United States District Court, E.D. New York
September 30, 2004.
LOCAL 851 OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, by its court-appointed Independent Supervisor and Union Trustee, Plaintiff,
THYSSEN HANIEL LOGISTICS, INC., formerly known as AMERFORD INTERNATIONAL CORPORATION, THYSSEN HANIEL LOGISTIC GMBH and ANTHONY RAZZA, Defendants. IN RE: LOCAL 851 OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, by its court-appointed Independent Supervisor and Union Trustee, Petitioner, v. GEORGE QUINLAN, RONALD GOLSTOCK, MARTIN ARONCHICK, the ATTORNEY GENERAL, State of New York, in his Official Capacity, and the DEPUTY ATTORNEY GENERAL, New York State Organized Crime Task Force, in his Official Capacity, Respondents. LOCAL 851 OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, by its court-appointed Independent Supervisor, Plaintiff, v. MARTIN ARONCHICK, Defendant.
The opinion of the court was delivered by: FREDERIC BLOCK, District Judge
MEMORANDUM AND ORDER
This consolidated action involves allegations leveled by
plaintiff Local 851 of the International Brotherhood of Teamsters
("Local 851") that former New York Deputy Attorney General George
Quinlan ("Quinlan"), former Director of the New York State
Organized Crime Task Force ("OCTF") Ronald Goldstock
("Goldstock"), and former Attorney-In-Charge of Civil Enforcement
for OCTF Martin Aronchick ("Aronchick") (collectively
"respondents")*fn1 violated Local 851's due process rights
by failing to comply with the requirements of the New York
forfeiture law (CPLR Article 13-A). Pending before the Court is
respondents' consolidated motion to dismiss both cases, pursuant
to Fed.R. Civ. P. 12(b)(1) and 12(b)(6), on an assortment of
grounds, including lack of standing and absolute and qualified
immunity, and Local 851's motion for summary judgment in each
case. For the reasons that follow, the Court grants the
respondents' motion to dismiss on qualified immunity grounds.
These actions and the current motions follow extensive
proceedings in the Eastern District of New York, the New York
Court of Claims, and New York State criminal investigations
arising out of corruption and racketeering activities involving
Local 851, Amerford International Corporation ("Amerford") and
the Luchese organized crime family, among other parties. In a
prior opinion dismissing Local 851's claims raised in the Ancillary Proceeding to Action I against government officials in
their official capacity, Judge Nickerson*fn2 provided a
detailed summary of the factual and procedural background of the
case. See Local 851 of the Int'l Bhd. of Teamsters v. Thyssen
Haniel Logistics, Inc., 90 F. Supp. 2d 237, 239-42 (E.D.N.Y.
2000). The Court summarizes its salient aspects as follows.
I. Prior Proceedings Before Judge Nickerson
A. Criminal Investigation and Forfeiture Agreements
In December 1990, Amerford and its president and chief
executive officer, Harold Niehenke ("Niehenke"), illegally
terminated a number of employees, all of whom were members of
Local 851, and shared the resulting cost savings with organized
crime.*fn3 Anthony Razza ("Razza"), Local 851's secretary
and treasurer at the time and a member of the Luchese crime
family, participated in the scheme and used his position within
the union to maintain labor peace following the terminations.
On June 30, 1993, following a criminal investigation by the New
York Attorney General's office, Amerford and OCTF entered into a
written agreement (the "Amerford Agreement") whereby OCTF agreed
not to prosecute Amerford in exchange for Amerford's cooperation
with the investigation, independent internal oversight at
Amerford, and forfeited funds. Amerford Agreement at ¶ 6 (Am.
Pet., Ex. A). Amerford agreed to retain an Independent Private-Sector Inspector General
("IPSIG") for purposes of monitoring Amerford's business
practices "and for identifying and determining the appropriate
amount of restitution for past or present [Amerford] employees as
a result of alleged improper labor activities and practices of
[Amerford]." Amerford Agreement at ¶ 1(a).
The parties further agreed that:
3. [Amerford] will pay two and one-half million
dollars ($2,500,000) to OCTF in settlement of its
forfeiture liability under Article 13-A of the Civil
Practice Law and Rules ("CPLR"), at the time this
agreement is executed. . . . All settlement payments
to OCTF will be distributed in accordance with the
provisions of Article 13-A of the CPLR.
