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Current Developments in the US District Court for the
Eastern District of New York
Posted: November 6, 2013

Attempt To Lift Officer–Director Bar Fails

In SEC v. Alexander, No. 06 CV 3844 (E.D.N.Y. Oct. 24, 2013), Judge Nicholas Garaufis denied a motion by the former CFO of Comverse to modify a consent judgment.  Facing charges that he participated in a scheme to backdate stock option grants in Comverse stock, David Kreinberg had pleaded guilty in 2006 and entered into a consent order with the SEC in which he agreed never again to be an officer or director of a public company.  Kreinberg sought to remove the officer and director bar, claiming that it caused him to forego numerous employment opportunities.

The Court first noted that motions for reconsideration of a final judgment are generally disfavored and require a showing of exceptional circumstances.  That showing needed to be even stronger here where the judgment at issue was on consent, described by the court as “basically [] a contract.”  The Court rejected Kreinberg’s arguments that his seven years of good behavior and extensive cooperation warranted lifting the bar.  Instead, Kreinberg was held to his bargain:

Defendant’s underlying conviction has not been overturned.  Defendant knew, when he agreed to the bar, that he was forfeiting future potential earnings.  As a financial professional, he would be aware of the ramifications of such as choice.  Having weighed the costs and benefits, he chose the bar over further negotiations or litigation of the issue.  And he received not only the benefits of quick settlement of his civil case, but extreme leniency in criminal sentencing as a direct result of his civil settlement.  To put the SEC to its proof on the issue of the bar, he might have had to risk greater sanctions.  That he miscalculated, if indeed he did, is not a reason to revise his bargain absent the showing of any extraordinary hardship.

Slip. op. at 8 (citation omitted).

Posted: November 5, 2013

Three-Judge Panel Holds That Defendant Sued In One Capacity Cannot Bring Cross-Claim In A Different Capacity

The October 29 Memorandum and Order in Favors v. Cuomo, No. 11 CV 5632 (E.D.N.Y. Oct. 29, 2013), is the third decision of the three-judge panel presiding over challenges to New York’s state and federal legislative redistricting, which the Panel earlier noted courts have come to expect “at predictable ten year intervals” coinciding with the census.  After a pair of 2012 decisions that dealt more directly with the merits of the plaintiffs’ challenges under the Constitution and Voting Rights Act, see 881 F. Supp.2d 356 (E.D.N.Y. 2012), and 2012 WL 928223 (E.D.N.Y. March 19, 2012), the motion addressed in the October 29 order provided an occasion for the Panel (consisting of Circuit Judges Raggi and Lynch and District Judge Irizarry) to clarify a point of civil procedure that is not limited in application to decennial challenges to legislative redistricting plans.

The defendants in the case include New York State Senators from the majority and minority parties.  The minority members asserted a cross-claim against the majority members alleging that the majority’s proposed redistricting plan violated the equal population requirement of the Fourteenth Amendment, which requires that each of the state’s electoral districts have equal populations, in order to conform to the principle of one person, one vote.  See Favors v. Cuomo, 2012 WL 928223, at *3 (E.D.N.Y. March 19, 2012).  The majority members moved to dismiss the cross-claim for lack of standing and res judicata.  The Panel granted the motion based on the standing argument, and declined to rule on the res judicata argument.  The court ruled that the legislators, who are sued in their official capacities, do not have the requisite personal stake in the equal population claim to confer standing on them to bring the claim.  In other words, the Court rejected the concept of “legislative standing.”   No new ground there.

What is new, the Panel explained, was the next step:  the Panel went on to hold that even if the minority party legislators could establish that they were personally harmed as voters in underrepresented voting districts, so as to give them a personal stake in the equal population claim, they would not be permitted to assert a cross-claim in their personal capacities when they had been sued in their official capacities.  The minority argued that their cross-claim should be allowed under Rule 13(g), which permits a “party” to bring a cross-claim against a “co-party.”  Finding nothing in the Circuit case law or Advisory Committee notes interpreting these terms, the Panel imported the Circuit’s interpretation of analogous language in the rule for permissive counterclaims, which also refers to an “opposing party” bringing a counterclaim.  The Circuit has interpreted that language to mean that a defendant sued in one capacity cannot bring a counterclaim in another capacity.  The rationale is that “each of a person’s different legal capacities constitutes a separate “’party.’”  Under Favors v. Cuomo, this rule now applies to cross-claims, meaning that a defendant sued in one capacity will not be permitted to bring a cross-claim in a different capacity.

