert granted a §2255 petition based on ineffective assistance of counsel at sentencing. Judge Nicholas G. Garaufis suppressed evidence found on a car passenger where the government failed to show "reasonable suspicion" to justify the vehicle stop. In denying a motion to dismiss, Judge Seybert decided a variety of issues relating to alleged constructive and actual fraud against a plaintiff bank. And Judge Roslynn R. Mauskopf upheld Title VII claims against a motion to dismiss.

Ineffective Assistance

In Harris v. United States, 08 CV 4886 (EDNY, Oct. 7, 2011), Judge Seybert, granting a §2255 petition, held that the 400-month sentence previously imposed had resulted from ineffective assistance of counsel.

Petitioner Elvin Harris had entered into a cooperation agreement under which he pleaded guilty before Judge Seybert to two counts of armed robbery and two firearms charges, and shared with the government information concerning his involvement with the Bloods criminal gang in Hempstead. The government submitted a 5K1.1 letter-motion affirming Harris’ cooperation, and stating that he "had provided information about his unindicted co-conspirator and Blood member Dougie Young," which "may assist in a future prosecution of Young."

The robbery counts carried a Sentencing Guidelines range of 84 to 105 months, while the firearms charges carried a minimum sentence of 30 years. At sentencing, the government advised that Harris’ cooperation had contributed to Young’s arrest on state charges. It also stated, however, that after signing the cooperation agreement, Harris himself had been charged with keeping a metal shank in his cell at the Nassau County Correctional Center (NCCC).

Harris’ criminal counsel first learned of the new criminal charges at the sentencing, but did no more than confirm with his client that such charges were pending. Although concerned that the government might exercise its right to disavow its obligations under the cooperation agreement in light of those charges, counsel did not seek an adjournment, or even a brief recess, to explore the circumstances surrounding the charges, or determine whether exculpatory or mitigating evidence might exist for the court to consider in passing sentence.

Judge Seybert sentenced Harris to 40 months, concurrently, on each of the robbery charges, and 30 years for the firearms charges, to run consecutively with the sentences on the robbery charges, for a total of 400 months’ incarceration. The court’s statements at sentencing made clear that the likelihood of recidivism, inferred from the post-cooperation criminal charge, played a major role in the severity of the sentence: "You will be back. You are going to commit one crime after another, after another. And that’s clearly displayed in the most recent charge." Slip op. 7.

Several years later Harris, represented by different counsel, filed the instant petition challenging the sentence. At the hearing on his §2255 petition, Harris established that he had the shank to protect himself, because he had heard that Dougie Young (the subject of his cooperation) had "put a hit out on him." The court credited Harris’ testimony that he had relied on self-defense, rather than reporting the threat from Young, because NCCC, unlike federal facilities, did not segregate threatened prisoners from the general population. As the court noted, during his time in federal custody since sentencing, Harris had been moved to five different facilities because "they didn’t know what to do with [him], to protect [him]," and spent nearly half his time in voluntary protective custody due to threats from other prisoners affiliated with the Bloods. Slip op. 8-9.

Judge Seybert, reviewing her own sentence, vacated that sentence and put the matter down for resentencing, finding the sentence would likely have been more lenient but for the defective performance of his criminal counsel. "[P]ossession of a shank in those circumstances – to defend oneself from attack – is quite different from possessing the shank to commit crimes and gang-related violence as Petitioner had done repeatedly in the past." Slip op. 15.

Vehicle Stop

In United States v. Bristol, 10 CR 36 (EDNY, Sept. 2, 2011), Judge Garaufis granted defendant’s motion to suppress a gun seized from him after a vehicle stop that was not supported by "reasonable suspicion" of a crime.

At 1:30 a.m. in December 2009, three New York City police officers were on patrol in Brooklyn when they saw a Crown Victoria automobile proceeding along with New Jersey license plates, no exterior markings, two passengers in the back seat, and no one in the front passenger seat. One of the officers had a "hunch" that the car was operating as an unlicensed livery cab in violation of City Administrative Code §19-506(b)(1). The officers pulled the vehicle over, and after defendant left his passenger seat and got out of the car, the officers recovered a loaded pistol on him. This led to a federal charge against defendant for possession of a firearm by a convicted felon. 18 U.S.C. §922(g)(1).

While Judge Garaufis discredited some of the testimony by the officers at the suppression hearing, the core holding here was that the factors cited by the government did not rise to a reasonable suspicion that the Crown Victoria was an unlicensed livery cab. Thus, any evidence resulting from the stop had to be suppressed.

The government relied on four factors: (1) two passengers were riding in the back seat of the car, with the front passenger seat empty; (2) Crown Victorias and other sedans are commonly used as livery cabs; (3) the car had New Jersey license plates; and (4) the car had no signage indicating it was a livery cab.

As Judge Garaufis explained, these factors are all quite consistent with innocence, and even when weighed together, they do not amount to reasonable suspicion. Slip op. 9-13. The firearm and all fruits of the poisonous tree would thus be excluded at defendant’s trial.

Fraud Issues

In Greystone Bank v. Neuberg, 10 CV 5225 (EDNY, Aug. 25, 2011), Judge Seybert denied defendants’ motion to dismiss a complaint alleging constructive and actual fraud related to efforts to avoid repayment of a mortgage from plaintiff bank.