4. [Amerford] agrees that it will enter into a
consent decree in a form to be prepared by OCTF
within two weeks following the conclusion of the
IPSIG's employment and final report providing for the
distribution of the settlement amounts in accordance
with the provisions of Article 13-A of the CPLR and
the restitution determinations of the IPSIG as
approved by OCTF.
5. [Amerford] will waive the criminal conviction
requirement for its forfeiture liability under
Article 13-A of the CPLR. Notwithstanding this
waiver, if Harald Niehenke . . . is convicted of any
felony, related to alleged improper labor activities
and practices within one year of the date of
execution of this agreement, [Amerford] will plead
guilty within six months thereafter to any
appropriate Class E felony superior court
information. . . .
Id. at ¶¶ 3-5. Goldstock executed the agreement on behalf of
OCTF; Aronchick was listed therein as the OCTF representative to
whom notices should be sent.
On June 30, 1993, Amerford paid $2,500,000 in escrow to OCTF
(the "Amerford Fund"). Under the direction of Goldstock and Aronchick,
the following distributions were made from the escrow account: on
June 30, 1993, OCTF distributed $1,149,337.53 from the Amerford
Fund to itself to cover budget deficits; in October 1993, OCTF
distributed $6,562 to itself and $544,000 to the Office of
Alcoholism and Substance Abuse Services ("OASAS"), and in March
1994, OCTF distributed $209,440 of the fund to itself and $98,560
to OASAS. In total, OCTF received $1,365,340 of the fund and
OASAS received $642,560.
Between March and November 1994, the IPSIG identified the
employees who were entitled to restitution, determined the amount
of their losses, and oversaw, together with OCTF, the
distribution to them of approximately $500,000 from what remained
of the Amerford Fund. Although the Amerford Agreement spoke only
of compensating "employees," Aronchick authorized an additional
$50,000 distribution from the Amerford Fund to the Local 851
Employer Group Pension Fund and the Local 851 Employer Group
Welfare Fund to settle claims for unpaid pension and welfare
On November 3, 1993, OCTF entered into a voluntary forfeiture
agreement with Niehenke (the "Niehenke Agreement"). Pursuant to
that agreement, Niehenke agreed to pay $100,000 in settlement of
his individual forfeiture liability in exchange for being
permitted to plead guilty to a single Class E felony (grand
larceny in the fourth degree) relating to the Amerford scheme. On
November 4, 1993, Niehenke pled guilty to this felony and later paid the stipulated $100,000 to OCTF (the
"Niehenke Fund").*fn4 Unlike the Amerford Agreement, the
Niehenke Agreement did not contain provisions reserving any part
of the forfeiture proceeds as restitution to victims. At
Aronchick's direction, OCTF retained $68,495 of the Niehenke Fund
and paid the remainder to OASAS.
OCTF has never commenced a civil forfeiture action against
either Amerford or Niehenke pursuant to CPLR Article 13-A, and no
judgment, order or decree of forfeiture has been entered against
either Amerford or Niehenke with respect to the Amerford Fund or
the Niehenke Fund.
B. Local 851's Litigation Against Amerford
On December 15, 1995, Local 851, through its court-appointed
Independent Supervisor and Union Trustee,*fn5 initiated
Action I before Judge Nickerson against Amerford, Razza, and
others. Local 851's amended complaint alleged RICO violations and
Amerford's participation in breaching Razza's fiduciary duty to
Local 851 in violation of New York Labor Law § 725 ("section
725"). Local 851 sought damages, including Razza's salary, as
well as attorneys' fees and costs. Local 851 claims that it did
not learn of the existence of the Amerford Agreement and the
Amerford Fund until March 1997, during discovery.
As memorialized in a consent order "so ordered" by Judge
Nickerson on June 16, 1998 ("Amerford Consent Order") (Am. Pet.
Ex. C), Local 851 settled its claims against Amerford in Action
I. As to the alleged RICO violations, Amerford paid Local 851
$1,200,000. In settlement of Amerford's alleged participation in
the breach of Razza's fiduciary duty to Local 851, Amerford
"assign[ed] to [Local 851] any rights it has under the [Amerford
Agreement] with respect to the distribution of the [Amerford
Fund] in accordance with the provisions of Article 13-A of the
CPLR and any interest it has in the [Amerford Fund]." Amerford
Consent Order at 4. Amerford further stipulated that it was
liable to Local 851 for $2,000,000 "as restitution, reparations
and damages . . . to Local 851, a victim of Amerford within the
meaning of Article 13-A of the CPLR; provided however, that said
award can only be satisfied from an apportionment of the
[Amerford Fund]. . . ." Id. at 5. Neither OCTF nor any of the
respondents was a party to the Consent Order.
