Judge Weinstein then called into the courtroom each juror and alternative, one at a time, to confirm that each would follow the instructions.
Concluding that the jury was capable of fairly deciding the sentence, the court stated: “No post-mortem dismemberment evidence or direct or indirect reference to it will be permitted during the penalty phase.” Slip op. 17-18.
Bail Pending Appeal
In United States v. Sabhnani, 07 CR 429 (EDNY, Oct. 20, 2008), Judge Spatt denied defendant’s request for bail pending appeal where, among other things, the exceptional circumstances that had justified his release pending sentencing no longer existed.
After a jury trial, defendant was found guilty of forced labor, including “threats of serious harm or physical restraint.” The court found at the time that, despite the “crime of violence,” bail pending sentence was warranted by “exceptional circumstances,” particularly defendant’s need to arrange his affairs and care for his family.
Sentenced to 40 months’ incarceration, defendant sought here to continue bail pending appeal.
Given the conviction for a violent crime, defendant had to show not only (a) that he was neither a flight risk nor danger to the community, and that his appeal raised a substantial question, but also (b) that there were exceptional circumstances justifying release.
The $3.4 million in posted assets, defendant’s established business and family ties in the United States, as well as his relatively short sentence eliminated concerns of flight risk or danger. But as the court also found, defendant’s main argument on appeal – that the jury charge erroneously allowed conviction as an aider and abettor based on willful action or “failure to act” – did not present a substantial issue. Slip op. 5-8.
Even if defendant had cleared that hurdle, bail was still out of reach. As Judge Spatt noted:
In short, “the harm articulated by [defendant] is not materially different from the harm suffered by any other incarcerated defendant with a family and a business.” Slip op. 9.
Judgment Enforcement Against Third Parties
In C.G. Holdings Inc. v. Rum Jungle Inc., 07 MC 534 (EDNY, Oct. 23, 2008), Judge Vitaliano granted plaintiff’s motion to enforce a Nevada judgment against Rum Jungle, defendant in the original Nevada action, but denied plaintiff’s motion to enforce the judgment against a third party that was not a party to the Nevada action.
Plaintiff obtained a default judgment in Nevada against Rum Jungle. In July 2008 plaintiff moved to enforce the Nevada judgment against J.M.C. Entertainment Inc., which was not named in the Nevada judgment, on veil-piercing and alter-ego theories.
Judge Vitaliano held that the court could not exercise ancillary jurisdiction over the new and independent action to impose liability on a person not previously found liable in the original action. Rather, plaintiff must establish an independent jurisdictional basis for the alter-ego or veil-piercing claims, because these claims are distinct from the underlying Lanham Act claims filed in Nevada against Rum Jungle. As Judge Vitaliano noted, nothing prevented plaintiff from commencing a separate action in federal or state court against JMC based on fraudulent conveyance or alter-ego theories.
ERISA Preemption
In Knickerbocker Dialysis Inc. v. Trueblue Inc. (previously known as Labor Ready Inc.), 08 CV 329 (EDNY, Oct. 11, 2008), Judge Spatt, denying defendants’ motion to dismiss a complaint alleging breach of contract to pay for services, held that plaintiff’s claim was not preempted by the Employee Retirement Income Security Act (ERISA).
Defendant Labor Ready, which places temporary employees, retained codefendant First Health to serve as third-party administrator of Labor Ready’s employee group health plan. Plaintiff provided dialysis services to a plan beneficiary. Pursuant to the contract that established the payment rate for the dialysis services, plaintiff was to provide services at a discounted rate if the claim was paid within a specified time, and receive its full rate if not paid within that time. Based on this and other factors, plaintiff alleged that Labor Ready failed to make payments in the amount of $486,189 and that Labor Ready and First Health had breached the agreement with plaintiff. In its motion to dismiss, First Health argued that plaintiff’s contract claim was preempted by ERISA because plaintiff was seeking to recover benefits payable under an employee benefits health plan.
Common-law actions that “relate to” employee benefit plans are preempted by ERISA, but there is a strong presumption against preemption. As Judge Spatt observed, First Health did not show that relevant state contract laws “clearly refer” to ERISA. Here, the existence of the ERISA plan was not essential to the operation of New York contract law since the plan was not an element of a breach of contract claim. Moreover, compliance with New York contract law would not affect the benefit structures or administration of the ERISA plan here. Because plaintiff’s “claim relates only to the contractual relations between a plan-administrator and one of its service providers and does not touch upon the relationship between Labor Ready’s plan and its beneficiaries,” ERISA preemption did not apply. Slip op. 7.
• Stay of Civil Discovery During Criminal Case
In United States Securities & Exchange Commission v. Cioffi, 08 CV 2457 (EDNY, Oct. 23, 2008), Judge Block denied the U.S. attorney’s motion to stay all discovery in an action brought by the SEC pending the completion of the criminal case against the same defendants charging the same acts. Judge Block granted the U.S. Attorney’s motion to intervene.
The asserted interest of the U.S. attorney was to prevent broad discovery in the civil case from compromising the criminal case. Defendants’ asserted interest in opposing the stay was to have a timely opportunity to clear their names. At this stage of the civil case – neither defendant had yet answered and no discovery requests had been propounded – the court was not yet in a position to balance the competing interests. Judge Block was also skeptical of the government’s blanket claims of prejudice, particularly where the government itself had commenced both the civil and criminal cases.
Discovery limits are intended to guard against (1) broad disclosure of the prosecution’s case; (2) revelation of the identity of government witnesses; and (3) surprise at trial by defendants who have gathered information through discovery. Here, without specific discovery requests and specific objections, the court could not evaluate the strength of the government’s concern. Judge Block therefore denied the government’s motion for a stay, without prejudice to its right to object to specific discovery requests.
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.
