March 7, 2018

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 Margo K. Brodie suppressed defendant's statement to law enforcement made before any  Miranda warnings. Judge Leonard D. Wexler dealt with issues relating to punitive damages under the Americans With Disabilities Act. And Judge Jack B. Weinstein declined to resolve claims of proposed intervenors seeking restitution in a criminal case.

'Miranda' - Statement Suppressed

In  United States v. Miller, 17 CR 00415 (E.D.N.Y., Dec. 21, 2018), Judge Brodie suppressed defendant's statement made prior to  Miranda warnings, despite the government's reliance on the "public safety" exception to the  Miranda requirement.

Defendant was charged with being a felon in possession of a firearm, in violation of 18 U.S.C. §922(g)(1). He moved to suppress physical evidence and statements obtained by Drug Enforcement Administration (DEA) agents just after he was taken into custody.

The evidence at the suppression hearing showed probable cause to arrest defendant. According to the testimony of DEA Special Agents, there was an undercover investigation of drug trafficking with a primary focus on one Anthony Yancey. The DEA had arranged for the sale of three kilograms of heroin to Yancey by an undercover officer. Yancey traveled from North Carolina to Brooklyn to complete the transaction, which took place on April 17, 2017.

Throughout that day, prior to any arrests, the Agents surveilled Yancey, observing him in the presence of defendant and other apparent participants in the drug deal. These men arrived in several cars, one containing Yancey and defendant, at the parking lot of a Hilton Hotel near JFK Airport. After Yancey displayed the heroin to an undercover agent in a hotel bathroom, the supervisory officer signaled that everyone involved in the transaction should be arrested.

An agent ordered defendant to get out of the car in which he was sitting and to lie on the ground with his hands out. Defendant complied. Before giving him  Miranda warnings, the agent asked defendant whether he had any weapons on his person. Defendant admitted he had a gun in his waistband. All of the arrests went smoothly.

In response to defendant's motion to suppress the statement that he had a gun, the government invoked the "public safety" exception to the  Miranda requirement. The government argued that the question about the gun, asked prior to  Miranda warnings, was justified by the dangers inherent in drug conspiracies of this kind.

But, as Brodie noted, the public safety exception is not a per se rule allowing officers to question people in custody during a drug arrest. See, e.g.,  United States v. Estrada, 430 F.2d 606, 613-14 (2d Cir. 2005). Rather, there must be notice of danger apart from the drug conspiracy itself. Here, the government presented no such evidence. Beyond the government's failure to point to specific additional evidence of danger (such as advance notice of assault convictions or of shots being fired), Yancey's meeting with the undercover agent had ended without incident-and defendant was compliantly lying prone on the ground at gunpoint.

Punitive Damages -- Americans With Disabilities Act

In  Reiter v. Maxi-Aids, 14 CV 3712 (E.D.N.Y., Jan. 19, 2018), Judge Wexler applied a statutory cap to reduce a jury's award of punitive damages under the Americans with Disabilities Act, 42 U.S.C. §12101 et seq. (the ADA), while rejecting defendants' argument that the reduced award was excessive in light of the jury's decision denying compensatory damages. Defendant Maxi-Aids, and its owner, Elliot Zaretsky, were found to have violated plaintiff's associational rights under the ADA. Plaintiff was terminated after he put his teenaged daughter on the company's medical plan and sought to take time off to attend to a mental health crisis she experienced. Wexler denied defendants' motion for judgment as a matter of law or for a new trial. Slip op. 4-5, 15-16. There was ample support for the jury's determination that defendants' professed reason for the termination-poor performance-was pretextual, and the true reason was an impermissible objection to plaintiff's associational right with his daughter. For example, the court noted the close proximity between plaintiff's request to take time off and his termination, as well as Zaretsky's comments regarding damage to the company from plaintiff's absence and the anticipated costs to the company's medical plan. Slip op. 7-10.

Wexler addressed three issues regarding the award of punitive damages.

