sanction - Coalition Against Insurance Fraud

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
TRENTON VICINAGE
DR. HARSHAD C. PATEL,
HON. PETER G. SHERIDAN, U.S.D.J.
Plaintiff,
v.
ALLSTATE NEW JERSEY
INSURANCE COMPANY;
THOMAS J. WILSON;
ENCOMPASS INSURANCE
COMPANY; JOHN JAY HOFFMAN (in
his official capacity as Acting:
Attorney General of the State
of New Jersey); RONALD CHILLEMI:
(in his official capacity as
Commissioner of the New Jersey
Office of Insurance Fraud
Prosecutor); ABC CORPORATIONS
1-10; JOHN DOES 1-10;
Civ. Action No. 3:14-cv-02851(PGS-TJB)
Civil Action
Defendants.
BRIEF OF DEFENDANTS JOHN J. HOFFMAN
AND RONALD CHILLEMI IN SUPPORT OF MOTION FOR
SANCTIONS PURSUANT TO FED. R. CIV. P. 11
JOHN J. HOFFMAN
ACTING ATTORNEY GENERAL OF NEW JERSEY
R.J. Hughes Justice Complex
25 Market Street
P.O. Box 117
Trenton, New Jersey 08625-0117
Attorney for Defendants: John J.
Hoffman, Acting Attorney General of New
Jersey; and Ronald Chillemi, Acting
Insurance Fraud Prosecutor (improperly
pled as Commissioner of the New Jersey
Office of Insurance Fraud Prosecutor)
By:
Richard E. Wegryn, Jr., DAG (REW2138)
Deputy Attorney General
Richard.WegrynCdol.lps.state.nj.us
TABLE OF CONTENTS
PAGE
PRELIMINARY STATEMENT ..........................................1
PROCEDURAL HISTORY .............................................2
STATEMENT OF FACTS AS ALLEGED IN COMPLAINT .....................4
LEGAL ARGUMENT .................................................7
POINT I
A
UPON
BASED
NOT
IS
COMPLAINT
THE
BECAUSE
REASONABLE INQUIRY INTO THE LAW OR THE FACTS, IT
VIOLATES RULE 11 .....................................7
A.
B.
The Complaint is Not Well-Grounded in Law. .......8
1.
Parallel Proceedings are Inherently Proper ..8
2.
The State is Immune from all ~ 1983
Claims Under the Eleventh Amendment .......11
3.
The Complaint Fails under the Younger
Abstention Doctrine .......................13
The Complaint is Not Well-Grounded in Fact ......15
1.
The Allegation of Outsourcing Has No
Basis in Fact .............................15
2.
Plaintiff Has Alleged No Injury-In-Fact ....16
(a) Plaintiff has not been deprived of
his right to counsel .................17
(b) Plaintiff has not been deprived of
selfagainst
right
his
incrimination ........................17
(c) Plaintiff has not been deprived of
his right to indictment by grand
jury .................................18
POINT II
SANCTIONS SHOULD ISSUE PURSUANT TO RULE 11(C)
......20
CONCLUSION ....................................................22
1
TABLE OF AUTHORITIES
PAGE
FEDERAL CASES CITED
Acevedo v. Donovan High School,
2006 U.S. Dist. LEXIS 64490 (D.N.J. 2006) ......................8
Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40,
119 S.Ct. 977, 143 L.Ed.2d 130 (1999) ........................19
Arthur v. Sterns,
560 F.2d 477 (lst Cir. 1977) ..................................18
Aschcroft v. Iqbal,
556 U.S. 662, 129 S.Ct. 1937, 172 L.Ed.2d 868 (2009) ..........12
Blanciak v. Allegheny Ludlum Corp.,
77 F.3d 690 (3d Cir. 1996) ....................................13
Brandon v. Holt,
469 U.S. 464, 105 S.Ct. 873, 83 L.Ed.2d 878 (1985) ............13
Doering v. Union County Bd. of Chosen Freeholders,
857 F.2d 191 (3d Cir. 1988) ...............................20, 21
Evancho v. Fisher,
423 F.3d 347 (3d Cir. 2005) ...................................12
930 F.2d 277 (3d Cir. 1991) ....................................8
Gaiardo v. Ethyl Corp.,
835 F.2d 479 (3d Cir. 1987) ...............................20, 21
Gittlemacker v. Prasse,
428 F.2d 1 (3d Cir. 1970) .....................................12
In re Prudential Ins. Co. Am. Sales Practice Litig. Actions,
278 F.3d 175 (3d Cir. 2002) ....................................8
Kentucky v. Graham,
473 U.S. 159, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985) ...........13
Langer v. Monarch Life Ins. Co.,
966 F.2d 786 (3d Cir. 1992) ....................................8
ii
Lieb v. Topstone Indus., Inc.,
788 F.2d 151 (3d Cir. 1986) ................................7, 20
Lujan v. Defenders of Wildlife,
504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ..........16
Martin v. Brown,
63 F.3d 1252 (3d Cir. 1995) ....................................8
Mary Ann Pensiero, Inc. v. Lingle,
847 F.2d 90 (3d Cir. 1988) ....................................20
Medimmune, Inc. v. Genentech, Inc.,,
549 U.S. 118, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) ...........17
Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass n,
457 U.S. 423, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982) ...........13
Miller v. Mitchell,
598 F.3d 139 (3d Cir. 2010) ...................................14
Miranda v. Arizona,
384 U.S. 436, 85 S.Ct. 1602, 16 L.Ed.2d 654 (1966) ............17
Oxfurth v. Siemens, A.G.,
142 F.R.D. 424 (D.N.J. 1991) ..................................20
Pennhurst State School & Hosp. v. Halderman,
465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) ..............13
Railway Mail Ass n v. Corsi,
326 U.S. 88, 65 S.Ct. 1483, 89 L.Ed. 2072 (1945) ..............16
Rode v. Dellarciprete,
845 F.2d 1195 (3d Cir. 1988) ..................................12
Ruffin v. Beal,
468 F.Supp. 482 (E.D. Pa. 1978) ...............................12
Thiokol Chem. Corp. v. Burlington Indus., Inc.,
448 F.2d 1328 (3d Cir. 1971), cert. denied,
404 U.S. 1019, 92 S.Ct. 684, 30 L.Ed.2d 668 (1972) ............15
Toll Bros., Inc. v. Twp. of Readington,
555 F.3d 131 (3d Cir. 2009) ...................................16
iii
United States v. Kordel,
397 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970) ..................8
U.S. Steel Corp. Plan for Emp. Ins. Benefits v. Musisko,
885 F.2d 1170 (3d Cir. 1989) ..................................14
Walsh v. Securities, Inc.. v. Cristo Property Management, Ltd.,
7 F.Supp.2d 523 (D.N.J. 1998) .................................8
Will v. Michigan Dep t of State Police,
491 U.S. 58, 109 S.Ct. 2304, 105 L. Ed.2d 45 (1989) ...........12
Younger v. Harris,
401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) ......12, 13, 14
STATE CASES CITED
Allstate New Jersey Insurance Co., et al. v.
Gregorio Lajara, et al., UNN-L-4091-08 .......1, 4, 5, 13, 14, 15
Kinsella v. Welch, 362 N.J.Super. 143
(N.J. App. Div. 2003) ........................................19
Merin v. Maglaki,
126 N.J. 430 (1992) ...........................................10
State v. Fleishman,
189 N.J. 539 (2007) ...........................................10
State v. Korbin Securities, Inc.,
111 N.J. 307 (1988) ............................................9
State v•. P . Z . ,
152 N.J. 86 (1997) ............................................18
FEDERAL STATUTES CITED
42 U.S.C. ~ 1983
.............................................12
28 U.S.C. § 2283
.............................................14
iv
FEDERAL RULES CITED
Fed. R. Civ. P. 11 .............................................1
Fed. R. Civ. P. 11(b)
.........................................7
Fed. R. Civ. P. 11(c) .................................20, 21, 22
Fed. R. Civ. P. 11(c)(2) .......................................3
STATE STATUTES CITED
N.J.S.A. § 17:33A-1, et seq• ...................................1
N.J.S.A. ~ 17:33A-9 ...........................................16
N.J.S.A. § 17:33A-20 ...........................................9
N.J.S.A. § 2C:21-4.4 ...........................................9
MISCELLANEOUS
Aviva Abramovsky, An Unholy Alliance: Perceptions
of Influence in Insurance Fraud Prosecutions and
the Need for Safeguards, 98 J. CRIM. L. & CRIMINOLOGY
363 (2008) .............................................5, 10, 11
u
PRELIMINARY STATEMENT
Defendants, the Acting Attorney General of New Jersey, John
J. Hoffman ("Hoffman"), and the Acting Insurance Fraud
Prosecutor, Ronald Chillemi ("Chillemi")(collectively, the
"State"), move for the imposition of sanctions pursuant to Fed.
