Posted by Solomon N. Klein, Litigation Partner

A recent decision by District Judge Joseph F. Bianco offers a reminder that the right to exercise federal jurisdiction can be contractually waived in a forum selection clause. (Wiest Int’l, GMBH v. Zobel, 17-CV-6722 (E.D.N.Y Feb. 6, 2018) (JFB) (GRB)).

Forum selection clauses – typically not the focus of great attention when parties negotiate an agreement – can result in a waiver of the right to bring an action in federal court. These clauses often are drafted to restrict venue geographically, e.g., requiring lawsuits to be maintained in the “courts within the State of . . .” – which could include both federal and state courts within that location. But such clauses can also be drafted to restrict venue to a specific state court, as occurred in this case.

In this action for breach of an operating agreement and other claims, defendant moved to dismiss for improper venue based on a forum selection clause that read as follows: “The parties and members designate the courts of the State of New York, County of Suffolk as the venue to resolve any disputes that may arise among them[.]” (Emphasis added).

The Court held that such a designation is mandatory and that the language “courts of the State of New York” required that the lawsuit be pursued in state court:

As an initial matter, the parties dispute whether the forum selection clause sets venue in this Court. Specifically, plaintiff asserts that the phrase “courts of the State of New York, County of Suffolk” should be read to include a federal court located in Suffolk County. Well-established precedent forecloses plaintiff’s argument. See, e.g., Dart Mech. Corp. v. Johnson Controls, Inc., No. 13-CV-2941JS WDW, 2013 WL 5937424, at *2 (E.D.N.Y. Nov. 4, 2013) (“The language, ‘Courts of the State of New York,’ sets venue in New York State courts.”); Phoenix Glob. Ventures, Inc. v. Phoenix Hotel Assocs., Ltd., No. 04–CV– 4991, 2004 WL 2360033, at *6 (S.D.N.Y. Oct. 19, 2004), aff’d, 422 F.3d 72 (2d Cir. 2005) (“The language, ‘[a]ny proceeding shall be initiated in the courts of the State of New York,’ clearly establishes exclusive jurisdiction in New York state courts.”); Rogen v. Memry Corp., 886 F. Supp. 393, 396 (S.D.N.Y. 1995) (“The use of the word ‘of’ and the phrase ‘State of’ is sufficiently specific and unambiguous to require that actions regarding the Agreement be litigated in New York State court.”). Thus, the Court concludes that the forum selection clause does not set venue in this Court.
. . .
Here, the forum selection clause provides that the parties “designate the courts of the State of New York, County of Suffolk as the venue to resolve any disputes” between them. (Pl’s Br. Ex. A at 22 (emphasis added).) The Court concludes that the clause is mandatory because it “designates” a specific venue— state court in Suffolk County—as “the” venue to resolve disputes among them. The mandatory force of the word “designates” and the use of the word “the” before venue support this conclusion. In other words, the forum selection clause conveys the clear intent to confer exclusive jurisdiction on state courts in Suffolk County, and is not broad or general enough to contemplate other venues.

(Wiest Int’l, GMBH v. Zobel, 17-CV-6722 (E.D.N.Y Feb. 6, 2018) (JFB) (GRB)).

Posted by Solomon N. Klein, Litigation Partner

Posted by Solomon N. Klein, Litigation Partner

Magistrate Judge James Orenstein continues his series of influential rulings on electronic surveillance and evidence gathering. (In re Grand Jury Subpoena, 18-MC-0334 (E.D.N.Y. Feb. 5, 2018) (JO)). In this recent ruling, Magistrate Judge Orenstein denied a government request under the Stored Communications Act, 18 U.S.C. § 2701, et seq. (the “SCA”) to prohibit the recipient from disclosing the existence of the subpoena for one year because the request was “boilerplate” “formulaic” and “conclusory”. The Court also doubled down on an October 2017 decision that “requested” that the government not seek indefinite sealing of the court records on motions for non-disclosure orders, and rather limits the requests to seal to an initial 90 days. The Court noted that the “request” should now be treated as a “directive.”

The general background: The SCA provides a statutory framework for allowing the government to obtain a court order directing “a provider of electronic communications service or remote computing service” not to disclose to the customer or subscriber the existence of the subpoena. (For example, a subpoena issued to Google for email communications relating to a particular account with an order that it not notify the user of the subpoena.) The SCA allows for delayed notice to the customer for 90 days (with additional 90-day extensions) upon a determination by a court that notice would result in harm, such as, causing the target to flee or destroy evidence.

