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O'Connell v. United States

United States District Court, E.D. New York

August 24, 2017

TIMOTHY O'CONNELL, Plaintiff,
v.
UNITED STATES OF AMERICA, MICHAEL ASARO, SEAN Y, PAUL SCHOEMAN, JAMES MCMAHON, JON E. GREEN, and UNKNOWN FEDERAL AGENT JOHN DOES 1-10, Defendants.

          MEMORANDUM & ORDER

          RAYMOND J. DEARIA, United States District Judge

         In a series of prosecutions, referred to as the "squawk box" cases, numerous financial advisers, including Plaintiff Timothy O'Connell, were charged with insider trading and related offenses. O'Connell's claims stem from the government's withholding exculpatory material from him and his co-defendants. He brings claims for malicious prosecution, negligence and gross negligence against the United States and claims for violation of due process and malicious prosecution against five Assistant United States Attorneys and ten unknown federal agents. Defendants move to dismiss the Amended Complaint (hereinafter "Complaint") pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The motion is granted.

         BACKGROUND

         The indictment charged O'Connell and his five co-defendants with securities fraud for purposefully allowing outside day traders to listen to confidential information broadcast over "squawk boxes"-intercom speakers used in investment banks and stock brokerage houses to facilitate internal communications between analysts, traders, and brokers. The government's case depended, in part, on its proving that the information shared over the squawk boxes was in fact confidential.

         The Assistant United States Attorneys prosecuting the case worked closely with the Securities and Exchange Commission ("SEC") to develop the charges against O'Connell and his co-defendants. Beginning in December 2004, the SEC deposed numerous witnesses, some of whom testified that the information broadcast over the squawk boxes was not confidential. The SEC provided the transcripts of these depositions to the prosecutors before trial and alerted the prosecutors that at least one, and potentially several, of the transcripts might contain exculpatory material. The prosecutors, however, elected not to share the transcripts with O'Connell and his co-defendants.

         O'Connell and his co-defendants were initially tried in 2007. O'Connell was convicted of witness tampering and making a false statement[1] and acquitted on thirty-eight counts of securities fraud and related offenses. The jury could not reach a decision on the related conspiracy charge.

         Defendants retried O'Connell and his co-defendants on the conspiracy count in 2009. The second trial team apparently chose to rely on the first team's decision not to disclose the SEC transcripts. O'Connell was convicted after a three-week trial and sentenced to a period of home confinement.

         In May 2009, the SEC initiated administrative proceedings against one of O'Connell's co-defendants. In connection with those proceedings, the SEC disclosed the deposition transcripts in December 2009. O'Connell and his co-defendants moved for a new trial in February 2010, arguing that the transcripts included Brady material that was withheld in the criminal proceedings. The trial court criticized the government's conduct, but concluded that the jury would not have reached a different result even if the transcripts had been disclosed. See United States v. Mahaffy, No. 05-CR-613(JG), 2010 WL 2925952 (E.D.N.Y. July 21, 2010), rev'd, 693 F.3d 113 (2d Cir. 2012).

         The Second Circuit reversed, concluding that the government's failure to disclose portions of the transcripts violated Brady and undermined the court's confidence in the jury's verdict. See United States v. Mahaffy, 693 F.3d 113, 119 (2d Cir. 2012). Following remand, O'Connell entered into a deferred prosecution agreement with the government. In December 2013, at the end of the agreed-upon six month deferral-which was successfully completed by O'Connell-the government moved to dismiss the indictment.

         On November 12, 2014, O'Connell filed a notice of claim against the United States, as required under the Federal Tort Claims Act ("FTCA"). See 28 U.S.C. § 2401(b). A year later, O'Connell commenced this action. The Complaint brings claims for malicious prosecution, negligence, and gross negligence against the United States pursuant to the FTCA and claims for violation of due process and malicious prosecution against the prosecuting Assistant United States Attorneys ("AUSA defendants") pursuant to Bivens v. Six Unknown Named Agents, 403 U.S. 388(1971).

         DISCUSSION

         Defendants move to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), citing the absolute immunity of the AUSA defendants and the sovereign immunity of the United States. Defendants also assert that the claims are barred by the statute of limitations and that O'Connell fails to state a claim.[2]

         A. Claims Against AUSA Defendants

         The government contends that the claims against the AUS A defendants are barred by the absolute immunity of federal prosecutors acting in an advocacy role. The Court agrees. Because the AUSA defendants were acting in their capacities as advocates when they decided not ...


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