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 Joanna Seybert rejected a defense of claim preclusion flowing from a prior settlement in a similar case. Judge Arthur D. Spatt denied summary judgment motions by two police officers asserting qualified immunity as a defense to §1983 claims resulting from a fatal shooting. In another case, involving a gun license revocation, Judge Spatt dismissed §1983 claims based on the First Amendment. And Judge Eric N. Vitaliano rejected an insurer's argument to disclaim coverage where it accepted premiums after knowing of the alleged basis for cancellation.

Claim Preclusion

In Modular Devices Inc. v. Alcatel Alenia Space Espana, 08 CV 1441 (March 16, 2009), Judge Seybert, denying defendants' motion to dismiss, dealt with issues of claim preclusion and privity.

In this diversity action for damages, plaintiff sued Alcatel and Space Systems/Loral Inc. after Alcatel canceled a work contract in midstream to produce electronic modules for ultimate use by Space Systems/Loral and made an unacceptable offer of payment to resolve the matter. Plaintiff claimed that Space Systems/Loral wrongfully interfered with the contract by steering the work to another vendor.

At issue here was the effect of the settlement of a prior action where plaintiff had sued another company, Mier Communications, S.A., and Space Systems/Loral on closely similar facts, involving the making of electronic modules by Mier for ultimate use by Space Systems/ Loral and alleged interference by Space Systems in that contract as well. That action was dismissed with prejudice after settlement.

In arguing claim preclusion, defendants emphasized the nearly identical allegations in the two complaints, the citation of specific acts by Alcatel in the complaint against Mier and plaintiff's missed opportunity to name Alcatel and Space Systems/Loral as defendants in the earlier suit.

Though the settlement with Mier was an 'adjudication on the merits,' defendants could not show claim preclusion. As Judge Seybert observed, the instant case did not fit the traditional model for claim preclusion where a plaintiff failed in an earlier suit to bring all claims at once against the 'same defendant' relating to the same transactions. Rather, this case 'involves a plaintiff seeking to add claims against new defendants.' Plaintiff was not required to bring the instant claims against Alcatel and Space Systems/ Loral in the suit against Mier. In fact, 'defendants in each action held separate contracts with plaintiff, and Mier had its own incentives in settling its dispute with MDI,' the judge said.

Defendants here never alleged that they 'controlled or substantially participated in the control of the presentation on behalf' of Mier in the prior case. Nor, the court added, did Mier and defendants here have an alignment of interests to warrant a finding of privity.

Excessive Force

In Rasanen v. Brown, 04 CV 1995 (EDNY, March 25, 2009), a §1983 action against a group of New York State Troopers for allegedly using excessive force in a shooting death, Judge Spatt denied motions for summary judgment by two of the troopers despite their claims of qualified immunity.

Plaintiff alleged that in December 2000 a Police Mobile Response Team used excessive force in fatally shooting his son during a search of the son's home in the East End of Long Island. Before executing the search warrant, the response team received briefings suggesting that one John Rasanen, an alleged drug dealer, possessed guns and had threatened police officers.

The police unit breached the front door of the home with a battering ram, and two of the officers — defendants Brown and Etherton — turned into a dark hallway as they made their way to Rasanen's closed bedroom door. Brown kicked open the door and yelled, 'police, get down.' According to Brown, he entered the room with a gun in one hand and a flashlight in the other.

Brown testified in his deposition that Rasanen charged him and tried to wrest away his gun and that in the ensuing struggle, out of fear for his own life, he shot Rasanen in the chest from close range. The only other eyewitness to the shooting was Angela Chinnici, who watched the encounter unfold from her vantage point in Rasanen's bed.

Judge Spatt granted summary judgment on the §1983 claims in favor of 14 troopers who were not directly present when the shooting occurred and thus had no reasonable chance to intervene.

The court then turned to the arguments of Officers Brown and Etherton that Brown's use of deadly force in response to the perceived threat from Rasanen was 'objectively reasonable,' entitling them to qualified immunity. As Judge Spatt noted, there were two disputed issues of material fact. First, plaintiff's ballistics expert asserted that the powder burns on Rasanen's chest were inconsistent with (a) Brown's claim of a close-range shooting, and (b) the finding by the Suffolk County ballistics examiner showing a shooting distance of only nine to 18 inches. A second material issue of fact arose from Ms. Chinnici's contention, contradicting Brown, that Rasanen 'never lunged at or struggled with Brown either before or after the shot was fired.'

Plaintiff alleged as well that all defendants were negligent in not planning adequately for the search, failing to provide an onsite medical technician and to give adequate first aid, and creating a mindset of 'shoot first and ask questions later.' Because defendants did not address the merits of this common law negligence claim, they failed to carry their burden for purposes of summary judgment.

License to Carry Weapon

In Razzano v. County of Nassau, 07 CV 3983 (EDNY, Feb. 14, 2009), Judge Spatt dismissed §1983 claims against the Nassau County Police Department, one of its detectives, Representative Carolyn McCarthy and a member of her staff. The claims, based on the First and Fourteenth Amendments, resulted from the revocation of plaintiff's license to carry a weapon.

In early 2003 plaintiff, a member of the Minutemen Civil Defense Corps, an organization concerned with securing the U.S. borders against unlawful entry, began writing letters to Representative McCarthy about the increasing number of undocumented persons living in his community. Ms. McCarthy responded to some of his letters and forwarded some to the U.S. Department of Homeland Security. In March 2007, plaintiff made several visits to Ms. McCarthy's office seeking an appointment with her. Finally, staff members called the police, and Detective Samaniego escorted plaintiff out of the office and told him to cease all communications with Ms. McCarthy.