First, punitive damages were permissible as a category because the evidence, including Zaretsky's statements and Maxi-Aids' employee manual identifying employee rights, was sufficient to allow the jury to find that defendants acted with, at least, "reckless indifference to the federally protected rights of an aggrieved individual." Slip op. 10.

Second, the $50,000 cap of 42 U.S.C. §1981a(b)(3)(A) "'is not an affirmative defense and is not waivable.'" Slip op. 13, quoting  Oliver v. Cole Gift Ctrs., 85 F. Supp. 2d 109, 112 (D. Conn. 2000). This required reduction of the award from $400,000 to the $50,000 maximum, despite defendants' failure to plead the cap in their answer.

Third, the jury's failure to award compensatory damages did not make the reduced award of $50,000 irrational or improper. In  Cush-Crawford v. Adchem, 271 F.3d 352, 357 (2d Cir. 2001), the Second Circuit held that actual or nominal damages are not a prerequisite for an award of punitive damages under Title VII of the Civil Rights Act of 1864, 42 U.S.C. §2000e, et seq. Wexler saw no relevant difference in the ADA context, there was sufficient evidence to support a need for deterrence, and defendants cited no cases suggesting the award was excessive. Slip op. 13-15.


In  United States v. Dharia, 14 CR 390, 15 CR 367 (E.D.N.Y., Jan. 9, 2018), Judge Weinstein dismissed the restitution claims of proposed intervenors for lack of merit as well as the burden on the sentencing process presented by the complexity of the claims and underlying factual issues.

Defendant Falgun Dharia pled guilty to bank fraud arising from two schemes related to the Small Business Administration and bank loans from PNC Bank and Fidelity Bank of Florida. In his cooperation agreement, defendant agreed to pay restitution to the two banks which had loaned him money for financing of restaurant franchises and hotels based on fraudulent loan applications. The proposed intervenors claimed to be victims of misrepresentations made by defendant in connection with investments in the hotels.

Under the Mandatory Victim Restitution Act (MVRA) of 1996, 18 U.S.C. §3663A, restitution is mandatory to victims of the offense. A victim is "a person directly and proximately harmed as a result of the commission of an offense ... ."  Here, the offense was bank fraud, defined as defrauding or obtaining money from a financial institution by means of false or fraudulent representations. See 18 U.S.C. §1344. Defendant was charged with and pled guilty to misrepresenting ownership interests in Houlihan franchise and hotel investments to obtain loans from banks and then misappropriating the funds. Proposed intervenors were not harmed by the two bank schemes involving PNC Bank and Fidelity Bank of Florida, and "they have made no showing that, if the defendant caused them losses, their losses were in any way related to the charged offense conduct with respect to specified banks." Slip op. 16. Weinstein concluded: "Without a nexus to the criminally charged schemes, these claimants have no entitlement to restitution." Slip op. 17.

In addition, the requirement for mandatory restitution does not apply when, as here, complex issues of fact relating to the cause or amount of a victim's losses would unduly complicate the sentencing. The proposed intervenors raised two such issues. First, they contended the principal of the intervenor entities might not have the authority to act on the companies' behalf; and second, they sought to have defendant's attorney removed.  Weinstein declined to resolve these issues, because doing so would "badly impede the sentencing process."

Finally, the proposed intervenors had the option of submitting a petition to the Attorney General for mitigation or remission of forfeiture. Remission is allowed for "related offenses"-in contrast to restitution, which is available only to victims that have been directly harmed by the offense and is part of the sentencing process overseen by the court. The Criminal Division of the Department of Justice oversees the remission process and the DOJ has the discretion to make payments out of forfeited funds. Here, the government represented that the forfeited money it collected from defendant could be distributed through the remission process. As Weinstein observed:

The Remission and Mitigation process is an efficient alternative. It avoids delaying the defendant's sentencing for further court hearings, which in the end could only provide the claimants with permission to wait in line for funds.

Slip op. 20.

 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.