December 6, 2017

New York Law Journal / Written by: Harvey M. Stone, Richard H. Dolan, Bennette Deacy Kramer

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 denied a petition pursuant to 28 U.S.C. §2255 alleging ineffective assistance of trial counsel. Judge Jack B. Weinstein explained factors relevant to when a worker is an employee or an independent contractor, and when overtime pay is required for work done at home. And Judge Nicholas G. Garaufis dealt with challenges to the Trump administration's rescission of the DACA program.

Ineffective Assistance of Counsel

In  Drivas v. United States, 15 CV 2327 (Oct. 31, 2017), Judge Gershon, denying a §2255 petition, held that defense counsel's performance in connection with a 2013 jury trial did not amount to ineffective assistance of counsel.

Petitioner Gustave Drivas was convicted of health fraud and conspiracy to commit health fraud, 18 U.S.C. §§1347, 1349, and sentenced (inter alia) to 151 months' incarceration and over $50 million in restitution. Petitioner is a doctor who, with several co-conspirators, submitted fraudulent claims to Medicare through three clinics. He was listed as owner of two of the clinics and managing employee of the third. Though he rarely treated patients at the clinics, his Medicare billing number was used to bill over $20 million, with a good portion of claims stating that he had personally provided or overseen the care.

The Second Circuit upheld the convictions on direct appeal. Petitioner later filed this pro se §2255 motion. His three trial counsel submitted responsive affirmations. Gershon, who had tried the criminal case, also considered papers from the government as well as supplemental papers from petitioner. On this record, no evidentiary hearing was necessary.

The court noted first that there was no factual basis to petitioner's assertions that (a) his lawyers had ignored petitioner's instructions to investigate an affidavit signed by him in a 2007 civil case and admitted in redacted form at the criminal trial as a government exhibit, or that (b) the affidavit was a fabrication and not authentic. Slip op. 7-8.

Nor were counsel derelict in failing to call a handwriting expert to show that he did not sign certain documents. Petitioner did not contend that none of the documents admitted into evidence have his genuine signature. The court "therefore credit[ed] defense counsel's assertion that, after much discussion, they made the tactical decision not to call a handwriting expert because the expert would have confirmed that a number of the government's documents were in fact signed by [petitioner], potentially harming the case more than it would have helped." Slip op. 9.

Similarly, counsel reasonably decided not to call as a witness Elena Girenko, a co-defendant who pled guilty before trial pursuant to a cooperation agreement but did not testify for the government. Petitioner pointed to Ms. Girenko's statement on a wiretap saying, "Why did they arrest Dr. Drivas? Dr. Drivas has no idea what was being done, he was clueless." But counsel's affirmation and its annexed exhibits showed multiple recorded statements by Ms. Girenko inculpating petitioner and demonstrating her unreliability as a witness.

Petitioner's "self-serving and improbable" claim that his lawyers refused to let him testify-which would have constituted ineffective assistance-were not credible when weighed against experienced counsel's sworn statements that they advised him not to take the stand while informing him that the decision was his to make. As Gershon further explained, petitioner "did not say or do anything during the trial that indicated to me that he wished to testify but was being denied the opportunity." Slip op. 10.

Gershon ended by recollecting that trial counsel "zealously defended and advocated on behalf of their client throughout the proceedings." Slip op. 11.

Labor Law Issues

In  Leevson v. Aqualife USA, 14 CV 6905 (EDNY, Nov. 1, 2017), Judge Weinstein, addressing post-trial motions, provided guidance on two common issues in state and federal labor law: (1) when is a worker an independent contractor, and (2) how to distinguish between "work" and "free time" when an employee works at home.

The employer here required sales persons and other workers to set up and operate through personal corporations and to sign Independent Business Owner contracts, agreeing that: (1) they were not employees or representatives, but independent legal persons; (2) they were entitled to receive commissions and profits; and (3) the company reserved the right to change the conditions. The employer claimed that the "contractors" were exempt from the overtime rules of the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL).

According to Weinstein, employers often misclassify employees as independent contractors to avoid liability and the FSLA and NYLL labor rules. Weinstein discussed the difference between an employee and an independent contractor and explained the "economic reality" test to determine whether a person is an independent contractor under the FSLA. "[T]he primary concern is whether or not the workers are in business for themselves." Under the NYLL, the focus is on "the 'degree of control exercised' by the employer." Slip op. 15. An employer does not have to pay overtime to commissioned salespersons as long as the worker (1) earns at least one and a half times the federal minimum wage; (2) earns more than half his or her salary in commissions; and (3) is employed by a retail or service entity. Thus, the salesperson plaintiffs here were not entitled to overtime.

