November 13, 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 vacated a state conviction on grounds of ineffective assistance of counsel and the admission of irrelevant, prejudicial evidence. Judge Nina Gershon granted a motion by defendant, a college president, for entry of judgment against herself in the amount of nine dollars without a concession of liability regarding plaintiffs' First Amendment claims. Judge Jack B. Weinstein declined to certify a class of persons who had bought defendants' prepaid calling cards. And Judge Arthur D. Spatt made various rulings in denying a motion to dismiss.

Habeas Relief

In Nelson v. Brown, 06 CV116 (EDNY, Nov. 25, 2009), Judge Seybert granted a §2254 petition to vacate a 1999 state court robbery conviction on two separate grounds: (1) ineffective assistance of counsel in failing to seek a remedy for the prosecution's loss of contemporaneous notes by an eyewitness to the crime; and (2) the patently erroneous and unduly prejudicial admission at trial of a 1993 arrest photograph relating to a different offense.

In January 1999 two people entered Thrifty Distributing's offices in Hempstead and committed an armed robbery, escaping with about $20 in cash. Seven Thrifty employees witnessed the robbery and six of them provided accounts to the police, indicating that the robbers were two African American males. One of the robbers, later identified as petitioner, wore a black jacket. There were discrepancies in the descriptions of his facial hair, or lack thereof, given by the eyewitnesses.

One eyewitness, Ms. Del Guidice, reported that he had a 'scruffy grey and black beard.' She also gave the most contemporaneous description of the robbery-her handwritten notes made shortly after it occurred. The police lost those notes.

Two eyewitnesses identified petitioner from a photo array. Four witnesses identified him in a subsequent lineup, and two did not. Defense counsel sought, unsuccessfully, to suppress the lineup identification as too suggestive. (The official photo of the lineup showed that petitioner was lighter-skinned and taller than the 'fillers.')

Shortly before the jury trial began, the prosecution informed the court that Ms. Del Guidice's handwritten notes had been lost and thus never turned over to the defense. The court asked defense counsel what his position was. Counsel responded, '[T]he prosecution made me aware. I don't know what to say.' Asked if he had 'any other applications at this time,' counsel said 'No, sir.'

The prosecution's case at trial relied entirely on the eyewitness testimony. Ms. Del Guidice testified, consistent with what she had told the police, that petitioner had a black and grey beard during the robbery. (Prior to sentencing, he grew a beard that was totally black.) Another witness remembered his 'scruffy beard.' A third witness testified that her original description of the black-jacketed robber as 'clean-shaven' was incorrect.

The defense called an attorney and a Nassau County probation department employee. Both testified that they saw petitioner the day before the robbery and he was clean-shaven at the time. Petitioner's employer testified that, in the five years he knew petitioner, starting in 1994, he never had a beard or mustache. To 'rebut' this testimony, the government introduced a 1993 arrest photo of petitioner wearing an orange prison uniform. The photo, depicting him with a beard and mustache, was admitted into evidence over objection.

Petitioner's employer and a coworker also testified that he was at work on the day of the robbery, limiting his opportunity to commit the crime.

The jury found petitioner guilty. Two months later one of his former jurors, Ms. Jones, visited him in prison out of a concern that defense counsel had been incompetent. Petitioner then hired a private investigator to speak with Ms. Jones, who reported that two men on the jury had openly discussed the likelihood, based on the mug shot, that petitioner had a prior criminal record.

Petitioner was sentenced, as a prior felon, to 20 years' imprisonment. Having traversed the channels of state court review, he filed this §2254 petition.

Judge Seybert held that petitioner met the difficult burden for habeas relief.

As to defense counsel's failure to seek a remedy for the prosecution's loss of Ms. Del Guidice's notes, respondent argued that there was no prejudice because the notes 'had been incorporated into a statement prepared by the police,' and that statement was given to the defense.

As Judge Seybert held, this did not cure the prejudice because there is no way to know if the descriptions in the notes and in the police statement matched each other. 'Thus,' the court stated, 'had [counsel] sought relief for the missing notes, [petitioner] would have been entitled – as a clear matter of law – to some kind of remedy, such as an adverse inference that Ms. Del Guidice's original handwritten description of the robbers was not consistent with her trial testimony.' Slip op. 14.

Defense counsel's failure to seek a remedy was 'objectively unreasonable' and, but for this deficiency, there was a 'reasonable probability' that petitioner would not have been convicted. The prosecution's case was 'remarkably weak.' Indeed, except for Ms. Del Guidice, the eyewitnesses all had problems in their accounts of what happened, particularly with respect to petitioner's facial appearance. Only Ms. Del Guidice gave consistent accounts, '[a]nd it was precisely this unique consistent account that an adverse inference instruction would have challenged.' Slip op. 16. Finally, despite counsel's crucial mistake, there was a strong defense in the testimony presented.