The structure of the statute would seem to contemplate successive requests by the government for extensions every 90 days. However, the apparent government practice has been to request a one-year delay of notice at the outset – one-year being the maximum under a policy by the Department of Justice. However, on October 2017, Magistrate Judge Orenstein “requested” in a footnote that, in the future, the government’s request to seal the court records of the application for a non-disclosure order should be limited to around 90 days subject to further extensions if needed.

In this case, the Court first took issue with the government’s description of the subpoena recipient as “a provider of an electronic communication service, as defined in 18 U.S.C. § 2510(15), and/or a remote comput[ing] service, as defined in 18 U.S.C. § 2711(2).” The Court rejected this description because in the absence of the recipient being Google or Facebook, it did not provide the Court the ability to determine for itself whether the recipient truly was a “covered service provider” of electronic communication/remote computing services under the statute. As an example of the need for a court to make an independent determination, the Court used the government’s recent position (rejected by a Magistrate Judge in D.C.) that a cruise ship company is a covered service provider because it furnishes Wi-Fi service to its guests. “Such a theory would apply with equal force to many stores, restaurants, schools, and individual homeowners – none of which could plausibly be considered a service provider within the law’s meaning. See id. at 2-3 & n.2. It is thus apparent that the government is willing to read the definitional provisions of the Stored Communications Act so expansively that a court should be wary of accepting at face value a conclusory assertion that the statute applies to a given entity about which no additional information is provided.” (In re Grand Jury Subpoena, 18-MC-0334 (E.D.N.Y. Feb. 5, 2018) (JO)).

The Court then rejected the factual underpinnings of the government’s request as “conclusory” and “boilerplate” that, if sufficient, would effectively justify a delayed-notice order for every subpoena to a covered service provider:

[T]he government engages in pure speculation about the potential adverse consequences of disclosure. It writes that notice would give the target “an opportunity” to flee and obstruct, and that is undoubtedly true. But it tells me nothing about whether it is reasonable to believe that the target “will” engage in such conduct, which is the question I must answer. Some context would help: if, for example, the target is being investigated on the basis of an anonymous tip for the misdemeanor of fraudulently displaying the emblem of the 4-H clubs, see 18 U.S.C. § 707, I might hesitate to conclude that the target of such an investigation, upon discovering his status, would either embrace the life of a fugitive or risk the far more severe sanctions for obstruction of justice. On the other hand, I would think it entirely likely that the target of a well-predicated murder investigation might make such choices if given the chance. As the record currently stands, I can engage in no such analysis.

Similarly, the government tacitly assumes that in any investigation involving either electronically stored records or electronic communications – which is to say, in essentially every criminal investigation in which a non-disclosure order would potentially be available under Section 2705(b) – a person’s awareness that she is under investigation supports a finding that she will delete or encrypt evidence so as to make it unavailable to law enforcement. Neither experience nor logic supports such a syllogism. It is of course true that the technology that allows a person to store and transmit information electronically also allows such information to be hidden or destroyed (even if it is harder to do so effectively than many targets would suspect or than the government would have me assume). But that truism, without more, does not reasonably support the conclusion that every investigative target will do so if possible.

The risk that persons who learn they are under investigation will engage in obstruction is a real one, but it arises to different degrees in different circumstances. Congress could have chosen to address that risk in blunderbuss fashion by universally prohibiting the recipient of any warrant, order, or subpoena from disclosing its existence, but it plainly chose not to do so. Nor did Congress choose to alleviate that risk either by requiring a non-disclosure order either where obstruction is merely a possibility, or by committing the discretion to secure relief to the executive branch (as it effectively did, by contrast, with respect to pen registers). Instead, it prescribed a more nuanced approach, circumscribing both the persons who could be subjected to silencing, and the circumstances in which a court may (and must) order it.

(In re Grand Jury Subpoena, 18-MC-0334 (E.D.N.Y. Feb. 5, 2018) (JO)).

Finally, the Court reminded the government that it had ignored the Court’s previous “request” that the application to seal the record of motions for non-disclosure orders be limited initially to 90 days, and that it should now treat the “request” as a “directive”:

I note that the government again, as it did in Google EDNY, seeks to silence a subpoena recipient for an entire year – the maximum permitted under a recent change in Justice Department policy – and seeks to have its Application and proposed order sealed indefinitely, all without explaining the need for those proposed durations. See Google EDNY, I questioned the need in Google EDNY for such a lengthy restriction of the subpoena recipient’s speech and secrecy, ordered the application sealed for 90 days (with a 90-day extension available upon a showing of continued need), and “respectfully request[ed] that in all future sealing requests, the government submit proposed orders with a similar temporal limitation absent a showing of need to do otherwise.” Id. *5 & n.3. I respectfully remind the government of the request it has thus far ignored and invite it to treat the request as a directive in the future; should that prove ineffective, I will consider more effective measures to avoid needless secrecy.

