November 13, 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 Nina Gershon permanently enjoined the defunding of ACORN as a Bill of Attainder. Judge Jack B. Weinstein held that the Adam Walsh Act's requirement of electronic monitoring was unconstitutional as applied to a particular defendant now awaiting trial on charges of receipt and possession of child pornography. Judge Dora L. Irizarry ordered that a personal money judgment of $3.16 million be imposed against defendant following his conviction for cocaine offenses. And Judge Arthur D. Spatt dismissed a bankruptcy appeal as moot.
Bill of Attainder
In Acorn v. United States, 09 CV 4888 (EDNY, March 10, 2010), Judge Gershon granted summary judgment permanently enjoining the U.S. government from enforcing legislation that, in the wake of recent highly publicized scandals, had defunded the Association of Community Organizations for Reform Now (ACORN). On Jan. 15, 2010, this column reported on Judge Gershon's grant of a preliminary injunction in the same matter.
Additional appropriations provisions and defendants had been added by amended complaint since the preliminary injunction issued. The court noted here that, in considering these for the first time, as when considering whether to convert the preliminary injunction to a permanent injunction, the outcome did not depend on the propriety of Congress' goals, or the accuracy of the fact-finding behind its decision-making process with respect to ACORN. Rather, '[t]he question here is only whether Congress has effectuated its goals by legislatively determining ACORN's guilt and imposing punishment on ACORN in violation of the Constitution's Bill of Attainder Clause.' Slip op. 2.
Judge Gershon approached the matter 'with the utmost gravity, because legislative decisions enjoy a high presumption of legitimacy,' especially 'where the challenge is brought under a rarely-litigated provision of the Constitution, the Bill of Attainder Clause, which has been successfully invoked only five times in the Supreme Court since the signing of the Constitution. ' Id.
The court rejected the government's argument that the ban on ACORN funding was not punitive: 'Wholly apart from the vociferous comments by various members of Congress as to ACORN's criminality and fraud . . . , no reasonable observer could suppose that such severe action could have been taken in the absence of a conclusion that misconduct had occurred.' Slip. op. 16.
In addition to adhering to its prior determinations, the court considered certain new arguments, such as the government's contention that plaintiffs lacked standing to sue the heads of the Department of Defense, the Environmental Protection Agency (EPA) and the Department of Commerce for injunctive relief against enforcement of the defunding provisions, because ACORN had not previously received, and therefore did not stand to be denied, any funding from those departments.
Judge Gershon found standing based on both 'reputational injury' and the related 'economic component' that may affect 'ACORN's ability to obtain funding from non-governmental entities fearful of being tainted-because of the legislation-as an affiliate of ACORN.' Slip op. 28.
In Judge Gershon's order, ACORN also showed its threatened injury to be 'irreparable,' because of sovereign immunity considerations as to at least some defendants, and because 'the amount of money plaintiffs might have been awarded had they been allowed to compete for contracts is . . .impossible to calculate. ' Slip op. 31.
In United States v. Polouizzi, O6 CR 22 (EDNY, March 23, 2010), Judge Weinstein granted defendant's motion to cancel the bail condition of electronic monitoring mandated by the Adam Walsh Child Protection and Safety Act of 2006. Defendant is awaiting retrial on charges of receiving and possessing child pornography. Judge Weinstein had set aside the conviction on the receipt count, ruling that the failure to inform the jury of the mandatory 5-year minimum sentence violated defendant's Sixth Amendment rights.
After the U.S. Court of Appeals for the Second Circuit reversed, Judge Weinstein again set aside the conviction on all counts based on other grounds (relating to the appellate court's reduction of the indictment from 23 counts to five-which showed, in Judge Weinstein's view, a prejudicial 'overindictment' the first time around).
Defendant's crime of conviction was receiving and watching child pornography, by himself, on a computer screen in his double-locked garage. So far as is known, he has never molested anyone.
Numerous conditions of bail were imposed. At issue here is the addition of an electronic tracking bracelet under the blanket mandate of the Adam Walsh Act, applicable since 2006 to charges of receiving child pornography.
As Judge Weinstein observed, the weight of authority is that the Adam Walsh Act is unconstitutional in cases such as this, 'since it requires imposition of electronic monitoring without discretion . . . .' Slip op. 6.
Applying the balancing test of Matthews v. Eldridge, 424 U.S. 319, 321 (1976), Judge Weinstein pointed to the valid liberty interest impaired by the Adam Walsh Act: 'Required wearing of an electronic bracelet, every minute of every day, with the government capable of tracking a person not yet convicted as if he were a feral animal, would be considered a serious limitation on freedom by most liberty-loving Americans.' Slip op. 10. Such a requirement here, with no individualized judicial consideration, amounts to excessive bail and a violation of due process. Slip op. 12.
While acknowledging the compelling governmental interest in protecting children from sexual attacks, in this case the court saw no 'statistical foundation for a finding of risk' or other factors suggesting the need for an electronic bracelet. The Adam Walsh Act, moreover, did not even permit an adversary hearing.
Though it was not necessary to go beyond this balancing test, the court noted that the Adam Walsh Act, with its universal requirement not supported by any facts, is at odds with the presumption of innocence and offends 'fundamental' principles of justice. See Medina v. California, 505 U.S. 437, 445 (1992).
Because 'defendant poses no risk to society in general, or to children specifically,' electronic monitoring was 'excessive.' Slip op. 21-22.