Posted: October 30, 2013

Punitive Damages Award In Big Pharma Case Reduced From $10 Million To $900,000

In Davids v. Novartis Pharmaceuticals Corp., 06 CV 431 (E.D.N.Y. Oct. 9, 2013), Judge Spatt resolved post-trial motions  in a case involving the defendant’s alleged failure to warn plaintiff of potential dangers posed by an anti-cancer drug called Zometa.  A jury awarded plaintiff $450,000 in compensatory damages and $10,000,000 in punitive damages because the drug caused her to develop a type of osteonecrosis of the jaw.

Defendant’s first motion sought a new trial based on evidence that the jurors had possibly consulted a dictionary to find the definition of “wanton” while considering punitive damages .  The Court held that defendant’s evidence, affidavits submitted by jury consultants who contacted the jurors after trial, consisted of “speculation . . . and first and second level hearsay.”  Without more, such as an affidavit from one of the jurors, the Court denied the motion.

Defendant’s second motion sought to reduce the punitive damages award.  The parties acknowledged that under the applicable New Jersey statute, punitive damages were capped at five times the compensatory award, or $2.25 million.  The Court then analyzed whether $2.25 million was appropriate under both the New Jersey statute and under a federal due process analysis.  After considering defendant’s conduct—specifically, that defendant “was warned by several doctors of the connection between Zometa and [plaintiff’s jaw condition] and yet decided to not only ignore these warnings, but to even undermine them”—the Court determined that punitive damages were warranted, but in a lower amount based on Second Circuit precedent.  The punitive damages award was reduced from five times compensatory to two times compensatory, or $900,000.

The Court denied plaintiff’s motion for prejudgment interest, citing authority that New Jersey does not permit prejudgment interest on punitive damages.

Posted: October 28, 2013

Disparate Treatment Claim Dismissed For Lack Of Nexus

In Forgione v. The City of New York, et al., 11 CV 5248 (E.D.N.Y. Oct. 17, 2013), Judge Gleeson granted summary judgment for the police department and two of its officials, dismissing disability discrimination claims brought by a police captain under the New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.  (The court also dismissed retaliation claims brought under City law as well as under the New York State Human Rights Law and the Americans with Disabilities Act.)  The New York City law is broader than its federal counterpart in significant respects, including by not requiring a plaintiff to demonstrate that his claimed disability impedes a major life activity or that he was subjected to an “adverse employment action” because of the disability.  To prevail, Forgione only had to prove that he was treated differently, not that the “treatment was particularly severe or adverse.”  Thus, the disparate treatment claim was dismissed not because Forgione failed to show substantial damages, but because there was an insufficient nexus between the supervisor’s actions and his perception of the plaintiff’s disability.

Plaintiff Ralph Forgione was a police captain who alleged he was perceived as having post-traumatic stress disorder after telling his supervisor that his (Forgione’s) father had murdered his mother when he was 18 years old, and that his being referred to Psychological Services for a fitness-for-duty evaluation constituted “different” treatment.  After the assessment, he was cleared for duty, and the opinion does not state whether Forgione claimed to have lost any pay or status as a result.  However, the City demonstrated that no nexus existed between the perceived status and the referral by showing that the real basis for the referral was an incident in which Forgione had instructed a subordinate to make a false report to their superiors, and Judge Gleeson dismissed the disparate treatment claim on that ground.

But try a thought experiment with all the same facts, except that in the hypothetical, the City did send Forgione for a psychological assessment because Forgione told his supervisor that his father murdering his mother, and Forgione is then cleared for duty just as he was in the case before Judge Gleeson.  Would that state a claim for disparate treatment, even though Forgione was cleared for duty and one would be hard pressed to identify any significant harm to him?  And should the Police Department’s interest in having psychologically fit officers play any role in the analysis, or does the different treatment and the existence of a nexus begin and end the claim?  It may well be that the Police Department emphasized the lack of nexus on summary judgment because it was the easier argument, but the breadth of the City’s human rights law appears to create the potential for recovery by plaintiffs who are not harmed in any material respect.

Posted: October 23, 2013

Rule 56 Requires A “Genuine” Issue Of Fact

In Cruz v. Reiner et al., 11 CV 2131 (E.D.N.Y. Oct. 16, 2013), Judge Brian Cogan granted defendants’ motion for summary judgment in a case alleging excessive force pursuant to 42 U.S.C. § 1983.  In so doing, the court found that even though a party opposing summary judgment submits a sworn statement giving its version of events, a genuine factual issue will not be deemed to exist if other evidence shows that the statement cannot be credited.

The pro se plaintiff contended that he was held in pretrial detention in the District Attorney’s office without food, water or access to a bathroom for five days.  However, in an earlier deposition plaintiff testified that he was repeatedly given water and use of a bathroom and that he had never asked for food.  In addition, contemporaneous police department business records refuted plaintiff’s contention by showing that he had been taken to Central Booking within a day of his arrest and thus could not have been in the District Attorney’s office for five days.  In opposing summary judgment, the plaintiff apparently relied exclusively on his uncorroborated testimony in an affidavit.

The court noted that the Rule 56 requirement that there be a “genuine” issue to warrant denial of summary judgment means that if no reasonable jury could believe the opponent’s version of the events, it is appropriate to grant dismissal.  The Court relied on Supreme Court and Second Circuit cases holding that in certain “rare” or unusual cases, a court will have to make some assessment of the plaintiff’s account to determine whether a jury could reasonably find for the plaintiff.  Here, plaintiff’s inconsistent and contradictory statements compelled dismissal and, if a jury did not reject plaintiff’s story, the court would have to set aside a verdict in plaintiff’s favor because it would be unreasonable.

This decision and the case law cited therein tell a practitioner that the court will only make an assessment of a plaintiff’s account of the facts in the unusual case where the plaintiff’s testimony opposing summary judgment is uncorroborated and contradictory; in the ordinary course, a court will refrain from making any credibility determinations.

Posted: October 23, 2013

Attacks On Witness Credibility Do Not Create Questions Of Fact

In Dominick v. Hospitality Valuation Services, Inc., 11 CV 3452 (E.D.N.Y. Sept. 30, 2013), Judge Joanna Seybert denied the defendants’ motion for summary judgment in an action alleging pregnancy discrimination under the Pregnancy Discrimination Act of Title VII and under the New York State Human Rights law.

The plaintiff worked at a search firm specializing in the hospitality industry.  She was terminated from her job just two months after informing her employer that she was pregnant.  When she asked her boss whether her termination was related to her pregnancy, her employer responded, “don’t even go there.”  In support of their summary judgment motion, Defendants asserted that the termination was based on a client’s complaint and negative peer evaluations of the plaintiff’s performance.

The Court applied the burden-shifting framework established by the Supreme Court in McDonnell Douglas Corp. v. Green, 411. U.S. 792, 802-04 (1973), and held that there were questions of fact whether (1) plaintiff was terminated for poor performance, the defendants’ proffered non-discriminatory reason for discharge, and (2) plaintiff’s pregnancy motivated her discharge.  Remarks made by the defendants’ decision-makers in close proximity to the termination could have been viewed by a reasonable juror as discriminatory, but the Court noted that the temporal proximity between the disclosure of her pregnancy and her termination was not, by itself, sufficient to show pretext.

Judge Seybert’s discussion regarding the use of dueling 56.1 statements to manufacture of issues of fact should be of interest to practitioners.  Plaintiff’s Rule 56.1 Counterstatement attempted to contest facts “supported by Defendants with admissible evidence in the form of deposition testimony” on the ground that the deponents were not credible.  While acknowledging that a witness’s credibility is typically a fact question for the jury, the Court held that conclusory attacks on the credibility of witnesses will not, by themselves, create questions of material fact precluding summary judgment.