(In re Grand Jury Subpoena, 18-MC-0334 (E.D.N.Y. Feb. 5, 2018) (JO)).

Posted by Solomon N. Klein, Litigation Partner

Posted by Solomon N. Klein, Litigation Partner

Magistrate Judge Cheryl L. Pollak recently denied a plaintiff’s motion to file her reply under seal despite a confidentiality stipulation and order requiring that documents designated as confidential be filed under seal. (Martinez v. City of New York, 16 CV 79 (E.D.N.Y. Jan. 26, 2018) (AMD)(CLP)). The Court explained that the nature of what is confidential under a discovery protective order is quite different than the requirements for a document to be filed under seal. In the confidentiality stipulation in this particular case, the burden of filing the motion to seal confidential documents was imposed on the party wishing to use the documents in court.

The court order does not spell out the nature of the documents and the party that claimed confidentiality, but the general scenario is quite familiar to civil litigators: Documents are produced in discovery with confidentiality designations – often using broad designations with the consent of the parties – and the receiving party then wishes to use them in submissions to the court.

(Practitioner Tip: This type of stipulation, which requires the receiving party to move to seal, provides little incentive to the producing party to avoid a motion to file under seal, even where the nature of the information is only marginally confidential. The New York State Commercial Division has attempted to resolve this issue by allowing parties to temporarily file redacted copies of the filing which are to be replaced with unredacted copies within 7 days unless the producing party moves to seal the documents.)

The Court in Martinez explained:

[T]he decision to allow documents to be filed under seal in connection with motions and court proceedings is a wholly separate inquiry governed by a different standard than whether to maintain documents disclosed in discovery in confidence.” Johnson v. Federal Bureau of Prisons, No. 16 CV 3919, 2017 WL 5197143, at *3 (E.D.N.Y. Nov. 9, 2017). To determine whether it is appropriate to allow documents to be filed under seal, courts engage in a two-part inquiry.

First, the court decides how strong a presumption of access a document deserves with reference to its role in the judicial process. Next, the court will “balance the weight of that presumption, if any, with competing interests, namely, the private interests and concerns of judicial efficiency and law enforcement, to determine whether or not to seal a document.” Cumberland Packing Corp. v. Monsanto Co., 184 F.R.D. 504, 506 (E.D.N.Y. 1999).

A “judicial document” is one that is presented to the Court and “relevant to the performance of the judicial function and useful in the judicial process.” United States v. Amodeo (“Amodeo I”) , 44 F.3d 141, 145 (2d Cir. 1995). Such documents are presumptively subject to public inspection and thus not properly sealed. See id. at 146. The presumption of access that attends judicial documents stems both from the common law tradition and from the Constitution: “[a]s the exercise of Article III [judicial] powers is a formal act of government, it should be subject to public scrutiny absent exceptional circumstances.” Cumberland Packing Corp. v. Monsanto Co. , 184 F.R.D. at 505.

In contrast to judicial documents, “[d]ocuments that play no role in the performance of Article III functions . . . lie entirely beyond the presumption’s reach . . . and stand on a different footing than a motion filed by a party seeking action by the court or . . . any other document which is presented to the court to invoke its powers or affect its decisions.” United States v. Amodeo (“Amodeo II”) , 71 F.3d 1044, 1050 (2d Cir. 1995) (emphasis added) (citations and quotation marks omitted).

The Court has reviewed plaintiff’s Reply and has determined that good cause to file the Reply under seal is lacking. The Reply was presented to the Court in connection with a motion for sanctions that resulted in this Court’s Recommendation that dispositive sanctions be imposed on the defendants. (See generally 1/25/2018 Report and Recommendation, ECF No. 100). The document is therefore subject to the presumption of public access. No party has offered, and the Court is unable to discern, any competing interests, let alone interests that would defeat the public’s presumptive right of access.

(Martinez v. City of New York, 16 CV 79 (E.D.N.Y. Jan. 26, 2018) (AMD)(CLP)).

The Court then directed plaintiff to file her reply on the public docket and directed either party to inform the Court if the exhibits related to the briefing that had been filed under seal “should be unsealed under the analysis provided in the order.”

Posted by Solomon N. Klein, Litigation Partner

In a January 9, 2018 ruling, Judge Leonard D. Wexler highlighted the rigid structure applicable to negligence actions for deceased seamen under the Jones Act. (In re Wittich Bros. Marine Inc. , 15–CV-5210 (LDW)(ARL)).

