Judge Garaufis Denies Defendants’ Summary Judgment Motion In Government’s Antitrust Case Against American Express Based On Government’s Theories Concerning The Significance Of Undisputed Facts

In a May 7, 2014 order in United States v. American Express Co, No. 10-CV-4496 (NGG) (RER), Judge Nicholas G. Garaufis denied summary judgment to defendant American Express in the government’s antitrust action against Amex arising out of the company’s “anti-steering” rules. These rules impose certain restrictions on merchants that accept American Express cards, which, generally speaking, prohibit merchants from expressing to customers a preference for other cards or imposing conditions on use of the Amex card that are not also imposed on users of other cards.

The United States and the attorneys general of 17 states allege that the anti-steering rules are anti-competitive in violation of Section 1 of the Sherman Act. Under Second Circuit precedents, to prove anti-competitive effect plaintiffs had to establish either an actual adverse effect on competition or market power in the relevant market. See Slip Op. 9, 12. The government’s theory of “actual adverse effect” on competition rested largely on the higher fees Amex charged merchants compared to Visa and Mastercard. Id. at 13. The government contended that absent the anti-steering rules, Visa and Mastercard could have competed with Amex to urge merchants to convey to customers a preference among cards, as was done in the 1990s with merchants’ displays of signs such as “We Prefer Visa,” and that this would have driven down prices across the industry.

Based on these conceptual arguments, the Court concluded that material issues of fact existed as to whether the anti-steering rules had an actual adverse effect on competition. The Court’s ruling that material issues of fact existed as to whether Amex had market power was also based arguments that were conceptual rather than evidence-based. The Court found that “the basic facts relating to Amex’s market share are not in dispute.” Id. at 18. But the government had a “customer insistence theory,” under which cardmember brand loyalty allegedly gave Amex control over how much merchants would use the Amex card, which allegedly enhanced Amex’s market power. Id. at 18. The Court’s approach, in short, was closer to a motion to dismiss than to a summary judgment analysis, with the court assessing the plausibility of the government’s theories of anti-competitive effect and market power, rather than whether it had presented sufficient evidence to suggest that Amex’s anti-steering rules have an actual anti-competitive effect or that Amex has market power.

Judge Weinstein Grants Summary Judgment To Contract Creditor Piercing The Corporate Veil

In an April 4, 2014 judgment and order in Jiaxing Globillion Import and Export Co. v. Argington, Inc., 11 CV 6291 (JBW) (E.D.N.Y. Apr. 4, 2014), Judge Jack B. Weinstein granted summary judgment for plaintiff and pierced the corporate veil to hold one of the corporate defendant’s two shareholders liable for the company’s breach of contract. Plaintiff Jiaxing Globallion Import and Export Co. (“JG”) entered into a contract with Argington, Inc., to supply children’s furniture and furniture parts for a contract price of nearly $900,000, and delivered the goods in 28 shipments between 2009 and 2011. Argington paid only for a portion of the shipments, and earlier in the case a default judgment was entered against it for $672,905. Judge Weinstein had little trouble granting JG’s summary judgment motion on its claim to pierce the corporate veil, which under governing Missouri law had to be pled as a distinct cause of action. The two shareholders were husband and wife and made all decisions for the company. They observed no corporate formalities, comingling funds and using corporate funds for their personal expenses, including purchases at Costco, Crate and Barrel, Home Depot, IKEA, Prospect Park Tennis and elsewhere. They failed to declare as income the personal expenses the corporation paid for them. As a result of the company’s payment of the shareholders’ personal expenses, the company became undercapitalized. Between 2009 and 2012 the company’s debt to vendors went from 0 to $558,000, but instead of paying their vendors the shareholders disbursed $554,000 from the corporation to themselves. They also disbursed to themselves $193,000 in loans. In his decision Judge Weinstein did not report that there was any countervailing evidence.

