MEDIA

January 9, 2004

Preemption of State Tort Claims, Preclusion of Psychiatric Evidence

Published in: New York Law Journal | volume 231
Written by: Peter R. Schlam and Harvey M. Stone

In the U.S. District Court for the Eastern District of New York, Judge Frederic Block dealt with an issue undecided by the U.S. Court of Appeals for the Second Circuit: Whether federal drug laws preempt state tort claims. Amid another slew of decisions ruling on habeas petitions challenging state court convictions, Judge Jack B. Weinstein granted the writ in a case where petitioner’s expert psychiatric testimony had been erroneously precluded. And Judge Nina Gershon declined to dismiss shareholder claims alleging violations of the Williams Act’s "Best Price" provision.

Preemption

In Drake v. Laboratory Corp. of American Holdings, 02 CV 1924 (Nov. 18, 2003), Judge Block dismissed all federal claims brought against a drug-testing laboratory and related defendants by a former Delta Airlines flight attendant, but retained jurisdiction over plaintiff’s state law claims and certified for appeal the question of whether federal drug testing laws in the Federal Omnibus Transportation Employee Testing Act (OTETA) and relevant regulations preempt state common law tort claims.

Plaintiff was terminated by Delta in 1993 after a series of tests upon his randomly collected urine sample had yielded varying results. Plaintiff filed claims against Delta and the Federal Aviation Administration (FAA), which proved largely unsuccessful (except for his challenge to the validity of the random selection process, which is still pending). Plaintiff then sued "those entities and individuals who he claims were responsible for furnishing false drug information to Delta, which served as the basis for his termination." As to these defendants, plaintiff asserted federal claims under the Fourth and Fourteenth amendments, and state law claims for negligence, tortious interference with economic relations, misrepresentation, negligent infliction of emotional distress, spoliation of evidence and conspiracy.

In its Fourth Amendment pleading, the complaint alleged material defects in the manner of testing and reporting results for plaintiff’s urine, but did not contend that his Fourth Amendment privacy rights were violated by defendants in the collection process. Since plaintiff’s allegations in this regard related to "testing procedures" rather than "physical invasion," the court found that "vindication cannot come by way of the Fourth Amendment" (slip op. 14-15), and dismissed these claims.

The complaint’s Fourteenth Amendment claims were also dismissed. Here, plaintiff had alleged "that defendants’ failure to preserve and maintain his records and urine samples, as required by FAA regulations, supports a due process claim because it deprived him of an opportunity to ‘challenge the drug test or pursue legal action,’ ”’ and that "by being falsely labeled a drug user, he suffered a loss of his Fourteenth Amendment liberty interest to pursue his profession ‘free from stigma.’ ”’ Slip op. 16.

Judge Block found these allegations insufficient to state a due process claim (even assuming, for sake of argument only, that the defendants were "state actors" for these purposes.). First, as an at-will employee, plaintiff did not have a protected liberty or property interest in his continued employment. Second, as to the allegations of "stigma" implicating a "cognizable liberty interest," while it is unclear exactly what circumstances, in addition to defamation, are minimally sufficient to meet the "stigma plus" standard of Abramson v. Pataki, 278 F3d 93, 101 (2d Cir. 2002), review of Second Circuit precedents showed that "[t]here is no such comparable right or status in this case." Slip op. 19.

However, the court denied defendants’ motion to dismiss the state law claims on grounds of preemption under the OTETA. After acknowledging that "[n]either the Supreme Court nor the Second Circuit has yet to decide" the preemption issue in this area," slip op. 21, Judge Block proceeded with a thorough review of the diverse factors affecting the question, including a recent split between the U.S. Court of Appeals for the Fifth and Ninth circuits. Slip op. 20-40. Judge Block found that: (1) express preemption was not warranted because the preemption provisions of the OTETA were precisely defined and "were never intended to impact any common law tort claims, but were only intended to bar positive state enactments" (emphasis in original); and (2) implied preemption was not appropriate "since an express preemption clause creates an ‘inference’ that implied preemption is ‘foreclosed’ …, because it shows that Congress never intended to occupy the entire drug testing field or place state common law torts in conflict with the federal law." Slip op. 41-42 (internal citation omitted).