Shortly after Judge Nickerson approved the Amerford Consent
Order, Local 851's attorney met with Quinlan. Apparently unaware
that OCTF had long since distributed nearly all of the Amerford
Fund, Local 851's attorney demanded that the OCTF pay $2,000,000
to Local 851 pursuant to the Amerford Consent Order. Local 851's
demand was premised on two grounds: (1) that Local 851 was a
"victim" within the meaning of Article 13-A and, therefore,
should have received payment from the Amerford Fund; and (2) that
Local 851 had been assigned Amerford's rights to the Amerford
Fund. Quinlan recommended to his superiors that the demand be
rejected. OCTF accepted Quinlan's recommendation and rejected Local 851's demand on or about August
C. Local 851's Ancillary Proceeding Against Vacco and Quinlan
As a consequence of the rejection, Local 851, through its
Independent Supervisor and pursuant to Fed.R. Civ. P. 64 and the
doctrine of ancillary jurisdiction, initiated the Ancillary
Proceeding on September 23, 1998.*fn6 The ancillary petition
named New York Attorney General Dennis Vacco ("Vacco") and
Quinlan as respondents. Again alleging that it was a victim
within the meaning of Article 13-A, Local 851 claimed that it had
been deprived of its due process rights, and sought a
determination that it was entitled to a portion of the Amerford
Fund under Article 13-A.
Vacco and Quinlan moved to dismiss the ancillary petition on
Eleventh Amendment grounds. Local 851 opposed the motion and
moved for summary judgment, arguing that respondents acted ultra
vires and in violation of the union's due process rights. In an
opinion dated March 30, 2000 that was highly critical of OCTF,
Judge Nickerson ruled that the Eleventh Amendment forbids suits
for retroactive damages against public individuals sued in their
official capacities. Local 851, 90 F. Supp. 2d at 251.
Accordingly, he granted the respondents' motion to dismiss "to
the extent that the petition names respondents in their official capacities, but denied [the
motion] to the extent they are named in their individual
capacities." Id. at 252.
In his opinion, Judge Nickerson stated that Vacco and Quinlan
acted ultra vires "without any plausible statutory or other
legal authority" by distributing the Amerford and Niehenke Funds
in violation of the provisions of CPLR Article 13-A. Id. at
247. Judge Nickerson concluded:
Nothing in this memorandum and order should be
construed as preventing or discouraging petitioner
from pursuing this action against Vacco and Quinlan
individually, rather than in their official
capacities. The Eleventh Amendment poses no barrier
to such an action, even if the result would be an
award of retroactive money damages.
The record at present does not provide a sufficient
basis for the Court to consider such a claim.
Individual capacity suits pose fundamentally
different issues than those addressed in the current
submissions, including the extent of respondents'
personal culpability and the availability of defenses
such as absolute or qualified immunity. The Court
does not reach the merits of such an action at this
Id. at 252 (citation omitted).
II. Proceedings Subsequent to Judge Nickerson's Decision
After discovery in the Ancillary Proceeding, the Court granted
Local 851 leave to amend its ancillary petition to add Goldstock
and Aronchick as respondents and to add a state-law conversion
cause of action.*fn7 See Order dated Nov. 4, 2002. Relying
on Judge Nickerson's conclusion that respondents' actions were
ultra vires, Local 851 seeks to hold them, together with
Quinlan, accountable in their individual capacities for violating
Local 851's due process rights, as well as for conversion.
On November 18, 2002, Local 851 filed a separate civil action
against Niehenke alleging violations of section 725 and due
process; the parties quickly settled those claims by entering
into a consent judgment, "so ordered" by this Court ("Niehenke
Consent Judgment"). In the Niehenke Consent Judgment, Niehenke
stipulated that: (1) Local 851 was a victim; (2) he was liable to
Local 581 for $100,000 as restitution, reparations and damages;
(3) such money could be satisfied solely from the Niehenke Fund;
and (4) he was assigning his interest in the fund to Local 851.
