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 assessed attorney fees and expenses against Arab Bank for failing to comply with its discovery obligations. Judge Nicholas G. Garaufis allowed the government to introduce in a death penalty proceeding certain evidence of defendant's courtroom behavior to show lack of remorse. Garaufis also affirmed an order of the Bankruptcy Court annulling an automatic stay of a foreclosure sale. And Magistrate Judge A. Kathleen Tomlinson allowed discovery, within defined limits, of records from plaintiff's social networking accounts relating to her claims of disability discrimination.
In Linde v. Arab Bank, 04 CV 2799 (EDNY, June 14, 2013), Judge Gershon ruled on the amount of attorney fees and expenses to be awarded to plaintiffs resulting from defendant's violations of its discovery obligations.
As detailed in the court's prior order, the sanctions against Arab Bank included fees and costs arising from its production failures and attendant sanctions litigation. Among other things, plaintiffs' counsel had spent time and money "flying to Jordan to depose witnesses who were directed not to answer questions on the previously rejected ground of foreign bank secrecy . . . ."
The bank argued that the claims under the Alien Tort Statute, 28 U.S.C. §1350 — constituting most of the 6,000 claims here — will likely be dismissed under recent developments in the law, making inappropriate any fees related to those claims. But as the court noted, "whether or not claims are ultimately successful, a violator of discovery orders is not relieved of the monetary sanctions imposed for those violations."
Gershon disagreed as well with the bank's view of when its "noncompliance" first occurred. The correct date is March 14, 2007, when the court affirmed Magistrate Judge Viktor V. Pohorelsky's order overruling defendant's foreign bank secrecy objections to discovery requests.
As to rates, Gershon had no problem with $655 per hour for partners, especially where (a) plaintiffs' counsel have billed paying clients at the same rates (and collected); (b) the issues in these cases are unusually complex and plaintiffs' lawyers unusually qualified; (c) most importantly, Arab Bank's own lawyers have charged their client in this very case at even higher rates. Moreover, the various firms representing the many plaintiffs (over 6,000) in various groupings have coordinated their efforts to avoid unnecessary duplication.
The court made the following awards:
- $185,121 for nine depositions of bank witnesses in Amman, Jordan. Despite court orders overruling defendant's foreign bank secrecy objections, the witnesses clung to their refusal to answer questions regarding bank recounts. Defendant noted here that this caused only a small portion of questions overall to go unanswered. Nevertheless, the account information was important, requiring plaintiffs' counsel to engage in wasted preparation time. Though plaintiffs offered to omit certain charges (such as travel time) and to reduce their other fees by 50 percent, counsel's time records were not specific enough to justify this resolution. For example, some time entries refer to preparation as to customer accounts; others state generally, "deposition preparation." Thus, the award covered only 25 percent of time spent in preparing for and taking the depositions.
- $1 million for non-deposition activities. Once again, the lack of specificity in the time entries impaired the court's ability to assess the reasonableness of some items and the precise allocation between compensable and non-compensable activities. The award credited counsel for 75 percent of hours spent.
- $32,125 for the fee application. This reflected all 73.8 hours of the claimed work.
- $91,284 in expenses. The bank's objections to the rates at hotels used by opposing counsel failed given the equal or higher rates at hotels used by its own lawyers. The award, reflecting 25 percent of claimed expenses, mirrored the reduction applied to deposition fees.
Death Penalty Proceeding
In United States v. Wilson, 04 CR 1016 (EDNY, June 21, 2013), Judge Garaufis granted in part the government's motion in limine concerning evidence to be introduced at the sentencing proceeding of Ronell Wilson, found guilty of the premeditated murder of two police officers.
Defendant's earlier death sentence in the case had been vacated by the U.S. Court of Appeals for the Second Circuit, leading to a new death penalty proceeding. To demonstrate a "lack of remorse," which may be considered as evidence of "future dangerousness" under the Federal Death Penalty Act, 18 USC §3591 et seq., the government sought to introduce, at the second proceeding, evidence that defendant had stuck out his tongue at family members of his victims when the first sentence had been announced.
Upon the government's application, the court had invited each side to submit a written proffer "detailing the intended testimony each would introduce to prove (or rebut) that Wilson demonstrated a lack of remorse when he stuck out his tongue." The government identified four witnesses: the two widows of defendant's victims, who would testify that the gesture was directed at them and their families and was patently offensive; a retired detective who observed the gesture, and would testify that it was "a taunt or mockery directed at the victim's families;" and a courtroom sketch artist who witnessed the gesture and had prepared a sketch of it (which the government also sought to introduce). Wilson made no submission.
