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. Judge Raymond J. Dearie ordered a change of venue under 28 USC §1404. Judge Arthur D. Spatt held that the Tax Injunction Act barred a suit against the New York Division of Tax Appeals. Magistrate Judge James Orenstein wrote an extensive Report and Recommendation dealing with attorney's fees in the Swiss Bank Holocaust litigation. And Judge Frederic Block identified various issues for trial, including coverage under an accident insurance policy following a severe, and ultimately fatal, brain injury.
Change of Venue
In Grant v. Homier Distributing Co., 06 CV 4262 (EDNY, March 15, 2007), Judge Dearie granted defendant's motion to transfer venue to the U.S. District Court for the Northern District of Indiana.
Defendant Homier is an Indiana corporation, headquartered in Indiana, that sells goods at traveling shows throughout the country. Plaintiffs, on behalf of themselves and others similarly situated, alleged that Homier failed to pay them overtime premium pay and minimum wages as required by the Fair Labor Standards Act.
Homier staffs its traveling shows with a manager and several 'sales partners.' When a show ends, the Homier sales team moves with its merchandise to the next location. Plaintiffs worked as sales partners traveling throughout the United States. During the relevant period, Homier claimed, it employed 231 sales partners who resided in 29 states.
In the court's view, Homier showed that a change of venue was warranted under 28 USC §1404(a). The convenience of witnesses and of parties weighed heavily in favor of transfer. As Judge Dearie noted:
The only witnesses so far identified as likely to testify in this case reside in Indiana. . . . The Plaintiffs who so far have opted to participate in this case have indicated that they reside in Missouri, California and Texas — not New York. Nor has any potential party been named who resides in this district. (Slip op. 14-15).
Regarding availability of process the court added:
If it becomes necessary to compel the testimony of former Homier employees, named by defendant, who now reside in Indiana, a court of the Northern District of Indiana will be more likely than this Court to possess the authority to do so. (Id.).
Judge Dearie disagreed with plaintiffs' assertion that the procedure by which Homier decided not to pay overtime — a subject of the proposed testimony by Homier's listed witnesses — was not a relevant 'operative fact.' The court found the other factors applicable to transfer to be neutral or not very significant. Normally, a plaintiff's choice of forum is entitled to considerable weight. But here plaintiffs did not claim to live in the Eastern District of New York, nor did most of the operative events occur in that district.
Tax Injunction Act
In Miller v. State of New York Division of Tax Appeals and Department of Taxation and Finance, 06 CV 0885 (EDNY, March 15, 2007), Judge Spatt, granting defendants' motion to dismiss the complaint, held that plaintiff's §1983 challenge to a New York State Notice of Deficiency regarding his 1994 taxes, and his attempt to enjoin enforcement of the Notice, were barred by the Tax Injunction Act, 28 USC §1341 (TIA) and the Eleventh Amendment.
In litigating the matter pro se before the New York Division of Tax Appeals, plaintiff claimed that he had paid taxes to the state of New Jersey for the relevant period. In his federal suit, plaintiff asserted that the Division of Tax Appeals had improperly failed to give him a second hearing after permitting him time to produce records, refused to give him certain documentation, and in other ways deprived him of a fair hearing.
The TIA provides that a federal district court shall not enjoin the 'assessment, levy or collection' of a state tax 'where a plain, speedy and efficient remedy is available in the State courts.' The goal of the TIA is to stop taxpayers from using federal injunctions to disrupt state tax collections. Slip op. 8-10.
As Judge Spatt observed, plaintiff challenged his own tax liability rather than matters of 'state tax administration.' This case is therefore unlike Luessenhop v. Clinton County, New York, 466 F3d 259, 265, 267 (2d Cir. 2006), where the plaintiff was willing to pay the property tax in question, but challenged the means used to inform delinquent taxpayers that their property would be transferred and sold at public auction.
The Eleventh Amendment, which bars 'federal jurisdiction over suits against nonconsenting states,' also required dismissal. Slip op. 10-13.
Attorney's Fees — Holocaust Settlement
In In re Holocaust Victim Assets Litigation: Application of Burt Neuborne, 06 CV 0983 (EDNY, March 15, 2007), Magistrate Judge Orenstein recommended to Judge Edward R. Korman that Burt Neuborne, as Lead Settlement Counsel in the Holocaust litigation against Swiss Banks, be paid $3,095,325 in attorney's fees. This sum was about 36 percent less than the amount sought by Mr. Neuborne.
As Judge Orenstein noted, the issue of Mr. Neuborne's fees was complicated by his failure to come to an understanding as to the 'precise terms on which he was willing to serve as Lead Settlement Counsel,' which led to ill will among class members. Mr. Neuborne had publicly stated that he would not seek fees for his previous work as class counsel, but while anticipating fees for his efforts as Lead Settlement Counsel, had been less vocal about his intentions for the seven years he had served in that role. Nonetheless, Judge Orenstein rejected Objectant Samuel J. Dubbin's contention that Mr. Neuborne was judicially estopped from seeking fees. Mr. Neuborne, the court observed, had made it clear, albeit quietly, that he anticipated receiving fees as Lead Settlement Counsel.
