November 12, 2014
The U.S. District Court for the Eastern District of New York recently handed down several significant, representative decisions including those covering issues such as: prior uncharged acts; the Longshore and Harbor Workers' Compensation Act; an antitrust class action settlement; and the statute of frauds. The details follow:
Prior Uncharged Acts
In United States v. Bruder, 98 CR 196 (EDNY, Feb. 5, 2000), a case against three New York City police officers – Bruder, Schwarz and Wiese – for conspiring to obstruct justice following the sexual assault on Abner Louima at the 70th Precinct, Judge Eugene H. Nickerson issued a pretrial decision allowing the government to introduce, under Federal Rules of Evidence 404(b), prior uncharged acts committed by Schwarz. A jury later found all three officers guilty.
The indictment alleged that defendants conspired to exculpate Schwarz with respect to his role in the assault by crafting and disseminating a false account of the surrounding events. The government sought to introduce evidence of a series of phone calls among Schwarz, Wiese and Officer Abbate which started immediately following the assault on Louima. Based on the timing and duration of the calls, the government planned to argue that Schwarz and Wiese consulted with Abbate in crafting their false story.
The government's 404(b) motion concerned a prior incident involving Schwarz and Abbate. In April 1995 the Police Department charged Abbate with discourtesy to a female officer and providing false statements during the investigation of the incident. In June 1995, Abbate was charged with discourtesy to another officer. At the departmental trial on those charges, Schwarz testified for Abbate. While waiting outside the hearing room, Schwarz allegedly "glared in an intimidating manner" at witnesses scheduled to testify against Abbate. Schwarz testified that he had seen the encounter between Abbate and the female officer, and that Abbate had used no profanity. A few days after the hearing, two witnesses against Abbate, both of whom worked in the 70th Precinct, received identical anonymous letters stating that they were "rats". One of the witnesses approached Schwarz, accused him of sending the letter to her and threatened to report it. Schwarz "said nothing" in response.
The administrative judge found Abbate not guilty on the first discourtesy charge, but guilty on both the false statement charge and the second discourtesy charge. Abbate was dismissed from the police force.
Judge Nickerson held that evidence of Schwarz's prior conduct in the Abbate matter was admissible to explain the relationship between Schwarz and Abbate:
Schwarz's alleged lie on Abbate's behalf, if proved, could explain why, less than a year later, Schwarz reached out to Abbate at critical moments in the investigation into his own misconduct. The evidence could provide context for these calls and establish a basis for Schwarz's trust in Abbate. (Slip op. 8).
But Schwarz's alleged prior conduct, the court noted, did not support the inference that he and Abbate actually crafted the false account of the Louima incident. Thus, though admissible as background to the relationship between Schwarz and Abbate, the prior-acts evidence was not admissible as proof of the conspiracy itself.
Judge Nickerson also ruled that Schwarz's alleged perjury on behalf of a fellow officer charged with misconduct was admissible as to Schwarz's "intent" to enlist that officer's aid in obstructing justice. Because Schwarz disputed any such inference, arguing that his phone calls with Abbate were innocent, his "intent" in making the calls was squarely at issue.
The evidence of Schwarz's prior acts, however, did not bear directly on defendant Wiese's relationship with Abbate or on the calls between Wiese and Abbate. Thus, the proffered evidence could not be used directly against Wiese. Nor, the court added, did Schwarz's prior acts, without more, demonstrate Wiese's intent.
Considering all of the proffered evidence, Judge Nickerson found:
A jury could reasonably conclude that Schwarz's testimony was perjurious and that Schwarz and Abbate acted together in deciding what Schwarz would say at the Departmental trial. The jury could also conclude that Schwarz attempted to intimidate Department witnesses. (Slip op. 24).
The court also found a sufficient basis for the jury to conclude that Schwarz had sent the "rat" letters. The witness not only confronted Schwarz with her accusation, but also threatened to report him. This occurred in the context of the disciplinary action against Abbate. Abbate, moreover, was no longer at the 70th Precinct when the letters were sent. It therefore seems "more probable than not," the court stated, "that an innocent officer in Schwarz's position would deny the allegation, or at least make some attempt to deflect it.''
Finally, Judge Nickerson concluded that the danger of unfair prejudice here was not excessive. Slip op. 27-30.
Longshore and Harbor Workers' Act
In Flynn v. American Auto Carriers Inc., 96 CV 4310 (EDNY, Feb. 24, 2000), Judge Raymond J. Dearie addressed the scope of a shipowner's duty to maintain safe conditions during cargo operations, and the government's duty, under an ocean carriage contract, to indemnify a ship owner for liabilities arising from negligence during such operations.