The trial court's admission of the 1993 arrest photo was a separate error preventing a fundamentally fair trial. The photo was 'totally without relevance' to the purpose for which it was introduced: impeaching the employer's testimony that he had never seen petitioner with a beard. The arrest photo was taken thirteen months before petitioner's employer had met him. Contrary to the trial court's assessment, a period of thirteen months is not 'close enough.' Slip op. 22.

The photo was also unduly prejudicial. Its effect on the jury was even a matter of record, as related by Ms. Jones, who observed the deliberations. Slip op. 23-24.

Right to Entry of Judgment

In Husain et al. v. Springer, et al., 97 CV 2982 (EDNY, Oct. 26, 2009), Judge Gershon held that a defendant has the right to entry of judgment against herself, without an express concession of liability, where she proposed to make payment that 'would satisfy in its entirety the single remaining claim of every plaintiff.'

The case concerned a 1997 decision by Marlene Springer, the President of the College of Staten Island (CSI), to cancel student elections based on her determination that a student publication had violated CSI rules about electioneering by organizations that received financial support from CSI. Judge Gershon had earlier dismissed plaintiffs' claims for injunctive and declaratory relief as moot. The court subsequently dismissed all claims, finding that Ms. Springer was entitled to qualified immunity 'because it was not apparent at the time that her action was unconstitutional.'

The U.S Court of Appeals for the Second Circuit remanded the case for resolution of certain fact issues concerning Ms. Springer's entitlement to qualified immunity. 494 F.3d 108 (2d Cir. 2007). Because the Second Circuit also found that plaintiffs had waived any claims to relief beyond nominal damages, trial loomed over $9 (one dollar in nominal damages to each plaintiff). Ms. Springer moved to pay this amount 'without a concession of liability,' rather than proceed to trial over that nominal sum.

Judge Gershon dismissed arguments that this would deny plaintiffs an opportunity 'to vindicate important public interests,' finding that plaintiffs had obtained rulings on certain constitutional issues, and that it was plaintiffs' waivers regarding damages that had made additional merits proceedings unnecessary.

Denial of Class Certification

In Ramirez v. Dollar Phone Corp., 09 CV 2290 (EDNY, Nov. 10, 2009), Judge Weinstein denied plaintiff's motion for class certification of all persons who purchased prepaid calling cards from defendants on the ground that a class action was not the appropriate remedy and that enactment of a federal regulatory scheme was appropriate. Judge Weinstein then dismissed the case for lack of subject matter jurisdiction.

Plaintiff brought this class action alleging that defendants violated the consumer fraud acts (CFA) of eleven states and were unjustly enriched through deceptive practices relating to prepaid calling cards. Plaintiff's individual claim was for $2 – the price he paid for a prepaid calling card. Plaintiff sought certification of two classes: (1) Class A included all persons who purchased defendants' prepaid cards since Jan. 4, 2004, and (2) Class B included all residents of specified states with 'substantially similar' CFAs who purchased defendants' cards since Jan. 4, 2004. Slip op. 8.

Defendants moved to dismiss the complaint on three grounds: (1) the complaint failed to meet the pleading requirements of Rule 9(b) and the state CFAs; (2) plaintiff lacked standing with respect to the state CFA claims; and (3) the court lacked subject matter jurisdiction because some CFAs authorize actions only in state court.

Judge Weinstein discussed the prepaid calling card industry in general and its problems, including allegations of inadequate pricing disclosure.

Judge Weinstein requested that the federal government attend hearings and submit a report detailing applicable federal regulations, federal enforcement activity and the policies of the FTC, the FCC, and any other federal agency involved. The resulting report showed that, despite the government's efforts, it was inhibited from providing full protections by a lack of explicit authority. A bill to provide that authority is pending in both the House and the Senate, but has not yet passed.

Judge Weinstein discussed private litigation, FTC enforcement actions, state attorney general actions and settlements, federal regulation (described as 'incomplete' and 'inconsistent') and existing state statutes, concluding that lack of uniformity and inaction by congress impeded the regulation of prepaid calling cards. The court viewed the enactment of the Prepaid Calling Card Consumer Protection Act of 2009 as the only means for providing uniform disclosure requirements and protection of consumers:

While the federal administrative system lacks effective control, the courts and states struggle-unsuccessfully-to meet a serious set of national and international communication problems that require a uniform national approach. Piecemeal class action litigation cannot effectively address these issues.