Judge Block concluded by retaining jurisdiction over the state law claims, based upon consideration of "all the factors set forth in the Second Circuit’s recent decision in Valencia [v. Lee, 316 F3d 299 (2d Cir. 2003)], governing the retention of supplemental jurisdiction." Slip op. 45. "It would be an act of unkindness and a manifestation of judicial insensitivity," the court stated, "to relegate [plaintiff] to yet another litigation in his decade-long odyssey in search of justice." Id.

Finally, noting the "substantial ground for difference of opinion" on the question of whether the OTETA preempts state common-law tort claims (as reflected by the split in the circuits) and the potentially dispositive nature of that question, the court certified the issue for interlocutory appeal under 28 USC § 1292(b).

Habeas Corpus

Preclusion of Psychiatric Evidence. In Pulinario v. Goord, Superintendent of Bedford Hills Correctional Facility, 02 CV 3681, 03 MISC 0066 (EDNY, entered Nov. 7, 2003), Judge Weinstein, granting a writ of habeas corpus, held that the state trial judge violated petitioner’s Sixth Amendment rights by erroneously precluding expert evidence of post-traumatic stress disorder (PTSD) and rape trauma syndrome (RTS), thereby eviscerating petitioner’s defenses to a charge of second-degree murder. Petitioner, who had been sexually abused as a child, claimed that she shot and killed the victim in this case because he had once raped her and was about to do so again. Petitioner was 21 years old at the time of the homicide and had an IQ of 70. She was sentenced to incarceration for 25 years to life.

According to petitioner’s defense at trial, the shooting victim, Imagio Santana, had forced her to have sex with him. A few days later, when she confronted him about the rape, he allegedly laughed and threatened to rape her again. Attempting to prevent a second attack, and still traumatized by the first attack, she shot him.

The trial judge initially denied the prosecution’s motion to exclude evidence on PTSD and RTS. After two weeks of testimony, however, the court reversed itself, precluding testimony from the defense expert on these conditions and how they affected petitioner. The trial judge held that preclusion was justified under New York Criminal Procedure Law § 250.10(5), which required a defendant who raised a psychiatric defense to cooperate fully during a psychiatric examination by the prosecution’s expert. In finding a lack of full cooperation, the trial judge pointed to petitioner’s admission on cross-examination that, during her examination by the prosecution’s expert, she had lied about certain matters, including her denial that she had ever, at any time, had consensual sex with Santana.

The trial court precluded all testimony by the defense expert on PTSD and restricted the expert’s testimony on RTS to a general explanation of how RTS might affect a rape victim’s timing in reporting a rape. The defense expert was not allowed to relate this condition specifically to petitioner’s situation or to explain why instances of petitioner’s untruthfulness during pretrial examinations were symptomatic of her psychiatric conditions.

The trial court’s mid-trial reversal crippled the defense theory that, at the time of the shooting, she suffered from PTSD and RTS, and that she thus lacked criminal responsibility by reason of mental disease or defect (which would require an acquittal), or suffered from an extreme emotional disturbance (which would require an acquittal on the murder charge but allow a possible conviction on the less serious charge of manslaughter). The preclusion of expert testimony also impaired petitioner’s third line of defense, that she was justified in shooting Mr. Santana as an act of self-defense to an impending rape.

As Judge Weinstein observed, courts in New York and elsewhere have permitted testimony on PTSD and RTS to explain to juries why rape victims may sometimes, to prevent being disbelieved, be untruthful about aspects of their personal history. Here, the extreme sanction of preclusion violated petitioner’s Sixth Amendment right to a complete defense. "The discrepancies between her trial testimony and her statements to the prosecution’s psychiatrist," Judge Weinstein stated, "were an appropriate subject for cross-examination, but did not rise to the level of a willful flouting of the court’s authority that would justify wholesale preclusion of otherwise critical evidence." Slip op. 8.