Local 851 thereafter instituted Action II against Aronchick
based on his actions regarding the Niehenke Fund. The factual
allegations of Action II parallel those asserted in the Ancillary
Proceeding involving the Amerford Fund: that in 1993, Niehenke
forfeited money to OCTF; that Local 851 was a victim of
Niehenke's conduct and should have received payment from OCTF;
and that OCTF, as directed by Aronchick, improperly distributed
the funds to OCTF and OASAS in violation of Article 13-A. Action
II was thereafter consolidated with Actions I and the Ancillary
Proceeding pursuant to this Court's order of January 29, 2003.
In addition to these consolidated actions, the parties are
litigating similar issues in the New York Court of Claims.
Describing Local 851's claims as being of "tremendous importance
to law enforcement officials throughout the State of New York," respondents assert that the following two broad issues are at the
heart of the Court of Claims case:
(1) Whether the enactment of CPLR Article 13-A
changed existing state law by imposing a new
requirement on prosecutors to initiate civil
forfeiture actions prior to entering into cooperation
agreements which include the voluntary forfeiture of
(2) whether a party whose status as an alleged victim
did not exist at the time a forfeiture agreement was
reached has standing under CPLR Article 13-A to sue
to recover funds obtained by the State pursuant to
that forfeiture agreement.
Mem. L. Supp. Mot. Dismiss Am. Pet. & Aronchick Comp. ("Resp'ts'
Mem.") at 3-4 .
In ruling on respondents' motion to dismiss, the Court
"accept[s] all of the plaintiffs' factual allegations as true and
draw[s] all reasonable inferences in favor of the plaintiffs."
Mason v. Am. Tobacco Co., 346 F.3d 36, 39 (2d Cir. 2003).
However, "[l]egal conclusions, deductions or opinions couched as
factual allegations are not given a presumption of truthfulness."
Id. at 39 (quotation omitted). Because the Court's decision on
the respondents' motion to dismiss, set forth below, disposes of
all of Local 851's claims, the Court need not rule on Local 851's
motion for summary judgment.
Standing is a jurisdictional prerequisite, see Steel Co. v.
Citizens for a Better Env't, 528 U.S. 83, 95, 101 (1998);
accordingly, the Court must initially determine whether Local 851
has standing to "invoke the jurisdiction of the federal courts to
determine the merits of the underlying disputes." United States v.
$557,933.89, More Or Less, In U.S. Funds, 287 F.3d 66, 78 (2d
Cir. 2002). As the party invoking federal jurisdiction, Local 851
bears the burden of establishing standing. See Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561 (1992).
"[S]tanding jurisprudence contains two strands: Article III
standing, which enforces the Constitution's case or controversy
requirement; and prudential standing, which embodies judicially
self-imposed limits on the exercise of federal jurisdiction."
Elk Grove Unified Sch. Dist. v. Newdow, 124 S.Ct. 2301, 2308
(2004) (citations omitted). The party asserting standing "need
not prove the full merits of [its] underlying claim. All that
needs to be shown is a facially colorable interest in the
proceedings sufficient to satisfy the case-or-controversy
requirement and prudential considerations[.]" U.S. v.
$557,933.89, 287 F.3d at 78 (emphasis added).
In order to satisfy the constitutional strand, three elements
must be met by the plaintiff:
(1) that the plaintiff [has] suffered an "injury in
fact" an invasion of a judicially cognizable
interest which is (a) concrete and particularized and
(b) actual or imminent, not conjectural or
hypothetical; (2) that there be a causal connection
between the injury and the conduct complained of
the injury must be fairly traceable to the challenged
action of the defendant, and not the result of the
independent action of some third party not before the
court; and (3) that it be likely, as opposed to
merely speculative, that the injury will be redressed
by a favorable decision.
Bennett v. Spear, 520 U.S. 154, 167 (1997) (citing Lujan,
504 U.S. at 560-61). To assert an injury to a "judicially cognizable interest," the
plaintiff need only assert a right that is "recognized" by the
courts. See McConnell v. Fed. Election Comm'n, 124 S.Ct. 619
708 (2003). Local 851 alleges that it had a property interest in
forfeited funds under Article 13-A and that its right to due
process was denied because it was deprived of that interest
without notice and an opportunity to be heard. Because courts
have long recognized that state statutory entitlements may create
constitutionally protected property rights, see, e.g., Kraebel
v. New York City Dep't of Hous. Pres. & Dev., 959 F.2d 395
(2d Cir. 1992) (recognizing property right under rental
reimbursement statute to landlords), the rights asserted by Local
851 are "cognizable" for standing purposes.
