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April 29, 2004.


The opinion of the court was delivered by: MICHAEL TELESCA, Senior District Judge



Plaintiffs Sherry Palmer ("Palmer" or "plaintiff") and Mark Palmer bring this action against numerous defendants claiming that Palmer's Constitutional and common law rights were violated in connection with her arrest and prosecution on charges of Second Degree Grand Larceny. Plaintiff claims that she was falsely accused and maliciously prosecuted on charges that she embezzled $52,205.90 from defendant Burns Glass Service, d/b/a Ray Sands Glass, her former employer. She brings this action under 42 U.S.C. § 1983 claiming that her Constitutional rights were violated, and under New York State law claiming that she was subjected to malicious prosecution, abuse of process, intentional and/or reckless infliction of emotional distress, and negligence.

  On May 23, 2001, defendants David Burns, Frank Burns, and Burns Glass Service (the "Burns defendants"), moved for summary judgment on grounds that plaintiff has failed to state a viable cause of action against them. By Order dated August 21, 2001, this Court granted the Burns defendants' motion for summary judgment, and granted in-part and denied in-part plaintiffs' motion to amend. The Court additionally allowed plaintiffs to amend their complaint to add as defendants Sergeant Ralph Sarkis and Lieutenant Michael Nyhan. Thereafter, plaintiff moved for reconsideration, and by Decision and Order dated January 3, 2002, I vacated that portion of my previous Decision and Order dismissing plaintiffs' malicious prosecution claims. While I allowed plaintiffs to pursue their cause of action for malicious prosecution against the Burns defendants, I dismissed plaintiffs' civil rights claims against the Burns defendants on grounds that plaintiffs had failed to sufficiently allege that the Burns defendants were state actors or acted in concert with state actors.

  Currently before the court are three motions seeking various forms of relief. Defendants Charles Callear ("Callear"), Joseph Hennekey ("Hennekey"), Ralph Sarkis ("Sarkis"), Michael Nyhan ("Nyhan"); the County of Monroe; and the Monroe County Sheriff (hereinafter collectively referred to as the "County Defendants") move for summary judgment against the plaintiffs on all claims. Additionally, the County defendants (1) seek permission to amend their answers nunc pro tunc; (2) move to dismiss the Complaint for plaintiffs' disobedience of previous court orders; (3) move to preclude plaintiffs from offering certain evidence at trial; (4) move for an order of contempt; and (5) seek various other forms of relief. See County Defendants' Notice of Motion (docket item no. 132).

  The Burns defendants move for summary judgment against the plaintiffs, and seek sanctions pursuant to Rule 37(b)(2) of the Federal Rules of Civil Procedure including the striking of plaintiffs' complaint, and preclusion of the use by plaintiffs of certain evidence at trial.

  Plaintiffs move for summary judgment against the defendants and for an order permitting plaintiffs to amend the Complaint to include causes of action for false arrest under New York State Law, and misuse of grand jury subpoena power.


  Plaintiff Sherry Palmer was employed by defendant Burns Glass Service as an office manager from July 1994 until February 1998. In November of 1995, plaintiff was assigned certain accounting responsibilities. In January 1998, bookkeeper Ed Able, ("Able"), an employee whom Palmer placed on probation because of poor work performance, wrote a letter to David and Frank Burns (President and Vice President respectively of Burns Glass Service), and complained of a number of improprieties with respect to plaintiff's management of the office. According to Able, Palmer, among other things leaked confidential information to employees and failed to return overpayments to customers. Palmer denies these allegations, and claims that Able was a poorly-performing employee who wrote the letter only to save his job. David and Frank Burns investigated Able's claims and on February 6, 1998, they terminated plaintiff's employment on grounds that she allegedly leaked confidential information. At the time, plaintiff was then seven months pregnant.

  Upon plaintiff's termination, she hired an attorney in an attempt to obtain a monetary bonus from the previous year and severance pay. The parties were unable to negotiate a settlement of those claims.