Practitioners often reflexively assume that a potential cause of action available to an individual will survive death and accrue to the estate. This, however, is not the case with certain actions under the Jones Act.

The facts of the case are tragic: Donald Maloney was a crew member of the tug boat “Sea Bear”. He died in March 2015 when the Sea Bear sank near Fire Island Pines. Maloney’s daughter, Corrine Maloney, was his only beneficiary and she was appointed as the administrator of Donald’s estate. However, just months after her father’s death, Corrine Maloney died in a car accident.

The estate of Corrine Maloney subsequently brought negligence and unseaworthiness claims on behalf of Corrine’s estate against the owner of the tug boat with respect to Donald Maloney’s death. The claims were brought under both the Merchant Marine Act of 1920 (Jones Act), 46 U.S.C. § 688 and general maritime law.

The Court granted the boat owner’s motion for judgment on the pleadings in part, and dismissed the claims brought under the Jones Act. The Court held that although Corrine could have sued under the Jones Act for both wrongful death and her father’s pain and suffering, the right to sue, if not exercised, terminated when she died.

The right of recovery under the Jones Act, if any, depends on Section 1 of the Federal Employers’ Liability Act, 45 U.S.C. § 51, which provides that recovery of damages shall be “for the benefit of the surviving widow or husband and children of such employee; and, if none, then of such employee’s parents; and, if none, then of the next of kin dependent upon such employee.” Gillespie v. United States Steel Corp., 379 U.S. 148, 156 (1964) (quoting 45 U.S.C. § 51). As the Supreme Court has held on more than one occasion, “this provision ‘creates three classes of possible beneficiaries. But the liability is in the alternative. It is to one of the three; not to the several classes collectively.’” Id. (quoting Chicago, B. & Q. R. Co. v. Wells-Dickey Trust Co., 275 U.S. 161, 163 (1927)).

Here, any cause of action pursuant to the Jones Act immediately vested in Maloney’s daughter, Corrine, upon his death. Had Corrine survived, she could have brought both wrongful death and survivor claims against [the boat owner] under the Jones Act. However, Corrine passed away prior to instituting any legal action against [the boat owner] for Maloney’s death. [Corrine’s mother] now seeks to bring that action on behalf of Corrine’s estate. Such conduct has been expressly rejected by the Supreme Court.

As the Supreme Court has made clear, when a cause of action accrues under the Jones Act, “there is an immediate, final and absolute vesting; and the vesting is in that one of the several possible beneficiaries who, according to the express provision in the statute, is declared to be compensated.” Chicago, B. & Q. R., 275 U.S. at 163. Had Corrine brought an action against the owner of the tug boat prior to her death, “it would have been for [her] benefit … and no other action would have lain.” Id. at 164. “The failure to bring the action in [her] lifetime did not result in creating a new cause of action after her death” for the benefit of either [Corrine’s mother] or Corrine’s estate. Id.

Based on the foregoing, any claims Corrine may have been entitled to bring against [the boat owner] pursuant to the Jones Act abated when Corrine passed away.

(In re Wittich Bros. Marine Inc. , 15–CV-5210 (LDW)(ARL)).

However, the Court held that the Jones Act did not pre-empt the general maritime laws, and such potential causes of action do in fact survive the death of the potential claimant. As such, the estate could nonetheless proceed under the general maritime law for claims of wrongful death of a seaman. The Court, accordingly, denied the boat owner’s motion for judgment on the pleadings as to the general maritime law claims.

Posted by Solomon N. Klein, Litigation Partner

In a January 4, 2018 ruling, Judge Frederic Block denied the City of New York’s motion for a change of venue from the EDNY to the SDNY. (Kennedy v. City of New York, et al., 17-CR-5042 (E.D.N.Y. Jan. 4, 2018) (FB)(VMS)). Not surprisingly, the court rejected the City’s claim that the SDNY was a more convenient forum than the EDNY. For those not familiar with the geography of the SDNY and EDNY, the SDNY courthouse on Pearl Street in Manhattan is a pleasant spring-time walk over the Brooklyn Bridge from the EDNY courthouse on Cadman Plaza in Brooklyn.

The plaintiff, a former inmate at Rikers Island, brought a lawsuit in the EDNY based on injuries he received when he was allegedly beaten by two other inmates. The plaintiff sued the City, City officials and corrections officers. The City moved for a change of venue arguing that Rikers Island was in the Bronx (within the SDNY), the officers involved would have worked at Rikers Island, and the events occurred in the SDNY.