Summary Judgment Denied In Trademark Dispute On The Gowanus

In The Gowanus Dredgers v. Baard, 11 CV 5985 (PKC) (E.D.N.Y. Dec. 17, 2013), the Gowanus Dredgers (the “Dredgers”), a charitable organization established “to raise awareness of environmental issues affecting the Gowanus waterfront in Brooklyn and the broader New York/New Jersey harbor area,” sued Erik Baard, the founder of a group called the Long Island City Community Boathouse (“Boathouse”) that later became affiliated with the Dredgers.  After Baard resigned from the leadership of both the Dredgers and the Boathouse, he allegedly continued to use the logo and name of the Boathouse on his Facebook page.  As a result, the Dredgers sued Baard for trademark infringement under the Lanham Act, common law unfair competition, and New York’s unfair competition laws.

In deciding the Dredgers’ motion for summary judgment, Judge Pamela Chen addressed whether they had standing to assert infringement claims owned by the Boathouse, which used (and therefore owned) the trademark at issue.  The Dredgers argued that they owned the Boathouse’s trademark because: (1) the Boathouse was “essentially a subsidiary” of the Dredgers; (2) the Boathouse was an “activity committee” of the Dredgers governed by the Dredgers’ by-laws; (3) the Dredgers provided insurance to the Boathouse; and (4) the Boathouse operated as a “fiscal conduit” for fundraising for the Dredgers.  Baard countered by arguing that the Boathouse was a separate entity from the Dredgers, therefore they did not have standing to assert the infringement claims at issue.

Judge Chen found that issues of fact concerning the Dredgers’ ownership of the Boathouse precluded summary judgment.  She was not persuaded that the purchase of insurance coverage or the alleged “fiscal conduit” relationship constituted evidence of ownership.  What she found “most telling” was the absence of a contract, board minutes, correspondence, or an authorization evidencing the Dredgers’ ownership of the Boathouse.  After oral argument she gave the Dredgers the opportunity to submit an affidavit supplementing their claim of ownership, and the Dredgers did so.  However, the affidavit did not definitively resolve the ownership question and left issues of fact.

Disparate Treatment Claim Dismissed For Lack Of Nexus

In Forgione v. The City of New York, et al., 11 CV 5248 (E.D.N.Y. Oct. 17, 2013), Judge Gleeson granted summary judgment for the police department and two of its officials, dismissing disability discrimination claims brought by a police captain under the New York City Human Rights Law, N.Y.C. Admin. Code § 8-101 et seq.  (The court also dismissed retaliation claims brought under City law as well as under the New York State Human Rights Law and the Americans with Disabilities Act.)  The New York City law is broader than its federal counterpart in significant respects, including by not requiring a plaintiff to demonstrate that his claimed disability impedes a major life activity or that he was subjected to an “adverse employment action” because of the disability.  To prevail, Forgione only had to prove that he was treated differently, not that the “treatment was particularly severe or adverse.”  Thus, the disparate treatment claim was dismissed not because Forgione failed to show substantial damages, but because there was an insufficient nexus between the supervisor’s actions and his perception of the plaintiff’s disability.

Plaintiff Ralph Forgione was a police captain who alleged he was perceived as having post-traumatic stress disorder after telling his supervisor that his (Forgione’s) father had murdered his mother when he was 18 years old, and that his being referred to Psychological Services for a fitness-for-duty evaluation constituted “different” treatment.  After the assessment, he was cleared for duty, and the opinion does not state whether Forgione claimed to have lost any pay or status as a result.  However, the City demonstrated that no nexus existed between the perceived status and the referral by showing that the real basis for the referral was an incident in which Forgione had instructed a subordinate to make a false report to their superiors, and Judge Gleeson dismissed the disparate treatment claim on that ground.

But try a thought experiment with all the same facts, except that in the hypothetical, the City did send Forgione for a psychological assessment because Forgione told his supervisor that his father murdering his mother, and Forgione is then cleared for duty just as he was in the case before Judge Gleeson.  Would that state a claim for disparate treatment, even though Forgione was cleared for duty and one would be hard pressed to identify any significant harm to him?  And should the Police Department’s interest in having psychologically fit officers play any role in the analysis, or does the different treatment and the existence of a nexus begin and end the claim?  It may well be that the Police Department emphasized the lack of nexus on summary judgment because it was the easier argument, but the breadth of the City’s human rights law appears to create the potential for recovery by plaintiffs who are not harmed in any material respect.

