A suit brought by a Long Island attorney and his client asserting they were the victims of a “pay to prosecute scheme/conspiracy” has survived a pre-discovery motion to dismiss though a federal judge has considerably narrowed the claims on which the suit can proceed.
Attorney Robert Del Col of Smithtown and his client, Leftheris Doukas, claim they were arrested and indicted for grand larceny after a company with which they were feuding over patent rights gave campaign contributions to Nassau County District Attorney Kathleen Rice in order to have her office press a criminal case against them.
Eastern District Judge Margo Brodie ruled on Dec. 18 that in the context of a pre-discovery dismissal motion, Del Col and Doukas sufficiently alleged conspiracy and abuse of process claims against Nassau County prosecutors and detective-investigators; and DataTreasury, a patent holder of remote check processing technology, and its outside counsel. Brodie also allowed the malicious prosecution claim to proceed against company officials at DataTreasury, and earlier had allowed to proceed a search-and-seizure claim against county defendants.
“By indicting and arresting Plaintiffs for extortion, Defendants could claim that Doukas never had a legitimate claim to the patent; thus, the goal of the indictment and arrest was to invalidate Doukas’s claim to the patent. Drawing all reasonable inference in Plaintiffs’ favor and accepting Plaintiffs’ allegations as true, Plaintiffs meet the elements of abuse of process under both federal and state law and Defendants’ motions to dismiss the abuse of process claims are denied,” Brodie wrote in Del Col v. Rice, 11-cv-5138.
The judge, however, dismissed false arrest and imprisonment claims against all the defendants and also dismissed malicious prosecution claims against county defendants. During July oral arguments, she also threw out claims including the manufacture of false evidence and intentional infliction of emotional distress.
According to the underlying complaint, around 1994 or 1995, Doukas and Claudio Ballard, an inventor, entered a joint venture whereby Doukas supplied capital and Ballard developed technology.
Ballard eventually produced a patent for check imaging later assigned to DataTreasury.
Doukas maintains he was unaware of the patent’s creation and learned of it from Del Col, who handled other matters for Doukas and was coincidently handling a breach of contract case against DataTreasury in Suffolk County Supreme Court.
(That case is now mid-trial. Del Col is also representing Doukas in a companion case against DataTreasury and Ballard in state court. Del Col is being sued by DataTreasury in a related suit (NYLJ, July 24).)
As early as July 2009, some company employees at DataTreasury began donating to Rice’s 2009 re-election campaign. The complaint maintained some DataTreasury employees and affiliated individuals donated $150,000. DataTreasury acknowledge making donations, but disputes the amount and purpose, saying the sum was $6,500.
In November 2009, Del Col sent a letter to DataTreasury’s outside counsel, Richard Friedman of McKenna Long & Aldridge, saying Doukas wanted to “discuss a pre-commencement settlement” of his claim on the patent.
Del Col’s post script referenced DataTreasury’s involvement in patent infringement litigation with a number of banks, saying, “several entities have been unsuccessfully attempting to serve subpoenas upon [Doukas], do you know what this is about…are they yours? Get back to me on this before he is compelled to testify in a way that could potentially harm your client in its action against the various banks.”
The complaint argued the alleged “pay to prosecute scheme/conspiracy” formed soon after, wherein DataTreasury officials allegedly colluded with Nassau County law enforcement, secretly meeting to devise how “Rice could assist [DataTreasury] in ridding itself of…Doukas and Del Col who had become a problem and posed a threat to” DataTreasury earnings.
Del Col and Doukas were indicted in February 2010 for second-degree grand larceny because of their alleged extortion attempt.
The day of the indictment, Del Col and Doukas met with DataTreasury officials at a Garden City hotel. The meeting was recorded with audio equipment provided by the district attorney’s office. During the meeting, company officials gave Doukas and Del Col $75,000 and the two agreed to future payments worth $325,000.
Doukas signed an affidavit saying he did not know anything about ownership of the patents. Both men were arrested on the indictment as they left the meeting.
The prosecutor who presented the charges to the grand jury, Guido Gabriele III, was a former assistant district attorney who had been appointed a “special assistant district attorney.”
Berkowitz and the Second Department determined the district attorney’s office lacked authority to appoint the prosecutor who presented the charges to the grand jury.
No new indictment has yet been brought against the men.
In response to Del Col and Doukas’ suit, county defendants argued they were shielded by absolute immunity and that plaintiffs “have presented absolutely no proof of any bribes or other untoward conduct.”
DataTreasury called the complaint “plainly vindictive” and stressed that campaign contributions occurred before the company “had any notice of Plaintiffs’ extortion attempt.”
Brodie found the county enjoyed absolute immunity on the malicious prosecution claim. But she said she could not determine from pleadings if the county defendants were acting under absolute immunity, qualified immunity or none at all on the remaining claims.
“Where it is impossible to determine from the pleadings the function a prosecutor played at certain stages, judgment on immunity should be reserved for summary judgment or trial,” Brodie noted, saying she also could not determine at this juncture if Nassau County non-prosecutor defendants were entitled to qualified immunity.
Brodie observed the elements of conspiracy pursuant to 42 U.S.C. §1983 were an agreement between a state actor and a private party “to act in concert to inflict an unconstitutional injury” and “an overt act done in furtherance of the goal causing damages.”
“Plaintiffs’ allegations go beyond the [DataTreasury] Defendants and Friedman simply calling the D.A.’s Office to report a crime. According to the Complaint, the [DataTreasury] Defendants bribed the Nassau County Defendants through specific campaign contributions to Rice. The Nassau County Defendants prosecuted Plaintiffs on behalf of the [DataTreasury] Defendants and Friedman, in exchange for the bribe. The ultimate goal of the prosecution was to prevent Doukas from asserting his interest in the [DataTreasury] patent,” she noted in supporting the upholding of some claims at this point in the litigation.
Del Col said in an interview that “an overwhelming majority of cases like this do not survive” dismissal motions.
“In the end, the essential causes of action were sustained,” he said, noting at one point that Brodie’s ruling represents “a step closer to getting at the truth here.”
John Byrne, a spokesman for the Nassau County district attorney, said the office is “pleased that the courts have now dismissed almost all of this frivolous lawsuit, and we believe the rest of it will be dismissed in due course.”
Daniel Bartoldus of Lewis Johs Avallone & Aviles in Melville, who is representing the office, did not respond to a request for comment.
“We were very disappointed in the court’s ruling because we thought we had a winning motion here,” said Richard Levine of Weil, Gotshal & Manges, who represents DataTreasury and its CEO, Keith DeLucia. “We believe the theory of the case is not plausible and therefore we were disappointed not all the claims were dismissed. On the other hand we were gratified that so many of the claims have been thrown out.”
Likewise, Scott Mollen of Herrick, Feinstein, who represents Ballard and the company’s general counsel, Shepard Lane, said, “Our clients are clearly gratified that so many claims have either been dismissed or withdrawn in an action that they believe is clearly baseless. Knowledgeable people know that on a pre-discovery motion to dismiss, the court was obligated to accept each allegation in the complaint as true and draw all reasonable inferences. There is a huge difference between drafting an allegation and proving the underlying facts.”
Lawrence Zweifach of Gibson, Dunn & Crutcher, who represents Friedman, declined to comment.
@|Andrew Keshner can be reached at email@example.com.