Judge Block explained that the location of the underlying events would only be relevant if venue was based on 28 U.S.C. § 1391(b)(2) (venue based on substantial part of the events), but not relevant where venue was based on § 1391(b)(1) (residency of defendants). The residence of an entity defendant (the City) is equated with personal jurisdiction under § 1391(b)(1). In other words, venue for an entity defendant is proper in any district where it would be subject to personal service if the district were its own state. Since the City is subject to jurisdiction in the Eastern District, venue is proper so long as all the other defendants reside in New York State.

”Under 28 U.S.C. § 1391(b), a civil action may be brought in: (1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located; (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.” . . .

For the purpose of venue, “an entity with the capacity to sue and be sued in its common name . . . shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . . .” 28 U.S.C. § 1391(c)(2). Section 1391(c) thus “equates jurisdiction with venue . . . for corporate defendants.” PDK Labs, Inc. v. Proactive Labs, Inc. , 325 F. Supp. 2d 176, 182 (E.D.N.Y. 2004) (quoting Laumann Mfg. Corp. v. Castings USA, 913 F. Supp. 712, 719 (E.D.N.Y.1996)). If a state has multiple judicial districts and has personal jurisdiction over a corporation at the beginning of the suit, the corporation is deemed to reside in any district that would have sufficient contacts for personal jurisdiction if the district were a separate state. Id. § 1391(d).

Here, venue is proper under § 1391(b)(1): All Defendants are residents of the State of New York, and the City is “subject to personal jurisdiction in the Eastern District and is thus deemed a ‘resident’ of the Eastern District.” Springle v. City of New York, 2013 WL 592656, at *8 (S.D.N.Y. Feb. 14, 2013).

(Kennedy v. City of New York, et al., 17-CR-5042 (E.D.N.Y. Jan. 4, 2018) (FB)(VMS)).

The court then rejected the City’s argument that venue should be changed for the convenience of the parties. “[T]he Eastern and Sourthern District are equally convenient from Rikers Island and both are within the state[.]”

Posted by Solomon N. Klein, Litigation Partner

District Judge Joseph F. Bianco recently dismissed a putative class action for lack of subject matter jurisdiction under the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”). (Medford v. The Civil Serv. Empls. Ass., Local 1000, AFSCME, AFL-CIO, CSEA Local 881, 17-CV-0011 (E.D.N.Y. Dec. 5, 2017) (JFB) (SIL). In doing so, Judge Bianco rejected plaintiffs’ creative argument that defendant’s union should be considered a mixed public/private union based on public sector workers that were assigned to work for the union itself.

A bit of background: The LMRDA provides for subject matter jurisdiction for certain claims against labor organizations that deal with employers. However, a public section union is not a labor organization under the LMRDA because state or political subdivisions are not employers under the LMRDA. Consequently, claims against public section unions do not have independent subject matter jurisdiction. Nonetheless, the LMRDA confers jurisdiction over a mixed public/private union.

In this case, Local 881 and other defendants were sued for statutory violations of the LMRDA. Defendants moved to dismiss, arguing that Local 881 represents only employees of the Town of Oyster Bay, which is a political subdivision of New York State. As such, there would be no subject matter jurisdiction under LMRDA. Plaintiffs, however, argued, that “Local 881 is a mixed union because [three] of its members do not perform work for the Town, and instead perform only union-related work. According to plaintiffs, those members are effectively Local 881 employees, not Town employees.”

The Court was unpersuaded:

Plaintiffs’ argument misses the mark. The fact that [the three members] were released from their regular duties for the Town to administer the CBA and process grievances for Local 881 members does not transform these public employees into union employees. To the contrary, they are still paid by the Town, continue to receive service credit in the New York State Local Employees Retirement System, and retain their civil service job titles. In fact, if any of these individuals were to lose their status as a Town employee, they would be ineligible to serve as a Local 881 officer. Therefore, under these circumstances, the Court declines to find that [the three members] are Local 881 employees based solely on the fact that they currently perform union-related work, and concludes that they remain public sector employees for purposes of the LMRDA. . . .

Moreover, this is not a situation where a union that generally represents public employees becomes a mixed union because it also represents such members in negotiations with private sector employers, thus subjecting itself to the LMRDA. See, e.g., Lynch [v. Patrolmen’s Benevolent Ass’n, No. 99 CIV. 63 LAP, 1999 WL 713369, at *1 (S.D.N.Y. May 18, 1999)] (noting that, if the PBA represented its members both in negotiations with the NYPD and in negotiations with private employers pursuant to a paid detail program, the union would be a mixed union and the LMRDA would apply). Here, plaintiffs have not alleged, or otherwise demonstrated, that Local 881 actually represented [the three members] (or any other Local 881 members) in negotiations with a private employer. . . .

