MEDIA

January 15, 2016

Warning Against Grand Jury Subpoenas With Non-Disclosure Commands

Published in: New York Law Journal | volume 255

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 Frederic Block granted a motion to suppress a firearm seized during a pat-down search on the street. Judge Raymond J. Dearie warned the government of possible sanctions in future cases if its grand jury subpoenas improperly directed recipients not to disclose the existence of the subpoenas. Judge Jack B. Weinstein found no long-arm jurisdiction over a Chinese company that manufactured a bicycle handlebar. And Judge Weinstein declined to dismiss a case or transfer it back to New Jersey under the first-to-file rule, where the Eastern District of New York had established jurisdiction first.

 

Illegal Search

In United States v. Williams, 15 CR 192 (EDNY, Dec. 17, 2015), Judge Block, crediting the testimony of defendant’s brother over that of two police officers, found no reasonable suspicion to justify a search of defendant resulting in the discovery and seizure of a loaded firearm.

Defendant was charged with possessing a loaded firearm on his person in violation of 18 U.S.C. §922(g)(1). He moved to suppress the gun as obtained pursuant to an unlawful search. Following a suppression hearing, the court granted the motion in a brief opinion. The government’s notice of appeal prompted Block to file the instant Supplemental Memorandum to give the U.S. Court of Appeals for the Second Circuit the benefit of a more detailed analysis of the evidence.

Here, the government failed to meet its burden of proving by a preponderance of the evidence that the officers who searched defendant on the street without a warrant had at least a reasonable suspicion that he was armed and dangerous.

At the hearing Officers O’Brien and Costello testified about the stop and search of defendant at around 12:45 a.m. on Oct. 23, 2014. In brief outline, the officers testified that they were in plainclothes, driving in an unmarked Chevrolet Impala, which many residents in the area would recognize as a police car, when they saw defendant and his brother, Hasheem Slaughter, walking on a Lexington Avenue sidewalk in Brooklyn toward the direction of the oncoming Impala. The two officers claimed to have seen defendant use one hand to pull up the side of his sweatshirt, revealing “the black grip of a firearm” tucked into his pants. This, the officers asserted, caused them to stop the car and search defendant.

Slaughter testified that, on the evening in question, he saw defendant stick a firearm in his long-john bottoms before they left a party in Bushwick. Later, as they were walking on Lexington Avenue, Slaughter saw two unmarked Impalas approach and he knew they were police cars. The officers in the second Impala got out and asked, “Do you guys have anything on you?” Though both replied no, one officer patted Slaughter down, yielding no weapons or drugs. Then, patting down defendant, the officers found the firearm. Defendant and his brother were arrested. According to Slaughter’s testimony, during their walk defendant never lifted his shirt to display his gun.

The court found the government’s testimony “questionable in several respects.” For example:

  • Given the recognizable police presence in the area, it seemed “far-fetched” that defendant would lift his shirt to reveal his gun for no purpose. Asked if this scenario was plausible, Officer Costello stated: “I understand it sounds crazy[.]”
  • The officers contradicted each other in their testimony as to who held defendant’s arms while the firearm was removed.
  • As described by the officers, their acts and omissions in approaching the two men, one of whom was allegedly known to be armed, appeared dangerous. Before stepping out of their car, the officers did not ask for police back-up though other officers were known to be nearby. Nor did the officers instruct the two men to put their hands up or on their heads. There were other questionable details, such as the failure to have frisked Slaughter before allowing him to “[stand] off to the side” while the officers “focused” on searching defendant, despite the possibility that Slaughter too could have had a gun. Both officers acknowledged that this purported procedure had its perils. Slip op. 11.

Slaughter’s testimony, on balance, was more credible. Slip op. 12.

 

Grand Jury Subpoena

In United States v. Gigliotti, 15 CR 204 (EDNY, Dec. 23, 2015), Judge Dearie denied the motion of defendants Gregorio Gigliotti, his wife and their adult son to exclude evidence obtained pursuant to grand jury subpoenas with improper non-disclosure commands, but cautioned the government that continuing this practice could result in sanctions.

Pursuant to a superseding indictment filed on May 6, 2015, these three defendants and another were charged with six offenses, including importation of cocaine. One of the grand jury subpoenas, issued to the defendant son’s accountants on May 11, 2015, contained the following language:

YOU ARE HEREBY DIRECTED NOT TO DISCLOSE THE EXISTENCE OF THIS SUBPOENA, AS IT MAY IMPEDE AN ONGOING INVESTIGATION.

In October 2015 the court ordered the government to file a report detailing how extensively such language has been used in its grand jury subpoenas, the procedures for review of subpoenas, and the steps taken to prevent similar improprieties in the future. Acknowledging the impropriety of the non-disclosure language, the government stated that it was not the practice and policy of the Eastern District to include this language in grand jury subpoenas. Rather, absent a court order or statutory authority, its policy was to include a request, but not a command, for non-disclosure. Here, the government added, it had sent out letters to the three recipients of subpoenas with the unlawful language advising them that the language was included in error and they were under no obligation not to disclose the receipt of or responses to the subpoenas. In addition, the office would make all future requests for non-disclosure by separate cover letter and not on the face of the subpoena. Slip op. 2-3.

Dearie expressed serious concern about the improper directives to subpoena recipients, noting that neither Federal Rule of Criminal Procedure 6(e)(2)(A) or (B) nor the Supreme Court imposes grand jury secrecy on witnesses. The question here was whether suppression of evidence was an appropriate remedy.

In United States v. Blumberg, No. 3:97-CR-119 (EBB), 1998 WL 136174 (D. Conn. Mar. 11, 1998), involving a similar demand for non-disclosure, the Connecticut court found that contacting witnesses and explaining the error was sufficient. Dearie similarly concluded that, at this stage, suppression was neither supported by law nor warranted.

