2d Circuit strikes down portion of New York's marijuana dispensary law

The dormant Commerce Clause may be the least interesting strand of constitutional law. But every few years, a case arises in the Second Circuit that invokes that provision. This time, we are dealing with New York State's mechanism for issuing licenses to sell legal marijuana. The state's procedure is stricken under the dormant Commerce Clause.

The case is Variscite NY Four v. New York State Cannabis Control Board, issued on August 12. When New York legalized marijuana, it adopted a method for issuing licenses to sell it. If you want a dispensary license, you stand a better chance if you or a close relative were convicted for a marijuana-related offense under New York law. The state argues this provision is merely restorative justice, not a constitutional violation nor economic protectionism, which would violate the Commerce Clause. The Second Circuit disagrees, granting the plaintiff organization a preliminary injunction against the state enforcing this provision.

The Commerce Clause says Congress has authority to regulate interstate commerce. The Constitution does not expressly provide for a "dormant" Commerce Clause. That is a creature of the Supreme Court, which holds the Commerce Clause is violated when the state practices "protectionism," favoring state entities without congressional authorization. The idea is that states cannot favor one state over another in regulating commerce. Hey, we are all Americans! 

The majority (Jacobs and Calabresi, with Livingston in dissent) holds that "Congress has given New York no clear permission to favor its residents over others whose businesses skirt the federal drug laws. Under traditional dormant Commerce Clause principles, New York’s prioritization of applicants with convictions under New York law is a protectionist measure that cannot stand." Plaintiffs convinced the Second Circuit to strike down this provision because they are from California and want a New York dispensary license. Since they were never convicted of any drug offenses under New York law, they are harmed by this statute simply because they are not New Yorkers and therefore lose priority in receiving a dispensary license. 

Case against Bob Dylan dropped, and the plaintiff's lawyers are sanctioned

A woman sued Robert Zimmerman in 2021, claiming that he sexually abused her in 1965, when she was 12 years-old. You know Robert Zimmerman as Bob Dylan, the famous singer. She was able to sue Dylan under recent statutes that re-opened the statute of limitations for sexual assault cases. The case was dismissed after the plaintiff voluntarily dropped the claim and failed to comply with court orders intended to manage discovery. 

The case is JC v. Zimmerman, issued on August 13. Under the rules of civil procedure, you have to follow court orders on discovery, which includes exchanging documents, witnesses, etc. But when Dylan's lawyer served JC with demands, her lawyer did not respond, prompting Dylan's lawyer to file a motion to compel discovery. JC's lawyer then promised to provide discovery in short order. By now the district court was getting impatient and warned JC's lawyer to keep their eye on the deadlines. But the discovery violations continued, and the judge warned that it would take "appropriate action" if these derelictions continued. When JC finally produced records, they were paltry but did not include relevant emails or texts that Dylan deemed relevant to the case. The judge again warned JC's lawyer about this and threatened to entertain a sanctions motion for the deficient discovery. The judge ultimately said this to JC's lawyer:

I don’t know, Mr. Isaacs, how to tell you more strongly and more honestly that I am disappointed and dissatisfied with the productions that have been made and with your and your client’s conduct in discovery. I leave it at that. You’ve had every warning. You’ve had it oral, you’ve had it written, you don’t need me to repeat it again. For the love of God, produce these materials because you understand the consequences if you don’t.

These are strong words. JC ultimately agreed to dismiss the case. JC fired her lawyer, when appeared before the judge for a status conference. They told the judge that JC gave them three boxes of papers but would not allow them to take the boxes with them. When counsel told JC this was unacceptable, she fired her lawyers. In court, when the judge again read counsel the riot act about the discovery violations, JC -- who was present  in court -- agreed to dismiss the case outright.

Even though the case was dismissed, the judge sanctioned counsel anyway on the basis that they had not complied with discovery orders.The trial court blamed counsel for these discovery violations. The sanctions were $5,000 against one lawyer, and $3,000 against another. Dylan's lawyers wanted a $50,000 sanction.

