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Mirka United, Inc. v. Cuomo

November 27, 2007


The opinion of the court was delivered by: Gerard E. Lynch, District Judge


In this action, filed pursuant to Section 1983 of Title 42 of the United States Code, Mirka United, Inc. ("Mirka") seeks a declaration that certain seizures by New York's Office of the Attorney General ("OAG") made during the course of a grand jury investigation pursuant to search warrants executed by a New York Supreme Court Justice were unconstitutional. The dispute comes before the Court on a motion to dismiss and a cross-motion for summary judgment, and the central issue is whether the principles underlying Younger v. Harris, 401 U.S. 37 (1971), require this Court to abstain from deciding the merits of Mirka's federal lawsuit in light of ongoing state criminal proceedings. Both the principles of Younger and general equitable considerations counsel abstention.


Mirka is a New York corporation that assists in management, billing, and collections for medical professionals. (Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss and in Support of Its Cross Motion for Summary Judgment ("P. Opp.") 1.) Jacob Kagan is the president and sole shareholder of Mirka. (Affidavit of Jacob Kagan, dated December 6, 2006, ¶ 1.) During an investigation regarding insurance fraud and pursuant to search warrants executed by Supreme Court Justice Deborah A. Dowling on November 21, 2006 (Complaint, Exs. 1-2), OAG searched Mirka's offices and seized various records relating to Mirka's business organization, the provision of medical and legal services, and certain funds transfers. One hundred and seventy four boxes of materials were seized. (Declaration of Edward Ferrity, dated December 15, 2006 ("First Ferrity Declaration"), ¶ 11.)

At the time the search warrant was executed and as part of the investigation, the Attorney General also served several grand jury subpoenas on other parties. (Affirmation of Robert Stavis, dated December 8, 2006, ¶ 5.) OAG did not attempt to obtain the Mirka documents by grand jury subpoena, however, because of its fear that the records would not have been produced if "[Jacob] Kagan and his associates had time to organize a production pursuant to subpoena." (Defendant's Memorandum of Law in Opposition to Motion for Preliminary Injunction ("D. Opp."), 4; see also First Ferrity Declaration, ¶ 9.) On December 5, 2006, the search warrant was returned to the issuing court with an inventory of the seized materials. (First Ferrity Declaration, ¶ 5.) According to the OAG, the records seized demonstrate the "pervasively criminal nature of Kagan's businesses." (Id. at ¶ 9.)

On December 8, 2006, Mirka initiated this suit against the Attorney General seeking both a declaration that the warrants under which the records were seized were overbroad and not supported by probable cause, and an injunction directing him to return the seized records. (Complaint, Prayer for Relief.) The Court conferred with the parties on December 21, 2006, January 4, 2007, and April 20, 2007. At these conferences, the parties discussed a practical resolution of the dispute. Mirka represented that the relief it principally sought was access to the records seized during the course of the investigation, the seizure of which purportedly interfered with Mirka's on-going conduct of business. See, e.g., 12/21/06 Tr. 4 (Mr. Stavis [Counsel for Mirka]: "If . . . I could have my hard drive copy and copies of my business records, your Honor, I'll fold my tent and go home."); id. at 14 (The Court: "Okay, so, Mr. Stavis, what is it that you're asking me to direct at this point?" . . . Mr. Stavis: "I would like access to all 172 boxes seized with an ability to photocopy any business records in the 172 boxes that were seized. . . . I would also seek the return of the computers."). As a result of those discussions, OAG agreed to, and did, copy and return to Mirka the original hard computer drives and copies of the compact discs that were seized pursuant to the search warrants. (Second Declaration of Assistant Attorney General Edward Ferrity, dated May 8, 2007 ("Second Ferrity Declaration"), ¶ 3.) In addition, the paper documents seized were made available to Mirka for inspection and copying at OAG's New York City office for at least four months prior to the last court date on April 20, 2007. (Id. at ¶ 6.)

