Harvey M. Stone and Richard H. Dolan

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 Jack B. Weinstein declined to grant collateral relief to a petitioner alleging that he would not have pled guilty had counsel accurately explained the risk of deportation. Judge Nicholas G. Garaufis granted a preliminary injunction barring the Secretary of Homeland Security and others from rescinding the DACA Program. And Judge Weinstein granted the CFTC’s application for an injunction against deceptive practices regarding virtual currency “spot” trading.

Section 2255—Ineffective Assistance

In Superville v. United States, 13 CR 302, 17 CV 5856 (E.D.N.Y., Feb. 27, 2018), Judge Weinstein rejected petitioner’s claim that, because defense counsel allegedly failed to warn him adequately of deportation as a consequence of his guilty plea, his 2014 conviction should be set aside pursuant to 28 U.S.C. §2255 or a writ of error coram nobis.

Over three years after his guilty plea and sentence for distributing 1,000 kilograms of marijuana and a related offense, petitioner moved to set aside the conviction, arguing that his attorney had understated the chances of deportation if he pled guilty, and that this incorrect advice induced him to plead rather than go to trial.

At a hearing on the motion, petitioner testified that counsel told him he “wouldn’t get deported” if he did not spend time in prison and stayed out of trouble. Weinstein did not credit this testimony, finding that “[a]t the least, [petitioner] was informed that he was eligible for deportation upon conviction.” Slip op. 5.

A second criminal attorney referred petitioner to an immigration attorney, who allegedly told petitioner he would “very likely not get deported” if he pleaded guilty and served no jail time.

Defense counsel testified that he told petitioner not that he “would” be deported as a result of the plea, but that he “could” be deported. In this regard counsel urged petitioner not to get re-arrested. Petitioner had claimed in his affidavit that counsel told him not to worry about deportation. In his testimony counsel called that a “bald-faced lie.” As Weinstein observed, counsel’s testimony “suggests that petitioner was in fact misled. The statute effectively calls for mandatory deportation because [petitioner] pled guilty to an aggravated felony.”

Petitioner asserted that, had he known the guilty plea would trigger his deportation, he would have gone to trial on the chance that he might escape that outcome.

Petitioner also argued that the incorrect advice he received about deportation amounted to ineffective assistance of counsel. In declining to set aside the conviction, Weinstein noted the following:

• The §2255 petition is barred by the one-year statute of limitations. Petitioner relied on 2255(f)(4), allowing a filing one year “from the date on which the facts supporting the claim or claims could have been discovered through the exercise of due diligence.” The cooperation agreement signed by petitioner in connection with his plea states that deportation is “presumptively mandatory” and affirms that he wants to plead guilty even if the consequence is “automatic removal from the United States.” This language “should have disabused” him of his alleged mistaken belief about the likelihood of deportation. Slip op. 16. The magistrate judge at the plea, and the court at sentencing, reinforced the message in the cooperation agreement. With due diligence, petitioner could have discovered his claim well over a year before he filed it.

• There was no need to reach the issue of ineffective assistance where petitioner could not show a “reasonable probability” that, but for counsel’s alleged error, he would have insisted on going to trial. Given the contemporaneous evidence in the record, petitioner knew there was a “strong possibility” of deportation at the time of the plea, and a stronger warning would not have changed his decision to plead. Significantly, he faced a ten-year mandatory minimum sentence if he did not cooperate.

• Though no statute of limitation applies to coram nobis, petitioner must demonstrate “sound reasons” for the delay in seeking relief. This he could not do. Nor could he prevail on his ineffective assistance claim.

As Weinstein also noted:

The court has changed the warning that it gives to non-citizen criminal defendants in a case such as this to “you should assume that you will be deported after conviction by plea or trial.”

Slip op. 19.

DACA—Preliminary Injunction

In Batalla Vidal v. Nielsen, 16 CV 4756, 17 CV 5228 (E.D.N.Y., Feb. 13, 2018), Judge Garaufis granted plaintiffs’ motions for a preliminary injunction barring defendants—including Kirstjen Nielsen, Secretary of the Department of Homeland Security; Attorney General Jeff Sessions; and President Trump—from rescinding the Deferred Action for Childhood Arrivals (DACA) Program. The court ordered defendants to “continue processing DACA renewal requests under the same terms and conditions that applied before September 5, 2017,” subject to some limitations. Slip. op. 6. As Garaufis saw it, defendants’ decision to end the DACA program was arbitrary and capricious and violated the Administrative Procedure Act (APA).

The government has broad discretion to grant deferred action to removable aliens, allowing them to remain in the United States. Deferred action programs have been used since the 1960s to provide relief to, for example, refugees fleeing war, refugees related to legal aliens and victims of violence or trafficking. Congress has ratified deferred action programs undertaken by the Executive branch.