Trial courts have discretion to sanction lawyers for violating discovery orders. The Court of Appeals (Livingston, Calabresi and Merriam) sustains the sanctions. While counsel argued that they did not violate any discovery orders, the Second Circuit disagrees, providing a detailed analysis in affirming the punishment. The Court borrows this principle from the Seventh Circuit: "in determining whether Rule 37 sanctions are warranted, the district court may “weigh not only the straw that finally broke the camel’s back, but all the straws that the recalcitrant party piled on over the course of the lawsuit.”

Trump waived his right to have the U.S. appear as a party in the Jean Carroll defamation case

Waiver is a scary word in the legal profession. It means the lawyer did not timely raise an argument and the court therefore will not entertain it. In this case, a jury found a man liable for defaming a woman by calling her a liar when she accused him of sexual assault; the jury awarded her $17.5 million in compensatory damages and $65 million in punitive damages. The question is whether the defendant, who made these defamatory statements as a federal employee, can substitute the United States as a party, a maneuver that presumably would require the government to pay out the damages.

The defamatory words came from the the President of the United States, who, according to the jury, rammed his fingers into the vagina of a woman in a Bergdorf-Goodman dressing room against her will. The victim is E. Jean Carroll, and the defendant is Donald J. Trump. The case is Carroll v. Trump, issued on August 8.

There were two trials. The first, for sexual assault and the first round of defamation, yielded a huge verdict. This round of defamation arose post-trial, when Trump verbally attacked Carroll from the White House on June 21-22, 2019. That led to a second trial for defamation. The second trial is the subject of this appeal, which does not resolve whether the jury got it right in ruling against Trump but whether the United States should be added as a party. The theory is that since Trump defamed Carroll from the White House when he was President, he was acting withing the scope of his employment in committing this actionable tort.

The substantive issue -- whether Trump was acting in the scope of his employment -- is unresolved. The District of Columbia Circuit Court of Appeals, which took on this issue at the Second Circuit's request a few years ago, did not resolve it, leaving this task to the district court. But at the district court level, the government declined to brief whether Trump was acting within the scope of his office. The case then went to trial, and the jury ruled in Carroll's favor.

In the Court of Appeals, Trump, and his Justice Department, revives this issue and wants the Second Circuit (Chin, Merriam and Kahn) to rule that, under the Westfall Act, he did act within the scope of his employment in defaming Carroll. Too late, says the Court of Appeals. The Westfall Act allows the United States to be substituted as a party in a lawsuit against a federal employee who acts within the scope of his employment, which would mean the plaintiff can only sue under the Federal Tort Claims Act, an entirely different legal scheme than the one invoked by Carroll in her defamation suit. 

Under the Westfall Act, this motion to name the U.S. as a party is untimely; Trump's lawyers should have done it prior to trial, not when the case is on appeal. Other Circuit Courts have similarly ruled in other cases, and this holding is now the law in the Second Circuit. In addition, the Court holds, even if the Westfall Act allowed Trump to seek this relief now, we have a waiver problem. He could have raised this issue previously but failed to do so.

Appellate Division strikes down $1,000 penalty against state court judges who deny certain habeas corpus petitions

Did you know that the CPLR provided a way for state court habeas corpus losers to personally sue the judge for a $1,000 fine if the judge got their decision wrong? CPLR 7003(c) allows for this, and if you don't believe me, here it is: 

For a violation of this section in refusing to issue the writ, a judge, or, if the petition was made to a court, each member of the court who assents to the violation, forfeits to the person detained one thousand dollars, to be recovered by an action in his name or in the name of the petitioner to his use.

No one else knew about this provision, either. According to the Appellate Division, Second Department, which recently struck down this provision as unconstitutional, no judge has ever been personally assessed a $1,000 fine in the more than 200 years and the four centuries that prior iterations of the statute has existed, and litigants in New York have only invoked it seven times over the years. No one ever won their $1,000 payout, and the lower court denied that relief to the plaintiff in this case, which is how it reached the Appellate Division.