In 2008 Greystone Bank lent David and Malkie Neuberg $3.7 million secured by their property in Inwood, N.Y. To obtain the loan, the Neubergs submitted financial statements indicating that they owned homes in Lawrence, N.Y., and Miami, Fla. In early 2009, the Neubergs requested permission from the bank to transfer 75 percent of their interest in the Inwood house to Ian Rubinstein. Mr. Rubinstein gave the bank a financial statement showing that he owned a house in Woodmere, N.Y., though he had actually conveyed that property to his wife for no consideration two weeks before submitting the statement.

Based on this false statement, the bank approved the transfer of the LLC holding the Inwood house to Mr. Rubinstein. At the same time, the Neubergs transferred the Laurence and Miami properties to a trust naming their children as beneficiaries. The deeds for these properties were recorded after the bank approved the loan modification. In January 2010 the Neubergs defaulted on the mortgage, and the bank commenced a default proceeding.

Defendants, the Neubergs and Mr. Rubinstein, moved to dismiss on a number of grounds. First, the Neubergs contended that the claim for constructive fraudulent conveyance of the Miami and Lawrence properties did not meet the heightened pleading requirements of Rule 9(b). As Judge Seybert concluded, there was no Rule 9(b) requirement for pleading constructive fraud, and allegations that the Neubergs transferred the Miami and Lawrence properties for no consideration, and that the transfers rendered them insolvent, were sufficient under Rule 8. In this regard, the court noted, intra-family transfers give rise to two presumptions: (1) information about the consideration paid would be exclusively within the Neubergs’ knowledge, thus giving them the burden of showing that the consideration was fair, and (2) insolvency is presumed when a conveyance is made without fair consideration.

Judge Seybert next addressed the bank’s actual fraud claim against the Neubergs, which was subject to the heightened pleading requirement of Rule 9(b). With this claim the issue was whether the bank had adequately alleged the Neubergs’ fraudulent intent. Because fraudulent intent can be difficult to prove, a plaintiff can rely on "badges of fraud" that may give rise to an inference of intent. Here, Judge Seybert found, the bank had alleged several badges of fraud: (1) a family relationship between the transferors and the transferee; (2) a suspicious chronology where the alleged fraudulent transfers coincided with the loan modification application and Mr. Rubinstein’s additional fraudulent conduct; and (3) the hiding of the transfers until after the loan modification was approved.

Concerning the fraudulent intent of the transferee trust, Judge Seybert concluded: "the better view is that the transferor’s intent is what matters, and consequently [the court] is not persuaded that the actual fraud claim should be dismissed for Plaintiff’s failure to allege the Trust’s fraudulent intent." Slip op. 11.

Judge Seybert also held that the bank had adequately pled the actual fraud claim against Mr. Rubinstein. The court rejected his argument that plaintiff was required to plead that the fraudulent transfer rendered him insolvent. Although the constructive fraud sections of the New York Debtor & Creditor Law contain an insolvency component, section 276, setting forth the requirements for actual fraud, does not. The bank alleged "an intra-family transfer (between Mr. and Mrs. Rubinstein) that was made under suspicious circumstances (Mr. Rubinstein transferred the property just two months before concealing the transfer on a financial statement designed to convince Plaintiff to allow the Neubergs to transfer their LLC to him)." Slip op. 15. That was sufficient to allege an actual fraudulent conveyance.

Title VII

In Briggs v. Women in Need Inc., 10 CV 2265 (EDNY, Aug. 24, 2011), Judge Mauskopf denied defendant’s motion to dismiss pro se plaintiff’s claims alleging violations of Title VII and the Pregnancy Discrimination Act (PDA) for unlawful termination based on pregnancy and associated medical issues.

In March 2007 plaintiff informed her employer Women in Need (WIN) that she was pregnant. She went on medical leave on May 23, 2007, and gave birth by caesarean section on Oct. 19, 2007. Plaintiff alleged that Maureen McLaughlin, a WIN human resources representative, promised her an 8 a.m. to 4 p.m. shift upon her return to work. Plaintiff kept in touch with McLaughlin during her pregnancy and after birth. On Dec. 11, 2007, plaintiff’s doctor informed her she could return to work on Jan. 21, 2008. At that time McLaughlin told plaintiff that her request for the 8 a.m. to 4 p.m. shift was denied. She spoke to another human resources official, who told her she was fired. She never received a termination letter. WIN also denied her request to be transferred to another building.

WIN contends that plaintiff was terminated because she would not agree to work her assigned schedule. WIN subsequently offered plaintiff her position back, but plaintiff declined because she had already found another job.

As Judge Mauskopf explained, the PDA provides that under Title VII, discrimination based on pregnancy amounts to discrimination based on gender. "Unless the employee on leave has informed the employer that she does not intend to return to work, her job must be held open for her return on the same basis as jobs are held open for employees on sick or disability leave for other reasons." Slip op. 7-8. An employment practice violates the PDA if pregnancy is a "motivating" factor in an adverse employment action.

Judge Mauskopf determined that plaintiff had established a prima facie case of discrimination. First, she was a member of a protected class because she was terminated while on maternity leave in "sufficiently close temporal proximity between her childbirth and related medical condition." Slip op. 11. She did not have to be pregnant at the time of termination. Plaintiff gave birth on Oct. 19, 2007, and was terminated sometime between Nov. 28, 2007, and Jan. 21, 2008, during her recovery from a caesarean section and before her doctor cleared her to return to work.

Second, plaintiff was qualified for the position. Defendant presented no facts to indicate that she was unqualified. Third, plaintiff raised an inference of discrimination, because there was a close temporal proximity between her pregnancy and the denial of her desired shift, her request for a transfer and her termination. Slip op. 13.

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.

[This article is reprinted with permission from the November 9, 2011, issue of the New York Law Journal. Copyright © 2011 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]