November 20, 2018

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 held that a claim against an art supply business for maintaining a website inaccessible to blind people was covered by the Americans with Disabilities Act. Judge Dora L. Irizarry made  Fatico findings against defendant in connection with a sentencing for his role in purchasing material with military or nuclear uses for shipment to Iran. And Judge Leonard D. Wexler relied, in substantial part, on contractual provisions, including a forum selection clause, in denying defendants' motion to dismiss.

ADA-Website Access

In  Andrews v. Blick Art Materials, 17 CV 767 (EDNY, July 31, 2017), Judge Weinstein clarified the extent to which the Americans With Disabilities Act, 42 U.S.C. §12101,  et seq. (ADA), applies to a business website.

Blick Art Materials operates "brick and mortar" retail stores nationwide that sell art supplies. It also maintains a website where customers can browse inventory and make purchases directly. Alleging that Blick Art did not make its website accessible to blind persons such as himself, plaintiff sued under the ADA (as well as New York state and New York City law).

Blick Art moved to dismiss for failure to state a claim, arguing that its website is not a "place of public accommodation" within the meaning of 42 U.S.C. §12182(a)a, and thus did not fall within the ADA's coverage, when plaintiff had not alleged that impaired access to the website contributed to a denial of access to its physical stores.

Weinstein identified a split in the circuits on this point. Noting that the Second Circuit had not directly addressed the issue, he came down alongside the First and Seventh Circuits, and counter to the Third, Sixth, Ninth and Eleventh Circuits, in holding that denial of effective access to a website violates the ADA, regardless of whether it is alleged to have impaired or denied access to a physical space. Slip op. 8-16.

Contrary to Blick Arts' argument, websites were not beyond the contemplation of Congress when it passed the ADA. Citing the "'broad mandate'" and "'comprehensive character'" of the statute, Weinstein concluded: "That the meteoric rise of virtual reality through the Internet and its impact on communal and commercial affairs could not have been anticipated by Congress does not mean the law's application to the Internet and website is ambiguous; 'the fact that a statute can be applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.'" Slip op. 20,  quoting Pennsylvania Dep't of Corr. v. Yeskey, 524 U.S. 206, 212 (1998).

As Weinstein also noted: "Today, Internet technology enables individuals to participate actively in their community and engage in commerce from the comfort and convenience of their home. It would be a cruel irony to adopt the interpretation of the ADA espoused by [Blick Art], which would render the legislation intended to emancipate the disabled from the bonds of isolation and segregation obsolete when its objective is increasingly within reach." Slip op. 24.

Blick Art's "primary jurisdiction" argument failed because the question presented was well within the competence of the judicial branch, and for some 20 years the Department of Justice had never acted on requests for rules regarding website access under the ADA. Slip op. 29-33. Applying the ADA in the absence of such rules did not violate due process because the legislation sufficiently identifies what it required. The adequacy of particular measures is necessarily fact-specific and can be addressed upon their presentation as an affirmative defense to a prima facie violation. Slip op. 33-36.

'Fatico' Hearing

In  United States v. Kuyumcu, 16 CR 308 (Sept. 8, 2017), Judge Irizarry found that certain statements in the Probation Department's Presentence Investigation Report (PSR) were supported by a preponderance of the evidence and could therefore be considered at defendant's sentencing in connection with his guilty plea to conspiring to violate the International Emergency Economic Powers Act, 50 U.S.C. §§1705(a), 1705(c).

At his plea defendant admitted that in March 2013 and again in July 2013 he had purchased a "cobalt alloy coating powder" that was sent to Iran via Istanbul.

On the original sentencing date defendant disputed several allegations in the PSR that could bear on his sentence. Specifically, he challenged the assertions that (1) he knew the March 2013 shipment of Cobalt Powder was destined for Iran; (2) the Cobalt Powder has military or nuclear, rather than merely commercial, uses; and (3) he attempted a third transaction (which was never completed). To resolve the dispute, the court ordered a hearing pursuant to  United States v. Fatico, 603 F.2d 1053 (2d. Cir. 1979).

At the  Fatico hearing, the government and defendant each presented an expert witness in the gas turbine industry. The government also presented testimony about the investigation from a Special Agent in the Department of Commerce.