The case is Poltorak v. Clarke, issued by the Second Department on July 30. The plaintiff lost his habeas petition in Kings County Family Court, but the Appellate Division reversed in concluding the defendant, Justice Clarke, got it wrong. Plaintiff then sued Justice Clark to recover the $1,000, pursuant to CPLR 7003(c). State Supreme Court held the statute was unconstitutional, so plaintiff got nothing, and the Appellate Division affirms and says the statute violates constitutional separation of powers and the compensation clause of the New York Constitution.

Something in the American legal tradition authorized penalties against judges for denying habeas corpus. That is in part because of the value the legal system places on habeas corpus. The Appellate Division reviews cases from around the country where this issue has arisen. This rule has been struck down in other states, and now it has been stricken in New York. Somebody worked their tail off in writing this decision, as it is quite lengthy and provides extensive background on statutory penalties against judges who deny habeas petitions.

The Second Department issues two holdings: first, the $1,000 penalty against the judge violates the judicial compensation clause of the New York Constitution because paying out the penalty to a litigant will naturally reduce the judge's salary. The clause promotes judicial independence and ensures that judges can make a living after leaving private practice or other legal positions in order to ascend to the bench. That concern goes down the drain if the judge has to pay litigants upon ruling against them in certain cases, and not for nothing, I would think the prospect of paying such a financial penalty would create a conflict of interest. Not that judges will rule one way or the other for the money, but the public at large might think the judge ruled the way they did to avoid paying $1,000 out of pocket. The separation of powers principle is also implicated here, as this penalty would incentivize a specific outcome, i.e., issuance of the writ of habeas corpus, to avoid paying the penalty. This would impair judicial discretion and judgment.

If a $1,000 fine was available to disappointed habeas litigants under the CPLR, why did no one ever invoke this entitlement? How did everyone miss this opportunity? I cannot answer that question. 

Another observation: this case has a 2020 Appellate Division docket number. The decision came down last week. The Second Department has been slower than molasses lately, but five years is an awfully long time. The case was argued in September 2024, so that delay is understandable since this issue is complex, but the four-year wait prior to argument is, for those of you who don't practice in the Second Department, par for the course.

Gun-speech case fails on qualified immunity

A gun rights advocacy group sued the State of New York after it directed insurance companies to consider the reputational risks arising from their association with the National Rifle Association and similar organizations. When the Department of Financial Services (a state agency) met with Lloyd's of London (a prominent insurance company) to express concern about insurance policies circulating in the gun world that would provide coverage for intentional and reckless shootings, Lloyds announced it had directed its underwriters to terminate all insurance policies related to the NRA and related organizations and to stop providing insurance to the NRA in the future. 

The Second Circuit, a few years ago, said the NRA did not have a First Amendment case against the state arising from this sequence of events, but the Supreme Court reversed and said the NRA had a case. The case returned to the Second Circuit to see if the individual defendant is protected by qualified immunity.

The case is NRA v. Vullo, issued on July 17. The NRA argues that the state is punishing it over its pro-gun advocacy. The concern was that these insurance policies violated state law because they protected gun owners from intentional or reckless shootings. Originally, the Second Circuit said the lawsuit must fail because the NRA failed to plausibly allege that the DFS official, Vullo, had unconstitutionally threatened or coerced Lloyds to stifle the NRA's speech because Vullo was simply doing her job at DFS in enforcing the law. But the Supreme Court disagreed, finding that the NRA did state a claim because the government cannot coerce a private party to punish or suppress someone else's disfavored speech.

The Second Circuit (Chin, Carney and Robinson) must now determine whether Vullo can invoke qualified immunity, which applies when the constitutional violation was not clearly-established. If the case law was fuzzy or unclear or nonexistent, then the government defendant cannot be expected to know she is violating the law. If the theory of liability is too novel, then the individual defendant cannot be liable. 

The bottom line: while the Supreme Court said the NRA plausibly asserted a viable First Amendment claim, prior law was not clear on this issue. While there have been cases holding that you cannot coerce someone over their expressive speech activity, the law was not clear that such coercion arising from an entity's non-expressive conduct would violate the First Amendment. Since this case involves non-expressive conduct on the NRA's part, Vullo gets qualified immunity. As the Second Circuit states, "we can surmise only that a reasonable officer in Vullo's position likely would have thought that her conduct -- which targeted regulated entities for concededly illegal, nonexpressive activities and only indirectly affected the NRA -- was permissible." At least against Vullo, the case is over. 