Because Local 851 has alleged that it has suffered economic
harm by the respondents, it has asserted a redressable
injury-in-fact to those rights by parties who are before the
Court. See United States v. Cambio Exacto, S.A., 166 F.3d 522,
527 (2d Cir. 1999 ("To demonstrate standing under Article III, 
a litigant must allege a distinct and palpable injury to [itself]
that is the direct result of the putatively illegal conduct of
the adverse party and likely to be redressed by the requested
relief. . . ."). As the Second Circuit has noted, "substantial
economic harm is plainly the type of injury for which parties may
seek redress in federal court." Cambio Exacto, 166 F.3d at 528.
Local 851's alleged economic injury would clearly be redressed by
a favorable decision by the Court.
Respondents contend that Local 851 lacks standing because it is
not a "victim" within the meaning of Article 13-A. Whether Local
851 is such a victim, and the rights attendant upon that status,
are issues to be resolved on the merits, and do not impact standing. See United States v. $557,933.89, More or Less,
in U.S. Funds, 287 F.3d 66, 78 (2d Cir. 2002) ("[T]o establish
standing, the plaintiff need not prove the merits of his
underlying claim.") (quotation omitted). Regardless of whether
Local 851 would ultimately succeed on the merits, it has shown
the requisite facially colorable interest in the proceedings to
satisfy the Constitutional standing requirement.
The same is true of prudential considerations. "[P]rudential
standing encompasses the general prohibition on a litigant's
raising another person's legal rights, the rule barring
adjudication of generalized grievances more appropriately
addressed in the representative branches, and the requirement
that a plaintiff's complaint fall within the zone of interests
protected by the law invoked." Elk Grove Unified Sch. Dist. v.
Newdow, 124 S.Ct. 2301, 2308. Nothing in this case suggests that
the Court should decline jurisdiction for prudential reasons.
Local 851 is not attempting to assert the rights of a third
party. Nor does this case involve questions more appropriately
addressed by other branches of government. Finally, Local 851's
claim that it was denied its property rights in the forfeited
funds without due process falls within the zone of interests
protected by the due process clause. See Bennett,
520 U.S. at 162 ("the plaintiff's grievance must arguably fall within the
zone of interests protected or regulated by the statutory
provision or constitutional guarantee invoked in the suit.").
II. Qualified Immunity
Both qualified and absolute immunity "not only immunize the
 official from any liability, [they] also immunize that
official from suit." Hill v. City of New York, 45 F.3d 653, 660 (2d Cir. 1995). Thus, these immunity defenses
are "effectively lost if a case is erroneously permitted to go to
trial." Saucier v. Katz, 533 U.S. 194, 200-01 (2001)
(quotations omitted). Issues of immunity should, therefore, be
addressed "at the earliest possible stage of litigation." Hunter
v. Bryant, 502 U.S. 224, 227 (1991) (per curiam). Because the
Court determines that respondents are at least entitled to
qualified immunity, it need not reach the issue of absolute
"The defense of qualified immunity shields government officials
performing discretionary functions `from liability for civil
damages insofar as their conduct does not violate clearly
established statutory or constitutional rights of which a
reasonable person would have known.'" Kerman v. City of New
York, 374 F.3d 93, 108 (2d Cir. 2004) (quoting Harlow v.
Fitzgerald, 457 U.S. 800, 818 (1982)). If the right is not
clearly established, the reasonableness inquiry "becomes moot."
X-Men Security, Inc. v. Pataki, 196 F.3d 56, 66 (2d Cir. 1999);
see Knox v. Southwest Airlines, 124 F.3d 1103, 1107 (9th Cir.