To the extent plaintiffs suggest this union-related work means that the union represents them in negotiations with the union itself, the Court rejects that argument. A union cannot represent its own employees in negotiations with itself.

(Medford v. The Civil Serv. Empls. Ass., Local 1000, AFSCME, AFL-CIO, CSEA Local 881, 17-CV-0011 (E.D.N.Y. Dec. 5, 2017) (JFB) (SIL)(citations omitted).

In the absence of subject matter jurisdiction, Judge Bianco dismissed the case.

Posted by Solomon N. Klein, Litigation Partner

For the second time in as many months, Chief Judge Dora L. Irizarry has ruled that the Government cannot use immigration detention to maintain custody of criminal defendants that are granted bail in their criminal case under the Bail Reform Act, 18 U.S.C. § 3141, et seq. (United States v. Boutin, 17-CR-590 (E.D.N.Y. Dec. 26, 2017) (DLI)). The court held that the government must choose between releasing defendant on bail or having the indictment dismissed with prejudice. The question presented is straightforward: “‘whether Defendant [who was granted bail] may be held in ICE custody while his prosecution by the U.S. Attorney’s Office is pending.’” This is an issue that has apparently not yet been addressed by any Court of Appeals, but according to the Government, the Solicitor General is now considering whether to test the issue on appeal.

Defense attorneys often forgo seeking bail for criminal defendants who are subject to removal for immigration issues; the thinking is that even if bail were granted, the defendant will simply be transferred to immigration custody. However, these cases suggest that defense counsel should actively consider seeking bail even for criminal defendants who are subject to removal, but should consult with immigration counsel given the complexities involved in correctly presenting the bail application.

In Boutin, the defendant is a dual Spanish and Panamanian citizen charged with money laundering and theft. Boutin’s visa expired in 2016 and was now in the United States illegally. At arraignment, Boutin was ordered released on $100,000 bond and conditions of home confinement and monitoring. However, Boutin remained in custody pursuant to an ICE detainer.

Judge Irizarry noted that she had recently ruled on the question of whether the Bail Reform Act trumps the Immigration and Nationality Act, 8 U.S.C. § 1101, et seq., in a case titled U.S. v. Ventura, 17-CR-418 (E.D.N.Y. Nov. 3, 2017) (DLI):

In Ventura, this Court concluded that, once a criminal prosecution is initiated and the Government has invoked the jurisdiction of a federal district court, the Bail Reform Act is controlling. When an Article III court has ordered a defendant released, the retention of a defendant in ICE custody contravenes a determination made pursuant to the Bail Reform Act. As such, the Government’s criminal prosecution cannot proceed and must be dismissed with prejudice. See [United States v.] Ventura, 2017 WL 5129012, at *3 [(E.D.N.Y. Nov. 3, 2017)]. As noted in Ventura, this issue has not been addressed by the Second Circuit Court of Appeals or any other circuit court, but other district courts that have addressed this issue are in accord.

(United States v. Boutin, 17-CR-590 (E.D.N.Y. Dec. 26, 2017) (DLI)).

In Boutin, the court rejected the Government’s arguments that the Ventura holding should only be applied where the immigration detainer is merely pretextual and where the defendant’s criminal charge is immigration related. The court then concluded:

The Government has requested that the indictment, if it is to be dismissed, be dismissed without prejudice. Dismissal without prejudice would frustrate the purpose of the dismissal, namely to force the Government to make a choice. The Government is not without remedy as it may appeal this Court’s decision. Therefore, the request is denied. The Government also has requested that any order of dismissal be stayed pending its decision whether to appeal that order. Apparently, such a stay would be indefinite as the Government still is deciding whether to perfect its appeal in Ventura, which was decided over a month ago. The Court sees no irreparable harm to the Government that would necessitate a stay. The Government is empowered fully to choose the path it prefers in this case: release Defendant from ICE custody and proceed with the criminal prosecution, or retain Defendant in ICE custody and proceed with removal. It simply cannot have it both ways. Accordingly, the request for a stay also is denied.

(United States v. Boutin, 17-CR-590 (E.D.N.Y. Dec. 26, 2017) (DLI)).

As in Ventura, Judge Irizarry ordered that the Government release the defendant as per the bail order or have the indictment dismissed with prejudice. The Court gave the Government about a week to decide how it wished to proceed. In Ventura, the Government chose to retain custody of the defendant and the indictment was dismissed with prejudice. (The motions in both Boutin and Ventura were argued by Isaac Wheeler, an immigration specialist at the Federal Defenders of NY.)