Dearie finished with a warning to the government: Although suppression was a drastic remedy, suppression or other significant sanctions might be warranted if this practice continued. The government’s response to the court’s request for an explanation of the scope of the problem was not adequate, and the government had not taken adequate steps to prevent future violations. Dearie concluded: “The government proceeds at its peril.” Slip op. 8.

 

Long-Arm Jurisdiction Denied

In Boyce v. Cycle Spectrum, 14 CV 1163 (EDNY, Dec. 8, 2015), Judge Weinstein found that a Chinese manufacturer that had made a part used in the manufacture of a bicycle sold into New York was not amenable to suit under the New York long-arm statute.

Plaintiff suffered injuries when the handlebar on his bicycle broke. He sued Spratt Cycle Support, Inc., which had sold him the bicycle pre-assembled, along with various companies that had provided parts. One of these was HL Corp. (USA), an affiliate of HL Corp. (Shenshen): China (HL Corp. China), which had made the handlebar. After Weinstein dismissed HL Corp. (USA) for lack of personal jurisdiction, 303 F.R.D. 182, 186 (E.D.N.Y. 2014), HL Corp. China was named in third-party complaints by several of the remaining defendants, and moved for dismissal on jurisdictional grounds.

Jurisdiction was lacking under CPLR 302(a)(1) because HL Corp. China did not “transact[] any business with the state or contract[] anywhere to supply goods or services in the state”, as required by the statute. It supplied the handlebar it had made to an intermediary in Taiwan, and “had no knowledge of where” it went thereafter. Slip op. 5. While the website of HL Corp. China was accessible in New York, it was not interactive as required to support a finding of sufficient contacts. Evidence of a single sale of medical equipment into New York by HL Corp. (USA) was irrelevant: its relationship to HL Corp. China was not established, it had already been found to be beyond the reach of the long-arm statute, a sale of medical equipment would lack the required nexus to the claim, and one such sale is in any case de minimis. Slip op. 19-22.

Jurisdiction was lacking under CPLR 302(a)(3) because, even accepting the well-pleaded allegation that HL Corp. China committed a tort outside the state which caused plaintiff’s injuries within the state, the other requirements of the statute were not satisfied: “The evidence indicates that HL Corp. [China] does not engage in any regular business in New York” or “receive any substantial revenue from goods used in New York,” and “a general awareness that its products might end up in New York, a large market for bicycles[,]…is insufficient to satisfy the statute.” Slip op. 22. Weinstein also noted that, while it was unnecessary to reach the constitutional issue, “due process would be violated were the court to exercise personal jurisdiction over HL Corp. [China] in this case.” Slip op. 23.

As the court observed, its holding that “a company that exploits the United States’ marketplace generally at the national level should be effectively immune from suit in the country for injuries caused by its products” was “not consistent with the way in which the modern global economy operates.” Weinstein referred back to an opening discussion regarding how the unfairness and inefficiency of insisting on minimum contacts with a forum state, rather than with the United States as a whole, might be addressed “in a treaty or standard contract provision.” Slip op. 23; 2-3.

 

First-to-File Doctrine

In AEI Life v. Lincoln Benefit Life Company, 14 CV 6449 (EDNY, Dec. 21, 2015), Judge Weinstein denied defendant’s motion, based on the first-to-file doctrine, to dismiss, stay or transfer the case to New Jersey. The proper venue lay in the court that established jurisdiction first—the Eastern District of New York.

Under the first-to-file rule, a court may stay an action involving the same parties, issues and facts as an action previously filed and pending in another court. The first action filed was in New Jersey in June 2013. In that case, Lincoln Benefit Life Company claimed that AEI Life, LLC and other defendants “illegally sought to benefit from a stranger-owned life insurance scheme (STOLI) in collusion with the insured.” The New Jersey court dismissed the action for lack of subject matter jurisdiction, and on Sept. 2, 2015, the U.S. Court of Appeals for the Third Circuit vacated the dismissal.

In the second action, filed Sept. 3, 2014, in the Supreme Court of New York, Kings County, while the appeal to the Third Circuit was pending, AEI was the plaintiff seeking: damages for LBL’s breach of the policy by bringing a federal action in New Jersey; and a declaration that LBL was barred from challenging the validity of the policy. The case was removed to the Eastern District on diversity grounds. LBL made a motion to dismiss or stay in December 2014, on the ground that the first-to-file rule required dismissal. That motion was denied because the New Jersey action had been dismissed for lack of jurisdiction.

Following the Third Circuit reversal of the New Jersey District Court’s decision dismissing the case, LBL renewed its motion to dismiss or stay the New York action based on general principles of comity and judicial efficiency because the New Jersey action had been filed first. The court addressed the motion as one to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3).

Under the first-to-file rule, the first action filed has priority based on an inference in favor of proceeding in the forum where the first action was filed. The application of the rule should not be rigid or mechanical, and the court that first obtained jurisdiction over the parties and issues—here, the Eastern District—should proceed with the litigation. This is particularly true where, as here, the Eastern District lawsuit, though the second action, has progressed substantially further than the initial action. In fact, discovery in the Eastern District litigation was substantially complete and the case had been certified trial-ready.

Finally, the “balance of convenience” analysis demonstrated that the Eastern District was the appropriate venue: (1) AEI was entitled to deference in choosing the forum; (2) New York was not less convenient than New Jersey for the Nebraska defendant; (3) relevant documents and sources of proof were likely located in New York; (4) the locus of operative facts was in New York; (5) essential witnesses resided in New York and were under the court’s subpoena power; and (6) the means of the parties was not a factor. Slip op. 11.

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.