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September 6, 1979

JAMES SLEVIN, MARY SLEVIN, BRIAN CLINTON, JOAN CLINTON, DR. STANLEY C. FELL, and FRANK D'AMICO, on their own behalf and on behalf of all others similarly situated, Plaintiffs, against CITY OF NEW YORK, NEW YORK CITY BOARD OF ETHICS; EDWARD I. KOCH, as Mayor of the City of New York; FRANCIS T.P. PLIMPTON, as Chairman of the Board of Ethics; and POWELL PIERPOINT and BARBARA SCOTT PREISKEL, as Members of the Board of Ethics, and DAVID N. DINKINS, as City Clerk, Defendants

The opinion of the court was delivered by: SOFAER

This is a civil class action brought by plaintiffs on their own behalf and on behalf of all persons employed as Battalion Chiefs, Deputy Chiefs, and Medical Officers in the New York City Fire Department, and their spouses, for a judgment declaring Local Law No. 48 ("LL 48") unconstitutional and enjoining enforcement of LL 48 Pendente lite and permanently. *fn1" LL 48 is a financial disclosure law enacted by the City Council and approved by the Mayor, effective July 27, 1979. It is broad in scope and applies to civil service employees such as plaintiffs, who earn over $ 30,000 per year, to candidates for City office, and to every elected and appointed official. A motion seeking to restrain enforcement temporarily was made on August 27, 1979, since the forms required by the statute must be filed by September 5. After argument, it became clear to all concerned that a decision granting a preliminary injunction, rather than merely a TRO, would suit the interests of the parties as well as dispense with the need for an additional hearing within the next few days. Consequently, and on the basis of the findings and conclusions contained in this opinion, the defendants are enjoined Pendente lite from enforcing LL 48 against the plaintiff classes as it is presently written and designed to operate.

I. Scope and Operation of the Challenged Statute

The information required by Section 1106-5.0 and LL 48 covers three general areas: income, debts, and property held. It applies with equal force to the employee and to his or her spouse, but not to any other member of the employee's family.

 The employee must report income of over $ 1,000 received by the employee or spouse during the previous year from any "professional organization" in which the employee or spouse "is an officer, director, partner, proprietor or employee" or for which either serves in an advisory capacity. The name and address of any such organization must be provided. In addition, the report must identify any source of income over $ 1,000 received by the employee or spouse for services other than those performed for a "professional organization." Any capital gain over $ 1,000 from a single source must be reported, other than from the sale of a residence occupied by the reporting employee. The employee and spouse must also report reimbursements of expenditures of $ 1,000 or more from a single source, and any "honoraria" of $ 500 or more from a single source, giving the name and address of each such source. Finally, the employee and spouse must report all gifts totalling $ 500 or more from a single source, including presumably gifts from each other.

 The employee and spouse must report all debts "to a single creditor" of $ 5,000 or more "for a period of at least 90 consecutive days." Each creditor must be listed, and the form requires that the creditor's address be revealed.

 Any significant wealth owned by the employee or spouse seems covered by the law. Any investment valued at $ 20,000 or more must be listed and described, along with the value at time of purchase or receipt. Any real property owned which is worth more than $ 20,000 must be listed, including the property's "address or precise location" and the value at the time of purchase or receipt. Finally, any beneficial interest in a trust or fiduciary relationship valued at $ 20,000 or more must be listed. In all the listings required, each item's value must be described by category, with the reporting employee checking the category applicable in his case.

 The disclosures required by a predecessor of LL 48 (LL 1 of 1975) were challenged on a variety of grounds in the state courts during 1977. In Hunter v. City of New York, 58 App.Div.2d 136, 396 N.Y.S.2d 186 (1st Dep't 1977), the statute in general was upheld on the authority of Evans v. Carey, 40 N.Y.2d 1008, 391 N.Y.S.2d 393, 359 N.E.2d 983 (1976), where the Court of Appeals upheld an executive order mandating similar financial disclosures by many State employees. But Justice Birns, in a thoughtful and unanimous opinion for the Appellate Division, declared the Act invalid insofar as it contained no mechanism for preventing automatic public disclosure. The Court of Appeals affirmed this decision, 44 N.Y.2d 708, 405 N.Y.S.2d 455, 376 N.E.2d 928 (1978), leading the City Council to amend the law to provide a mechanism by which employees might assert claims of privacy. The City argues that the mechanism provided by LL 48 is valid and sufficient, patterned as it is on the procedure used for State employees, which was upheld in Evans and referred to with approval by the Appellate Division.

 The law as it presently stands provides no mechanism by which reporting employees may be spared from reporting any item arguably required to be disclosed. Each employee must complete the reporting form provided by the City, and file the form with the City Clerk. Any question the employee may have with respect to what information must be reported must be dealt with initially by the employee. The "Information Manual on Disclosure of Financial Interests" prepared by the City does little more than repeat the words of the law. Thus, for example, if an employee is in doubt as to whether a non-cash gift worth more than $ 500 must be reported, the employee must resolve the question without any assistance from the City. No regulations attempting to explain or interpret the law have been promulgated, and none is intended or required by the statute. The Information Manual warns, however, that if the employee fails to "follow all the instructions carefully you may violate the law or lose certain rights," and the law itself makes any "intentional violation" a misdemeanor punishable by a year in prison and/or a fine of up to $ 1,000.

 The completed forms filed by employees are automatically available to any "member of the public" unless the employee has claimed before a request for disclosure is made (§ 3(d)(1)) that a specific item should be withheld from public inspection because its revelation would constitute an unwarranted invasion of privacy. The statute seems clearly to require the City Clerk to make available to any member of the public all the information in any report as to which no privacy claim is asserted. The City Clerk must notify the filing employee whenever a request "is made" to examine the employee's report. But the City Clerk has published no regulations or rules indicating whether such notification will be given before or after the report is revealed; whether the names and/or addresses of persons seeking such information will be recorded and preserved by the City Clerk, or will be provided to the reporting employee; or whether the persons seeking the report will be asked to give any reason they may have for wanting the information. In the absence of any guidance on these matters, employees (and this court) must assume the reports will be revealed automatically, without notice or record of the specific individual seeking the information, or of his or her claimed purpose or need.

 Those employees who seek protection for information they have been forced to include in reports must go through a mandatory procedure that is exacting and requires detailed revelation of the individual's claim. The Information Manual makes clear there are "NO EXCEPTIONS" to the following, three-step process:

1. The employee must state the nature of the information to be kept private and the number and letter of the item in the disclosure report containing the information.
2. The employee must state the reasons why the particular information should be kept from public inspection. The Manual makes clear that the "mere fact that an employee believes that his financial affairs are his own business will not, without more, sustain a claim of privacy. The reasons must be set forth in sufficient detail to enable the Board of Ethics to evaluate the privacy claim."
3. The reasons for each privacy claim must be set forth separately for each item requested to be withheld from public inspection. The City's form provides four pages on which privacy claims are to be detailed, and employees are told to add additional sheets if necessary.

 The law requires the Board of Ethics of the City of New York to pass on all privacy claims made by employees filing reports. (No provision entitles the spouse of a reporting employee to assert such claims before the Board.) The privacy claims made are not adjudicated, however, until a request for public inspection is made of the City Clerk; privacy claims ...

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