Update: On January 3, 2018, the Court dismissed the indictment after the Government advised the Court that the defendant was not released from ICE custody.

Posted by Solomon N. Klein, Litigation Partner

District Judge Nicholas G. Garaufis recently denied summary judgment in an automobile accident diversity case where plaintiff claimed a “serious injury” as defined under New York’s no-fault insurance laws. Zhang v. Alvarado, 15-CV-04373 (E.D.N.Y. Dec. 8, 2017) (NGG) (JO). In denying defendants’ summary judgment, Judge Garaufis employed New York State’s burden-shifting analysis that at first requires defendant to “establish a prima facie case that no such injury was sustained.”

At first glance, readers of our recent post titled “Judge Chen Dismisses Slip and Fall Case after Applying Federal Summary Judgment Standard” would have expected the court to use the federal standard that merely requires a defendant to show an absence of evidence by plaintiff. Indeed, Judge Garaufis expressed these exact reservations in employing the New York standard, but noted that “it must do so” given the Second Circuit’s “explicit adoption of the New York burden shifting scheme” for summary judgment motion in a no-fault injury case.

In Zhang, the plaintiff claimed that he suffered a “serious injury” such that he was not subject to the damage limitations under New York’s no-fault insurance scheme. In analyzing the motion, Judge Garaufis employed the more imposing standard of summary judgment under New York law rather than the federal standard – though the court noted that the distinction was mooted by the fact that the plaintiff had submitted sufficient evidence to defeat summary judgment regardless of which standard was used. The court explained:

The court notes the tension between this burden-shifting scheme and the standard generally applicable to motions for summary judgment in federal court, which permits a defendant to prevail on its motion where it demonstrates that a plaintiff has “fail[ed] to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. . 477 U.S. at 322. However, given the Second Circuit’s explicit adoption of the New York burden-shifting scheme in Yong Qin Luo, as described above, the court concludes that it must do so as well. Perpall v. Pavetek Corp. , No. 12-CV-336 (PKC), 2017 WL 1155764, at *12 n.27 (E.D.N.Y. Mar. 27, 2017). Moreover, as described in greater detail below, the court concludes that Plaintiff has placed sufficient evidence in the record to raise a triable issue as to whether he suffered a “serious injury” under New York law, such that he would survive summary judgment even under the Celotex standard.

Zhang v. Alvarado, 15-CV-04373 (E.D.N.Y. Dec. 8, 2017) (NGG) (JO).

It is important to keep in mind, however, that the Second Circuit in Yong Qin Luo employed the New York standard without analyzing whether the competing federal standard should be used instead. But, as Judge Garaufis noted, for now, the precedent in this Circuit, at least for no-fault insurance cases, would require the use of New York’s burden-shifting analysis for summary judgment motions.

Posted by Solomon N. Klein, Litigation Partner

District Judge Pamela K. Chen recently granted summary judgment in a slip and fall diversity case that highlights the difference between the summary judgment standards under federal and New York state law. Taylor v. Manheim Marketing Inc., 15-CV-01950 (E.D.N.Y. Nov. 30, 2017).

This case offers a reminder to counsel that the federal summary judgment standard can be less forgiving to plaintiffs, and a reason, particularly in close cases, for defense counsel to consider removing eligible cases to federal court.

Taylor involved a slip and fall at a gravel parking lot in defendant’s car auction facility. Plaintiff claimed that he slipped on a patch of oil or ice and that defendant either created or was on constructive notice of the condition. Judge Chen found that plaintiff’s failure to offer evidence that defendant created the hazard or had notice of the condition required dismissal of the case. In analyzing the summary judgment motion, Judge Chen noted a critical distinction between New York state and federal summary judgment practice:

The federal burden of proof on a motion for summary judgment differs from the corresponding standard under New York law on a slip-and-fall action. See, e.g., Tenay v. Culinary Teachers Ass’n of Hyde Park, 281 Fed.Appx. 11, 12-13 (2d Cir. 2008); Vasquez v. United States, No. 14-CV-1510 (DF), 2016 WL 315879, at *4-5 (S.D.N.Y. Jan. 15, 2016). “Under New York law, [a] defendant who moves for summary judgment in a [sl]ip-and-fall case has the initial burden of making a prima facie showing that it neither created the alleged hazardous condition, nor had actual or constructive notice of its existence for a length of time sufficient to discover and remedy it.” Vasquez, 2016 WL 315879, at *4 (citation omitted). Conversely, under federal law, the moving party “need not make any affirmative prima facie showing on [a] motion for summary judgment, and may discharge its burden of proof merely ‘by pointing to an absence of evidence to support an essential element of [Plaintiff’s] claim.’” Id. at *5 (citation omitted).

