Harvey M. Stone and Richard H. Dolan

This column reports on several significant, representative decisions handed down recently in the United States District Court for the Eastern District of New York. Judge Carol Bagley Amon denied injunctive relief against anti-abortion protesters. Judge LaShann DeArcy Hall upheld a complaint alleging a violation of the Telephone Consumer Protection Act for unsolicited robocalls to a residence. And Judge Jack B. Weinstein, finding extensive fraud in the purported sale of virtual currencies, granted an injunction and severe monetary penalties against defendant under the Commodity Exchange Act.

Injunction Against Abortion Protesters Denied

In People of the State of New York, by Barbara D. Underwood, Acting Attorney General of the State of New York v. Kenneth Griepp, 17 CV 3706 (EDNY, July 20, 2018), Judge Amon denied a preliminary injunction sought by the New York Attorney General’s Office (OAG) against 13 anti-abortion protesters for their conduct toward patients and escorts as they entered the Choices Women’s Medical Center in Jamaica, Queens. This 103-page decision was based on extremely detailed factual findings.

In June and July 2016, the OAG arranged for surveillance by video cameras of Choices’ entrance and the surrounding sidewalk. Amon gave “significant weight” to the video from these cameras. Slip op. 10-11. Reviewing inconsistencies in testimony, Amon found that the OAG’s witnesses generally were not credible to the extent their testimony went beyond the video evidence (slip op. 13-17), and that the video evidence did not support the OAG’s contention that the protesters had used force or threats of force, engaged in physical obstruction or “follow-and-harass” behavior, or interfered with the operation of a reproductive health care facility (slip op. 67-103).

As to each of the 13 protesters against whom an injunction was sought, the court compared the testimony of the OAG’s witnesses to the corresponding video. Slip op. 18-53. In the vast majority of cases, the video showed the protesters attempting to speak with, or hand literature to, those seeking to enter the clinic, and did not show them engaging in obstruction or other conduct that would support injunctive relief.

The protesters had in many cases made their own video recordings of their interactions with patients and escorts. Amon reviewed that video in detail, and credited the protesters’ testimony that they made it to create a record against charges of improper conduct, rather than to intimidate patients or prevent access to the clinic. E.g., Slip op.  18-53.

The court found that defendant Patricia Musco falsely told “a patient and her mother that the Clinic was closed when it was open, causing the patient and mother to turn around and leave” (slip op. 29); defendant Ranville Thomas told certain escorts that they could die at any time (slip op. 30-31); defendant Anne Kaminsky told an escort “that, if she stopped working at Choices, Kaminsky could take her off a murder mill website” (slip op. 42); and defendant Brian George deliberately engaged in a “slow walk” in front of patients that was intended to, and did, impair their access to the clinic. Slip op. 43.

But these actions were not enough for injunctive relief. Patricia Musco made the offending statement once in six years of protesting and, even assuming it rose to the level of interfering with the operation of a reproductive health facility, there was no actual and imminent threat that she would do so again, “having been warned of the impropriety of such statements.” Slip op. 102-03.  The escorts were aware that Ranville Thomas regularly preached about the fragility of life and therefore could not reasonably interpret his statements on that subject as threats. Slip op. 75-78. “[C]ourts should not find that a defendant made a true threat if the statement informs a person merely that ‘he or she is in danger from a third party,’” which is the most that Anne Kaminsky’s statement did, and none of the escorts took steps in response to what they claimed was a threat. Slip op. 79. There was no “actual and imminent” threat that Brian George would again engage in the “slow walk” behavior; he affirmed that he had done so “on only a handful of occasions, that he stopped doing so when [co-defendant Kenneth] Griepp learned of the practice and told him to discontinue it, and that he ‘will not engage in that behavior again.’” Slip op. 91.

Amon cautioned: “This decision should not embolden the defendants to engage in more aggressive conduct …. Several of the defendants’ actions came close to crossing the line from activity protected by the First Amendment” to prohibited conduct. Slip op. 102.

Telephone Consumer Protection Act

In Banks v. Pro Custom Solar, d/b/a Momentum Solar, 17 CV 613 (July 31, 2018), Judge DeArcy Hall declined to dismiss a complaint alleging that defendant violated the Telephone Consumer Protection Act, 47 U.S.C. §227 (TCPA), and New York General Business Law §399-p (NYGBL) by initiating or authorizing two “robocalls” to plaintiff’s residential line without his consent. The court found that plaintiff sufficiently pled vicarious liability under the apparent authority doctrine.

