November 12, 2014
This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Subject matter included: collateral estoppel, discrimination in law school admissions, attorney's fees and substantive due process.
Collateral Estoppel
In United States v. Duffy, 02 CR 142 (EDNY, Feb. 20, 2002), Judge Frederic Block dismissed an indictment where the government would have to relitigate at trial an issue that had necessarily been resolved in defendant's favor by the jury in a prior trial. Making literally short shrift of the government's arguments against collateral estoppel, the court issued its nine-page decision less than three weeks after the indictment was returned.
On Jan. 23, 2002, a jury acquitted defendant of conspiracy and attempt to interfere with commerce by robbery and of causing the death of a person by using a firearm. The charges in that case arose out of an attempted armed robbery in September 1997. A new indictment, superceding a complaint issued the day after the acquittal, charged him with being a felon in possession of ammunition in and affecting commerce. The new charges, arising from the same 1997 incident, stated that the ammunition in question consisted of the shell casings recovered at the scene of the attempted robbery.
Analyzing the record of the prior trial, Judge Block found this to be the "rare situation" in which it is possible to determine the precise basis for the acquittal. Specifically, it had to be based on the only defense advanced at trial, mistaken identity.
To justify the new indictment, the government posited that the jury did not necessarily have a reasonable doubt that defendant was the assailant, but could simply have been unconvinced that (a) the robbery affected commerce (an issue that would not be an element of the retrial) or (b) the shooting occurred in the course of a robbery, as charged, rather than a "drug-related dispute." In light of the record, the court viewed these arguments as "unrealistic and hypertechnical." Because no rational jury could have grounded its acquittal upon anything other than reasonable doubt that defendant was the assailant, the government was now collaterally estopped from disputing this finding.
The government also argued that a jury could convict defendant on the new ammunition charge without proving he was the assailant. But this, Judge Block observed, would require the government to take the "disingenuous" and "probably impermissible" step of contradicting its prior representations to the jury. In any event, the government "proffers[ed] no theory to explain how the ammunition that was discharged from the shooter's gun could possibly have been possessed by [defendant] if he were not the shooter." Slip op. 8.
Particularly "telling," Judge Block added, was the government's characterization of the second prosecution as a "retrial."
Discrimination In Law School Admissions
In Weser v. Glen, 97 CV 4031 (EDNY, Feb. 1, 2002), Judge Raymond J. Dearie, granting summary judgment for defendants, found insufficient evidence to support plaintiff's claims that his denial of admission to CUNY Law School at Queens College reflected discrimination based on religion, race and gender. Plaintiff is a white, Jewish 79-year-old retired businessman who unsuccessfully applied for admission in 1995, 1996 and 1997.
The law school is a New York State taxpayer-supported institution created to train public service lawyers. Contending that he was discriminated against as a Jewish white man, plaintiff asserted here that the law school limits the admissions of white male applicants, sets aside seats for women and subjects applicants to different standards based on race, religion and gender, under an invalid affirmative-action plan. Defendants asserted that plaintiff was denied admission not because of discrimination, but because his academic qualifications and commitment to public service were judged lacking as compared to other applicants.
The law school's admissions policy during the relevant years stated (inter alia): (1) "We seek people who are able to complete the program successfully." The school "looks beyond" LSAT scores and past academic performance to "other demonstrations of academic promise." (2) "We look for indications that the candidate has a special affinity for our particular program." (3) "We try to select a diverse group of students." To this end, the school "actively recruit [s], among others, students who are members of populations that have traditionally been underserved by the law and under-represented by the profession." (4) "We seek students who have demonstrated connection to the State and, particularly, the City...."
The admissions policy defines "successful candidates" as those who "manifest strength in more than one of these four areas." The front of the catalog states that the school has a responsibility to help create a bar "more diversified" and "more representative" of the City and United States. "Accordingly, we actively seek to recruit... and train men and women of all races, national origins, classes, sexual orientations and belief systems...."
The admissions committee utilizes two review processes: one for applicants with LSAT scores of 140 or above and another for applicants with scores below 140. Each year the school admits no more than eight applicants in the latter category.
Plaintiff's highest LSAT score was 133. After a full career as founder and owner of an insurance firm, he graduated from the State University of New York Empire State College in 1992 with a GPA of 3.78. His prior work experience entitled him to advanced standing credits at Empire State College. He earned the remaining credits by completing "contract courses," which had no traditional classroom instruction or formal exams. Rather, they were independent study courses designed by the student and a "mentor." The work included discussions and papers; the mentor wrote a "contract evaluation" and assigned a grade.