As to the "economic reality" test, plaintiffs who were office workers were bound by the decisions of management. "They worked set hours each day, were paid hourly wages, 'clocked' in and out, made calls from the office to set up appointments for Aqualife technicians and assisted with customer complaints and cancellations." Slip op 29. These workers were entitled to overtime pay for hours worked over 40 hours a week.

The office workers were also required to be available to receive calls at home before and after regular work hours to assist technicians and salespersons with completing and financing sales. Under Department of Labor guidelines, a worker should be compensated for "on-call" hours when "the employee is unable to use the time effectively for his own purposes. It belongs to and is controlled by the employer." In contrast, an employee is "off-duty" and not entitled to compensation when the "employee is completely relieved from duty and [the time is] long enough to enable him to use the time effectively for his own purposes." Slip op. 21. "The touchstone for 'on-call' hours is whether the assignment is so unpredictable and encompassing that a worker has been 'engaged to wait.'" Slip op. 22.

When they left the office, the office workers "continued to be 'on-call,' and were required to answer phone calls from technicians and complete sales, [which] prevented them from going about their normal non-work routines." They were entitled, therefore, to overtime pay for those hours. Slip op. 30-32.

Motion to Dismiss Challenges to Rescission of DACA

In  Vidal v. Duke, 16 CV 4756 and  State of New York v. Trump, 17 CV 5228, (EDNY, Nov. 9, 2017), Judge Garaufis granted in part and denied in part motions to dismiss challenges to the Trump Administration's phased rescission of the Deferred Action for Childhood Arrivals (DACA) program.

The named defendants are Elaine C. Duke, Acting Secretary, Department of Homeland Security, and Donald Trump, President of the United States. DACA, established by the Obama administration, defers prosecution of undocumented immigrants who meet certain standards, including but not limited to having entered the United States prior to age 16, and being free from a significant criminal history.

Defendants contested the court's subject matter jurisdiction on four grounds.

The court rejected defendants' first argument: that, because the decision to rescind DACA was "committed to agency discretion by law," the cases were not justiciable under §701(a)(2) of the Administrative Procedure Act (APA). Slip op. 20-28. The exception of §701(a)(2) applies only where statutes are drawn in such broad terms that, in a given case, there is no law to apply. Plaintiffs' claims arose under the Immigration and Nationality Act (INA), 8 U.S.C. §1101 et seq. and the Regulatory Flexibility Act, 5 U.S.C. §§601-12. The text of those statutes, as well as an opinion that defendants relied on from the Justice Department's Office of Legal Counsel, supplied the "law to apply," and §701(a)(2) in any event does not bar U.S. Constitutional claims, which plaintiffs had raised.

Garaufis distinguished  Heckler v. Chaney, 470 U.S. 821 (1985), which had held the decision of the Food and Drug Administration not to take enforcement action against certain drugs used in judicial executions to be beyond review.  Chaney involved a challenge to an agency's decision not to take enforcement action as to particular violations of law; the case at hand, by contrast, involved the elimination of a program of wide application.  Chaney also emphasized the need to defer to an agency's expertise where it is called upon to balance a variety of complicated factors. Defendants' decision to terminate DACA based on a finding that it was unlawful involved no such balancing, and no expertise in areas where the agency's experience was superior to a court's.

The court rejected defendants' second argument, that judicial review of the denial of deferred action is barred by §1252(g) of the INA. That provision applies only to bar suit by "any alien" to challenge decisions of the Attorney General to commence proceedings, adjudicate cases, or execute removal orders. It does not reach the sort of "broad, programmatic challenges" at issue, or those plaintiffs (various states, known as the "State Plaintiffs," and Make the Road New York) who were not aliens. Slip op. 28-32.

The court sustained certain standing defenses raised by defendants' third argument. Plaintiffs had, in general terms, sufficiently pleaded injury-in-fact to sustain standing. But while their claims were premised on the governments' failure to timely provide individualized notice to DACA participants that they had to apply for renewal by October 5, 2017, there was no factual basis to support an inference that anyone had missed the deadline as a result of the alleged failure. And, to the extent the State Plaintiffs objected to defendants' failure to provide such notice or to proposed changes in defendants' use of information obtained in the DACA application process, they failed to identify a sufficient proprietary interest in the challenged actions. Slip op 32-46.

The court declined to resolve defendants' fourth argument, that certain plaintiffs could not bring claims under the APA because their asserted interests fell outside the "zone of interest" protected by the INA. Although raised on a jurisdictional motion under Rule 12(b)(1), this argument concerned an element of the claim, not a question of standing. Slip op 46-47.

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.