In finding that the Cobalt Powder has military and nuclear uses, Irizarry noted that the substance sold here is a "dual use" item. Restrictions on exporting dual use products to Iran exist because there is no way to know how the products will be used. For example, "the Cobalt Powder could be used to extend the life of the General Electric J79 engine used in the McDonnell Douglas F-4 Phantom Jet." Slip op. 5-6. The United States provided over 100 of those planes to Iran before the 1979 revolution, and they are still used by the Iranian military. The Cobalt Powder could also "protect gas turbine engines used to provide backup for nuclear power plants." Slip op. 6.

Defendant's argument that Cobalt Powder was not the best chemical protectant did not negate its potential "to extend the source life of Iranian military aircraft or turbines used in power plants." Slip op. 7.

His claimed lack of awareness that the March shipment was destined for Iran was contradicted by email communications and contacts among the co-conspirators. The initial request for Cobalt Powder came from someone purportedly acting on behalf of an Iranian company. That person would contact an employee of a Turkish company, which acted as an intermediary in getting messages to and from defendant, the co-conspirator in the United States who could place orders for the Powder.

After receiving requests for the Powder, defendant sought prices from two commercial companies in the United States and, when asked by each to reveal the end user, he gave disparate responses. Defendant even asked the Turkish company to give him names of end users to cite in his communications with the Cobalt Powder providers.

Another technique was to use "neighbor" in communications as a code word for Iran. This was proven by circumstantial evidence and corroborated in defendant's post-arrest interview. Slip op. 9-11. Both shipments, moreover, actually went to Iran. Slip op. 12.

Documentary evidence and defendant's own admissions show his attempt after July 2013 to continue doing business with Iran. Slip op. 14. He knew that the "very purpose of the enterprise" was to provide Cobalt Powder to Iran-"a country that for decades has supported international terrorism." Slip op. 14-15.

Jurisdiction Based on Forum Selection Clause

In  Flame-Spray Industries v. GTV Automotive GmbH, 15 CV 6664 (EDNY, Aug. 14, 2017), Judge Wexler denied defendants' motion to dismiss plaintiff's claims for breach of contract, misappropriation of trade secrets and Lanham Act violations for lack of personal jurisdiction.

Plaintiff entered into four separate Mutual Non-Disclosure Agreements with each of four defendants in 2003, 2006, 2009 and 2011, respectively. Defendants were German companies with similar but slightly different names, but each started with the letters "GTV". Each agreement contained a choice of law provision stating that the agreement "shall be construed under the laws of the State of New York." The 2011 agreement included a forum selection clause stating that "any disputes arising under this Agreement shall be resolved in a court sitting in the State of New York. The parties agree to personal jurisdiction in New York and waive any and all objections to personal jurisdiction in New York."

The complaint alleged that defendants began working with Ford Germany to patent modifications to plaintiff's equipment without obtaining plaintiff's approval or providing payment to plaintiff. Plaintiff claimed that the four defendants acted as a single entity throughout the relationship, making application of the forum selection clause and long-arm jurisdiction appropriate for personal jurisdiction over all defendants.

In the court's view, plaintiff had made a prima facie case that all defendants were subject to the forum selection clause and had "sufficiently alleged that there is no distinction between the [defendant] GTV entities that would allow GTV Verschlei schutz to avoid application of the forum selection clause." Slip op. 8. There was no allegation that the forum selection clause was procured by fraud, and enforcement of the clause would not be unreasonable or unjust.

Even assuming that the forum selection clause was not applicable to GTV Verschlei schutz, the totality of the circumstances supported long-arm jurisdiction under CPLR 302(a)(1), because all defendants transacted business in New York. The most significant factor was the New York choice of law provision in each Non-Disclosure Agreement. Other factors as well supported jurisdiction: "the parties maintained a continuous business relationship for a period of years, defendants made payments under the agreements to plaintiff in New York, and there was at least one visit to the forum by a representative of defendants." Slip op. 10. Moreover, all of plaintiff's claims arose from the business relationship between it and defendants, creating "a sufficiently close connection between the acts constituting the transaction of business under 302(a)(1) and plaintiff's claims." Slip op. 11.

Finally, the requirements of due process had been met. As to the minimum contact requirement, the choice of law provision and the ongoing, long relationship between defendants and the New York plaintiff established that "defendants purposefully invoked the benefits and protections of New York laws and created the reasonable foreseeability that litigation could take place" in New York. New York was a reasonable forum because the defendants had invoked "its benefits and protections by expressly choosing to be bound by its laws." Slip. op. 12.

Defendants' arguments based on forum non conveniens and various other grounds fared no better. Slip op. 13-21.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan.