The opinion of the court was delivered by: WILLIAM C. CONNER
Plaintiff brought this action under 42 U.S.C. § 1983 seeking to remedy alleged violations of his rights under the Fifth, Sixth and Fourteenth Amendments to the United States Constitution. Plaintiff has applied for an order temporarily, preliminarily and permanently restraining and enjoining the New York State criminal proceeding currently pending against him in the County Court for the County of Rockland. For the reasons set forth below, we decline to enjoin New York State's prosecution of plaintiff. We also deny defendant's motion for sanctions under Rule 11, Fed. R. Civ. Pro., and deny defendant's motion to dismiss this action.
Plaintiff James F. Smith is the former Chief Executive Officer and Chairman of the Board of Orange & Rockland Utilities Inc. ("O&R").
In March 1993, O&R filed a civil action in New York Supreme Court alleging that plaintiff misused approximately $ 366,000 worth of corporate funds and property. On June 10, 1994, Justice Howard Miller compelled arbitration of O&R's claims pursuant to a provision in plaintiff's employment contract.
In August 1993, a vice-president of O&R was arrested and charged with criminal misconduct relating to her employment at O&R. Shortly thereafter, Judge Ingrassia, the administrative judge for the ninth judicial district of New York, ordered a special investigative grand jury impaneled to investigate any criminal conduct relating to O&R and its employees. In late August 1993, Smith initiated the appointment of a Special Committee of the Board of Directors to conduct an internal investigation at O&R.
On March 21, 1994, Smith was indicted by the grand jury. That same grand jury returned a superseding indictment (Indictment No. 137/94) on June 12, 1994, charging Smith with 24 counts of larceny and falsifying business records. Each count stems from Smith's alleged improper use of corporate funds and property for personal purposes. In sum, the indictment charges Smith with the misappropriation of approximately $ 45,000.
From the summer of 1993 onward, both the internal and grand jury investigations excited intense media scrutiny. O&R, presumably seeking to repair its damaged reputation with its customers, mailed a series of informational notices to the ratepayers along with their utility bills. In March 1994, while the grand jury that indicted Smith was sitting, each customer received a notice discussing the progress of O&R's internal investigation and announcing a total rebate of approximately sixty cents per customer based on the investigation's finding, as of that date, that approximately $ 345,000 had been misappropriated. Furthermore, the brochure stated that "should new disclosures in any of the current investigations indicate additional losses, all ratepayers' bills will reflect additional refunds." See O&R Newsletter, attached as Exhibit B to the Complaint. The parties do not dispute that virtually every member of the grand jury was a customer of O&R and therefore received this notice.
Smith made a motion to dismiss the indictment before Rockland County Court Judge Robert Meehan, on the grounds that, inter alia, the grand jury was impermissibly biased and the conduct for which plaintiff was indicted was not criminal. That motion was denied. Smith then applied to the Appellate Division for a Writ of Prohibition and to the Court of Appeals for leave to appeal. Both of those applications were denied. The District Attorney of Rockland County, defendant Kenneth Gribetz,
is currently proceeding with the prosecution of plaintiff.
Plaintiff brought suit in this court under 42 U.S.C. § 1983 against the District Attorney, alleging that the indictment and continued prosecution of plaintiff violate his rights under the Fifth, Sixth and Fourteenth Amendments to the United States Constitution. He has requested an order temporarily, preliminarily and permanently restraining and enjoining the state court criminal proceedings against him and awarding damages, including costs and attorney's fees for this action.
Defendant has filed a motion to dismiss this action, and has moved for sanctions against plaintiff, including reasonable attorney's fees, under Rule 11, Fed. R. Civ. P.
I. Plaintiff's Application for Injunctive Relief
Under our system of federalism, the balance of power between federal and state courts is delicate, and federal courts must tread with care whenever they are asked to intervene in pending state actions. The policy against interference by federal courts is embodied in the Anti-Injunction Statute, which provides that a federal court may not enjoin a pending state proceeding "except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." 28 U.S.C. § 2283. The Supreme Court has held that Section 1983 expressly authorizes federal courts to enjoin state proceedings. See Mitchum v. Foster, 407 U.S. 225, 243, ...