MEDIA

November 9, 2001

On Sentencing Guidelines, Jurisdiction and Discrimination

Published in: New York Law Journal | volume 226
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. The cases covered issues as follows: sentencing guidelines, acquitted conduct; jurisdiction, state antitrust claims with patent issues; and discrimination, failure to accommodate.

Sentencing Guidelines

In United States v. Koczuk, 98 CV 1140 (EDNY, Oct. 10, 2001), Judge Frederic Block dealt with the "constraints" under the Sentencing Guidelines of "relevant conduct" i.e., alleged conduct that is not established by the conviction but would increase punishment absent a downward departure. In granting a downward departure, the court squarely confronted the distinction between relevant uncharged conduct and relevant charged conduct on which, as here, the defendant was actually acquitted. The decision is yet another example of a court’s need to hack through the Guidelines thicket to achieve a result that a pre-Guidelines judge could have reached by free resort to fairness and common sense.

Defendant Mr. Rozbicki and a codefendant were each indicted on one count of conspiring to smuggle caviar into the United States; one count of smuggling caviar; and four counts of unlawfully importing caviar. A jury found the codefendant guilty on all counts, but found Mr. Rozbicki guilty on only one count, charging unlawful importation on Oct. 20, 1998. The jury acquitted him on all other counts.

The market value of the caviar attributable to his one count of conviction was less than $100,000. Nonetheless, at the initial sentencing the court found, as "relevant conduct" under Guidelines 1B1.3, that Mr. Rozbicki had to be held accountable for the $11 million of caviar attributable to the codefendant. This subjected Mr. Rozbicki to a 15-level increase under the relevant Fraud and Deceit Table (see 2F1.1, 2Q2.1). Judge Block made all the "relevant conduct" findings under a preponderance of the evidence standard.

With a four-level reduction for minimal role, plus enhancements for other factors, Mr. Rozbicki’s guideline range came to 37-46 months. Judge Block departed downward to five months’ incarceration. Relying in part on Application Note 11 to the Fraud and Deceit Table, the court determined that the 15-level enhancement overstated the seriousness of Mr. Rozbicki’s misconduct and that his criminal participation was minimal to a degree not contemplated by the Guidelines.

Both defendants, as well as the government, appealed. The Second Circuit rejected the government’s challenge to the four-level minimal role reduction for Mr. Rozbicki, but also disagreed with the district court’s analysis and conclusion regarding the Fraud and Deceit Table. Remanding the case for resentencing, the Second Circuit noted that the district court was free to consider other reasons for a downward departure.

At the resentencing, Judge Block again downwardly departed, sentencing Mr. Rozbicki to a year and a day. The court later issued this memorandum.

As Judge Block observed, a verdict of acquittal "does not prevent the sentencing court from considering conduct underlying the acquitted charge, so long as that conduct has been proved by a preponderance of the evidence." United States v. Watts, supra, 519 U.S. 148, 157 (1997). A distinction, however, should be drawn between uncharged conduct and conduct related to a charge resulting in an acquittal. Slip op. 6. See United States v. Watts, supra, 519 U.S. at 170 (Kennedy, J., dissenting). Judge Block adopted the following approach:

[W]here relevant acquitted conduct produces the same sentencing result as if the defendant had been convicted of that conduct, or significantly increases the Guidelines range, downward departure invariably is warranted. Slip op. 8.

As to relevant uncharged conduct, the court suggested, the authority to depart downwardly should require an extraordinary combination of factors such as those set forth in United States v. Cordoba-Murgos, 233 F.3d 704 (2d Cir. 2000) i.e., "(i) an enormous upward departure adjustment (ii) for uncharged conduct (iii) not proved at trial and (iv) found only by a preponderance of the evidence, (v) where the court has substantial doubts as to the accuracy of the finding." Id. at 709.

Here, the same 15-level enhancement would have applied even if Mr. Rozbicki had been found guilty on all six counts. Judge Block found this in itself a sufficient basis to depart.

Judge Block found two other grounds for a downward departure. First, the four-level minimal role reduction did not adequately reflect the utterly menial and peripheral role played by Mr. Rozbicki in this $11 million conspiracy. Second, Mr. Rozbicki’s rehabilitative efforts after his arrest permitted some consideration in combination with either basis for "relevant conduct" departure. As Judge Block recognized, this finding could lead to further litigation on a variety of issues (e.g., the timing of the rehabilitation, waiver by the government, and ex post facto protections). Slip op. 12 at n.6.