1997) ("If a plaintiff fails to allege a violation of a clearly
established law, the court need not even reach the
[reasonableness] issues presented regarding qualified
In Saucier v. Katz, 533 U.S. 194 (2001), the Supreme Court
instructed that in adjudicating a qualified immunity defense,
courts should first determine the constitutional right that has
been violated before ascertaining whether it was clearly
established. See id. at 200-02 (2001). Its central rationale
for prescribing this two-step inquiry was that if courts
consistently "skip ahead to the question whether the law [was]
clearly established," id. at 201, standards of official conduct
would tend to remain uncertain. On the other hand, in determining whether a
constitutional right was violated, "a court might find it
necessary to set forth principles which will become the basis for
a holding that a right is clearly established. This is the
process for the law's elaboration from case to case. . . ." Id.
However, in Ehrlich v. Town of Glastonbury, 348 F.3d 48 (2d
Cir. 2003), the Second Circuit held that where the constitutional
right is dependent on an unresolved issue of state law, the
constitutional violation need not be resolved first; the Court
may, instead, proceed directly to the question of whether the
constitutional right was clearly established. See Id. at 57-60.
The court reasoned that the interpretation of ambiguous state law
by federal courts would be "provisional only and subject to
reversal as a result of subsequent state court rulings." Id. at
60; see also id. at 58 ("adopting our own interpretation of
state law would actually subvert Saucier, by inducing state
actors to rely on our rule when that rule might change altogether
upon subsequent review by the relevant state courts.").
The respondents surely are charged with knowledge that the
fundamental principles of due process require notice and an
opportunity to be heard before a deprivation of property
attaches, and they surely should be charged with knowledge that
they failed to comply with Article 13-A (indeed, as Judge
Nickerson concluded, their actions were ultra vires). However,
the appropriate inquiry is whether Local 851's property rights
were clearly established. As recently succinctly explained by the
Second Circuit: "To be clearly established, a right must have
been recognized in a particularized rather than a general sense.
In other words, it is not enough that a general right to due process is clearly established in the Constitution," Sira v.
Morton, 380 F.3d 57, 80 (2d Cir. 2004); rather, "the contours of
that right, as they pertain to a particular issue . . . must have
been delineated with sufficient clarity. . . ." Id. (quotation
omitted). In the context of the present case, this means that it
must have been clearly established that Local 851 had a property
right under state law in the forfeited funds. See Greenwood v.
New York, 163 F.3d 119, 122-23 (2d Cir. 1998) (recognizing that
for a due process claim based on state entitlement to be viable
in the face of qualified immunity defense, property interest must
have been clearly established at the time defendants acted); see
also Ciambriello v. County of Nassau, 292 F.3d 307, 313 (2d Cir.
2002) ("Property interests are not created by the Constitution;
rather, they are created and their dimensions are defined by
existing rules or understandings that stem from an independent
source, such as state law rules or understandings that secure
certain benefits and that support claims of entitlement to those
benefits." (quotation omitted)).*fn8
Local 851 argues that it had a property interest in the
forfeited funds based on (1) its alleged status under Article
13-A as a "victim" of crimes committed by Amerford and Niehenke;
and (2) that portion of the consent judgments entered into by
Amerford and Niehenke assigning to Local 851 any interest they
may have had in the funds. As now explained, it was unclear
whether state law afforded Local 851 a property interest in the
forfeited funds, either as a "victim" under Article 13-A or based
on the assignments. Accordingly, the Court should, as Ehrlich instructs, avoid
resolving this constitutional predicate to Local 851's due
process claim, and simply conclude that qualified immunity
A. Unresolved Whether Local 851 is a "Victim" Under Article
Local 851 argues that it was clearly a "victim" under Article
13-A because, in order to qualify for that status, it need only
establish that it was the victim of a crime committed by Amerford
and Niehenke. Local 851 characterizes their criminal conduct as
"caus[ing] a union officer to violate his fiduciary obligations
to Local 851 and thereby depriv[ing] the union of the honest
services of its officer." Mem. L. Supp. Pet'rs' Mot. Summ. J.
("Pet'rs' Mem.") at 11. It asserts that this scheme consisted of
four crimes, namely, mail fraud, unlawful labor payoffs, larceny
(the felony to which Niehenke pled guilty) and violations of New
York Labor Law Section 725 (which prohibits employers from
participating in or inducing violations of the fiduciary duties
of union officers). See id. at 11-14. Respondents counter that
Local 851's status as a "victim" under Article 13-A was by no
means clear because Article 13-A does not define that term and
neither Article 13-A nor any New York court applying it has
answered the question of whether a union or other representative
entity, as opposed to a natural person, may be considered a
"victim" under that statute. See Resp'ts' Mem. at 17-18, 27.
