MEDIA

January 11, 2002

On Attorney Disqualification, Rule 37(C)(1), Internal Investigations

Published in: New York Law Journal | volume 227
Written by: Peter R. Schlam and Harvey M. Stone

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. On Attorney Disqualification, Rule 37(c)(1), Internal Investigations.

Attorney Disqualification

In United States v. Joyeros, 00 CR 960 (Oct 19, 2001), Judge Eugene H. Nickerson (who died on Jan. 1, 2002), held that, where defense counsel in a criminal case had to be disqualified because he could become a potential witness or unsworn witness, the disqualification barred counsel from participating in the entire case, including the argument of pretrial motions even if defendant waived her right to conflict-free representation.

Defendants were charged with money laundering. Defense counsel for defendant Ms. Hebroni submitted a bail motion that attached an exhibit, purportedly signed by two Panamanian prosecutors, asserting that "nothing has come to light" in a Panamanian investigation of the alleged criminal activity of Ms. Hebroni and her co-defendants.

The prosecution here asserted that the exhibit was a forgery. Defense counsel withdrew the bail motion, noting that events had "undermined our confidence in the validity of the [exhibit]." The government then moved to disqualify defense counsel, who withdrew from the case, rendering the motion moot. A new attorney was later substituted.

Subsequently, the defense expressed an intention to have the attorney who had withdrawn argue a motion to dismiss the indictment. The government renewed its disqualification motion.

As Judge Nickerson observed, the courts have an independent interest in the integrity of the judicial process. Indeed, some conflicts of interest are so serious that defendant’s waiver will not cure them. "For example, an attorney should be disqualified any time he or she might be called as a witness for his or her client, or if there is a risk the attorney could become an unsworn witness for the client at trial." Slip op. 7. In these situations, the detriment is to the court, since the fact-finding process is impaired. See United States v. Locascio, 6 F.3d 924, 932-34 (2d Cir. 1993), cert. denied, 511 U.S. 1070 (1994).

As Judge Nickerson also noted, the government has stated an intention to investigate the origins of the exhibit supporting the bail motion and defense counsel virtually conceded that the government’s allegation of forgery was credible. Thus, prior counsel might be called as a witness or become an unsworn witness at any judicial proceedings, thereby running afoul of the Locascio rule.

Judge Nickerson rejected the defense contention that, if prior counsel appeared merely to argue a motion rather than representing Ms. Hebroni at trial, no conflict existed. The court stated:

… [I]f an attorney or firm is disqualified, he or it is disqualified for the entire case.

To adopt defendant’s theory would undermine the [Locascio] rule itself. If an attorney who represents a conflict can appear in court to argue a potentially dispositive motion, this court can see no limiting principle to prevent him from taking depositions, writing and filing motions, or even making opening and closing arguments. None of these activities involves calling witnesses, but all are core activities of legal representation. Allowing a disqualified attorney to continue to represent a client in this way would be an exception that could quickly swallow the rule. (Slip op. 11)

Rule 37(c)(1)

In Kanyi v. United States, 99 CV 5851 (EDNY, Nov 5, 2001), Judge I. Leo Glasser, affirming discovery rulings by Magistrate Judge Viktor V. Pohorelsky, declined to preclude plaintiff from offering, in opposition to motions for summary judgment, an affidavit allegedly at odds with plaintiff’s prior deposition testimony.

After arriving at JFK Airport on a flight from Ghana, plaintiff was stopped by U.S. Customs Agents. He admitted swallowing 51 bags of heroin before boarding the flight.

Plaintiff contends that, at the time, he felt fine and was naturally passing the heroin bags and that the government unlawfully forced him to undergo surgery to remove the remaining bags. Defendants the government, Mary Immaculate Hospital and others painted a very different picture. They contended that plaintiff was lapsing in and out of consciousness, that one of the bags had already ruptured in his intestines, that the surgery was necessary to save plaintiff’s life and that a psychiatrist had found plaintiff incompetent to refuse consent to the surgery.

Plaintiff filed this suit seeking $5 million in damages for unlawful search and seizure plus assault and battery. (Meanwhile, he served his two years’ imprisonment for drug importation, and was then deported to Ghana).