Plaintiff Flynn was a foreman in Bayonne, N.J., responsible for checking the loading and unloading of cargo from a docked vessel and for associated paper work. Plaintiff sued the vessel owners, under the Longshore and Harbor Workers' Compensation Act (LHWCA; 33 USC 905(b)), for injuries assertedly sustained when he slipped and fell on the vessel's slick stern ramp in February 1994.
The vessel owners impleaded the U.S. government, owner of the cargo being unloaded at the time of the accident. The government in turn impleaded the stevedore responsible for the unloading operation, asserting negligence. Judge Dearie found that fact issues remained regarding the apportionment of liability among the parties for failure to clear snow from the ramp. Slip op.15-19. The court proceeded to consider various motions for summary judgment not tied to the apportionment of fault, including the government's motion premised on interpretation of the contract of indemnity.
Under the LHWCA, a shipowner may be found liable, under the circumstances here, only on a negligence theory. Thus, the government argued, the shipowner necessarily sought indemnification for its own negligence. The government therefore moved for summary judgment, relying upon policies of federal maritime law that disfavor requiring a faultless, or less culpable, party to indemnify a party guilty of greater negligence, unless the relevant contract unambiguously requires it.
While acknowledging this general principle, the court found that the government could not rely upon ambiguities in the contract of indemnity to avoid liability where the contract rendering the point ambiguous was drafted by the government itself. Slip op. 20-22. Having denied summary judgment, Judge Dearie was called upon to apply the indemnification language at issue, which was similar to that commonly appearing in maritime contracts.
The court concluded that the government was obliged to indemnify the shipowner only for "negligent acts or omissions that occurred during and in relation to the cargo loading process." Slip op. 38. Thus, the government's duty of indemnification would not apply as to liabilities resulting from negligence occurring while the shipowner was primarily responsible for the ship's condition. Rather, that duty would be limited to liabilities of the shipowner arising from its failure to correct the negligent acts or omissions of the stevedore – which acted as the government's agent during the loading and unloading of cargo. In this way, the shipowner would receive the benefit of indemnity where its negligence consisted merely of failing to correct the mistakes of the government's agents, while the government would not be responsible for indemnifying parties whose acts of negligence were completely beyond its control.
In In re Toys "R" Us Antitrust Litigation, 98 MDL 1121 (EDNY, Feb. 17, 2000), Judge Nina Gershon approved an antitrust class action settlement between Toys "R" Us and warehouse wholesale clubs, consumers and state attorneys general. The court had granted preliminary approval of the settlement in July 1999.
In October 1998, the FTC issued a final order and opinion approving prior findings of an administrative law judge that Toys "R" Us had engaged in anticompetitive conduct in violation of Section 1 of the Sherman Act and Section 5 of the FTC Act. The FTC found that Toys "R" Us had used its dominant market power to force agreements with toy manufacturers to restrict sales of toys to Warehouse Clubs such as Sam's Club. The FTC also found that Toys "R" Us had induced toy manufacturers to agree with Toys "R" Us and with each other not to sell certain toys to the Warehouse Clubs or to sell them to the Warehouse Clubs only on unfavorable terms and conditions that stifled effective price competition and prevented comparison shopping by consumers. The FTC Order included an injunction and imposed record keeping and reporting requirements on Toys "R" Us. Toys "R" Us appealed the FTC Order to the Seventh Circuit.
Actions Filed Nationally
Following the decision of the administrative law judge in 1997, dozens of federal antitrust class actions, brought on behalf of nationwide classes of consumers, were filed in district courts across the country. Numerous state actions alleging violations of antitrust, unfair competition and consumer protection laws were also filed. In October 1997 New York, joined by 43 other states, the District of Columbia and the Commonwealth of Puerto Rico, filed suit as parens patriae on behalf of the toy-consuming public. In February 1998 all district court actions, including the parens patriae action, were transferred for pretrial purposes to the Eastern District of New York. Defendants in the actions include Toys "R" Us and manufacturers Hasbro, Mattel, Little Tikes, Tyco, Fisher Price, Binney & Smith, Huffy Corporation, Just Toys, Lego Systems, Rubbermaid, Inc, Sega of America, Tiger Electronics, Today's Kids and V-Tech Industries.
The class action complaint sought injunctive relief and treble damages on behalf of a class consisting of all consumers who purchased toys from Toys "R" Us between Jan. 1, 1990 and the filing of the complaint. The complaint alleged that Toys "R" Us put together vertical and horizontal agreements between itself and toy manufacturers and among toy manufacturers, which restricted sales of toys to Warehouse Clubs and thus denied class members the opportunity to purchase popular toys at competitive prices. The parens patriae complaint sought injunctive relief and treble damages on behalf of all persons who purchased toy products from retailers, including mass merchandisers as well as Toys "R" Us, at prices that were affected by the alleged unlawful agreements, between 1989 and the present.
