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 Jack B. Weinstein rejected the government's application to impose certain restrictive conditions on defendant during service of his sentence. Judge Joseph F. Bianco dismissed an indictment under the Speedy Trial Act, but without prejudice to reindictment. Judge Nicholas G. Garaufis denied British Airways' motion to dismiss a putative class action against it for reckless baggage handling. And Judge Dora L. Irizarry dealt with claims of quantum meruit and unfair competition in denying defendant's summary judgment motion in a suit by a poultry distributor against a poultry dealer.

Right to Associate

In United States v. Corozzo, 08 CR 76 (EDNY, April 24, 2009), Judge Weinstein denied the government's request for an order pursuant to 18 U.S.C. §3582(d) barring defendant from associating or communicating with members or associates of organized crime during his incarceration and supervised release.

Defendant, a 69-year-old 'captain and killer for the mafia,' was sentenced to prison for 13 1/2 years. In its request at sentencing to limit defendant's rights of association during his incarceration and subsequent supervised release, the government cited §3582(d), which provides that, in imposing sentence in certain racketeering and drug cases, the court 'may include . . . an order' requiring defendant not to 'associate or communicate with a specified person . . .upon a showing of probable cause' that such activity is intended to enable defendant to manage or otherwise participate in 'an illegal enterprise.'

After reviewing instances of 'cruelty to American prisoners' during the Revolutionary War, the Civil War, World War II, and the Korean War, Judge Weinstein observed that the severe restrictions sought here would make life in prison and on supervised release 'harsher than necessary.' Because defendant 'has close relatives who are members of organized crime,' the proposed restrictions would separate him even from his own family.

As Judge Weinstein noted, 'Section 3582 is almost never used,' and the court's power under it is, in any case, discretionary.

There was no way to meet the government's request without creating unacceptable prison conditions:

Imposition of the terms sought by the government would almost certainly lead to incarceration in a 'supermax' prison, solitary confinement or segregation. Yet, there is no evidence that this defendant . . . is more dangerous to other prisoners, guards or to outside society, than are others of his ilk who do not suffer these restrictions. (Slip op. 6)

'Whether for religious or secular reasons,' the court added, 'human beings require the company of others to stay healthy.' Similarly, 'research demonstrates the psychological harms of solitary confinement and segregation, ' forms of punishment that may 'seriously inhibit rehabilitation.'

Thus, assuming the proposed order is constitutional, the court elected in its discretion not to issue it. 'It is expected,' Judge Weinstein stated, 'that this defendant, like all others, will have telephonic and visiting privileges with his natural family.' The Bureau of Prisons, moreover, has 'adequate power' to deter participation in organized crime 'without resorting to harsh confinement.' Slip op. 7.

While ordering non-association with other criminals during supervised release, the court chose not to cut off familial association, which eases integration into society. Should interaction with relatives lead to the possibility of further crime, the powers of probation officials and the court suffice to deal with the problem. The overriding factor is that '[u]nnecessary denial of contact with family stunts rehabilitation and violates basic human rights. ' Slip op. 9-10.

Speedy Trial Act

In United States v. Munlyn, 08 CR 796 (EDNY, April 15, 2009), Judge Bianco, while dismissing an indictment because of a 65-day delay between defendant's arraignment and his eventual indictment, declined to dismiss with prejudice.

In March 2008 defendant, then already a convicted felon, was arrested on state charges of robbery. At the time, he was allegedly in possession of a loaded firearm, resulting in charges of criminal possession of a weapon in violation of New York Penal Law. The weapons charge was later referred to the Eastern District U.S. Attorney's Office. In June 2008 defendant was found guilty by a Nassau County jury on robbery and related charges. In July 2008 he was sentenced to consecutive terms of imprisonment for a total of 17 years.

On Sept. 8, 2008, defendant was arraigned in the Eastern District on a federal complaint charging possession of a firearm by a convicted felon. Under the Speedy Trial Act, the indictment on those charges had to be filed within 30 days of the arraignment. The indictment was 45 days late. Defendant moved to dismiss the indictment with prejudice.

On balance, Judge Bianco found no basis for a dismissal with prejudice:

Specifically, after weighing all of the relevant factors, including, among other things, the seriousness of the instant charge of felon-in-possession of a firearm, the relatively short duration of the delay, the absence of any evidence of bad faith or pattern of neglect by the government, the effects on the administration of the Speedy Trial Act and justice, and the lack of any prejudice from the delay to the defendant, who is serving a seventeenyear state sentence . . . the Court concludes that dismissal without prejudice is warranted . . . .