In response to defendants’ motions for summary judgment, plaintiff submitted an affidavit which allegedly differs from his deposition testimony. The government argued that the affidavit should not be considered because plaintiff had waited until defendants’ postdiscovery motions for summary judgment to change his testimony and thus create a factual dispute.

The government relied on F.R. Civ. P. 37 (c) (1), which provides:

A party that without substantial justification fails to disclose information required by Rule 26(a) or Rule 26 (e) (1), or to amend a prior response to discovery, as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at a trial, at a hearing, or on a motion any witness or information not so disclosed.

The Magistrate Judge denied the motion, holding that the production of evidence under Rule 37(c)(1) does not relate to affidavits or deposition testimony. The remedy for changes in testimony like those alleged here, the Magistrate Judge noted, is impeachment by use of prior inconsistent statements. In Judge Glasser’s view, this holding was neither contrary to law nor clearly erroneous. See Cannon v. Cherry Hill Toyota, Inc., 190 F.R.D. 147 (D.N.J. 1999).

The government also cited cases holding that a party’s affidavit contradicting his prior deposition testimony should be disregarded on a motion for summary judgment. But as Judge Glasser observed, this rule is limited to situations where the affidavit actually contradicts a prior deposition. Here, no contradictions warranting preclusion were shown.

For example, one challenged portion of plaintiff’s affidavit states that he was threatened with surgery before he was taken to the JFK medical facility, while in his deposition plaintiff stated that the threat occurred after he was taken there. This is in fact a contradiction. Nevertheless, Judge Glasser observed, the affidavit is consistent with plaintiff’s response to interrogatories. Thus, the deposition testimony was contradicted by evidence other than the deponent’s subsequent affidavit a factor which alleviated the concern that the proffered issue of fact is a mere "sham." Slip op. 14-15.

Other cited examples from plaintiff’s affidavit showed no "contradictions" of his deposition testimony, but rather merely "embellishments" of it or gratuitous digressions.

Internal Investigation

In McGrath v. Nassau County Health Care Corp., 00 CV 6454 (EDNY, Nov. 30, 2001), Judge Thomas C. Platt overruled defendant’s objection to an order issued by Magistrate Judge William D. Wall, discussed in this column published Oct. 18, 2001, directing the defendant company (NHCC) to produce documents of its internal investigation concerning plaintiff Ms. McGrath’s allegations of sexual harassment.

Plaintiff alleged that defendant Mr. Rosenblum, NHCC’s chairman of the board, had harassed her from the date she started employment there in September 1999, by "passing lewd remarks to her, inappropriately touching her and eventually giving her a note containing an indecent direction." In July 2000, Ms. McGrath met with NHCC’s COO and general counsel to discuss the matter. NHCC reassigned Ms. McGrath with her permission and commenced an internal investigation through outside counsel, which continued until September 2000. Following the investigation, Mr. Rosenblum was removed as chairman of the board, but remained a board member. Ms. McGrath filed an EEOC complaint in July 2000, and a complaint with the court on Oct. 30, 2000.

Plaintiff sought production of documents pertaining to NHCC’s internal investigation, which defendants opposed. Magistrate Judge Wall directed defendants to produce the report prepared by outside counsel and counsel’s notes. Defendants objected to the order, claiming that the documents were privileged, and that there was no waiver since their contents were not placed at issue.

As Judge Platt observed, an employer that has not taken employment action against an employee may assert that (1) it exercised reasonable care to prevent and correct any sexually harassing behavior, and (2) the employee unreasonably failed to take advantage of preventive or corrective opportunities to avoid harm the Faragher-Ellereth defense. Judge Platt determined that NHCC had waived the attorney-client and work-product privileges, having put the privileged information at issue by asserting that "its adequate remedial measures consisted only of reassigning McGrath," and by demoting Mr. Rosenblum after the investigation. Additionally, the sufficiency of NHCC’s response to Ms. McGrath’s allegations was at issue, in light of what it learned through its investigation. Slip op. 11-12.

Judge Platt concluded that Magistrate Judge Wall had not abused his discretion by ordering production of outside counsel’s incomplete report to NHCC, counsel’s handwritten investigative notes and any sections of the report that had been deleted or redacted before submission to the court.