Through mediation, the parties entered into eight separate Settlement Agreements. The Settlement Agreements provide for payments of over $20.3 million in cash and over $36.6 million in toy distributions through public and charitable entities, as well as injunctive relief. The injunctive relief will apply regardless of the outcome of Toys "R" Us's appeal of the FTC Order to the Seventh Circuit. Every state will receive monies, regardless of whether it participated in the litigation, which must be used to benefit children by providing them with toys, books or other educational materials. Each state's distribution plan must be approved by the court and all but two have satisfied this "benefit to children" requirement. For example, New York has selected a program to promote literacy in children; the District of Columbia will distribute funds to a program to assist victims of child abuse; Colorado will use its share to benefit homeless children.
After approving notice and certifying the class, the court concluded here that the settlement was fair, stating that plaintiffs' decision to forego individual recoveries made sense because of the difficulty of identifying proper claimants and the expense of administrating the claims. Children nationwide would benefit from the distributions of toys and educational programs, and the toy-consuming public would benefit from the injunctive relief and antitrust deterrent. The matter would also be brought to a successful and expeditious conclusion, avoiding lengthy, complicated and expensive litigation which would have resulted in small damage awards to individual consumers.
The court noted that certain conditions and monitoring provisions attached to the toy distribution. For example, the Settlement Agreement requires that the toys be in good condition, include a wide range for both boys and girls and be taken from current inventory. Before distribution, Toys "R" Us must provide plaintiffs with a list of toys to be distributed and plaintiffs have the right to veto toys which do not meet the settlement criteria. In addition, plaintiffs may send investigators to verify that the toys meet the settlement criteria.
Judge Gershon discussed the handful of objections of class members, which principally focused on their demand for personal refunds. The court noted that the objections did not take into account the practical problems of individual refunds such as the massive cost of administration for small individual claims.
Finally, the court approved as reasonable attorneys' fees in the total amount of $5,434,000, which amounted to 9.54 percent of the total value of all settlements and 26.69 percent of their cash value.
Statute of Frauds
In Roberts v. Karimi, 97 Civ. 4756 (EDNY, Dec. 22, 1999), Judge Arthur D. Spatt gave a flexible reading to the writing requirement of the statute of frauds, in finding for plaintiff in a breach of contract action.
In 1997, plaintiff sought to purchase a house owned by defendants. Plaintiff contacted one Deborah Foglia, a broker at the real estate agency that listed the house. The parties conducted a series of negotiations through Foglia, finally agreeing on a purchase price of $610,000, subject to various common conditions.
Foglia committed the terms of the agreement to writing in a "Memorandum of Sale." This memorandum was a form generated by the real estate broker, with the pertinent information filled in. On the line on the form for the seller's signature, Foglia signed her own name. Defendants had never authorized Foglia in writing to sign the Memorandum of Sale on their behalf.
A dispute erupted at the closing, and the sale did not go forward. Plaintiff then commenced an action for breach of contract.
The case was tried before a jury, which returned a special verdict finding that there was a "meeting of the minds," and that plaintiff should therefore prevail on his breach of contract claim.
At trial and after the verdict, defendants moved for judgment as a matter of law. Defendants' central argument was that, even if there was a meeting of the minds, the contract for sale fell within the statute of frauds, because defendants had never signed, nor authorized in writing anyone else to sign, the Memorandum of Sale.
Judge Spatt agreed that the contract had to be supported by a writing. While plaintiff did not have a signed contract, he submitted other supportive "writings" by defendants. For example, the court admitted into evidence an affidavit from one of the defendants, submitted in a separate lawsuit against defendants by Foglia to collect her sales commission on the house. That affidavit - which was dated more than a year after plaintiff's contract with defendants - admitted that Foglia had prepared the Memorandum of Sale, stated the terms of that memorandum, and went on to say, "Initially, I was agreeable to the terms outlined in the memorandum of sale." The court also admitted a note from one defendant to defendants' attorney stating, "The house is sold as is and as is rented." Finally, plaintiff pointed to an affirmation on the summary judgment motions in which defendants' attorney acknowledged that defendants had initially agreed to the terms of the memorandum of sale, but claimed that plaintiff had breached the agreement by demanding additional terms.
Oral Pacts: What's Key
As Judge Spatt observed, there is authority, albeit scattered, for the proposition that court pleadings and affidavits can constitute a memorandum sufficient to take an oral agreement outside the statute of frauds. This is true even when the writing is not contemporaneous with the oral agreement. Here, the writings contained all of the material terms of the oral agreement. They also demonstrated defendants' agreement to those terms at the time of the oral agreement. Thus, even though some of the writings relied upon were made in a different action, and all but one were made over a year after the alleged oral agreement, they were sufficient to satisfy the writing requirement of the statute.
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, April 14, 2000. Copyright 2000 ALM Properties, Inc. All rights reserved.]