Jurisdiction

In In re Ciprofloxacin Hydrochloride Antitrust Litigation, MDL-00-1383 (EDNY, Oct. 1, 2000), Judge David G. Trager granted plaintiffs’ motions to remand to state court eight putative class actions against Bayer A.G. and its American subsidiary. The actions, which were filed in state court and removed by defendants on the grounds of federal question and diversity jurisdiction, claim that defendants violated state antitrust laws and related state statutes by agreeing to prevent competition by generic drug manufacturers in the market for the antibiotic ciprofloxacin hydrochloride. Finding no federal question jurisdiction because each of the causes of action was brought under state law, Judge Trager rejected defendants’ contention that federal question jurisdiction applies because plaintiffs’ state law claims implicitly raise a question of federal patent law. The court also found that the amount in controversy in each action was insufficient to support diversity jurisdiction except as to large institutional plaintiffs in two of the actions whose claims exceeded $75,000.

The Bayer defendants manufacture Cipro, the best-selling antibiotic in the world for the past eight years. As Judge Trager noted, Bayer has earned more than $1 billion from sales of Cipro in the United States alone. Bayer claims the active ingredient in Cipro, ciprofloxacin hydrochloride, under a U.S. patent issued in 1987. Since 1987, Bayer has been the only producer of ciprofloxacin in the United States. In 1991, defendant Barr Laboratories Inc. (a competitor of Bayer) filed an application to produce a generic version of Cipro. In its application, Barr contended that Bayer’s patent was invalid and unenforceable. Bayer responded by initiating a patent suit against Barr. In 1997, the parties in the patent suit, as well as certain of the other defendants in the class actions, entered into a settlement agreement pursuant to which Bayer agreed to pay Barr and the other defendants over $100 million, and Barr agreed to drop its challenge to the validity of Bayer’s patent and its plans to market generic ciprofloxacin.

Settlement Agreement

The settlement agreement inspired nearly 30 lawsuits, including eight class actions which were consolidated by the Panel on Multidistrict Litigation and transferred to Judge Trager. Those class actions, brought by indirect purchasers of Cipro, allege that defendants unlawfully restrained trade in the market for ciprofloxacin, and effectively eliminated the possibility of generic competition. Plaintiffs allege that defendants violated the antitrust and consumer protection laws of the states in which the various suits were filed, and caused the plaintiffs injury because, but for the settlement agreement, plaintiffs would have had access to generic ciprofloxacin at a price lower than that charged for the brand name drug, Cipro.

In asserting federal subject matter jurisdiction, defendants argued that plaintiffs’ claims "arise under" federal patent law insofar as the court must first resolve the validity of Bayer’s patent since Barr could not have lawfully entered the market unless the patent was invalid. Judge Trager rejected that argument, noting that under Christianson v. Colt Industries Oper. Corp., 486 U.S. 800 (1988), a claim arises under federal patent law only where each and every theory of liability advanced by plaintiffs depends upon resolution of a patent law question. Judge Trager, citing Andrx Pharmaceuticals v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001), found that plaintiffs had asserted at least one theory by which they may establish state antitrust violations without resorting to a determination of patent law.

With regard to diversity jurisdiction, Judge Trager found that under Second Circuit precedent, even if one or more of plaintiffs’ claims exceed the jurisdictional minimum (as was apparently the case with respect to some large institutional plaintiffs), a district court is not permitted to exercise supplemental jurisdiction over the remaining class claims which do not exceed the $75,000 threshold. Moreover, defendants had not met their burden of showing that plaintiffs’ claims for injunctive relief (which may not be aggregated for this purpose), assessed from the plaintiffs’ rather than defendants’ viewpoints as required by the Second Circuit, satisfy the jurisdictional minimum. Defendants’ request to consider attorneys’ fees in calculating the amount in controversy was rejected because an award of attorney’s fees is not mandated by statute or contract.