As the parties acknowledge, Article 13-A does not define the
term "victim." The parties do not cite any case that provides a
definition, nor has the Court's research uncovered one.*fn9 Disparate definitions of "victim" in
other State statutes provide no further clarity to the definition
of "victim" under Article 13-A. For example, some statutes define
"victim" narrowly as those "who suffer personal physical
injury." N.Y. Exec. L. § 621. Others include a much broader
definition that includes representational victims and "good
samaritan[s]." N.Y. Penal L. § 60.27. Thus, as respondents argue,
it appears to be unsettled as a general proposition of State law
whether a union or other representative entity, as opposed to a
natural person, can be a victim for purposes of Article 13-A.
Additionally, it is unclear how Local 851 could have been a
"victim" of the specific crimes that it claims to have suffered.
Local 851 bases its assertion that it was the victim of mail
fraud, unlawful labor payoffs, and larceny on the unlawful
termination of its members. See Pet'rs' Mem. at 12-13. As the
parties agree, Local 851's members were indeed victims of
unlawful termination; as such, they were entitled to restitution,
which they received. It does not necessarily follow, however, that
Local 851 was also a victim of those crimes. Local 851 has not
articulated any separate injury that it suffered as a result of
the unlawful terminations. Given the unsettled definition of the
term "victim" in Article 13-A, the Court rejects the notion that
Local 851 was a "victim" simply because its members suffered an
injury for which they have already received relief. At the very
least, the Court concludes that the question of whether the union
quo union was a "victim" of these crimes was not, at any point
in time, clearly established as to afford Local 851 rights under
It is not surprising, then, that Local 851 relies primarily on
the alleged violation of section 725, as this crime goes to the
heart of its claim that Amerford and Niehenke "caused a union
officer to violate his fiduciary obligations to Local 851 and
thereby deprived the union of the honest services of its
officer." Pet'rs' Mem. at 11. Unlike the other crimes asserted,
where the only rights clearly violated were those of its members,
a violation of section 725 could implicate Local 851's rights, in
particular, its right to loyalty from its union officers.
However, although Amerford and Niehenke settled Local 851's civil
claims alleging violations of section 725, which is a
misdemeanor, neither Amerford nor Niehenke has been convicted of
this crime. Article 13-A provides for forfeiture actions only
against criminal defendants convicted of felonies. See CPLR §
1310; Dillon v. Kim, 601 N.Y.S.2d 405, 408 (Sup. Ct. Nassau
County 1993) ("a district attorney lacks the authority to seek
the forfeiture of the proceeds of [a misdemeanor]"). It may well
be, therefore, that a forfeiture proceeding cannot be brought
against a criminal defendant who is guilty of only a misdemeanor. Regardless, that Amerford and
Niehenke settled Local 851's claims under section 725 does not
translate to Local 851 being a "victim" of a crime entitled to
distribution under Section 13-A.
Nor can Local 851 be adjudicated a "victim" of a violation of
section 725 for purposes of Article 13-A simply because the
consent judgments settling its claims against Amerford and
Niehenke referred to it as such. As succinctly explained in
Crumpton v. Bridgeport Educ. Ass'n, 993 F.2d 1023 (2d Cir.
1993), where, as here, "there was never a judicial finding that a
constitutional violation had occurred precisely because a consent
decree [approved by the court] resolved the parties' dispute" a
carefully worded consent decree "cannot substitute for a judicial
determination." Id. at 1029; see also Ashley v. City of
Jackson, Miss., 474 U.S. 900, 902 (1983) ("The cental feature of
a consent decree is that it is not an adjudication on the
Consequently, the Court concludes that New York law was
unresolved as to whether Local 851 had a property interest in the
forfeited funds as a "victim" under Article 13-A. That the New
York Court of Claims may resolve this very issue in the action
pending before it further supports the Court's decision to
refrain from delving into this uncertain area of state
law.*fn10 B. Unresolved Whether Assignments Give Local 851 Property
As noted above, Local 851 also asserts property rights in the
forfeited funds based on that portion of the consent judgment
assigning to Local 851 any interest that Amerford and Niehenke
may have had in those funds. Local 851 argues that in the absence
of a judicial forfeiture order (as required by Article 13-A),
title never transferred from Amerford and Niehenke to the State
and, therefore, that it can assert a right to the funds based on
the assignment. See Pet'rs' Mem. at 16-22. Respondents counter
that by the time the assignments were made, neither Amerford nor
Niehenke had any assignable right or interest in the funds
because they had already voluntarily forfeited the same, and that
it was unsettled in State law whether a formal forfeiture order
was required for their voluntary forfeiture to be valid. See
Resp'ts' Opp. Mem. at 27, 39-40.
