January 13, 2000
This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York including a matter that turned on the way one party in a civil action handled material that could have provided important evidence.
Preservation of Evidence
In Abramowitz v. Inta-Boro Acres Inc., 98 CV 4139 (EDNY, Nov. 16, 1999), an action under the Age Discrimination in Employment Act (ADEA), Judge I. Leo Glasser denied plaintiff's motion to preclude the introduction of an audio tape, or to grant an adverse inference charge, as a sanction for the defendant company's negligent erasure of other tapes.
Plaintiff worked for almost 25 years as a dispatcher for defendant's limousine service. In March 1998 plaintiff was terminated, purportedly for using vulgar language in a conversation with a company board member and driver named Flaxman. The company's practice was to record all conversations between dispatchers and drivers. Plaintiff argued here that the taped conversation with Flaxman, although admittedly coarse, was not exceptional in the context of plaintiff's normal habit and custom and that other tapes, which were erased by defendant, would have demonstrated this point, thus proving the real reason for plaintiff's discharge, age discrimination.
Within three weeks of the firing, plaintiff's counsel sent a letter to the company alleging an ADEA violation. Company counsel responded by citing the recorded conversation with Flaxman as establishing a complete defense. In June 1998 plaintiff served his complaint, alleging that his use of "colorful language" was considered normal for dispatchers during his long tenure with the company.
In discovery, defendant claimed that taped conversations between dispatchers and drivers were routinely erased after 30 to 90 days. Some eight months after commencing suit, plaintiff sought production of tapes other than his preserved conversation with Flaxman. By letter dated April 1, 1999, defense counsel responded that the tapes had been destroyed and that any tapes still preserved as of the date of the letter were irrelevant.
As Judge Glasser observed, service of the complaint in June 1998 put defendants on notice of plaintiff's allegation that his language in the recorded conversation precipitating the discharge was nothing new. This created a duty on defendants to preserve other tapes as relevant to the issue whether, in the year and more after plaintiff was fired, company dispatchers habitually used vulgar language in speaking with drivers.
In denying the request to exclude the taped conversation with Flaxman, Judge Glasser found that defendants' failure to preserve tapes was no worse than negligent. The court then turned to plaintiff's alternative request for an adverse inference charge. As for recordings still preserved as of the filing of the complaint or made thereafter, "defendants were simply slow to appreciate" the relevance. Slip op. 9. The record suggested neither bad faith nor gross negligence.
Nor did plaintiff make a sufficient showing as to the contents of the destroyed evidence. "Given that the defendants were no worse than negligent in their destruction of the tapes," the court concluded, "it is not harder to believe that the missing tapes would have borne out [defendant] Mizrahi's assertion that he instituted a new policy of intolerance of dispatcher profanity, than it is to believe that they would have supported plaintiff's argument that his firing was pretextual." Slip op. 10-11.
Judge Glasser also granted defendants' motion to exclude decisions of the Unemployment Insurance Appeal Board (which found no sufficient misconduct to bar unemployment insurance) as overly prejudicial in a jury trial.
In de Silva v. New York City Housing Auth., 96 CV 2758 (EDNY, Nov. 17, 1999), Judge Raymond J. Dearie granted summary judgment to defendants in a discrimination claim under Title VII and 1983 brought by two New York City Transit Authority employees.
Plaintiffs (an Asian-American male and an African-American male) alleged that they had been passed over for promotion, and subjected to undesirable transfers, as a result of racial discrimination and in retaliation for their filing of a complaint regarding such discrimination with the State Division of Human Rights (DHR) in 1986.
Judge Dearie first rejected defendants' argument that various instances of asserted discrimination or retaliation assertedly occurring after the 1986 DHR complaint were barred because of plaintiffs' failure to exhaust their administrative remedies by filing additional DHR complaints for each. These allegations were "reasonably related" to the acts identified in the DHR filing, thus eliminating any need for subsequent filings. Slip op. 15-16.
The court found, however, that plaintiffs had failed to raise an issue of fact as to either discriminatory or retaliatory motive. Each of the areas about which plaintiffs complained with regard to their on-the-job treatment - denial of overtime, assignment of parking spots, failure to invite them to meetings, additional review of their work product and various transfers - had been explained by defendants with a legitimate, non-discriminatory and non-retaliatory justification, based on standard, race-blind office practices, budgeting concerns or complaints about the quality of plaintiffs' work.
No Evidence of Pretext
Although contending that the jury should be permitted to weigh their assertion of discriminatory purpose against defendants' denials, plaintiffs failed to provide evidence that defendants' apparently race-neutral explanations were pretextual. As Judge Dearie observed: "Plaintiffs cannot defeat summary judgment on the basis of their unsupported personal beliefs, even if they are sincerely held." Slip. op. 33.
The court also found that plaintiffs' 1983 claim against the municipal defendant failed, both for failure to rebut the Agency's showing of non-discriminatory purpose and because plaintiffs' complaints of discrimination for the filing of a private grievance did not satisfy the requirement that a 1983 claim relate to a matter of "public concern." Slip op. 41. Finally, the court declined to exercise supplemental jurisdiction over plaintiffs' claims under 296 of the New York Executive Law. Id. at 43.
Sanctions in Bankruptcy
In Marti v. Macco (In re Jones), 98 CV 6205 (EDNY, Nov. 8, 1999), Judge Eugene H. Nickerson reversed an award of sanctions by Bankruptcy Judge Marvin A. Holland in the amount of $2,500 against Mary Mercedes Marti, Esq.
Debtor Gregory Jones owned property mortgaged by Greenpoint Bank. Jones, who was incarcerated, defaulted on the mortgage, and the bank initiated a foreclosure action. The bank scheduled an auction sale of the property for Jan. 9, 1998. Meanwhile, Jones entered into a contract with a third-party to sell the property, with the closing scheduled for Feb. 14, 1998. Representing Jones, Marti first sought a TRO to block the foreclosure sale and then filed a Chapter 13 petition on Jan. 9th, hours before the scheduled auction, automatically staying the sale. Marti, Jones and the buyer amended the contract of sale to make it subject to bankruptcy court approval.
In March 1998, Judge Holland denied Jones' motions for approval of the contract and for an extension of time to file a reorganization plan. In May, Judge Holland and the parties agreed on a reorganization plan to be funded by the proceeds of the sale of the property, but Jones subsequently refused to accept the plan and the court granted his prior motion to dismiss.
On Aug. 10, 1998, Judge Holland imposed sanctions against Marti under Bankruptcy Rule 9011 stating three grounds:
(1) that Marti failed to make reasonable inquiry into the facts and law prior to filing the petition; (2) that the sole purpose in filing the petition was to delay the foreclosure sale; and (3) that Marti intended to withdraw the petition as soon as the arms-length sale was completed.
In reversing the imposition of sanctions, Judge Nickerson concluded that Marti "neither advanced a legally frivolous petition nor filed the petition in bad faith." Slip op. 10. First, Jones met the requirements of Chapter 13 and qualified as a debtor - "an individual with regular income." Based on her discussions with Jones, Judge Nickerson determined that Marti could argue in good faith that Jones was eligible as a debtor based on future income and the interim contributions of relatives. Although Marti had made these arguments in an affidavit submitted to the bankruptcy court, Judge Holland, acknowledging that he had not read her submissions, flatly rejected her arguments.
Judge Nickerson also disagreed with Judge Holland's conclusion that the only purpose in filing the petition was to delay the foreclosure auction and that Marti intended to withdraw the petition as soon as the arm's-length sale closed. As Judge Nickerson noted, the timing of the filing did not in itself prove bad faith, and the trustee had made no showing that the filing was substantively meritless.
Addressing the remaining issues concerning Marti's conduct after the petition was filed, Judge Nickerson first noted that the propriety of sanctions under Bankruptcy Rule 9011 is determined as of the filing date. In any event, Marti's post-filing conduct did not support a finding of bad faith. For example, her offer to withdraw the petition upon the court's approval of the contract reflected Jones' desire to sell his property at arm's length rather than enter bankruptcy. Nor did Marti's failure to file a reorganization plan warrant sanctions. As Judge Nickerson observed, Judge Holland was admittedly mistaken in rejecting as untimely her application for an extension of time to file the plan. Marti could therefore not be sanctioned for failing to file the plan after the deadline.
While Jones did fail to appear at the first creditors' meeting, his incarceration at the time gave him good cause to do so, and his father appeared in his place with a power of attorney. Marti, who had previously represented clients whom the bankruptcy court had excused from appearing, would not be sanctioned for failing to produce Jones in person.
In Savino v. Computer Credit Inc., 95 CV 4446 (EDNY, Nov. 20, 1999), on remand from the Second Circuit, Judge Arthur D. Spatt awarded significantly reduced attorney's fees to a plaintiff in a Fair Debt Collection Practices Act case.
In a prior opinion the court had granted summary judgment to plaintiff, finding that a letter sent by defendant demanding immediate payment of an outstanding debt violated the Act. Under the Act, a debtor is entitled to request confirmation of the amount owed within 30 days of being notified of the debt. The court subsequently awarded plaintiff $500 in damages and attorney's fees of $3,675, finding plaintiff's request for more than $34,000 in fees excessive. Plaintiff appealed the court's reduction in the number of hours for attorney's fees, and the defendant cross-appealed the finding that it had violated the Act. The Second Circuit affirmed, but remanded the case for further clarification of the district court's calculation of attorney's fees and the reduction of the hours.
On remand, Judge Spatt applied the "lodestar" method of calculating fees after reducing the number of hours and explaining the reasons for the reduction. A lodestar fee results from multiplying the number of hours "reasonably" expended by a "reasonable" hourly rate. Here, while the rate was not at issue, the court reduced plaintiff's request for compensation from 187 hours to 20 hours, finding the requested 187 hours to be "grossly excessive.''
Judge Spatt explained that the case was fairly simple, involving little factual development and a single, uncomplicated legal issue. The court also noted that plaintiff's counsel had significant expertise in representing FDCPA plaintiffs in both individual and class actions. Therefore, any requirement for research should have been minimal.
Similarly, Judge Spatt reduced the attorney's fees that plaintiff requested in connection with the appeal from $16,400 to $8,827, on the ground that plaintiff only partially prevailed on appeal and that many of the hours submitted were excessive or unnecessary. The court pointed particularly to a request for 28 hours for preparing a joint appendix. Finally, Judge Spatt awarded a minimal fee - $675 - for preparing the instant request for fees. The requested 40 hours, in the court's review, "borders on the absurd." Slip op. 14.
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 223, Friday, January, 14, 2000. Copyright 2000 ALM Properties, Inc. All rights reserved.]