Discrimination

In DeSenso v. Coney Island Hospital, 96 CV 3219 (EDNY, Sept. 4, 2001), Judge Raymond J. Dearie granted summary judgment for defendants on plaintiff’s claims of discriminatory discharge, retaliation and failure to provide a reasonable accommodation in violation of the Americans With Disabilities Act and New York State Executive Law. Judge Dearie denied summary judgment on plaintiff’s Rehabilitation Act claim of failure to accommodate.

Defendant Coney Island Hospital employed plaintiff as a nurse from February 1988 through November 1994. In September 1988, while administering chemotherapy to a patient, plaintiff suffered a severe asthmatic attack. She suffered similar asthmatic responses to chemical agents in 1989 and 1990. Following the first attack, plaintiff began missing workdays. Many of her absences were "patterned," meaning that they occurred before or after a weekend, holiday or scheduled day off.

In March 1990 and July 1991, the hospital sent plaintiff warning notices concerning her patterned absences. In February 1992 the assistant personnel director sent her a memorandum stating that her absences disrupted patient care. Plaintiff’s absences continued, and in July 1993 the hospital charged her with excessive absenteeism. After a hearing in August 1993, despite notes from her doctors, the charges were upheld, her request for an alternative work schedule was rejected for a second time and her objected-to reassignment to a day shift was upheld. In settlement of October 1993 absenteeism charges, the hospital issued plaintiff a final warning and withdrew the charges. Plaintiff ceased coming to work as of Nov. 8, 1993, and in December 1993 the hospital approved her request for retroactive medical leave without pay. The hospital extended plaintiff’s medical leave until November 1994, when it terminated her employment on the ground that she had been continuously absent for over a year.

Between 1990 and 1994, plaintiff filed various Workers’ Compensation claims. In November 1992, despite the hospital’s challenge, the Workers’ Compensation Board determined that plaintiff suffered from a permanent partial disability and awarded her Worker’s Compensation benefits for 138 missed work days. On January 1995, the Workers’ Compensation Board determined that plaintiff had a permanent total disability as of November 1993 and awarded her $300 per week, retroactive to November 1993. In November 1992, three months after the first excessive absenteeism charge was filed against her, plaintiff filed a Workers’ Compensation Discrimination complaint charging that the hospital had retaliated against her for filing her benefits claim by issuing warnings and charging misconduct. The Workers’ Compensation Board dismissed her retaliation claim following the settlement of all pending excessive discharge claims against plaintiff.

Concerning plaintiff’s ADA accommodation claim, Judge Dearie determined that plaintiff was not otherwise qualified for her job at the time of her discharge because she had been unable to work at all on any schedule since December 1993. Thus, the hospital’s failure to accommodate her requests for a reduced schedule was irrelevant, because the ADA is intended to prevent employers from terminating disabled persons who are capable of performing their jobs.

Exclusivity Provision

Next, Judge Dearie held that plaintiff’s state law retaliation claim arising out of the filing of her Workers’ Compensation discrimination claim was barred by the exclusivity provision of the New York Workers’ Compensation law, which provides the exclusive remedy for work-related injuries. With respect to her federal retaliation claims, plaintiff established that the hospital was aware of her discrimination claim with the Workers’ Compensation Board.

In addition, she had suffered an adverse employment action by her reassignment, charges of excessive absenteeism and discharge after she filed her discrimination claim. The court found, however, that plaintiff had failed to make out a prima facie case of retaliation, because she could not demonstrate a causal connection between the filing of her discrimination claim and the subsequent adverse employment actions that began with her reassignment approximately six months later. Slip op. 15.

While the court determined that there was a genuine issue of material fact regarding the reasonableness of the hospital’s accommodation efforts, it found plaintiff’s ADA accommodation claim to be time-barred, because the very last possible act in furtherance of any continuing policy did not occur within 300 days of plaintiff’s filing of her EEOC complaint.

Turning to the three-year statute of limitations for plaintiff’s Rehabilitation Act accommodation claim, Judge Dearie stated:

If a jury finds a continuing violation did exist, then the Rehabilitation Act claim is timely because [plaintiff] can point to timely acts in furtherance of the continuing violation, namely the Hospital’s refusal to remove [plaintiff] from Tour II [the day shift] before she became completely disabled in December 1993. Slip op. 24.

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

[Reproduced with permission from New York Law Journal Volume 226, Friday, November 9, 2001.  Copyright 2001 ALM Properties, Inc.  All rights reserved.]