November 12, 2014

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

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 Fredric Block upheld a complaint seeking damages and an injunction relating to uncorrected errors in pre-sentence and criminal-history reports. Judge Arthur D. Spatt found deficiencies in a debt-collection letter because it could suggest that the right to request validation is outweighed by the demand for payment. Chief Judge Raymond J. Dearie dismissed a property owner's indemnity claim against an insurance company in the wake of a construction accident. And Judge Spatt dismissed, on jurisdictional grounds, discrimination claims that had essentially been litigated before the NYSDHA.

Errors in PSR, Rap Sheet — Damages, Injunction

In two consolidated actions, Hall v. L. Marshall, Superintendent, Wallkill Correctional Facility, 04 CV 4953, and Hall v. The City of New York, 05 CV 0079 (EDNY, March 6, 2007), Judge Block declined to dismiss several of a pro se plaintiff's claims for monetary and injunctive relief in connection with the failure to correct asserted inaccuracies in his pre-sentence report ("PSR") and rap sheet.

In the first action, commenced as a habeas motion but later treated as a § 1983 suit, plaintiff claimed that his PSR falsely stated that he attempted to kill someone, when he had actually been convicted of second-degree assault, possession of a weapon and reckless endangerment. He also alleged that, despite his repeated attempts to have the PSR corrected, it never was, causing parole to be denied. In the second action, commenced as a § 1983 suit, plaintiff focused on both the PSR and an uncorrected reference in his rap sheet to an arrest for second-degree murder.

In addition to the City of New York, defendants in the second action were the City Department of Probation ("DOP"), the King's County DA's Office and three people sued in their official and individual capacities - DOP's Assistant General Counsel and two Assistant District Attorneys. An amended complaint added several State defendants including the Division of Criminal Justice Services ("DCJS").

As to the City, plaintiff alleged a practice of failing to train its officers and deliberate indifference to constitutional rights.

Plaintiff sought damages and an injunction ordering the correction of errors in his PSR and rap sheet.

In this and earlier rulings, Judge Block dismissed various claims against a number of defendants. The parties also entered into a "so ordered" stipulation requiring DOP to correct the PSR and plaintiff to withdraw claims for injunctive relief regarding the PSR.

In the instant decision, the court held that plaintiff alleged viable claims (1) for damages against the City based on errors in the PSR; and (2) for an injunction against the City and DCJS's Acting Commissioner, in her official capacity, based on the error in the rap sheet.

As plaintiff correctly asserted, the error in the rap sheet will impair his interaction with the government as well as potential employers, and will prevent him from receiving a state-issued tow-truck driver's license.

At bottom, Judge Block noted, plaintiff's due process claims stem from a "reasonable" premise that "official records regarding one's criminal history should be accurate." Because the alleged inaccuracies in the PSR damaged plaintiff's reputation, resulting in a denial of parole, plaintiff set forth the necessary "stigma plus" claim for governmental defamation, even if most of the named defendants cannot be liable for monetary damages. Slip op. 11-14. Liberally construing the complaint to allege that the City maintains a custom or policy of refusing to correct PSR's even after errors are brought to its attention, Judge Block found a "sound basis" for municipal liability.

The alleged error in the rap sheet, which would preclude issuance of a tow-truck license, also amounts to a "stigma plus" claim. Plaintiff, however, has not yet been denied a license. In the absence of a current injury caused by the rap sheet, the court saw no basis for damages. But there was a basis to order a permanent mandatory injunction ordering the City to correct the error in the rap sheet


For purposes of injunctive relief, Judge Block allowed plaintiff to add as a defendant the acting head of DCJS, the agency with authority to make the correction. Slip op. 21-22.


In Meselsohn v. Lerman, 06 CV 4115 (EDNY, April 11, 2007), Judge Spatt denied defendant's motion to dismiss a complaint under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1962.

Plaintiff, on behalf of himself and others similarly situated, filed a complaint alleging that defendants violated the FDCPA by sending him a letter that stated (in part):

You have thirty (30) days after receiving this notice to dispute the validity of the [specified] debt or any portion thereof. If you dispute the debt or any portion thereof, within the thirty (30) day period, this office will obtain verification of the debt and mail you a copy of same . . . .

Subject to the above, your payment . . . is due at this office thirty (30) days from your receipt of this letter . . . .

The validation notice tracks the statutory language of the FDCPA and is presumptively valid. The letter is nonetheless deficient under Section 1962(g). As Judge Spatt stated:

The phrase "subject to the above" does not explain to an unsophisticated consumer that he or she has the right to either request validation of the debt or pay the debt within 30 days. In fact, a consumer may believe that he or she is required to pay the debt, and that any right to request validation is overridden by the demand for payment. (Slip op. 10-11).

The problem, the court noted, could have been cured by inserting "simple transitional language explaining that the demand does not eliminate the right to request validation."

Employee Injuries - Insurance Coverage

In Smolarczyk v. United States Liability Insurance Group, 03 CV 1051 (EDNY, March 30, 2007), Chief Judge Dearie granted summary judgment to defendants United States Liability Insurance Group and United States Underwriters Insurance Company (collectively, "US Underwriters"), which had explicitly excluded employee claims from coverage. The court also denied summary judgment motions of third-party defendant and fourth-party plaintiff Sutton Street Realty Corp. ("Sutton") and fourth-party-defendant insurance broker Butwin Insurance Group ("Butwin").