Mirka made sporadic use of the copying facilities during that time, notwithstanding its long-term access to the documents and the copying machine. (Id. at Ex. E.) In order to facilitate the copying process, and at Mirka's request (id. at Ex. B), OAG agreed to allow Mirka to lease a second photocopy machine to be placed at the document repository so that Mirka's employees could more readily photocopy the material (id. at ¶¶ 3, 4). However, on March 30, 2007, Mirka's counsel informed OAG that Mirka was no longer interested in leasing a copy machine, and intended to "copy the documents as needed." (Id. at Ex. D.)

At the April 20, 2007, conference before the Court, Mirka withdrew its request for immediate injunctive relief. However, Mirka claims that it did not withdraw its request for any form of injunctive relief but rather "sought to consolidate the request for preliminary injunctive relief with the final hearing on the request for permanent injunctive relief." (P. Opp. 16.) Mirka continues to seek both an injunction and a declaration that OAG's seizure of the documents was unconstitutional to vindicate its "right to privacy in its documents . . . which includes the right to exclude others." (P. Opp. 16.) On May 9, 2007, OAG moved to dismiss Mirka's complaint. On May 22, 2007, Mirka submitted its opposition to OAG's motion to dismiss, and cross-moved for summary judgment.

On September 21, 2007, a state grand jury returned a fifty-five count indictment charging Jacob Kagan (the president and sole shareholder of Mirka) and three others with crimes including a scheme to defraud, grand larceny, insurance fraud, falsifying business records, and money laundering. (Letter of Lee Alan Adlerson, Esq., to the Court, dated Oct. 4, 2007, and enclosed attachment).


1. Younger Abstention

Federal courts must refrain from considering claims for injunctive relief based on constitutional challenges to ongoing state criminal proceedings. Younger, 401 U.S. at 43 (noting the "longstanding public policy against federal court interference with state court proceedings"). Younger and its progeny "espouse a strong federal policy against federal-court interference with pending state judicial proceedings absent extraordinary circumstances." Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 431 (1982); see also Hicks v. Miranda, 422 U.S. 332, 349 (1975) ("The rule in Younger v. Harris is designed to permit state courts to try state cases free from interference by federal courts . . . particularly where the party to the federal case may fully litigate his claim before the state court.") (citations and internal quotation marks omitted). Federal courts should abstain from enjoining pending state judicial proceedings in order to "allow state courts to resolve pending matters within their jurisdiction." Washington v. County of Rockland, 373 F.3d 310, 318 (2d Cir. 2004). Younger abstention is driven both by the premise that "courts of equity should not intervene where a party has an adequate remedy at law," and by the premise that "the National Government will fare best if the States and their institutions are left free to perform their separate functions in their separate ways." Cecos Int'l, Inc. v. Jorling, 895 F.2d 66, 70 (2d Cir. 1990) (citations and internal quotations omitted). Where the Younger requirements are met, the appropriate remedy is dismissal of the federal case. Gibson v. Berryhill, 411 U.S. 564, 577 (1973).

The Second Circuit has analyzed three factors in determining whether Younger abstention applies to any particular state action. Courts must "determine (1) whether there is an ongoing state proceeding; (2) whether an important state interest is involved; and (3) whether the federal plaintiff has an adequate opportunity for judicial review of his constitutional claims during or after the proceeding." University Club v. City of New York, 842 F.2d 37, 40 (2d Cir. 1988), quoting Christ the King Regional High School v. Culvert, 815 F.2d 219, 224 (2d Cir. 1987).

Even if all three factors point towards abstention, a federal court may still intervene in the state proceeding "if the plaintiff demonstrates bad faith, harassment or any other unusual circumstances that would call for equitable relief.'" Spargo v. New York State Judicial Comm., 351 F.3d 65, 75 n.11 (2d Cir. 2003) (citations and internal ...

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