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 Raymond Dearie dismissed §1983 claims alleging false arrest and malicious prosecution because, even though the indictment was ultimately dismissed for lack of evidence, the arrest itself was based on probable cause. Judge Dora Irizzary saw no basis to grant damages to plaintiffs bumped from a flight where they failed to reach the check-in counter an hour before departure, as required, even though they did reach the check-in line within that time frame. Judge Joseph Bianco, affirming the bankruptcy court's judgment, denied debtor's discharge from bankruptcy in light of her material misstatements and omissions. And Magistrate Judge Lois Bloom recommended default judgments and attorney fees against defendants for violating the Electronic Fund Transfer Act.

No §1983 Claims

In Hewitt v. City of New York, 09 CV 214 (EDNY, Sept. 27, 2012), Dearie granted summary judgment to the City of New York and various police officers, dismissing claims under 42 U.S.C. §1983 for alleged constitutional violations.

Plaintiff Jennifer Hewitt was indicted as an accomplice of her brother, Carl Hewitt, in a large-scale, multi-year narcotics investigation. An undercover agent identified Jennifer as the female who had handed Carl packages of apparent narcotics while seated in his car during two different purchases. While Carl Hewitt pled guilty to narcotics sale and conspiracy charges, the indictment returned against Jennifer Hewitt was thrown out for "lack of legally sufficient evidence" — but only after she had spent approximately six months incarcerated at Rikers Island.

Denying that she "ever rode in Mr. Hewitt's car or sold drugs," Jennifer Hewitt sued, alleging false arrest and malicious prosecution based on falsification of evidence and falsification of her identification, and related claims arising from her confinement.

Dearie found that the undercover officers' identification of plaintiff through a photo array some five months after the observed incidents, and in the face of arguable inaccuracies in the description of plaintiff, did not suffice to create an issue of fact to defeat summary judgment. Delay may have affected the weight accorded to the identification at hearing or trial, but "delay alone does not vitiate probable cause to arrest." There were no allegations that the photo array was unduly suggestive, and "unsubstantiated conjecture" of fabrication, without more, provided "no basis to question" that the officers "identified plaintiff in good faith." Slip op. 10-12.

Plaintiff's claim that she was subject to illegal strip searches was dismissed because plaintiff failed "to allege or provide any admissible evidence that any one of the named defendants were involved in strip searching plaintiff." Slip op. 20.

Denial of Boarding

In Giuffre v. Delta Air Lines, 10 CV 1462 (EDNY, Sept. 11, 2012), Irizarry, granting summary judgment to defendant, held that plaintiffs had no valid claim arising from Delta's refusal to let them board with baggage upon their arrival at the curbside check-in counter slightly less than one hour before the scheduled flight.

Plaintiffs, a family of four, were scheduled to fly from JFK Airport to Orlando on a flight departing at 8:15 a.m. They arrived at the airport at 7 a.m. and entered a curbside check-in line at 7:06 a.m., more than an hour before departure. Two or three people were ahead of them in the line, and plaintiffs did not reach the counter until about 7:19 a.m., four minutes past the one-hour mark. The curbside agent told plaintiffs they could not check in with luggage because the flight was leaving in less than an hour.

Defendant offered to rebook plaintiffs on a different flight with two layovers. Instead, plaintiffs found a more suitable alternate flight.

In rejecting plaintiffs' various grounds for damages, Irizarry held first that plaintiffs were not entitled to "denied boarding" compensation pursuant to 14 C.F.R. Part 250. That remedy applies only to customers who are "bumped" from an overbooked flight. 14 C.F.R. §250.5(a). The flight here was not oversold, and plaintiffs were denied boarding because they were "late."

To support a broader reading of the regulation, plaintiffs relied on a consent order issued by the Department of Transportation in a Spirit Airlines matter. The Spirit order provides that Transportation Department has "long held" it to be "an unfair and deceptive practice under 49 U.S.C. §41712 for a carrier to declare passengers to be late check-ins when they are prevented from formally presenting their tickets at the ticket counter . . . due to the length of lines of people waiting to check-in." Even assuming that this consent decree has the force of an agency opinion, the practice in question would violate not 14 C.F.R. 250, but only 49 U.S.C. §41712, which prohibits certain deceptive practices and grants the Secretary of Transportation power to investigate and stop the practices. It does not grant a private right of action. Similarly, a Transportation Department email expressing a preliminary informal opinion sympathetic to the equity of plaintiffs' claim did not displace the regulatory requirement that the flight be "oversold." Slip op. 4-7.

As the court also held:

  • Plaintiffs' breach of contract claim merely raises policy concerns with defendant's rule that customers have to reach the check-in counter itself an hour before departure. Moreover, tickets sold by defendant properly incorporate terms from its Domestic General Rules Tariff into its contract of carriage. The Tariff refers passengers to defendant's website for check-in deadlines, which were not met here.
  • Plaintiffs' claim for breach of the implied covenant of good faith and fair dealing duplicates the breach of contract claim and tries to impose an obligation directly contradicted by the contract of carriage.
  • There is no merit to plaintiffs' claim of collateral estoppel based on a prior consent decree between the Transportation Department and defendant involving different issues.

Denial of Discharge

In Burgos v. Pergament, 11 CV 5257 (EDNY, Sept. 10, 2012), Bianco affirmed the judgment of the Bankruptcy Court (Alan Trust, B.J.) denying debtor's discharge from bankruptcy based on material inaccuracies in her schedule of assets and statement of income.

Debtor/appellant Sonia Burgos filed a Chapter 7 petition in February 2009. The trustee/appellee investigated debtor's schedule of assets and liabilities and conducted an examination at the 341 Meeting of Creditors. As the trustee discovered, debtor had omitted two income-producing rental properties in Syracuse from her asset schedule and failed to turn over those rents to the trustee. She also had not included the income of her mother, who lived with her, on the schedule. Additionally, debtor had failed to disclose transfers within two years of the petition date — $24,800 to her husband and $77,000 to her daughter. In bankruptcy court, debtor initially had an attorney, but was unrepresented at trial and on appeal.

The trustee filed a complaint in September 2009, seeking to deny debtor a discharge. After some procedural maneuvering and a trial, the court entered judgment in August 2011, denying debtor her discharge, and she appealed.

On appeal, a district court reviews the bankruptcy court's legal conclusions de novo and its factual findings for clear error. In the first instance, Bianco held that the appeal was subject to dismissal because appellant's pro se brief was untimely filed without demonstrating excusable neglect.

Bianco also concluded that the appeal had no merit. Appellant argued that creditors failed to file claims and she was denied the right to challenge claims made by creditors. The court found this argument "utterly false and frivolous." Slip op. 7. Next, she complained she was denied the right to challenge claims made by secured creditors. But, as a debtor, appellant had no standing to challenge claims. A Chapter 7 debtor is a "party in interest" only if there is a surplus after all creditors' claims have been paid, and she did not allege that there would be a surplus or what objections she had to any claim.

Bianco also concluded that appellant was not denied effective assistance of counsel. In bankruptcy court, the debtor had moved to vacate the judgment pursuant to Federal Rule of Civil Procedure 60(b). To prevail on a Rule 60(b) motion, a movant must show exceptional circumstances, not that her attorney made a mistake or omission due to ignorance of the law or inability to manage his caseload. Appellant did not identify any errors by counsel to support a finding of ineffective assistance. Indeed, appellant was not represented by counsel at trial and as a pro se litigant was not entitled to relief for her own mistakes or ignorance of the law.

Finally, Bianco found clear grounds for denial of discharge. In her filings with the bankruptcy court, appellant failed to disclose information about her financial condition and transfers to her husband and daughter, and submitted no evidence to explain this non-disclosure. Similarly, she withheld documents requested by the trustee from which her true financial condition could have been ascertained and never explained her failure to produce this evidence. Bankruptcy Code §727(a)(4)(A) provides for denial of discharge to a debtor who makes a false oath or account in connection with a bankruptcy petition. The court concluded that appellant had done so here.

Electronic Fund Transfer Act

In Archbold v. Tristate ATM and Archbold v. Cash on the Spot ATM Services, 11 CV 5796, 12 CV 847 (EDNY, Sept. 7, 2012), actions brought pursuant to the Electronic Fund Transfer Act (EFTA), 15 U.S.C. §1693, et seq., Bloom recommended that Judge Sterling Johnson Jr. grant plaintiffs' motions for default judgments against defendants and that judgments in the amount of $825 be entered against each defendant.

The two plaintiffs commenced an action against Tristate ATM Inc., and an identical action against Cash on the Spot ATM Services LLC, alleging that defendants charged them a fee for using ATMs without posting a notice of the fee on the ATM, in violation of EFTA. Plaintiffs sought an award of $3,350 in each action. Plaintiffs had filed two additional identical lawsuits, which they subsequently withdrew.

Plaintiffs made several withdrawals from defendants' ATM machines located in Avenel, N.J., and at 216 W. 50th Street, New York, N.Y. Each time, plaintiffs were charged a $2 terminal fee. However, there was no notice of the fee posted on or at the ATM. Plaintiffs incurred a total of $17 in unauthorized ATM transaction fees and sought a combined $24,000 in actual and statutory damages, along with attorney fees and costs in the four lawsuits.

After defendants failed to respond, plaintiffs duly requested the clerk of court to enter the defaults of defendants and then moved under Rule 55(b)(2) for default judgments and damages.

Under EFTA, ATM operators must notify consumers that a fee may be imposed and the amount of any fee both on the ATM itself and on the screen or a paper receipt. Without a fee notification, no fee may be imposed in connection with any electronic fund transfer. Bloom concluded that plaintiffs had stated a cause of action and entry of a default judgment was appropriate.

Plaintiffs had the burden of proving damages with reasonable certainty. They submitted photographs of the ATMs, copies of their receipts, and affidavits of counsel describing his experience and customary fees, and attaching time entries.

Bloom noted the potential for abuse by plaintiffs going from ATM machine to ATM machine in order to manufacture claims. Congress itself has pointed to individuals who have removed the sticker from ATMs to create lawsuits. Thus, Bloom approached the issue of damages with some skepticism.

As the court observed, "plaintiffs do not, and presumably could not, establish the facts necessary to entitle them to actual damages." Slip op. 10. To do so, plaintiffs would have to show detrimental reliance on the failure to post a fee notification leading to substantial monetary loss.

Plaintiffs, instead, sought statutory damages. The EFTA provides for damages to any consumer of not less than $100 to not more than $1,000 with costs and attorney fees. Bloom was "disinclined" to reward plaintiffs for their efforts to gain a windfall, but was constrained to award statutory damages. The court recommended statutory damages in the amount of $100 for each of the two plaintiffs in each of the two actions.

Plaintiffs also sought $1,000 in attorney fees, plus $350 in costs, for each lawsuit, reflecting attorney time of two hours and 30 minutes at $400 per hour. Bloom noted that hourly rates for partners in the Eastern District of New York range from $200 to 400 per hour. In the court's view the $400 hourly rate sought here and the time expenditures were not reasonable given the nature of the action, extent of legal services provided and the experience of the attorney.

Plaintiffs' counsel had filed the identical lawsuit five times in the Eastern District and numerous actions in other jurisdictions. Preparing and filing multiple suits, the court stated, would diminish the time expended for each suit, creating economies of scale. As a result, Bloom awarded one hour of attorney fees per action at the rate of $275 per hour, along with $350 in filing costs. In sum, Bloom recommended an award of damages in each case in the amount of $825: $200 in statutory damages, $275 in attorney fees and $350 in costs.

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 October 12, 2012, issue of the New York Law Journal. Copyright © 2012 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]