As Judge Bianco noted, dismissal without prejudice is not a 'toothless sanction,' United States v. Taylor, 487 U.S. 326, 342 (1988), and will require the government to obtain a new indictment within six months if it decides to reprosecute.

Montreal Convention

In Hutchinson v. British Airways PLC, 08 CV 2781 (EDNY, April 6, 2009), Judge Garaufis denied a motion by British Airways (BA) to dismiss a putative class action complaint alleging that British Airways' baggage handling system was operated 'recklessly and with knowledge that damage would probably result.'

Plaintiffs allege that from April through June 2007, British Airways lost bags at twice the rate of the worst U.S. airline. The British airline's Heathrow processing centre had a massive backlog of lost luggage — 40,000 lost bags in March 2007 — and sometimes auctioned off lost bags after only a few weeks. British Airways admitted in 2007 that its baggage service did not meet an acceptable standard. The complaint included allegations of lost, damaged and delayed baggage relating to the various named plaintiffs.

In 2003 the Montreal Convention, a comprehensive international treaty that addresses the liability of airline carriers for destroyed, lost, damaged or delayed baggage, replaced the Warsaw Convention. Article 22 of the Montreal Convention expressly limits the liability of carriers for the destruction, loss, damage or delay of baggage, unless a plaintiff can prove that the damage resulted from an act or omission 'done with intent to cause damage or recklessly and with knowledge that damage would probably result.' Because the Montreal Convention is substantially the same as the Warsaw Convention, courts look to the cases interpreting the Warsaw Convention.

British Airways contended that plaintiffs had failed adequately to allege that its conduct was reckless or that it acted with knowledge that damage would probably result. To demonstrate that the airline was aware that its baggage handling system would cause damage, loss or delay to some passengers' baggage, plaintiffs pointed to British Airways' acknowledgement that its service did not meet an acceptable standard and concession that it had lost baggage at rates from 2.8 percent to 2.3 percent, which was 60 percent above the industry average.

Judge Garaufis determined that plaintiffs' allegations stated a claim under the Montreal Convention. First, plaintiffs alleged that British Airways' conduct was an extreme deviation from the norms of behavior in the airline industry, that BA was aware of this extreme deviation . . . but that BA consciously ignored the risk in continuing its baggage handling policies. Slip op. 15.

As the court found, these allegations plausibly suggested recklessness. Second, plaintiffs alleged sufficient facts to support their claim that British Airways was subjectively aware of the harm and degree of risk to plaintiffs' baggage. Thus, at this stage of the litigation, plaintiffs' claims should go forward. Slip op. 16-17.

Quantum Meruit

In Milton Abeles Inc. v. Farmers Pride Inc., 03 CV 6111 (EDNY, March 19, 2009), Judge Irizarry denied defendant's second summary judgment motion seeking to dismiss claims for quantum meruit and unfair competition.

Plaintiff distributed defendant's poultry from July 2000 to November 2003. Defendant claimed that plaintiff terminated the distribution relationship by refusing to pay outstanding balances, telling defendant to pick up inventory, initiating this lawsuit and ceasing to place new orders. Plaintiff claimed that defendant ended the relationship by attempting to cut plaintiff out of the distribution arrangement and sell poultry directly by disclosing prices plaintiff charged defendant and undercutting plaintiff's prices.

Judge Irizarry found sufficient evidence that before Nov. 25, 2003, defendant disclosed Direct-Purchase Pricing, the prices that defendant would charge subdistributors if it sold poultry directly to them. Because there was conflicting testimony whether plaintiff had been impacted financially by defendant's disclosure, the court denied this aspect of the summary judgment motion.

An unfair competition claim under New York law does not require a showing of actual customer confusion or deception as to the origin of the product or service. Instead, a claim may be based on the misappropriation of confidential information such as a distribution list of customers and subdistributors. In Judge Irizarry's view, plaintiff's allegations that it invested significant labor, skill and money in developing the distribution list and that defendant converted the list to supply poultry directly to subdistributors created triable issues of fact.

Although the contract between the parties was unenforceable, the court held that it may allow quantum meruit recovery to prevent unjust enrichment. The court had previously found that plaintiff did not have a legal right to continue as master distributor, defendants did not tortiously interfere with plaintiff's contractual relationship with the subdistributors and defendant was entitled to customer identities as part of its agreement with the plaintiff. But plaintiff was still entitled to quantum meruit recovery for distribution services he had provided and the steps he had taken to develop good will toward defendant's products. Under a quantum meruit claim plaintiff does not have to establish damages for services that are distinct from the services covered by the unenforceable contract to recover. Slip op. 9.

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