Two of plaintiff's professors wrote strong letters of recommendation. In his personal statement plaintiff emphasized his work experience, his past commitment to public service and his desire to use his law degree to help the elderly on a pro bono basis.
The complaint alleged violations of "equal protection"; "racial, gender and religious discrimination" in violation of 42 U.S.C. 1981-1983; and violations of Title VI and Title IX.
Judge Dearie held, first, that the admissions policy is facially neutral:
[It] does not classify persons on the basis of race or gender. It neither requires nor encourages unequal treatment of applicants. Although the policy references the school's desire for diversity and recruiting efforts to achieve it in the explanation of the admissions criteria, the policy does not favor or create a less rigorous admissions standard for members of under-served and under-represented groups, nor does it imply that slots are set aside for members of such groups. (Slip op. 23).
The court also pointed to portions of Dean Kristin Booth Glen's deposition testimony to support the conclusion that the admissions policy, "though protective of certain groups," is uniformly applied and therefore not discriminatory.
Nor, Judge Dearie held, was the policy discriminatorily applied against plaintiff. According to defendants, the main barrier to plaintiff's admission was his low LSAT score; his GPA was discounted because of the nontraditional undergraduate program and performance measures; many of the evaluations were "conclusory" and, in some cases, questioned his analytical skills; and his applications failed to show a commitment to public service. The court saw no reason to reject defendants' explanations.
Judge Dearie then turned to an analysis of plaintiff's statistics comparing the admission of women and minorities to those of white men in an attempt to show defendants' proffered reasons to be a pretext for discrimination. In the court's view the statistics did not support an inference of discrimination as to race, gender or religion. Slip op. 29-40.
Attorney's Fees
In a class action securities fraud case that was settled,In Re Twinlab Corporation Securities Litigation, 98 CV 7425 (EDNY, Feb. 23, 2002), Judge Arthur D. Spatt awarded $3,178,307 in attorney's fees to plaintiffs' counsel. This amount was 12 percent of the total cash settlement of $26,485,893, but less than the 33 percent requested by counsel. Fourteen law firms worked on plaintiffs' case.
The action was brought by purchasers of stock in Twinlab Corp. alleging fraudulent accounting and business practices designed to artificially inflate the stock price. After certifying the action as a class action and approving the settlement agreement and allocation plan, Judge Spatt dealt with counsel's request for $8,828,543 in fees.
The trend in the Second Circuit, Judge Spatt observed, is to use the percentage method rather than the lodestar method in awarding fees. Applying the relevant factors, which would be about the same under either approach, Judge Spatt first considered the most important factor, the "risks involved in the litigation." The court found counsel's assertion of a significant contingency risk to be "somewhat overstated." Indeed, anecdotal and empirical evidence tends to show "no appreciable risk for non-recovery" in securities class actions. Here, shortly after the court decided the motions to dismiss, the parties reached a settlement understanding.
As to the time and expertise required of counsel, plaintiffs' attorneys devoted over 7,750 hours to the matter. These hours, multiplied by hourly rates, establish a lodestar of $2,462,537. The requested 33 percent of the cash settlement would constitute a multiplier of about 3.5 times lodestar. As Judge Spatt noted, no depositions (much less a trial or appeal) took place here, a "remarkable" fact in light of the size of the settlement.
The court did not take issue with counsel's claims regarding the magnitude and complexity of the litigation and negotiations. Judge Spatt also characterized the representation as being of "great quality."
With respect to the "requested fee in relation to the settlement," counsel sought to recover almost $9 million from the $26.5 million available.
Judge Spatt was not overly impressed by the "public policy considerations" cited by plaintiff (e.g., the need for private counsel to take "enormous risks" to help the SEC, "a vital but understaffed" agency, enforce the securities laws). As the court stated, "public policy may not be the major reason for bringing a securities fraud class action."
Guided by "principles of moderation" urged by the Second Circuit, Judge Spatt awarded $3,178,307, which was 12 percent of the recovery. The "lodestar cross-check" confirmed the appropriateness of a 12 percent award. Judge Spatt found it significant that (a) counsel's lodestar calculation sometimes used partner billing rates even where an associate or paralegal could have done the work and (b) certain associates billed at $410 and $340 per hour, and certain paralegals at $205 and $180 per hour.