The Deferred Action for Parents Act (DAPA), which would have granted deferred action to certain parents of U.S. citizens and lawful permanent residents, was enjoined by the Southern District of Texas, a decision affirmed by the Fifth Circuit. The Supreme Court granted certiorari and affirmed by an equally divided court.

Shortly after President Trump came into office, then-DHS Secretary John F. Kelly rescinded all deferral programs except DACA and DAPA. Four months later Secretary Kelly rescinded DAPA and an extension of DACA based on the injunction in the DAPA case. Following the rescission of the DAPA program, the Texas Attorney General wrote to Attorney General Sessions threatening to amend his prior DAPA complaint to challenge the DACA program. Sessions then issued a letter stating that DACA was unlawful, unconstitutional, and likely to be invalidated, which formed the basis for the rescission of DACA by president Trump.

Granting the preliminary injunction, Garaufis concluded that plaintiffs were “substantially likely to succeed on the merits of their claim that Defendants’ decision to end the DACA program was arbitrary and capricious.” Slip op. 23. In the court’s view, the Attorney General wrongly concluded that DACA was unconstitutional. The Executive has wide discretion to shield certain categories of removable aliens, and Congress’ rejection of proposed legislation did not preclude the Executive Branch from enacting a narrower DACA program. See slip op. 32-35.

The Attorney General’s conclusion that DACA was unconstitutional in light of the Fifth Circuit decision was based on “an obvious factual mistake.” The injunction issued by the Southern District of Texas, and affirmed by the Fifth Circuit, expressly declined to reach the constitutional claim, relying instead on the ground that DAPA violated the APA.

Moreover, defendants’ decision to rescind the DACA program was internally inconsistent: even though the Attorney General saw the DACA program as unconstitutional, DHS would continue to review DACA applications and renewal requests. Slip op. 37-39. Garaufis also rejected defendants’ “litigation risk” argument based on the threat to add the DACA program to the Texas litigation.

Plaintiffs demonstrated that they were likely to suffer irreparable harm if the DACA program ended. Plaintiffs faced loss of work authorization and employer-sponsored healthcare coverage with the accompanying risks of losing their homes or having to drop out of schools. “[T]he DACA rescission will result in ‘staggering’ adverse economic impacts, including, by the State Plaintiffs’ best lights, $215 billion in lost GDP over the next decade, and $797 million in lost state and local tax revenue.” Slip op. 49.

Finally, the balance of equities “weigh firmly in Plaintiffs’ favor.” The injunction would preserve the status quo, enabling a full resolution on the merits. Slip op. 51-53.

CFTC Jurisdiction—Virtual Currency Fraud

In granting an injunction against deceptive sales practices regarding virtual currency—a digital asset used as a medium of exchange—Judge Weinstein recognized the authority of the Commodity Futures Trading Commission (CFTC) to exercise enforcement power over that emerging investment form. Commodity Futures Trading Commission v. McDonnell, 18 CV 361 (E.D.N.Y., March 6, 2018).

Plaintiff CFTC sought an injunction against virtual currency “spot” trading. Weinstein identified two questions as critical to determining the CFTC’s standing: “(1) whether virtual currency may be regulated by the CFTC as a commodity; and (2) whether the amendments to the CEA [Commodities Exchange Act, 7 U.S.C. §1 et seq.] under the Dodd-Frank Act permit the CFTC to exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts.”  Slip op. 3.  He answered both in the affirmative.

The CEA defines “commodities” as “all other goods and articles … in which contracts for future delivery are presently or in the future dealt in. Title 7 U.S.C. §1(a)(9).” Slip op. 24. Weinstein found that virtual currency falls within this definition, bringing it within the CFTC’s “regulatory authority under 17 C.F.R. §180.1 … prohibiting ‘any person, directly or indirectly, in connection with any … contract of sale of any commodity in interstate commerce’ from using a ‘manipulative device, scheme or artifice to defraud’ or making ‘any untrue or misleading statement of a material fact.’” Slip op. 21.

While the CFTC typically focuses on fraud that directly involves the sale of futures or derivative contracts, “its expansion into spot trading commodity fraud is justified by statutory and regulatory guidelines,” including the CEA and 17 C.F.R. §180.1. Slip op. 25. The court also consulted recent publications and regulatory decisions, quoting from Gary DeWaal, CFTC Files Alleging Bitcoin Ponzi Scheme Not Involving Derivatives, Sept. 24, 2017, for its discussion of CFTC v. Gelfman Blueprint, Case No. 17-7181 (S.D.N.Y. Filed Sept. 21, 2017) (“This CFTC complaint [CFTC v. Gelfman Blueprint] has significant ramifications beyond its four corners. It represents a powerful statement by the Commission that it will exercise jurisdiction over cryptocurrencies when there is potential fraud—even if the fraud does not involve derivatives based on cryptocurrencies.”) Slip op. 25-26.

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.