Plaintiff brought this action individually and on behalf of a putative class. According to the complaint, plaintiff received the unsolicited calls on Dec. 29, 2016, and Jan. 12, 2017. When he answered, a prerecorded voice, identifying itself as Steven with Home Solar Solutions, asked a series of questions about energy costs. At the end of each recording, the calls were transferred to a live representative from Advanced Energy Solutions, who informed plaintiff that the calls had been made to “promote” defendant’s “goods and services.”

Plaintiff “researched” the matter by making several calls. The first call was to Sunnova Energy Corporation, which he believed to be affiliated with defendant. A Sunnova representative told him that Sunnova works with defendant Momentum Solar and that Sunnova seeks customers through prerecorded calls. In a subsequent call to defendant, its representative told plaintiff that defendant uses prerecorded calls to promote its business, adding:  “I think there [are] … robotic messages” directed to “homeowners that [may] be interested in going solar.” In a second call to defendant, another representative acknowledged the use of the kinds of calls at issue here (“ye[s], that’s our operative service”).

The TCPA was passed “‘because many consumers [were] outraged over the proliferation of intrusive, nuisance telemarketing calls to their homes.’ Mims v. Arrow Fin Servs., LLC, 565 U.S. 368, 372 (2012) (alterations omitted).” Slip op. 3. The relevant section prohibits (with exceptions not relevant here) the initiating of a telephone call to a residential line “leaving an artificial or prerecorded voice to deliver a message without the prior express consent of the called party.” 47 U.S.C. §227(b)(1).

Because plaintiff did not allege that defendant itself initiated the call, defendant could not be directly liable. But it could be vicariously liable: “From the perspective of Plaintiff, Defendant’s statements could reasonably give the appearance that Defendant, the purported principal, authorized Advanced Energy Solutions, the purported agent, to initiate the calls on its behalf.” Slip op. 5-6.

Similarly, plaintiff succeeded in alleging a violation of NYGBL §399-p, which also creates vicarious liability. Slip op. 6.

CFTC and Cryptocurrency Regulation

In Commodity Futures Trading Commission v. McDonnell, 18 CV 361 (EDNY, Aug. 23, 2108), Judge Weinstein granted the CFTC’s request for a permanent injunction, restitution and civil monetary penalties against defendant based on his fraudulent “boiler room” scheme involving virtual currencies.

Weinstein had previously issued opinions in this case finding that: (a) the CFTC had standing and authority to bring an action for fraud involving virtual currencies; and (b) the CFTC was not asserting authority to regulate trading in virtual currencies, but only to stop and prevent ongoing fraud. In the decision here, the court found that, in this administrative enforcement proceeding, defendant had no right to a jury trial for civil and criminal penalties because he had absented himself from trial, thereby forfeiting the right to protest the CFTC’s jury trial waiver.

Defendant’s scheme involved soliciting clients to invest in virtual currencies by making them believe that he was experienced in this area and capable of providing bona fide advice, and that he was purchasing virtual currencies to sell to them. Defendant never provided any services to his customers and misappropriated all the funds entrusted to him. To carry out his scheme, he used pseudonyms, phone numbers, and bank accounts to conceal his identity. He promised his customers exorbitant gains and lifetime trading services, lied about his record, and sent customers false statements showing imaginary large profits. When his customers became suspicious because he would not return their investments, he cut off all communication, destroyed records and hid their funds.

Defendant violated section 6(c)(1) of the Commodity Exchange Act by engaging in prohibited conduct with scienter, in connection with a contract of sale of a commodity in interstate commerce. Slip op. 118. Defendant acted with scienter because the scheme, realized through misrepresentations and omissions and misappropriation of customer funds, was fraudulent, illegal and intentional.

As Weinstein observed, a permanent injunction was appropriate to prevent injury to the public and deter future illegal conduct. The injunction included “permanent bans on trading virtual currency, controlling trading accounts for other persons, soliciting or accepting funds from any person for trading in commodity interests, or applying for or claiming exemption from registration with the [CFTC] or engaging in any activity requiring such registration or exempt from registration pursuant to Commission Regulation.” Slip op. 134. Because defendant “cannot be trusted to operate only on his own behalf in a lawful and honest way,” the injunction also prevented him from dealing in assets he legally owned. Id.

The court ordered “restitution in the full amount of customer losses from funds transferred by customers to the Defendant from February to June 2017 for the purchase and sale of virtual currencies and the trading services they did not receive.” Slip op. 136. Restitution in the amount of $290,429.29 would take priority over all other payments, including the civil monetary penalty, which was set at triple defendant’s monetary gain and totaled $871,287.87.

 

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan.