ALBANY – The removal of the Albany County district attorney from an illegal steroid trafficking case over the fact that defendants filed a civil suit against the prosecutor was found improper yesterday by the Court of Appeals.
The court said that the “mere” potential that the prosecutor could be prejudiced by the suit was not enough to justify his disqualification from a case he was otherwise empowered to try by the state Constitution and statute.
In a separate case, the court held that a partner in a limited liability corporation did not owe his partners a fiduciary duty in a Manhattan real estate transaction in which he bought out his colleagues for $1.5 million and immediately assigned the property’s lease to another company for $17.5 million.
Albany County District Attorney P. David Soares argued in Matter of Soares v. Herrick, 198, that Albany County Judge Stephen Herrick (See Profile) overstepped his authority by disqualifying Soares from prosecuting five defendants on charges they were selling illegal steroids online from the Signature Pharmacy of Orlando, Fla., to customers in Albany County.
After Herrick dismissed four indictments against the defendants, they sued the district attorney in federal court in the Middle District of Florida. Their suit alleged that the prosecutions violated their constitutional rights
When Herrick dismissed the fifth indictment in November 2010, he disqualified Soares’ office from the case, claiming the district attorney’s “personal, professional and financial stake in the outcome of both the civil and criminal cases” establishes a “demonstrable potential for prejudice.”
Herrick subsequently appointed a special prosecutor to handle the case. Soares appealed.
Writing for a 6-0 court, Judge Carmen Beauchamp Ciparick (See Profile) said County Law §701 allows courts to appoint special district attorneys where the elected district attorney is “disqualified from acting in a particular case.”
But Ciparick cautioned that rulings such as People v. Leahy, 72 NY2d 510 (1998), have interpreted the courts’ “exceptional superseder authority” over district attorneys “narrowly” and that such instances raise separation of powers concerns between the executive and judicial branches.
In Soares, Ciparick wrote that it has not been shown that superseding Soares as prosecutor will protect the defendants from “actual prejudice.”
“Here, there is no record support for the conclusion that the defendants suffered actual prejudice or any risk thereof in connection with petitioner’s prosecution of the criminal case,” she wrote.
The court held that it does not agree with the defendants’ argument that a conflict arose once the federal civil suit against Soares had been filed.
“Under our precedent, the existence of a conflict of interest between the district attorney and a defendant, by itself, does not warrant the removal of the district attorney,” Ciparick said, citing Matter of Schumer v. Holtzman, 60 NY2d 46 (1983). “In addition, a defendant ‘should demonstrate actual prejudice or so substantial a risk thereof as could not be ignored.’”
In the course of the ruling, the court paused to address whether prohibition is the appropriate remedy to void the improper appointment of a special prosecutor.
“To the extent that Matter of Kavanagh v. Vogt, 58 NY2d 678 (1982), stands for the proposition that a court’s decision to disqualify a district attorney is not reviewable by way of prohibition, that case is no longer good law,” Ciparick wrote.
Chief Judge Jonathan Lippman (See Profile) and Judges Susan Phillips Read (See Profile), Victoria Graffeo (See Profile), Robert Smith (See Profile) and Eugene Pigott Jr. (See Profile) joined in the opinion.
In a statement yesterday, Soares said he was pleased with the decision.
“We look forward to proceeding with this criminal prosecution,” he said.
Assistant District Attorney Christopher Horn argued for the prosecutor’s office.
William Dreyer of Dreyer Boyajian in Albany and James Knox of the E. Stewart Jones Law Firm in Troy represented the defendants.
Yesterday’s decision upheld a 3-2 determination by an Appellate Division, Third Department, panel that found Herrick exceeded his authority under County Law §701.
In an amicus curiae brief in the case supporting Soares’ position, the District Attorneys Association of the State of New York said it is “manifestly erroneous” for a defendant to disqualify a prosecutor by filing a civil lawsuit against him.
“Requiring the substitution of a special district attorney simply because a criminal defendant has filed a civil action naming the duly elected district attorney as a civil defendant upsets the settled constitutional order and raises questions, both ethical and constitutional,” the association said in its brief.
Soares got into difficulty in the case when an Appellate Division, Fourth Department, panel censured him in May 2012 for making “reckless and misleading” remarks about Herrick after the judge removed him as prosecutor in 2010. Soares accused the judge of handing out a “get-out-of-jail-free card for every criminal defendant in New York state” through his action.
Pappas v. Tzolis, 193, the real estate case, focused on the extent of the fiduciary duty, if any, that Steve Tzolis owed to his former partners in a limited liability corporation formed to enter into a long-term lease for a commercial building in Lower Manhattan.
After a rocky relationship, Tzolis struck a deal to buy out the shares of partner Steve Pappas for $1 million and Constantine Ifantopoulos for $500,000 in January 2007.
The former partners sued Tzolis for breach of fiduciary duty, fraud and other claims after Tzolis assigned the lease in August 2007 to the Extell Development Company for $17.5 million.
Pappas and Ifantopoulos contended that the rapidity with which the deal was completed with Extell indicated that Tzolis had surreptitiously negotiated the sale contrary to the interests of his partners.
The court dismissed the action entirely.
Pigott wrote for the court that Pappas and Ifantopoulos were effectively on notice through the difficult relationship they had with Tzolis that trust was no longer the basis of their association and that they could not rely on Tzolis to protect any fiduciary interests except his own.
At the very least, Pigott wrote, Pappas and Ifantopoulos should have sought an independent assessment of the value of the lease they held with Tzolis when Tzolis offered to buy them out for 20 times what they had paid for their interests in the LLC only a year earlier.
“Here, plaintiffs were sophisticated businessmen represented by counsel,” Pigott wrote. “Moreover, plaintiffs’ own allegations make it clear that at the time of the buyout, the relationship between the parties was not one of trust, and reliance on Tzolis’s representations as a fiduciary would not have been reasonable.”
Pigott said the ruling was in keeping with the Court of Appeals’ determination in a similar case, Centro Empresarial Cempresa v. America Movil, 17 NY3d 269 (2011).
Judges Lippman, Ciparick, Read, Graffeo and Smith joined in the Pigott ruling.
E. Leo Milonas, Frederick Brodie and Peter Ostrovski of Pillsbury Winthrop Shaw Pittman represented Tzolis.
Carl Person of Manhattan argued for Pappas and Ifantopoulos.
Error in Warrant Case
Also yesterday, the court decided 5-1 to affirm a Third Department ruling suppressing evidence seized from the home of suspect John Gavazzi in a child pornography case.
The warrant, as written in error by a state trooper, listed the name of the local criminal court as “Town of Broome, Broome County,” when the correct court was actually Town of Greene Court in Chenango County. The Greene village justice did not correct the mistake when signing the warrant.
In an unsigned ruling, the Court of Appeals said CPL §690.45 stipulates that a search warrant must contain the “name of the issuing court.”
While courts have ruled that “substantial” rather than “literal” compliance is needed for the requirement, in People v. Gavazzi, 195, the court said the warrant was not nearly close enough as it contained an erroneous designation of the local criminal court, an illegible signature by the justice and the name of the nonexistent “Town of Broome.”
Judges Lippman, Read, Graffeo, Pigott and Ciparick were in the majority.
In his dissent, Smith held that suppression would only be warranted as a remedy if a constitutional right was endangered by the police’s actions.
Smith said the majority’s worry that allowing the mistaken warrant in Gavazzi could “open the door” to warrants that are not signed at all by judges is “far-fetched.”
“The name requirement is essentially formal, and sloppiness in complying with it, while regrettable, endangers no one’s liberty,” Smith wrote.
John Cameron of Norwich represented Gavazzi, whose sentence for his guilty plea to promotion and possession of child pornography was stayed pending the appeal.
Chenango County Assistant District Attorney Michael Genute appeared for the prosecution.
@|Joel Stashenko can be contacted at email@example.com.