Under 18 USC §3595(c), "information may be excluded if its probative value is outweighed by the danger of creating unfair prejudice, confusing the issues, or misleading the jury." The court found only the widows' testimony admissible under this standard. They, unlike the retired detective and sketch artist, were "the intended targets of Wilson's act" and thus "in the best position to observe and ascertain the meaning of Wilson's gesture." The artist's sketch was excluded for the additional reason that it risked prejudice by seeming "to depict the defendant sticking out his larger-than-life tongue directly at the artist." Slip Op. 5.
Annulment of Automatic Stay
In Koutsagelos v. PII SAM, 12 CV 1703 (EDNY, June 4, 2013), Judge Garaufis denied Mary Koutsagelos' appeal from an order of the Bankruptcy Court granting the motion of PII SAM, LLC to annul the automatic stay, nunc pro tunc, of the foreclosure proceeding against appellant's property.
PII SAM was the assignee and holder of a note and mortgage on appellant's property. Appellant defaulted and PII SAM scheduled a foreclosure sale in April 2010. Appellant filed a Chapter 13 bankruptcy petition, which stayed the sale. The petition was dismissed in September 2010 because (inter alia) appellant had failed to make post-petition mortgage payments.
PII SAM scheduled another foreclosure sale for October 2010. On the day before the sale, appellant filed a Chapter 7 bankruptcy petition, which stayed the sale. That case was also dismissed.
In April and July 2011, PII SAM scheduled foreclosure sales for the third and fourth times. In each instance, appellant filed orders to show cause in state court seeking to stay the sale and both were denied.
Finally, in December 2011, PII SAM scheduled a sale for the fifth time. Two days before the scheduled sale appellant filed another Chapter 13 petition invoking the automatic stay. PII SAM proceeded with the foreclosure sale and purchased the property itself.
The Bankruptcy Court granted PII SAM's motion to annul the automatic stay, finding that appellant had filed her petition in bad faith, as shown, for example, by her failure to include the correct address of PII SAM on her schedules and make post-petition mortgage payments.
Appellant contends that the Bankruptcy Court applied the incorrect legal standard for nunc pro tunc relief and that the finding of a bad-faith filing was clearly erroneous.
As Garaufis explained, the filing of a bankruptcy petition creates an automatic stay intended to afford a breathing spell to the debtor. An annulment of the automatic stay grants retroactive relief and validates past actions that would otherwise be deemed void. A finding of bad-faith filing alone, without consideration of other factors, is sufficient to grant relief from the automatic stay. Here, the Bankruptcy Court examined the facts and found bad faith — an adequate basis upon which to grant nunc pro tunc relief.
Next, Garaufis examined the factors the Bankruptcy Court considered in determining that appellant made a bad-faith filing. These factors included continuous violations of the Bankruptcy Code, making it "'abundantly clear' that Appellant's intent, reflected in part by her serial filings (including three petitions and two orders to show cause), was 'not a Chapter 13 purpose.'" Slip op. 9. On this record, there was no abuse of discretion in the Bankruptcy Court's finding of bad faith.
Social Networking Accounts
In Giacchetto v. Patchogue-Medford Union Free School District, 11 CV 6323 (EDNY, May 6, 2013), Magistrate Judge Tomlinson granted in part and denied in part defendant's motion to compel plaintiff to provide authorizations for the release of all records from plaintiff's social networking accounts in connection with plaintiff's allegations that defendant violated the Americans with Disabilities Act and the New York State Human Rights Law.
Plaintiff began working for defendant as an elementary education teacher in 1996. In December 2010, she was diagnosed with adult Attention Deficit Hyperactivity Disorder. Plaintiff claims here that she was repeatedly mocked after she reported her diagnosis to defendant. She also claims that after she filed a complaint with the New York State Division of Human Rights alleging disability discrimination, the school district treated her differently from other employees and refused to accommodate her disability.
Defendant asserted that the information in plaintiff's social networking accounts was relevant to her claims of physical and emotional damages, and sought unlimited access to those accounts. Plaintiff argued that defendant's request was a fishing expedition intended to harass her and would impinge on her privacy.
Tomlinson applied a standard of relevancy. The fact that defendant sought social networking information in electronic form did not change the relevancy analysis. In its motion to compel, defendant first sought postings relating to plaintiff's emotional and psychological well-being in connection with her emotional distress damage claims.
As the court observed, allowing broad discovery of these postings would open the door to discovery of all her personal communications. Accordingly, Tomlinson limited production to any specific references to either the emotional distress she claims she suffered or treatment related to the incidents underlying the complaint. The court added that "any postings on social networking websites that refer to an alternative potential stressor must also be produced." Slip op. 7. Plaintiff had to produce as well any social networking postings regarding events alleged in the complaint.
The court directed plaintiff to turn over her postings to her counsel to be reviewed for relevance under the prescribed guidelines.
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 July 12, 2013, issue of the New York Law Journal. Copyright © 2013 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.]