Due Process
Substantive Due Process. In Hampton Bays Connections, Inc. v. Duffy, 99 CV 7029 (EDNY, Jan 18, 2002), Judge Spatt, granting defendants' motion for reargument, dismissed plaintiffs' substantive due process claim regarding an application for a construction permit. The court denied defendants' motion to certify for interlocutory appeal its First Amendment ruling upholding plaintiffs' right to petition for redress of grievances.
Plaintiffs, Hampton Bays Connections Inc. (HBC) and the Phoenix Group of Hampton Bays Inc. (Phoenix), brought this suit against the Town of Southampton and certain of its agencies and employees. In a prior decision, Judge Spatt dismissed plaintiffs' (1) equal protection claim; (2) substantive due process claim concerning their petition to rezone their property and application for site-plan approval; (3) procedural due process claims; and (4) tort claims. That decision, however, denied defendants' motion to dismiss the claim that they arbitrarily denied land use permits to HBC. Hampton Bays Connections, Inc. v. Duffy, 127 F. Supp. 2d 364 (EDNY, 2001). Plaintiffs, real estate developers, owned two parcels of property in Hampton Bays, N.Y. HBC leased the front portion of one parcel to McDonald's for a restaurant and intended to build an ambulatory surgery center to be used by Stony Brook Hospital on the rest of the property. In March 1998 McDonald's applied to the Southampton Planning Board for a special exception use permit and site-plan approval to build the restaurant. In April 1998 the State Department of Health authorized construction of the ambulatory surgery center, provided that construction would begin by Dec. 31, 1998. Public hearings on the McDonald's applications were held in August and September. At the same time, August 1998, HBC filed an application to change the zoning designation of the rear portion of the property from residential to Planned Development District. In September, the Planning Board returned the application as incomplete.
On Sept. 28, 1998, before HBC could resubmit its application for a zoning change and before the decision on McDonald's application for site-plan approval and special exception use permit, the Southampton Town Board imposed a six-month moratorium on the issuance of any zoning approval in Hampton Bays. This made it impossible for HBC to begin construction of the ambulatory surgery center by Dec. 31, 1998. Thus, the Department of Health Certificate of Need was cancelled and HBC lost a 25-year, $17-million lease with the hospital.
Concerning McDonald's application, in June 1999 the Planning Board granted McDonald's special exception use permit and site plan approval, but the Building Department returned McDonald's building permit application on the ground that it was not submitted with a wastewater management approval. Then, in July 1999, the Town Board adopted an amended local zoning law on the same date McDonald's resubmitted its application for a building permit. In August 1999, the Building Department denied McDonald's application based on the newly enacted zoning law.
Phoenix received site plan approval for two medical arts buildings, but had to reapply when it did not construct the buildings within the two years allotted by the Planning Board. In October 1998, the Planning Board returned Phoenix's reapplication because it was incomplete.
Defendants sought reconsideration of Judge Spatt's decision that HBC's substantive due process claim regarding the application for a construction permit was sufficient to withstand the motion to dismiss. On further review the court was persuaded in defendants' favor by language in the denial of the building permit stating that McDonald's application did not address three conditions set forth in the Planning Board's site plan approval. The court had initially declined to dismiss the claim on the ground that the denial of the building permit was based on the new zoning regulations. Focusing now on the Planning Board's citation of plaintiffs' failure to satisfy the three conditions, the court granted reargument and determined that defendants' action was not arbitrary. Thus, even if the zoning amendments had not been passed, the Town Board would still have denied McDonald's permit application.
Defendants also sought an order certifying for an interlocutory appeal Judge Spatt's ruling that plaintiffs' applications for approvals and permits for the restaurant were protected by the right to petition the government for redress of grievances. According to defendants, the court's interpretation of the First Amendment as requiring constitutional scrutiny whenever an applicant for a land use permit asserts that someone associated with the review has a personal animus against the application would have enormous implications for municipalities and courts. But as Judge Spatt concluded, the exceptional circumstances to justify immediate appellate review were not present here, and the presence of a question of first impression and the potential of other civil rights lawsuits were insufficient reasons for certification. Slip op. 16-20.
Peter R. Schlam and Harvey M. Stone are partners at Schlam Stone & Dolan.
[This article is reprinted with permission from the March 8, 2002, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]