Rule 56 Requires A “Genuine” Issue Of Fact

In Cruz v. Reiner et al., 11 CV 2131 (E.D.N.Y. Oct. 16, 2013), Judge Brian Cogan granted defendants’ motion for summary judgment in a case alleging excessive force pursuant to 42 U.S.C. § 1983.  In so doing, the court found that even though a party opposing summary judgment submits a sworn statement giving its version of events, a genuine factual issue will not be deemed to exist if other evidence shows that the statement cannot be credited.

The pro se plaintiff contended that he was held in pretrial detention in the District Attorney’s office without food, water or access to a bathroom for five days.  However, in an earlier deposition plaintiff testified that he was repeatedly given water and use of a bathroom and that he had never asked for food.  In addition, contemporaneous police department business records refuted plaintiff’s contention by showing that he had been taken to Central Booking within a day of his arrest and thus could not have been in the District Attorney’s office for five days.  In opposing summary judgment, the plaintiff apparently relied exclusively on his uncorroborated testimony in an affidavit.

The court noted that the Rule 56 requirement that there be a “genuine” issue to warrant denial of summary judgment means that if no reasonable jury could believe the opponent’s version of the events, it is appropriate to grant dismissal.  The Court relied on Supreme Court and Second Circuit cases holding that in certain “rare” or unusual cases, a court will have to make some assessment of the plaintiff’s account to determine whether a jury could reasonably find for the plaintiff.  Here, plaintiff’s inconsistent and contradictory statements compelled dismissal and, if a jury did not reject plaintiff’s story, the court would have to set aside a verdict in plaintiff’s favor because it would be unreasonable.

This decision and the case law cited therein tell a practitioner that the court will only make an assessment of a plaintiff’s account of the facts in the unusual case where the plaintiff’s testimony opposing summary judgment is uncorroborated and contradictory; in the ordinary course, a court will refrain from making any credibility determinations.

Attacks On Witness Credibility Do Not Create Questions Of Fact

In Dominick v. Hospitality Valuation Services, Inc., 11 CV 3452 (E.D.N.Y. Sept. 30, 2013), Judge Joanna Seybert denied the defendants’ motion for summary judgment in an action alleging pregnancy discrimination under the Pregnancy Discrimination Act of Title VII and under the New York State Human Rights law.

The plaintiff worked at a search firm specializing in the hospitality industry.  She was terminated from her job just two months after informing her employer that she was pregnant.  When she asked her boss whether her termination was related to her pregnancy, her employer responded, “don’t even go there.”  In support of their summary judgment motion, Defendants asserted that the termination was based on a client’s complaint and negative peer evaluations of the plaintiff’s performance.

The Court applied the burden-shifting framework established by the Supreme Court in McDonnell Douglas Corp. v. Green, 411. U.S. 792, 802-04 (1973), and held that there were questions of fact whether (1) plaintiff was terminated for poor performance, the defendants’ proffered non-discriminatory reason for discharge, and (2) plaintiff’s pregnancy motivated her discharge.  Remarks made by the defendants’ decision-makers in close proximity to the termination could have been viewed by a reasonable juror as discriminatory, but the Court noted that the temporal proximity between the disclosure of her pregnancy and her termination was not, by itself, sufficient to show pretext.

Judge Seybert’s discussion regarding the use of dueling 56.1 statements to manufacture of issues of fact should be of interest to practitioners.  Plaintiff’s Rule 56.1 Counterstatement attempted to contest facts “supported by Defendants with admissible evidence in the form of deposition testimony” on the ground that the deponents were not credible.  While acknowledging that a witness’s credibility is typically a fact question for the jury, the Court held that conclusory attacks on the credibility of witnesses will not, by themselves, create questions of material fact precluding summary judgment.