Court clerk has speech claim against Town Justice

This is an important First Amendment retaliation case brought by a public official against her municipal employer. The Court of Appeals holds that a former small-town court clerk may sue the Town and the Town Justice for retaliation after she cooperated with state investigators into possible misconduct at the Town Court. This is a rare victory for plaintiffs like this, as the Supreme Court has curtailed these lawsuits in holding that speech that falls within the scope of the plaintiff's official job duties is not protected by the First Amendment and therefore may legitimately motivate retaliation by a thin-skinned supervisor.

The case is Long v. Byrne, issued on July 30. Long worked as a court clerk for the Town of New Lebanon, and Byrne was the Town Justice. When the State Commission on Judicial Conduct asked for certain records in the course of an ethics investigation into the Town Court, Long, who had previously earned stellar performance reviews, turned over the records in an effort to comply with the laws, rules and regulations of the Commission, much the consternation of Justice Byrne. Long was eventually fired after she refused to answer Byrne's questions about her interactions with the Commission. Not for nothing, but Justice Byrne eventually resigned from the Town Court due to a Commission investigation; it is unclear if that resignation resulted from the investigation that gave rise to this case.

The district court dismissed the case on authority of Garcetti v. Ceballos, a 2006 Supreme Court ruling that says you do not speak as a "citizen" (and you do not engage in protected speech) if your speech was pursuant to your official job duties. The First Amendment only protects citizen speech, not work speech. This means that speech relating to politics in general or whistleblowing that does not directly relate to your duties is free speech or, as the Court of Appeals puts it, the "speech fell outside of her official responsibilities." The comptroller who blows the whistle on bad budgeting or missing money may be fired even if he was just doing his job. It sounds unfair, and the cases that have followed Garcetti over the last 20 years have led to some inequitable results, but the idea is that the government has the right to manage its employees to ensure workplace efficiency.

Long has a case, the Second Circuit (Lynch, Park and Robinson) holds, because cooperating with the Commission on Judicial Conduct was not among her official job duties. She was not employed by the Commission and had no duty to report to it. Bear in mind that this ruling falls within a Rule 12 motion to dismiss posture, the Court of Appeals emphasizes, and discovery might yield evidence that would support a contrary result on summary judgment. For now, Long is the victor. Here is why the Court of Appeals rules in Long's favor:

1. Long's refusal to answer Byrne's questions about the investigation was protected speech, and she therefore cannot fired over this. The First Amendment protects your right not to speak -- or to avoid coerced speech -- a principle that the Second Circuit recognized 14 years ago in Jackler v. Byrne, a case that I argued involving a police officer who was unlawfully fired after he refused to lie about a sergeant's misconduct. The fact that Long declined to speak while physically in the workplace does not cut against her case.

2. Long's speech was not among her official job duties. "Long alleges it was not within the scope of her job duties to advise a Town Justice as to the requirements of the Commission," an independent entity that did not employ Long. "There is no clear reason why it would be within Long's job duties to provide Byrne with information related to an independent third-party's investigation into Byrne's suspected misconduct. Even if it were within Long's job duties to tell Byrne who had requested the court files, it would not follow that it was also within Long's duties to give Byrne the information that she sought: the identity of the person who had filed complaints with the Commission.

3. Long asserts that she did not answer Byrne's questions because the Commission advised her that it would be unlawful to do so. This permits the inference that Long acted as a private citizen in not answering Byrne's questions about her interactions with the Commission. While the Second Circuit notes there is no case law in support of this holding, the Court identifies another civilian analogue to Long's refusal to answer Byrne's questions: "the right to reject governmental efforts to require her to make statements that would violate the law." The authority for that is Jackler. 

4. The complaint alleges that Long cooperated with the Commission out of her sense of civil duty. "Her desire to be a law-abiding citizen is not an employment-related motivation" that would kill the case under Garcetti.