It is certain that a forfeiture order acts to terminate any
property interest that a criminal defendant may have in forfeited
property. See In re Wolfson, 261 B.R. 369, 374-75 (E.D.N.Y.
2001) ("forfeiture order divested defendants of their interests
in the property"). However, the parties identify no case law, nor
has the Court's research revealed any, that clarifies the issue
of whether the absence of a forfeiture order renders a voluntary
forfeiture invalid. The purpose of the forfeiture-order
requirement and other procedural safeguards in Article 13-A is to
"protect defendants from an erroneous deprivation of their
property through the imposition of a provisional remedy."
Morgenthau, 68 N.Y.2d at 222. Because Niehenke pled to a crime
and Amerford waived the conviction requirement of Article 13-A,
the underlying reasoning for the forfeiture-order requirement of
Article 13-A is not applicable in this case.
Moreover, the Court finds Local 851's argument to be somewhat
disingenuous. Local 851 asserts that the moneys in the fund
represent the proceeds of Amerford and Niehenke's wrongdoing. At
the same time, it argues that they held transferable title to
those funds. It is a well-established principle of State law that
a person cannot benefit from his own wrongful act. See, e.g.,
Tucker v. Mashomack Fish & Game Preserve Club, Inc.,
606 N.Y.S.2d 79, 79 (3d Dep't 1993). It logically follows that a
person who attains property through a wrongful act does not have
transferable title to that property. See, e.g., People v.
Diehl, 144 N.Y.S.2d 265, 266 (Sup. Ct. Monroe County 1955) ("a
person cannot benefit from his own wrongful act and it follows
that he cannot vest himself with title to property by means of
said wrongful act."). Because the forfeited funds bear the taint
of that unlawful act, it is unlikely that Amerford and Niehenke
had transferable title in the funds. Accordingly, the Court
questions whether a New York court would ever conclude that a
criminal defendant who voluntarily forfeited wrongfully acquired
funds retained a transferrable property interest in those funds.
In any event, as noted above, the New York courts have not
answered the question of whether the absence of a forfeiture
order renders a voluntary forfeiture invalid. Accordingly, the
Court determines that New York law was uncertain as to whether
Local 851 acquired a property right from the assignment. Like the
issue of whether Local 851 was a victim under Article 13-A, the
New York Court of Claims may also resolve the issue regarding the
assignment, lending further support to the Court's decision to
refrain from delving into this uncertain area of state law.*fn11
III. Conversion Claims
In light of the dismissal of Local 851's due process claims,
the Court must determine whether to assert supplemental
jurisdiction over Local 851's remaining state-law conversion
claim. The Court may decline to exercise supplemental
jurisdiction, where, as here, "the claim raises a novel or
complex issue of State law, . . . [or] the district court has
dismissed all claims over which it has original jurisdiction[.]"
28 U.S.C. § 1367(c).
In most circumstances, a district court should decline
supplemental jurisdiction if, as here, all federal claims have
been dismissed at the pleading stage. See United Mine Workers v.
Gibbs, 383 U.S. 715, 726 (1966). In any event, the conversion
claim raises novel issues of New York State law (i.e., alleged
property rights under Article 13-A, the definition of victim
under that statute, and the duties of officials in voluntary
Where a pendent state claim turns on novel or
unresolved questions of state law, especially where
those questions concern the state's interest in the
administration of its government, principles of
federalism and comity may dictate that these
questions be left for decision by the state courts.
This is particularly true if the federal claim on
which the state claim hangs has been dismissed.
Seabrook v. Jacobsen, 153 F.3d 70
, 72 (1998). The Court,
therefore, declines to exercise supplemental jurisdiction over
the conversion claims.
Because respondents are entitled to qualified immunity, and the
Court declines to exercise supplemental jurisdiction over Local
851's state-law claim, both Actions, including the Ancillary
Proceeding, are dismissed; dismissal of the state law claim is