Neither the trial court nor the Appellate Division, Judge Weinstein noted, analyzed the impact of petitioner’s psychiatric condition on her conduct in pretrial examinations, even though her PTSD and RTS were vital to the issue of whether her untruths were "willful" and motivated "to gain a tactical advantage." Nor did the state courts here address the question of prejudice to the prosecution or the use of alternative sanctions. The preclusion of expert testimony was thus "contrary to" and an "unreasonable application of" Supreme Court decisions. See Taylor v. Illinois, 484 US 400 (1986).

As Judge Weinstein added: "It would be both illogical and unjust to preclude evidence of the defendant’s psychiatric condition because the defendant manifested the symptoms of that psychiatric condition." Slip op. 36. Rather than preclusion, the issue of a failure to cooperate "should be put to the jury, which would make the ultimate finding on the credibility of a defendant’s mental defect defense." Slip op. 40. And any prejudice to the district attorney could have been alleviated by, for example, granting a short continuance of the trial to allow its expert to question petitioner further and, then, to testify about petitioner’s untruths.

Finally, the defense was "sandbagged" when the legs were cut off of its central theory some two weeks into the trial. Slip op. 43-45.

Williams Act Claims

In In re Luxottica Group SpA, Securities Litigation, 01 CV 3285 (EDNY, Nov. 26, 2003), Judge Gershon denied defendants’ motions to dismiss shareholders’ claims that defendants violated the "Best Price" provision of the Williams Act, § 14(d) of the Securities Act, 15 USC § 78n(d).

Defendant Luxottica, an Italian corporation, was interested in acquiring Sunglass Hut, a speciality retailer of sunglasses and watches. Defendant Leonardo Del Vecchio, the owner of 69 percent of Luxottica shares, negotiated primarily with defendant James Hauslein, Sunglass Hut’s chairman of the board and owner of approximately 4 percent of Sunglass Hut outstanding shares. On behalf of Sunglass Hut, Mr. Hauslein rejected several offers, bidding the offering price up from $8.50 per share to $11.50 per share. Finally, Luxottica offered Mr. Hauslein a noncompetition and consulting agreement. Once the merger was consummated, Luxottica would pay Mr. Hauslein $15 million, in monthly installments of $250,000, if Mr. Hauslein made himself reasonably available to Luxottica. In contrast, Mr. Hauslein’s employment agreement with Sunglass Hut provided for a $375,000 annual salary and required all his working time. Upon Mr. Hauslein’s recommendation and disclosure of the consulting agreement, the board of Sunglass Hut approved the tender offer and recommended that the shareholders accept it. Mr. Hauslein then signed the consulting agreement.

Plaintiffs alleged that Luxottica and its subsidiary violated the "Best Price" provision of § 14(d), by providing Mr. Hauslein with a better price for his shares than was given to other shareholders. Denying defendants’ motion to dismiss, Judge Gershon found that under the Second Circuit’s flexible pleading standard for Best Price Rule cases, plaintiffs had sufficiently alleged that the characteristics of the consulting agreement made it "functionally inseparable from the Tender Offer." As the court also found, "defendants had attempted to avoid the Williams Act by paying a premium to Mr. Hauslein shortly before commencing the Tender Offer." Slip op. 11. The consulting agreement advanced the acquiring company’s goal of obtaining Sunglass Hut’s shares, and the payments made to Mr. Hauslein may be considered additional compensation for his stock in violation of the Williams Act. Thus, the facts alleged by plaintiffs were sufficient to establish that defendants’ true purpose brought them within the Williams Act, and defendants could not show, as a matter of law, that the consulting agreement did not provide increased consideration for a sale of securities in violation of the Williams Act.

Judge Gershon also dismissed plaintiffs’ § 10(b) claims, but denied defendants’ motion to dismiss allegations of breach of fiduciary duty. Slip op. 22.

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

[This article is reprinted with permission from the January 9, 2004, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]