Taylor v. Manheim Marketing Inc., 15-CV-01950 (E.D.N.Y. Nov. 30, 2017).

And, no, applying the federal summary judgment standard to a diversity action does not violate the Erie Doctrine – the burden of proof under rule FRCP 56 is procedural. See Tenay v. Culinary Teachers Ass’n of Hyde Park, 281 Fed.Appx. 11, 12-13 (2d Cir. 2008)). A more recent Seventh Circuit decision made that clear as well. See Couvillion v. Speedway LLC, 673 F. App’x 558, 559 (7th Cir. 2016) (“federal procedure governs all federal cases, even if this implies an outcome different from the one likely in state court”).

Posted by Solomon N. Klein, Litigation Partner
Schlam Stone & Dolan LLP

District Judge Brian M. Cogan recently re-imposed sanctions on the defendants in Funk v. Belneftekhim a/k/a Concern Belneftekhim, 14 CV 0376 (E.D.N.Y. Oct. 17, 2017) after the Second Circuit addressed the nuances of sanctioning parties for non-compliances with jurisdictional discovery.

Of course, the term “jurisdictional discovery” is a bit of a misnomer, since a court would need some predicate jurisdiction in order to direct discovery in the first instance. So when it comes to sanctions for non-compliance with jurisdictional discovery, a “half-dozen” is not the same as “six”, though the results may be indistinguishable.

We have previously discussed how the facts alone make this case a worthy read. Plaintiffs (an attorney and his legal assistant that represented investors in a Belarus oil company) alleged that they were drugged, abducted and flown to Belarus, where they were imprisoned and tortured for over a year. Defendants moved to dismiss, claiming sovereign immunity among other grounds. Judge Cogan directed limited jurisdictional discovery on the sovereign immunity defense to determine defendants’ claim that they were agents or instrumentalities of Belarus.

Defendants presented documents in support of their sovereign immunity argument, but repeatedly refused to comply with plaintiffs’ discovery demands relating to jurisdiction. In 2015, Judge Cogen sanctioned defendants by striking their sovereign immunity defense. Funk v. Belneftekhim a/k/a Concern Belneftekhim, 14 CV 0376 (E.D.N.Y. Oct. 20, 2015).

On appeal, the Second Circuit took no issue with the decision to sanction defendants, but nonetheless vacated the striking of the defendants’ sovereign immunity defense. The Second Circuit found that “striking a jurisdictional challenge . . . risks a district court’s exercise of jurisdiction where none may exist.” In other words, by striking a jurisdiction challenge without determining the merits, a court may be improperly creating jurisdiction where no jurisdiction existed.

The Second Circuit then proceeded to explain that there were “alternative[]” sanctions – such as (1) “an evidentiary presumption against defendants that [the] withheld discovery” would have refuted the claim of sovereign immunity, and (2) “prohibiting defendants from offering further supporting evidence” of immunity.

Upon remand, Judge Cogan embraced the Second Circuit’s suggestion and re-imposed sanctions in the form of an evidentiary presumption against defendants – not striking the sovereign immunity defense outright, but with the same effect:

[P]laintiffs presented evidence that the documents defendants relied upon give an incomplete picture of Belarusian. . . . . Plaintiffs also presented affirmative evidence that Belneftekhim or some portion of it is a commercial company owned at least in part by private investors, and therefore not subject to sovereign immunity.

This conflicting evidence created a factual dispute about whether Belneftekhim is actually majority-owned by Belarus, rather than by other companies, private investors, or individual government agents. . . . . The factual dispute necessitated discovery, which defendants refused to provide, thereby preventing me from assessing the validity of the evidence defendants originally submitted.

In light of the sanctions I applied against defendants . . . , their sovereign-immunity claim fails. The evidence that defendants initially submitted, which was significantly undermined by plaintiffs’ response, is now clearly insufficient in light of the evidentiary presumption. Based on that presumption – that the discovery defendants withheld would have disproven the assertions they put forth about Belneftekhim’s ownership structure and its status under Belarusian law – defendants fail to demonstrate that they are entitled to immunity. Because the evidentiary presumption rebuts defendants’ only immunity evidence before the Court, I therefore deny defendants’ motion to dismiss on the grounds of foreign-sovereign immunity.

Posted by Solomon N. Klein, Litigation Partner
Schlam Stone & Dolan LLP