Slip op. 32. In Judge Weinstein's view the class certification would not be superior to other means of protecting the rights of class members 'through regulation and enforcement by a federal administrative agency.' Slip op. 33.

After denying class certification, Judge Weinstein dismissed the action for lack of subject matter jurisdiction. The action failed to meet the jurisdictional requirements of the Class Action Fairness Act, because there was no diversity, there were not at least 100 members of the class and plaintiff's claim did not meet the $5 million jurisdictional minimum under the statute. Nor had plaintiff met the $75,000 amount in controversy required for a diversity action.¹

Motions to Dismiss

In Allen v. Devine, 09 CV 668 (EDNY, Nov. 19, 2009), Judge Spatt denied defendants' motions to dismiss on a variety of grounds.

The complaint alleged as follows: plaintiff, a wealthy man, is physically and mentally infirm. Soon after he met defendants Messrs. Devine and Buzil, Mr. Devine began telephoning him in his New York home on a daily basis to solicit him to invest in Superior Broadcasting Company. Messrs. Devine and Buzil represented that Superior owned several radio stations and other property, when in fact it was a shell company with no substantial assets.

In 2000, plaintiff started to make significant loans to Superior, which Messrs. Devine and Buzil began using for their own benefit. They used the money, instead, to fund a network of their own limited liability corporations. Plaintiff's neighbor in New York, Davis, aided the scheme and had frequent contact with plaintiff. To keep the scheme going, Messrs. Devine and Buzil prepared false financial statements for Superior and sent them to plaintiff in New York. By 2007, when plaintiff's family discovered the fraud, plaintiff had lost approximately $70 million.

Plaintiff asserted claims against Mr. Devine and Mr. Buzil based on RICO, fraud and breach of fiduciary duty, and against Mr. Devine, Mr. Buzil, Superior and D&B Towers, based on civil conspiracy, conversion and unjust enrichment. Plaintiff had voluntarily dismissed Mr. Buzil, and had never joined Mr. Davis. Defendants argued that Mr. Buzil and Mr. Davis were necessary parties, and that Mr. Buzil may not be joined because the court did not have personal jurisdiction over him and that Davis's joinder would destroy subject matter jurisdiction.

In sorting all of this out, Judge Spatt started with a series of findings:

  • Mr. Buzil, Mr.Davis and Superior did not have to be joined in connection with plaintiff's tort claim, because joint tortfeasors are not necessary parties under Rule 19(a) and the complexity of the action did not mandate their joinder.
  • As to plaintiff's equitable claims for a constructive trust and an injunction, Mr. Buzil, Mr. Davis and Superior were necessary parties to provide complete relief.
  • Joinder of Superior was feasible.
  • While the court had personal jurisdiction over Mr. Davis, his joinder would destroy complete diversity. However, even though the state law claims were more numerous than plaintiff's federal claims, it was not obvious that they predominated. Thus, the court's 'exercise of supplemental jurisdiction would be proper even if the state law claims were determined to predominate,' making Davis's joinder feasible. Slip op. 10.
  • Buzil's joinder also was feasible, because Devine took tortious actions while physically in New York, and personal jurisdiction may be predicated on acts taken by a co-conspirator within New York acting as an 'agent' for the absent party. Joinder of Buzil was also consistent with due process.

In light of the above, the court ordered joinder of Superior, Davis and Buzil as defendants with respect to the constructive trust claim, and Davis and Buzil as defendants in connection with plaintiff's request for injunctive relief.

Judge Spatt denied defendants' alternative motion to transfer the action to the Northern District of Illinois. First, venue was proper under 28 U.S.C. §1391, if not under the RICO venue statute, because the RICO venue statute was intended to supplement and not replace section 1391. The primary factor in selecting the Eastern District of New York as the most convenient venue was deference to the plaintiff's choice of forum, particularly given his illness, his inability to travel to Chicago, and his allegation that he was present in the Eastern District and felt the effects of the fraud solely in New York.

Judge Spatt found long-arm jurisdiction over defendant D&B Towers through its agent Devine when Messrs. Devine and Buzil were its sole owners. The open question was whether Devine met with plaintiff in New York during the period when D&B Towers knew of and consented to Devine's actions. Taken in the best light for plaintiff, his allegations could be viewed as alleging that Devine did so, establishing a prima facie case for long-arm jurisdiction over D&B Towers. Slip op. 23.

Plaintiff also adequately alleged civil conspiracy to commit fraud, which does not have to meet the requirements of Rule 9(b). Slip op. 25.

1.  Schlam Stone & Dolan did not represent Dollar Phone in this case, but has represented it in other matters.

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