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Abuzaid v. Woodward

February 19, 2010

ADEL ABUZAID, ZAID ABUZAID, ARREF H. KASSEM, MOHAMED MOHAMED, PLAINTIFFS,
v.
JAMIE WOODWARD, ACTING COMMISSIONER, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, DEFENDANT.



MEMORANDUM-DECISION AND ORDER

On April 21, 2009, Plaintiffs Adel Abuzaid ("Adel"); Zaid Abuzaid ("Zaid"), Arref H. Kassem ("Kassem"), and Mohamed Mohamed ("Mohamed") (collectively, "Plaintiffs") filed the instant First Amended Complaint (Dkt. No. 23) seeking injunctive relief to redress the alleged deprivations of their federal civil rights under the Fifth, Eighth, and Fourteenth Amendments to the United States Constitution. Plaintiffs bring this suit pursuant to 42 U.S.C. § 1983 and § 1988. First Am. Compl. ¶ 1. Plaintiffs allege that Defendant Jamie Woodward ("Defendant"), in his capacity as Acting Commissioner of New York State's Department of Taxation and Finance, violated their Fifth Amendment right to be free of successive punishment by imposing fees pursuant to New York Tax Law § 481 ("§ 481") subsequent to Plaintiffs' guilty plea and sentencing for the same offense under New York Tax Law § 1814 ("§ 1814"); Plaintiffs further allege that the fees imposed by Defendant were excessive and, thus, violated their Eighth Amendment and Fourteenth Amendment Due Process Rights. Id. ¶¶ 15-22. On August 21, 2009, Plaintiffs filed a Motion to correct/amend their Complaint, requesting that Fuad Azzubaidi ("Azzubaidi" or "Proposed Plaintiff") be added as a plaintiff to the action. Pls.' Mot. to Am. Compl. (Dkt. No. 40). Proposed Plaintiff would assert the same claims presented in Plaintiffs' First Amended Complaint. Id. Presently before the Court are Plaintiffs' Motion for summary judgment (Dkt. No. 22); Defendant's Cross-Motion for summary judgment (Dkt. No. 31); and Plaintiffs' Second Motion to amend/correct their Complaint (Dkt. No. 40).

I. BACKGROUND

New York State collects a cigarette tax in the amount of $15.00 per ten-pack carton of cigarettes. The State collects this tax by selling New York State Sales Tax Stamps to stamping agents who affix the stamps to cigarette cartons to be sold within the state and selling these stamped cartons to cigarette retailers. See N.Y. TAX LAW § 471. The cost of the tax is then added to the sales price of the cigarettes as they are passed down the distribution chain and is ultimately to be borne by the consumer. See N.Y. TAX LAW § 471; 20 NYCRR § 74.1(b)(1).

Plaintiffs are owners of small newsstands that sell cigarettes at the retail level. Mem. of Law in Supp. of Pls.' Cross Motion for Summ. J. (Dkt. No. 22-1) ("Pls.' Mem.") at 2. Defendant initiated a "sting operation" targeting such retailers' purchase for sale of cigarettes bearing counterfeit tax stamps so as to avoid paying the added tax cost of authentic stamps. Pls.' Mem. at 2; Def.'s Mem of Law in Opp'n to Pls.' Mot. for Summ. J. and in Supp. of Def.'s Cross-Mot. for Summ. J. (Dkt. No. 31-12) ("Def.'s Mem") at 2-3. This operation resulted in the arrest, indictment and eventual guilty pleas and sentencing of Plaintiffs under New York Tax Law § 1814(e).*fn1 Def.'s Mem at 2. None of the Plaintiffs served jail time, but all had their license to sell cigarettes revoked. Am. Compl. ¶¶ 11-14. Additionally, Plaintiffs Adel, Zaid, and Kassem entered into stipulations with the Attorney General's Office to forfeit seized assets. Id. None of the parties contest their guilt in these criminal violations. Pls.' Mem. at 4.

Subsequent to the pleas and sentencing, Defendant imposed additional penalties on Plaintiffs pursuant to New York Tax Law § 481.1(b)(I) in the amount of $150 per carton of unlawfully stamped cigarettes possessed. First Am. Compl. ¶¶ 11-14. Plaintiffs each received a notice of determination ("NOD") informing them of these penalties.*fn2 Statement of Material Facts (Dkt. No. 22-2) ("Pls.' SMF") ¶¶ 7-8, Exh. E. Each NOD stated that the sum owed by the recipient was a penalty assessment and that no tax amount was owed. Id. The underlying offense for these penalties was the same possession of unlawfully stamped cigarettes for which Plaintiffs had criminal liability. First Am. Compl. ¶¶ 11-14.

Plaintiff Adel challenged the assessment leveled against him in the Division of Tax Appeals ("DTA"). On March 19, 2009, an ALJ sustained the assessment. Comiskey Aff. (Dkt. No. 31-4) ¶ 29. Adel filed an exception to that determination, which he later withdrew. Pls.' Mem of Law in Opp'n to Def.'s Mot. for Summ. J. and in Reply to Def.'s Response to Pls.' Cross-Mot. for Summ. J. (Dkt. No. 38) ("Pls.' Reply Mem") at 7. Adel never made any payments to the Department. Def.'s Mem at 5. On June 1, 2009, the Department of Taxation and Finance ("the Department") cancelled the assessments against Adel, Mohamed, and Kassem. Comiskey Aff. (Dkt. No. 31-4) ¶ 31; Ex. F (Dkt. 31-10); Coney Aff. (Dkt. No. 39-7) 4-5. The Department subsequently refunded payments made by Plaintiffs Kassem and Mohamed. Def.'s Mem. at 5.

