November 12, 2014

New York Law Journal / Written by: Harvey M. Stone, Richard H. Dolan

In the U.S. District Court for the Eastern District of New York. Judge David G. Trager dismissed claims by a Canadian-Syrian citizen based on his rendition to Syria and alleged torture there. Judge Trager also granted a writ of coram nobis where petitioner's payment of a fine in 1992 pursuant to a 'Violation Notice' recently caused him to lose his job. Judge Arthur D. Spatt dismissed Racketeer Influenced and Corrupt Organizations Act (RICO) claims on a number of grounds, while allowing plaintiff to replead. Judge I. Leo Glasser awarded attorney's fees to a plaintiff who had been wrongly deprived of disability benefits by a private insurer. And Judge Denis R. Hurley granted specific performance of a contract for the sale of land.


In Arar v. Ashcroft, 04 CV 0249 (EDNY, Feb. 16, 2006), Judge Trager considered claims by a dual Canadian-Syrian citizen arising from his detention in the United States and his subsequent 'rendition' to Syria, where he claimed to have been subject to torture.

Mr. Arar, a Canadian resident, had not sought entry to the United States: he was detained at Kennedy Airport while attempting to catch a connecting flight from Tunisia to Canada, via Switzerland. For purposes of its decision, the court accepted Mr. Arar's allegations that he had been denied access to counsel and to possible deprivation of due process or other constitutional rights in the U.S. before he was sent to Syria, as well as allegations that he had been tortured in Syria.

Mr. Arar asserted four claims. The first three were grounded on the alleged participation of U.S. officials in the torture inflicted upon him in Syria, through their involuntary 'rendition' of him to that country and otherwise. The fourth claim concerned his treatment in the U.S. before he was sent to Syria.

Judge Trager found it foreseeable that Mr. Arar might be subject to torture upon being sent to Syria.

Mr. Arar pleaded 'on information and belief' that 'there has never been, nor is there now, any reasonable suspicion' that he was involved in terrorist activity. (As the court noted, however, the record suggested at least some suspicion, and perhaps reasonable suspicion, for purposes of an investigation regarding Mr. Arar's activities. Slip op. 10-11 and fn. 1).

None of these factors ultimately affected the court's decision. Nor did the governments' various technical arguments--such as contesting jurisdiction under the Immigration and Nationality Act (INA); relying on Mr. Arar's failure to institute review of a final order of removal; citing Mr. Arar's nonresidence to contest application of the Due Process Clause; or challenging constitutional claims on the ground that the INA's 'comprehensive scheme' precludes relief beyond the statute.

Rather, turning to what it regarded as the heart of the matter, the court found all claims premised on Mr. Arar's removal to Syria, or his treatment there, subject to dismissal based on national security and foreign policy considerations. '[T]he task of balancing individual rights against national-security concerns,' Judge Trager stated, 'is one that courts should not undertake without the guidance or the authority of the coordinate branches....' Under the Constitution, '[t]hose branches have the responsibility to determine whether judicial oversight is appropriate. Without explicit legislation, judges should be hesitant to fill an arena that, until now, has been left untouched--perhaps deliberately--by the Legislative and Executive branches.' Slip Op. 75-76.

The court allowed Mr. Arar to replead his claims concerning denial of access to counsel and 'coercive and involuntary custodial interrogation' during his 13 days of detention in the U.S. prior to his deportation to Syria. Slip Op. 77.

Coram Nobis

In Dean v. United States, 05 CV 1496 (EDNY, Feb. 27, 2006), Judge Trager, granting coram nobis relief, held that petitioner's conviction many years ago for public lewdness was invalid and that the results of the conviction persisted in the form of a recent termination of employment. The writ of coram nobis is available when a petitioner, though no longer 'in custody,' can show compelling circumstances, sound reasons for failing to seek earlier relief, and continuing legal consequences from the conviction.

In 1992, petitioner was arrested at Gerritsen Inlet by a park police officer for public lewdness under 36 Code of Federal Rules (CFR) § 7.29(c). The officer issued a Violation Notice and released petitioner. According to petitioner, the officer told him not to contact a lawyer, but to pay a fine, after which the case would 'fall off [his] record in a few years and no one would know about this little incident.' The Notice stated that if petitioner paid a specified fine, he would not have to appear in court.

In 2003, petitioner's employer, the state of New Jersey, arranged a background check of his fingerprints and found the record of his arrest and fine. Treating this record as a guilty plea and conviction, the state disqualified petitioner from his employment as a bus driver--a job he had held for 17 years.

As Judge Trager noted, petitioner was in no way informed of the legal consequences he would suffer from paying the fine. The Violation Notice did not explain the permanent conviction on petitioner's record, and the arresting officer incorrectly told petitioner that the record would be expunged. Some 11 years later, this episode caused petitioner to lose his job. Under these and other circumstances, petitioner made the necessary showing for collateral relief.