NHCC had waived the attorney-client privilege, Judge Platt stated, because:

(1) while NHCC has not revealed any substantive information by invoking the Faragher-Ellereth defense; (2) McGrath would be prejudiced by NHCC’s invocation of that defense if she could not assess the full measure of NHCC’s response in light of what it learned from its investigation; (3) invocation of the Faragher-Ellereth defense would mislead the Court for the same reason; (4) it is unfair to McGrath to allow NHCC to invoke the Faragher-Ellereth defense while at the same time protecting the documents NHCC itself has put at issue; and (5) it is inconsistent for NHCC to invoke the Faragher-Ellereth defense but to retain the documents necessary to evaluate the sufficiency of its response as required by that defense. (Slip op. 14)

For the same reasons, NHCC had also waived the work-product privilege. As Judge Platt explained, it would be unjust to allow NHCC to invoke the Faragher-Ellereth defense while allowing it to protect the documents it relied on to assert that defense.

Damages: Cable Signal

In Time Warner Cable of New York City v. Herrara, 98 CV 7534 (EDNY, Oct. 3, 2001), a case pending before Judge Glasser, Magistrate Judge Marilyn Go recommended an award of statutory damages plus attorney’s fees and costs against a defaulting defendant for violations of 553(a)(1) and 605(a) of Title 47 of the Communications Act.

Time Warner Cable of New York City (TWCNYC) is a cable television operator which has been awarded franchises by the City of New York to construct, operate, and maintain cable television systems within parts of New York City. TWCNYC offers cable television programming at differing levels of service with different monthly charges. "Standard" service costs approximately $33.14 per month, while pay-per-view programs and premium channels may cost up to $350 and $85 per month, respectively. TWCNYC transmits signals from satellites and radio communication to subscribers through a cable wiring network. To protect its programming services from unauthorized reception, TWCNYC scrambles the signals, which are unscrambled by a "converter" at the subscriber’s television to the extent of the level of purchased programming.

Defendant Ms. Loureiro became a TWCNYC subscriber and received a converter in December 1993. In April 1998, TWCNYC disconnected her service for nonpayment and retrieved a converter from her home. The converter had been modified to enable Ms. Loureiro to receive all premium and pay-per-view cable television programming, even though Ms. Loureiro had subscribed to "standard" service. The difference between the cost of service paid by Ms. Loureiro and the unauthorized premium service she received with the modified converter was approximately $51.86 per month. In addition, the full pay-per-view programming could have cost $350 per month with full-time use. The cost of a converter, which is unusable after modification, was $150.00.

Following Ms. Loureiro’s default, which constitutes an admission of liability, the court turned to an analysis of the damages. Magistrate Judge Go determined that both 553(a)(1), which pertains to interception of cable communications, and 605(a), which pertains to interception of radio communications, apply to pay television programming transmitted over cable and satellite mediums, even though the statutes overlap. Sections 553(a)(1) and 605(a) authorize the court to award statutory damages "as the court considers just." As Magistrate Judge Go noted, in exercising its discretion to award damages, a court should consider the nature of the violation and the circumstances concerning damages, as well as "the difficulty in detecting such violations and the widespread problem of piracy." Slip op. 8. The damages should also fit into the deterrent purpose of the statutes.

Starting with the approximate value of the services stolen, Magistrate Judge Go used information provided by plaintiff regarding the cost and length of services paid by defendant, as well as the cost of unauthorized services, from the date that Ms. Loureiro first received cable service to the termination of service. The court recommended a monthly multiplier of the difference in the monthly cost of unauthorized premium service, plus $75 for the unauthorized pay-per-view programming (53 mos. x ($85 – $33.14 + $75) = $6,723.58), plus $150 for the cost of the altered converter for a total of $6,873.58. Magistrate Judge Go also recommended (a) the awarding of mandated attorney’s fees in the amount of $974.50; (b) an award under only 605(e), not both statutes; and (c) denial of enhanced damages since the recommended award would sufficiently compensate plaintiff.

Peter R. Schlam and Harvey M. Stone are partners at Schlam Stone & Dolan.

[This article is reprinted with permission from the January 11, 2002, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]