In recommending a fee in the amount of $3,095,325, Judge Orenstein reduced Mr. Neuborne's requested hourly rate of $700 to $450. The court held that the lower rate would be fairer because (1) Mr. Neuborne earns lower hourly compensation as a law professor than he sought here; (2) he performed all the work himself instead of delegating it to a less-expensive associate; and (3) as a law professor, he has lower overhead and lost opportunity costs.
Finally, appealing to all the participants in the fee litigation to put aside their differences and emotions, Judge Orenstein urged the objectants to 'forgo further attempts to prevent a payment to Neuborne that will in any event largely be paid by others' and Mr. Neuborne to 'accede to the lower amount of compensation I recommend.' Slip op. 103.
Mr. Dubbin, however, filed an objection to the Report and Recommendation seeking review by Judge Korman on all the same bases as his original objection. Mr. Neuborne filed a conditional objection seeking $700 per hour plus an excellence multiplier, stating that he would waive all objections and accept the Report and Recommendation unless the objectors interposed 'baseless legal objections.'
In Ajnoha v. JC Penney Life Insurance Co., 02 CV 3769 (EDNY, March 30, 2007), Judge Block denied the parties' motions for summary judgment with respect to plaintiff's accidental death claim under an accident insurance policy and granted defendant's motion for summary judgment with respect to plaintiff's loss-of-sight claim because of plaintiff's delay in asserting that claim. Plaintiff's wife, Indirne Ajnoha, purchased a Group Accidental Death and Dismemberment policy issued by defendant. Under the policy, if an insured person suffers a loss of life within 90 days of an accident, including an accident on a public conveyance, the insurance company must pay a $1 million benefit. No benefits would be paid for loss or injury due to disease. The policy requires written notice of claim 'within 30 days after it [the basis for the claim] occurs or as soon as possible,' followed by written proof of loss within 90 days after the loss 'or as soon as reasonably possible.'
On April 9, 2001, Ms. Ajnoha fell and hit her head on a pole when the 'F' train she was riding lurched forward. She fell into a coma later that day. The hospital staff put her on a ventilator and inserted a tube through a hole drilled into her skull to drain fluid. By April 25, medical professionals described her as being in a vegetative state and, by June 1, her physicians determined that there was no chance of recovery. In mid-June, doctors approached plaintiff and suggested that his wife be removed from life support. Plaintiff declined, and she remained in the hospital breathing by means of a ventilator until she was pronounced dead on Nov. 10, 2001.
Plaintiff and defendant submitted conflicting medical opinions in support of their summary judgment motions on Ms. Ajnoha's brain functioning and life expectancy after the accident. They also disagreed on the nature of her pre-existing condition. Ms. Ajnoha had a small cyst in her brain at the time of the accident that burst with the trauma, but the experts disagreed on whether the cyst would have led to problems without the accident.
Plaintiff's counsel notified the insurance company by telephone of Ms. Ajnoha's death on Nov. 16, 2001 — seven months after the accident and six days after her death. The company accepted this call as a notice of claim. The company sent plaintiff claim forms on Nov. 21, and plaintiff's counsel submitted the forms with reports and affidavits on March 28, 2002. Other reports followed.
As Judge Block found, whether notice of the accidental death had been given 'as soon as possible' was an issue of fact. Whether proof of loss on that claim was submitted within a 'reasonable time' was also a question of fact. Clearly, however, the proof of loss on the loss-of-sight claim, submitted two years after Ms. Ajnoha's death, was untimely as a matter of law.
Defendant argued that because Ms. Ajnoha died more than 90 days after the date of the accident, the claim was barred. The New York Court of Appeals and the New York Department of Health had defined death as 'irreversible cessation of all functions of the entire brain, including the brain stem.' Slip op. 18. Judge Block pointed out the disagreement among the medical experts whether Ms. Ajnoha, in her persistent vegetative state, was 'brain dead' within 90 days of the accident. If so, plaintiff could recover.
Plaintiff also asserted that the 90-day provision was unenforceable as against public policy, an issue which had not been addressed in New York in the context of a person kept alive by extraordinary means. Judge Block stated:
But if the Court must decide the issue, it must do so based on the facts of this case, taking into account such considerations as whether Ms. Ajnoha's condition, if something short of brain death, was nevertheless irreversible (i.e., whether or not she could be expected to recover lost brain function) and whether there was any hope of recovery (i.e., her prognosis, including whether or not her condition would inevitably result in death); it would be premature to address the public policy issue until these factual disputes are resolved. Slip op. 20.
Finally, Judge Block turned to defendant's contention that Ms. Ajnoha's pre-existing brain cyst precluded recovery because her injuries came from disease or bodily infirmity and were not independent of all other causes. To exclude recovery under this accidental death policy, a disease or infirmity must create a condition that would be expected to be a 'source of mischief' in itself, such as progressive kidney disease or cirrhosis of the liver. Judge Block concluded that the competing medical opinions 'reveal a genuine dispute as to whether the cyst was a disease of bodily infirmity, or merely a predisposing tendency. ' Slip op. 24. Thus, defendant was not entitled to summary judgment.
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 April 13, 2007, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]