Forfeiture — Money Judgment
In United States v. Roberts, 07 CR 425 (EDNY, March 11, 2010), Judge Irizarry granted the government's motion for a money judgment of forfeiture in the amount of $3.16 million, arising from a jury verdict on drug-trafficking charges.
Defendant was found guilty of cocaine importation, distribution and conspiracy arising from his participation as crew chief in a drug-smuggling operation staffed by American Airlines baggage handlers at JFK Airport. Based on the evidence, the court concluded that approximately 79 kilograms of cocaine with an estimated street value of $3.16 million had been smuggled through the airport by the narcotics gang.
Under Federal Rule of Criminal Procedure 32, if the government seeks a personal money judgment, the court must determine the amount of money defendant will be ordered to pay based on evidence in the record or evidence presented at a hearing after the verdict. Rejecting defendant's argument that the court lacked statutory authority to award a forfeiture money judgment, Judge Irizarry concluded that a money judgment is appropriate when a defendant lacks sufficient assets to satisfy a forfeiture order at the time of sentencing. See United States v. Awad, No. 07-4483-cr (2d Cir. March 11, 2010). The inclusion of a money judgment as part of a forfeiture order furthers the remedial purposes of the forfeiture statute by preventing defendants from spending their ill-gotten gains.
Judge Irizarry also reaffirmed a prior determination that if the government does not seek specific property for forfeiture, the court, rather than the jury, determines the amount of a personal money judgment.
Judge Irizarry accepted defendant's proffer statements as evidence for sentencing and forfeiture purposes where they conflicted with his statements in opposition to the government's motion. Defendant's proffer statements provided a larger estimate of the quantity of drugs in the illegal shipments than the government's own estimate and 'properly bolster[ed] the forfeiture money judgment calculation espoused by the government.' Slip op. 13.
As Judge Irizarry also found, the government's expert testimony supported defendant's conviction on the drug charges and the government's request for a personal money judgment. Slip op. 15.
Bankruptcy — Mootness
In RM 18 Corp. v. Aztex Associates, L.P. (In re Malese 18 Corp.), 09 CV 2412 (EDNY, March 9, 2010), Judge Spatt dismissed a bankruptcy appeal as moot because of comprehensive changes in the parties' circumstances.
The Malese 18 Corp. bankruptcy proceeding arose from the Kmart Corp. bankruptcy filing in January 2002. Malese and appellant RM 18 Corp. were created to participate in a complicated real estate transaction with Kmart providing Kmart with tax benefits and Malese the right to collect rent from Kmart for 18 stores. Appellee Aztex Associates, L.P. held a 25-year estate in the properties subject to mortgage liens.
Malese emerged from bankruptcy under a stipulation providing that Malese would transfer all its stock to Aztex, and Aztex would have the right to pursue Malese's claims against Kmart. Aztex could not settle the claim against Kmart without the consent of Lawrence Kadish, one of the owners of Malese and RM. Such consent was not to be unreasonably withheld or delayed.
When Aztex and the bank came to agreement with Kmart, Mr. Kadish refused to consent on the ground that the claim was worth more. In June 2005 Bankruptcy Judge Dorothy T. Eisenberg issued an order to reopen the Malese bankruptcy and found that Mr. Kadish was unreasonably withholding his consent. The Kmart bankruptcy judge then approved the settlement in July 2005. Neither RM nor Mr. Kadish moved to stay Judge Eisenberg's order or the Kmart settlement.
RM appealed, and the district court remanded. In April 2009, Judge Eisenberg, finding that the Kmart settlement was reasonable and that Mr. Kadish had unreasonably withheld his consent, stated: 'this proceeding may be moot as it is uncertain whether the parties can be restored to the same positions they were in respectively at the time Aztex and Kmart negotiated the Kmart Settlement.' Slip op. 6. RM appealed, but did not seek a stay of the bankruptcy court order.
As Judge Spatt observed, a bankruptcy appeal is presumed moot 'when, pending a final appellate decision, there is either (1) 'substantial consummation' of the debtor's reorganization plan, or (2) a 'comprehensive change in circumstances' relative to the challenged order.' Slip op. 7. Judge Spatt found a comprehensive change in circumstances leading to a presumption that the appeal was moot, because the Kmart Settlement was consummated in 2005 and Kmart had made significant distributions of stock to Aztex under that settlement. Further, Aztex had liquidated the stock it received.
The presumption may be rebutted if an appellant satisfies five factors. Judge Spatt found that appellant did not satisfy the first factor because the Kmart settlement could not be unwound equitably and, therefore, effective relief could not be ordered by the district court and the Kmart court. The second and third factors were satisfied because neither the Malese nor the Kmart bankruptcy would be threatened in their entirety by the present appeal. Appellant did not meet its burden with respect to the fourth factor because it did not provide notice and an opportunity to participate to Kmart, a third party adversely affected by the proposed relief. Most importantly, the fifth factor was not satisfied because appellant failed to seek a stay pending appeal, demonstrating a lack of diligence. Given appellant's failure to carry its burden with respect to several factors, Judge Spatt found the appeal moot.
Finally, Judge Spatt declined to issue an advisory opinion on the reasonableness of Mr. Kadish's withholding of consent to provide RM a basis on which to pursue claims against appellees in tort and contract. Slip op. 13-14.
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, 2010, issue of the New York Law Journal. Copyright © 2010 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]