5. While Long claimed she acted as a citizen when she turned over the documents at the Commission's request, the lawsuit says little about the nature of her job duties, "making it difficult to discern whether her decision to provide the Commission with the files it requested falls within the scope of those duties." We are going to have to explore this in discovery. 

The Garcetti holding was notable in scaling back free-speech retaliation claims by public employees. This happened after Justice Alito replaced Justice O'Connor in the mid-2000's. Prior to Garcetti, these cases were common in federal court. Since then, many such cases have been thrown out because the speech in question was closely related to the plaintiff's job duties. In this ruling, Judge Lynch outlines the rationales in support of the Garcetti analysis: (1) its holding would not deprive the plaintiff-speaker of any rights that the citizen speaker would enjoy since the plaintiff-speaker owes her speech to the government employment; (2) a contrary rule would create a free speech claim "for every statement public employees make in the course of doing their job," (3) state law claims are still available to such plaintiffs even if they cannot sue under the First Amendment, and (4) there are limitations to Garcetti, as speech that is not ordinarily within the scope of the plaintiff's employment is still protected under the First Amendment. Plaintiffs' lawyers may question these justifications, and I certainly have, but Long's case shows that these claims can still proceed to discovery in limited instances.

Some guidance on attorneys' fees in student disability cases

Civil rights lawyers are well aware that, upon winning the case, they will recover attorneys' fees from the losing side. That it true in cases brought under Title VII and the other employment discrimination statutes, as well as constitutional claims under 42 U.S.C. 1983. Not so true for student disability claims brought under the Individuals with Disabilities in Education Act (IDEA). The victorious lawyer has to jump through a hurdle in order to recover fees.

The case is NGB v. New York City Department of Education, decided on July 24. In IDEA cases, the plaintiff's lawyer can only recover fees if the plaintiff was "substantially justified" in rejecting the school district's settlement offer. If not, then no attorneys' fees for any work incurred post-rejection. This rule puts the plaintiff and their lawyers in a tough spot, as they have to carefully analyze the settlement offer, much like a Rule 68 offer in other cases.

In this case, a hearing officer ruled in favor of the plaintiff, who claimed their child was denied a free appropriate public education due to disability. After plaintiff filed this federal lawsuit seeking attorneys' fees, the City offered $17,000. Plaintiff rejected the offer. The district court eventually ruled on the attorneys' fees petition, awarding plaintiff approximately $14,500, about $2,500 less than the City's offer. However, the district court also said plaintiff was "substantially justified" in rejecting the $14,500 offer, as recovering less money than the defendant offered does not always mean the plaintiff was not justified in accepting the offer. As plaintiff had sought more money in the fee motion than $14,500, and had a good faith belief that the district court would have awarded plaintiff that additional money, the plaintiff acted reasonably in proceeding with the fee motion in the first instance.

The Court of Appeals (Calabresi, Lohier and Karas [D.J.]), affirms this reasoning, deciding for the first time "what standard applies in evaluating substantial justification under the IDEA's fee-shifting provision." So the Court looks to Supreme Court cases under the Equal Access to Justice Act, which also has a substantial justification test when it comes to attorneys' fees settlement offers. The Supreme Court holds the standard for substantial justification is "justified to a degree that could satisfy a reasonable person." This is a "reasonableness" test. Following the reasoning of a Third Circuit case that has already explored this issue, the Second Circuit holds that "it is inimical to the purpose of the IDEA to force prevailing parents to accept an offer that they reasonably and in good faith belief faith to provide adequate compensation." In other words, if the parent acted reasonably in saying No to the offer, they may recover fees through an attorneys' fees petition in the district court.

The Second Circuit finds the district court did not abuse its discretion in ruling on the attorneys' fees motion and finding the parent had substantial justification to reject the settlement offer, thus allowing the parent to recover fees incurred post-rejection. This is so even though the trial court awarded plaintiff less money than the settlement offer. The district court's careful analysis on the plaintiff's good faith was not an abuse of discretion, the general rule guiding attorneys' fees motions in federal court. As the Second Circuit often defers to the trial court's judgment on attorneys' fees, plaintiff wins this appeal.