Even if the payment of a fine amounted to a conviction, the conviction would have to be set aside for violating the due process requirements of fair notice. Slip op. 13.

Judge Trager also directed the government to clarify the National Crime Information Center record with a notation that petitioner was not convicted of a crime. Slip op. 18-19.

RICO Pleading

In Tuscano v. Tuscano, 05 CV 2008 (EDNY, Dec. 12, 2005), Judge Spatt dismissed plaintiff's RICO claims, without prejudice, for failure to join a necessary party, and gave plaintiff guidance on what allegations should be included in an amended complaint.

Plaintiff Richard Tuscano, individually and derivatively on behalf of several corporations, sued his brother Ronald; his nephew Joseph; two accountants; Countrywide Transport Inc., a corporation formed by his brother; and a law firm that served as counsel for Countrywide. Richard and Ronald owned five corporations (the Companies) engaged in selling used clothing, and divided up the management responsibilities. Richard alleged that Ronald excluded him from the financial management of the Companies, made financial decisions without his knowledge or consent, and withheld information in order to hide his pilfering of assets and profits. Richard also asserted that Ronald formed Countrywide, which was to be owned by Richard, Ronald and Joseph in equal shares, and then had the Companies enter into questionable arrangements with Countrywide, causing the Companies to pay Countrywide excessive fees.

The complaint asserted derivative claims on behalf of the Companies under New York State law; requested appointment of a receiver; sought recovery against the law firm for disgorgement of legal fees; and alleged RICO violations.

Addressing the derivative claims first, Judge Spatt found Richard as half owner of the Companies adequate to represent their interests. As the court observed, a demand to Ronald would be futile, since he allegedly orchestrated the challenged conduct. Because a plaintiff may not join individual and derivative claims in a lawsuit, the court dismissed Richard's claims for appointment of a receiver brought individually against Ronald.

Next, the complaint had to be dismissed for failure to join the Companies as necessary parties. Under Federal Rule 23.1, a shareholder derivative action cannot proceed in the absence of the parties--here, the corporations--whose rights are being asserted.

As to RICO, the court first dismissed the claims under § 1962(c) against Countrywide because the same entity cannot be both the RICO 'enterprise' and a defendant in the same action. The claims against Countrywide under § § 1962(a) and (b) failed because there were no allegations that Countrywide participated in the prohibited conduct or received any income through a pattern of racketeering activity.

Though the two accountants were acting within the scope of their employment and there were no allegations that they directed the enterprise, it was premature to dismiss the RICO claims against them based solely on their status within the enterprise.

The court found several further deficiencies in the § 1962(b) claims: (1) such claims may not be 'founded on accusations that the defendant 'acquired or maintained' an interest in the same corporate entity comprising the RICO ' enterprise"--to wit, Countrywide; (2) the complaint failed to link the predicate mail and wire frauds to defendants' ability to acquire or maintain an interest in Countrywide; and (3) the complaint did not allege that defendants' motivation for pursuing their racketeering activities was to acquire or maintain control of Countrywide. Instead, plaintiff alleged that defendants desired to injure the companies and achieve financial gain.

Insurance Benefits, Fees

In Lijoi v. Continental Casualty Co., No. 01 CV 4536 (EDNY, Feb. 13, 2006), Judge Glasser granted summary judgment to plaintiff against defendant, a private disability insurer. The undisputed facts showed that plaintiff was disabled and eligible for long-term disability benefits under the 'Own Occupation' segment of the disability plan purchased by his employer, defendant Forbes Inc. Judge Glasser also granted a declaratory judgment that plaintiff was permanently disabled under the 'Any Occupation' phase of the policy and was entitled to permanent disability benefits.

Given defendant's high level of culpability in litigating for seven years despite the finding by a federal administrative law judge that plaintiff was eligible for long-term Supplemental Security Income (SSI) benefits, Judge Glasser awarded costs and attorney's fees to plaintiff. Slip op. 34-37.

Specific Performance

In Petrello v. White, No. 01 CV 3082 (EDNY, Feb. 2, 2006), Judge Hurley, granting plaintiffs' motion for summary judgment, ordered specific performance of a contract for the sale of land.

The parties entered into a complex agreement in August 1995 involving the sale of land by defendant to plaintiffs and the agreement by plaintiffs to pay for all land planning and legal work required to subdivide the property and to develop an estate plan for defendant and his wife. In August 1998 the parties entered into a subsequent contract for the sale of the approximately 10 acres in Sagaponack.

Judge Hurley granted specific performance after plaintiff had fulfilled all his obligations under the contract and defendant refused to close. The court based its decision on findings that (1) a contract had been established, and (2) defendant acknowledged receipt of the down payment. Judge Hurley dismissed defendant's counterclaims for breach of fiduciary duty, fraud and fraud in the inducement. Slip op. 33.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.

[This article is reprinted with permission from the March 10, 2006, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]