In October 2001, construction worker Denert sustained serious injuries from a hand-held saw. He sued Sutton as the owner of the premises and Sutton's vice president, Smolarczyk, who commenced this action seeking a declaration that US Underwriters were obligated to defend and indemnify Sutton. Smolarczyk was also the president and principal share holder of Joseph S & Son Construction, Inc., Denert's employer.

US Underwriters did not issue the insurance policy until December 3, 2001, but Butwin, Sutton's broker, issued a binder in early October based on a quote from the broker for US Underwriters, Morstan General Agency ("Morstan"). The quote from Morstan to Butwin listed employee/independent contractor coverage as an exclusion. However, the representative from Butwin did not mention this exclusion to Sutton in a fax sent on October 4 detailing the proposed coverage. Nor did an October 23 document titled Insurance Binder, also sent to Sutton, contain the employee exclusion. The final policy contained the exclusion, and US Underwriters denied coverage for Sutton's claim for indemnification and defense of Denert's actions.

Under New York law "an insurance binder is a fully enforceable contract that provides interim coverage until a formal policy is either issued or refused." Slip op. 8. As Chief Judge Dearie noted, to determine what constitutes the binder, a court in New York should consider: (1) the specific and referenced terms of the binder; (2) the terms contained in the usual policy issued by the insurance company or those required by statute; and (3) pre-binder negotiations.

Here, the controlling document was the October 23rd order blank and binder sent by Morstan to Butwin, which listed the covered locations, outlined the monetary caps on coverage, and incorporated the terms and conditions of the quote, including the employee exclusion. Moreover, US Underwriters acted promptly in its investigation and issued its notice of disclaimer five days after it had gathered sufficient facts to disclaim based on the employee exclusion. Chief Judge Dearie therefore granted US Underwriters' motion for summary judgment.

Turning to Butwin's motion for summary judgment, the court found a triable issue of fact as to whether Sutton specifically requested coverage for employees working on the project or only made a general request for standard liability insurance. Faxes between the parties permitted an inference that Butwin and Smolarczyk discussed coverage for employees working on the property. Slip op. 17.

Election of Remedies - New York Executive Law

In Benson v. North Shore-Long Island Jewish Health Systems, 06 CV 3257 (EDNY, April 4, 2007), Judge Spatt granted defendants' motion to dismiss all claims brought under the New York State Human Rights Law ("NYSHRL"); §§ 1981, 1985 and 1986 claims against North Shore-Long Island Jewish Health Systems ("North Shore"), except for plaintiff's retaliatory discharge claims; and Title VII claims against the individual defendants and all Title VII claims based on discrimination for sexual orientation.

The plaintiff is an African-American woman, involved in a same sex relationship, who suffers from ocular albinism, a birth defect that causes acute vision impairment. Plaintiff worked for defendant North Shore-Long Island Jewish Health Systems and Zucker Hillside Hospital (the "Hospital") from 1992 until June 2006, when she was terminated. She claimed that her supervisor harassed her and discriminated against her, and that other individual defendants ignored and condoned these discriminatory practices. The complaint listed numerous discriminatory actions such as forcing her to keep a log detailing every minute of her day; making racially derogatory comments; and depriving her of a permanent work space. The complaint also alleged that white, heterosexual, non-disabled employees were treated more favorably. Plaintiff alleged that she was terminated in retaliation for her complaints about discriminatory treatment in June 2006. In March 2004, plaintiff had filed a charge of discrimination against North Shore with the New York State Division of Human Rights ("NYSDHR"), setting forth allegations almost identical to those in the complaint. In February 2006, the NYSDHR made a determination of no probable cause to believe that North Shore discriminated or retaliated against plaintiff.

Judge Spatt dismissed plaintiff's state law claims as barred by the election-of-remedies provision of New York Executive Law § 297(9). If a plaintiff has filed a discrimination complaint with the NYSDHR, he or she may not bring a subsequent judicial action based on the same underlying facts. Here, the prior claim with that agency, which found no discrimination, deprived the court of jurisdiction over the New York State claims against North Shore. The state claims against the other defendants met the same jurisdictional barrier.

The court did have jurisdiction over the claims of retaliatory discharge because they arose after her administrative charge was dismissed.

Much the same analysis applied to plaintiff's §§ 1981, 1985 and 1986 claims against North Shore. The rest of the defendants, however, were not litigants before the NYSDHR, and the §§ 1981, 1985 and 1986 claims were thus not precluded as to them.

Judge Spatt dismissed the Title VII claims against the individual defendants because they may not be held personally liable under that Title. The court also dismissed Title VII claims alleging discrimination based on sexual orientation, because Title VII does not recognize homosexuals as a protected class. Finally, as to the continuing violation doctrine for a Title VII hostile work environment claim, plaintiff had adequately pled that all the alleged acts were part of the same unlawful practice, and at least one act fell within the 300-day filing period. As Judge Spatt stated: "Plaintiff's allegations are numerous and include events spanning a period from 2000 through her termination in 2006 . . . . Plaintiff has sufficiently alleged a pattern of discrimination that continued over a period of years with some incidents occurring within the appropriate filing period." Slip op. 21.

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 May 11, 2007, issue of the New York Law Journal. Copyright © 2007 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]