  Following Palmer's termination, Frank and David Burns hired Patricia Hedeen, ("Hedeen"), as the replacement office manager. Hedeen was asked to review the financial records to determine if Palmer had engaged in any financial misconduct. In the course of her investigation, Hedeen learned that for every month from November 1995 (when plaintiff took over the accounting functions) through December 1997, (two months before plaintiff was fired), cash receipts for Burns Glass Service exceeded cash deposits. Hedeen found that for the approximately two-year period, receipts exceeded deposits in the amount of $52,205.90. Plaintiff claims that the investigation was flawed, and that there were no discrepancies. Specifically, plaintiff contends that the records used by the defendants did not accurately reflect which accounts were paid in cash, and which accounts were paid in some other manner. She contends that because the records utilized did not accurately reflect which accounts were paid in cash, those records would not correspond to cash deposits, and therefore any comparison of amounts from those sources is fundamentally flawed. She contends that had the defendants utilized accurate records in determining wether or not there was a discrepancy between cash receivables and cash deposits, the Burns defendants would have realized that there was no discrepancy, or at worst, and insignificant discrepancy.

  Following Hedeen's investigation, Burns Glass Service hired the accounting firm of Mengel, Metzger, Barr & Company, ("Mengel Metzger") to conduct an independent investigation. The firm utilized the same method to investigate records for two separate months, and reached the same conclusion as Hedeen: that there were discrepancies between cash receipts and cash deposits.

  One week after receiving the confirming report from Mengel Metzger, David and Frank Burns directed Hedeen to report her findings to the Monroe County Sheriff's Department. Monroe County Sheriff's Deputy Joseph Hennekey, ("Hennekey") investigated the allegations, and filed a felony Complaint against Palmer on September 3, 1998, charging her with second degree grand larceny. As part of his investigation, Hennekey obtained the plaintiffs' financial records and compared the plaintiffs' known expenditures to their known sources of income. In doing so, he concluded that plaintiffs, over the course of three years from 1996 through 1998, had spent over $19,000.00 in excess of their known sources of income. Plaintiffs dispute Hennekey's findings on grounds that Hennekey ignored over $19,000.00 in known income, and improperly calculated plaintiffs' expenditures by double-counting several expenditures. According to the plaintiffs, the actual discrepancy between plaintiffs income and expenditures over the course of approximately 2 and one half years was less than $300.00

  On March 12, 1999, a Grand Jury returned an Indictment against the plaintiff on Grand Larceny charges. The case was later tried at a bench trial before the Honorable William Bristol, who, on August 5, 1999, found the defendant not guilty. Plaintiffs filed the instant case on August 4, 2000.


  I. The Burns Defendants

  The sole remaining independent count against the Burns defendants is a claim for malicious prosecution. As I held in my January, 2002 Decision and Order, a complaining witness can be held liable for malicious prosecution if the witness "fail[s] to make a full and complete statement of facts to the District Attorney or the court," or "hold[s] back information that might have affected the results" of an investigation or trial. Alberto Ramos v. The City of New York, 2001 N.Y. Slip Op. 06735 (1st Dep't August 16, 2001). I therefore determined that the Burns defendants could be held liable for malicious prosecution "if it is found that they gave information which they knew to be false and which unduly influenced the authorities." January 3, 2002 Decision and Order at p. 3.

  The Burns defendants now move for summary judgment on grounds that as a matter of law, there is no evidence that they provided authorities with information they knew to be false or which unduly influenced authorities. In support of their argument, defendants contend, inter alia, that: (1) there is no evidence that the invoices they used to determine if there was a discrepancy between cash payments and cash deposits were unreliable; and (2) law enforcement authorities conducted their own independent investigation thus demonstrating that the information they reported to the authorities did not unduly influence law enforcement officials.

  I find, however, that there is a question of fact as to whether or not the Burns defendants provided information they knew to be false to law enforcement authorities, and whether or not law enforcement authorities were unduly influenced by that information. Specifically, with respect to the investigation conducted by the Burns, there is significant evidence in the record raising a question as to whether the investigation performed by the Burns defendants was made in good faith, and whether they knew the information presented to authorities was accurate or reliable. There is evidence that the invoices used by the Burns defendants to calculate cash receipts actually reflected receipts of cash, checks, or credit cards. Accordingly, because the invoices used to determine the amount of cash received on a given day may have actually reflected payments made in cash, credit cards, or checks, the comparison of these invoices only to deposits of cash would not necessarily reflect accurately any discrepancy between cash received and cash deposited. Moreover, there is evidence that the person who conducted the investigation knew that the invoices she used to calculate cash receipts included forms of payment other than cash — to wit: check and credit card payments. Because there is ...

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