The next day, the Nassau County Police Department confiscated nine rifles and 15 handguns from plaintiff's mother's house. In April 2007, the Nassau police chief informed plaintiff that his license to carry a weapon was being revoked in light of the incident at Ms. McCarthy's office and plaintiff's increasing obsession with the day laborer situation.

Plaintiff asserted here that he no longer attends anti-immigration demonstrations or writes letters to a newspaper editor because he fears retaliation by the police.

Judge Spatt dismissed all claims against the Nassau County Police Department because, under New York law, departments that are administrative arms of municipalities do not have a separate legal identity apart from the municipality.

Plaintiff did not allege that Nassau County has a policy of retaliating against citizens who exercise their First Amendment rights. Judge Spatt therefore dismissed plaintiff's retaliation claim against the county for confiscating his weapons after he sought to meet with Ms. McCarthy.

As to the other defendants, plaintiff also had no valid First Amendment claim. As Judge Spatt pointed out, plaintiff wrote numerous letters to Ms. McCarthy and spoke with her staff over a five-year period. It was only after plaintiff twice appeared in Ms. McCarthy's office, and was asked to leave, that her staff contacted the police. Thus, the decision by the police to confiscate plaintiff's weapons was motivated not by plaintiff's First Amendment activity but by his confrontations with Ms. McCarthy and her staff. In short, there was no causal relationship between plaintiff's expressive activity and defendants' actions.

Ms. McCarthy, her staff members and the Nassau County Police Department officers were also entitled to qualified immunity. As the court found, 'it was objectively reasonable for Mendelsohn and the NCPD Defendants to believe that they were not violating the Plaintiff's First Amendment rights.'

The McCarthy staff called the police because they felt threatened by plaintiff, and the police confiscated the weapons because it believed such a step was warranted by plaintiff's behavior.

Judge Spatt declined to dismiss plaintiff's due process claim under §1983 against Nassau County and the other police department defendants based on an alleged Nassau County policy to confiscate firearms without a mechanism for reclaiming them.

Under Matthews v. Eldridge, plaintiff had a property interest in the seized weapons, but the court did not have enough information about county policy to assess the risk of erroneous deprivation through its procedures or the government's interest in taking action.

Insurance Coverage

In GuideOne Specialty Mutual Insurance Co. v. Congregation Adas Yereim, 04 CV 5300 (EDNY, Jan. 15, 2009), Judge Vitaliano denied plaintiff's summary judgment motion seeking relief from insurance contracts with defendant Congregation Adas Yereim and granted defendants' cross-motions to establish GuideOne's coverage obligations. GuideOne initially sought to disclaim coverage on the ground that Adas Yereim breached the cooperation clauses in the insurance contracts. GuideOne subsequently amended its claim on the additional ground that Adas Yereim failed to disclose a leasing arrangement with Deli Plus Inc.

Adas Yereim, an Orthodox spiritual and cultural center, runs a synagogue and religious school on 50th Street in Boro Park, Brooklyn, which includes a social hall, Adas Terrace, in the basement. In the mid-1990s, the 50th Street synagogue entered into an understanding with Deli Plus, a caterer, granting it the exclusive right to cater functions at Adas Terrace. During the policy application process, Adas Yereim's secretary-treasurer met with an insurance broker and GuideOne agent, who completed the application. The secretary-treasurer did not volunteer information about the catering operation. GuideOne issued policies to Adas Yereim insuring 21 separate premises. The commercial general liability policy was renewed three times and an umbrella policy twice. GuideOne alleges that it would have charged a higher premium and sought a certificate of insurance from the caterer if it had known about the Deli Plus agreement.

In December 2003 an attendee at a social function at Adas Terrace fell and sustained injuries leading to his death on December 23. His estate gave notice to GuideOne in January 2004. In February 2005 GuideOne took an examination under oath of witnesses from Adas Yereim who explained the relationship between Adas Yereim and Deli Plus and disclosed that Deli Plus never produced an insurance certificate despite numerous requests.

After the examinations under oath, GuideOne generated an internal memo to the effect that Adas Yereim had allowed the caterer to use its basement. Later, in March 2005, GuideOne accepted premium payments from Adas Yereim. In May 2005 GuideOne amended its complaint to include allegations based on the failure to disclose the Deli Plus relationship, but afterwards it accepted another premium from Adas Yereim.

Judge Vitaliano denied GuideOne's motion for rescission of the policy based on the undisclosed relationship between Adas Yereim and Deli Plus. The key issue was when GuideOne knew the material facts about Deli Plus, and the court concluded that GuideOne knew all it needed to know in February 2005, not May 2005, as it contended.

Under New York law an insurer 'must promptly disaffirm the contract upon learning of the misrepresentations — and certainly it may not continue to derive benefit under it.' Slip op. 16. Thus, GuideOne's seven-month delay was unreasonable as a matter of law.

New York law similarly makes clear that where an insurer accepts premiums after learning of an event allowing for cancellation of the policy, the insurer waives the right to cancel or rescind. Additionally, when an insurer who is aware of misrepresentations sends a notice of non-renewal, stating coverage will remain in effect through the end of the policy, all the while accepting premiums, the insurer is estopped from seeking rescission. GuideOne thus forfeited its right to rescission and defendants were entitled to judgment.

Judge Vitaliano also granted attorney's fees in favor of Adas Yereim for its successful defense against the insurer's attempt to dishonor its policy obligations.

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, 2009, issue of the New York Law Journal. Copyright © 2009 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]