On August 21, 2009, Plaintiffs moved to amend their Complaint for a second time to add Fuad Azzubaidi as a plaintiff to this action. Pls.' Second Mot. to Am. Compl. (Dkt. No. 40). Plaintiffs' assert that Proposed Plaintiff Azzubaidi is in "a sustainably similar position as the other plaintiffs" because he "was arrested in the same sting operation as the other plaintiffs, he pled guilty to the substantially same activity as the other plaintiffs, defendant has assessed a penalty for the same conduct to which he pled guilty, and defendant has sought enforcement of the penalty." Marchelle Aff. (Dkt. 40-1) ¶¶ 4-5. On November 13, 2006, approximately seven months after Azzubaidi entered a guilty plea to the criminal offenses associated with his possession of unlawfully stamped cigarettes, Defendant assessed a penalty pursuant to § 481(1)(b)(i) for the same conduct.*fn3

Mot. to Am. Compl. Exh. A ¶ 15. Azzubaidi filed an administrative appeal with the DTA on the ground that the assessment was a violation of both the state and federal Constitutions. On March 5, 2009, the ALJ determined that this assessment should be reduced, but sustained the assessment in the lesser amount. Aff. Michael Glannon (Dkt. No. 47-2).

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56 provides that summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); Beard v. Banks, 548 U.S. 521, 529 (2006) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). A court must "'resolve all ambiguities, and credit all factual inferences that could rationally be drawn, in favor of the party opposing the judgment.'" Brown v. Henderson, 257 F.2d 246, 251 (2d Cir. 2001) (quoting Cifra v. General Elec. Co., 252 F.3d 205, 216 (2d Cir. 2001). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

If the moving party meets its initial burden of demonstrating that no genuine issue of material fact exists for trial, the non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Corp., 475 U.S. 574, 586 (1986) (citations omitted). The non-movant "must come forth with evidence sufficient to allow a reasonable jury to find in her favor." Brown, 257 F.3d at 251 (citation omitted). The nonmoving party "may not rely merely on allegations or denials in its own pleadings" and bald assertions unsupported by evidence are insufficient to overcome a motion for summary judgment. FED. R. CIV. P. 56(e)(2); see Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir. 1991); Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990).

III. DISCUSSION

A. Joinder of Proposed Plaintiff Fuad Azzubaidi

Generally, leave to amend should be freely given. FED. R. CIV. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962); Rusyniak v. Gensini, 629 F. Supp. 2d 203, 212 (N.D.N.Y. 2009). However, where the amendment is futile because it fails to state a claim or would otherwise be subject to dismissal, a court is justified in denying the amendment. Foman, 371 U.S. at 182; Evac, LLC v. Pataki, 89 F. Supp. 2d 250, 262 (N.D.N.Y. 2000).

Under the doctrine announced in Younger v. Harris, 401 U.S. 37 (1970), federal courts generally must abstain from exercising jurisdiction over constitutional claims being adjudicated in state proceedings. The doctrine originally applied to criminal proceedings pending in state courts, but it now pertains equally to cases involving state administrative proceedings. See, e.g., Middlesex County Ethics Comm v. Garden State Bar Ass'n, 457 U.S. 423 (1982); Diamond "D" Construction Corp. v. McGowan, et al., 282 F.3d 191, 198 (2d Cir. 2001). The doctrine, developed in the interest of comity and the protection of "Our Federalism," recognizes that "ordinarily a state proceeding provides an adequate forum for the vindication of federal constitutional rights." Cullen v. Fliegner, 18 F.3d 96, 103 (2d Cir. 1994). Abstention, under the doctrine, applies when (1) a state proceeding is ongoing, which (2) implicates an important state interest, and (3) the state proceeding provides the federal plaintiff an adequate opportunity for judicial review of the federal constitutional claims. Diamond "D", 282 F.3d at 198. The requirement that a state proceeding be "ongoing," relates to the time when the federal action is initiated. Hansel v. Town Court for Town of Springfield, NY, 56 F.3d 391, 393 (2d Cir. 1995) (citing Dubinka v. Judges of Superior Court of the State of California for the County of Los Angeles, 23 F.3d 218, 223 (9th Cir. 1994)); see also Blackwelder v. Safnauer, 689 F. Supp. 106, 117 (N.D.N.Y. 1988); Rolle v. McCarthy, 2005 WL 5885366 at *4 (E.D.N.Y. June 21, 2005).

Plaintiffs filed their Complaint on November 10, 2008, thereby initiating the action that Azzubaidi now seeks to join. On July 10, 2007, Azzubaidi filed a petition with the DTA challenging the assessment Defendant leveled against him. That proceeding was completed when the ALJ issued a determination on March 5, 2009, upholding a reduced assessment against Azzubaidi. The fact that the state proceeding is now complete, however, does not alter the requirement under Younger that no state proceeding be ongoing at the time of filing the federal action. See Dubinka, 23 F.3d at 223 ("even if appellants' trials were completed at the time of the district court's ...


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