R. Civ. P. 11 against Carl A. Salisbury, Esquire for the filing
of the Complaint (Doc. No. 1) on behalf of his client, Harshad
C. Patel ("Plaintiff" or "Patel").
Plaintiff has not been charged with a crime by the Office
of the Insurance Fraud Prosecutor ("OIFP")
Notwithstanding, he
alleges unspecified damages against the State based upon the
possibility that he may be charged at some unspecified point in
time in the future, and requests that this court enjoin numerous
pending state court civil "parallel" proceedings filed by
private insurance companies and the New Jersey Department of
Banking and Insurance under the New Jersey Insurance Fraud
Prevention Act, N.J.S.A. ~ 17:33A-1 et seq• ("IFPA") including
the pending action in the Superior Court of New Jersey in which
he is a Defendant, Allstate New Jersey Insurance Co., et al. v.
Gregorio Lajara, et al., UNN-L-4091-08 (the "Lajara Action").
Indeed, no court or treatise has found the existence of a
cause of action such as is alleged in the Complaint. Plaintiff
has failed to allege a single fact in support of his reckless
charge that the OIFP somehow "outsources" its criminal
1
investigation to private insurance companies. Moreover, the
authority cited by Plaintiff himself supports the structure and
constitutionality of the IFPA. The Complaint is simply not based
on a reasonable investigation of the facts and the law. This
court should assess sanctions in order to deter the filing of
such frivolous allegations which are objectively unreasonable
and intended to harass or threaten the State.
PROCEDURAL HISTORY
The Complaint (Doc. No. 1) was filed on May 5, 2014, and a
Summons was issued on May 6, 2014 (Doc. No. 2).
On June 10, 2014, the Honorable Tonianne J. Bongiovanni,
U.S.M.J. entered the Consent Order Extending Time for the State
Defendants to Answer, Move or Otherwise Reply until September
15, 2014. (Document No. 6).
On August 7, 2014, Magistrate Judge Bongiovanni entered the
Consent Order Extending Time for the Allstate Defendants to
Answer, Move or Otherwise Reply until September 15, 2014. (Doc.
No. 11).
On August 25, 2014 the State served counsel for Plaintiff,
Carl A. Salisbury, with a letter stating that the Complaint is
frivolous and demanding that it be withdrawn. Pursuant to Fed.
R. Civ. P. 11(c)(2), a draft Motion for Sanctions was attached
to the demand. The Allstate Defendants have joined-in the
State's demand to withdraw the Complaint. Plaintiff's counsel
has made no response.
The deadline for all Defendants to answer, move, or
otherwise reply is September 15, 2014.
3
STATEMENT OF FACTS AS ALLEGED IN COMPLAINT
Patel is the owner of A. P. Diagnostic Imaging, Inc.,
("APDI")
Complaint, ¶3. In 2008, Allstate filed a Complaint in
the Superior Court of New Jersey against Patel and AP Diagnostic
seeking statutory damages under the IFPA in the Lajara Action.
In 2011, the Commissioner of Banking and Insurance intervened in
the Lajara Action and asserted additional statutory IFPA civil
penalty claims against Patel and APDI. See Complaint, ¶16. The
Lajara Action is pending and the claims under the IFPA asserted
against Patel and APDI have not yet been finally adjudicated.
However, no criminal charges have been filed against Patel or
APDI.
Although no criminal charges have been filed, Plaintiff
alleges that the State has "outsourced" a criminal investigation
against him to Allstate's Special Investigation Unit ("SIU") to
be conducted as part of the Lajara Action. Complaint at ¶¶13,
16. The Complaint alleges that the investigation has been
conducted "with the result and intent" of avoiding
constitutional strictures placed on such investigations, in
order to circumvent "the protections afforded by the United
States and New Jersey Constitutions in connection with selfincrimination, the right to counsel, the requirement under New
Jersey law to provide notice to a target of a criminal
investigation, and the requirement to convene a grand jury." Id.
at ~¶18, 24.
Plaintiff alleges that Allstate improperly commandeered the
Edison Police Department in order to interrupt a wedding
ceremony for his son in an attempt to serve a subpoena in the
Lajara Action. Id. at ¶25. Patel further alleges that Allstate
has harassed him and his immediate family members, including his
wife and two sons, with threats of future civil and criminal
action. Id. at ¶18.
The Complaint alleges that referrals from insurance company
SIUs are the sole source of information from which the OIFP
selects cases to prosecute criminally and asserts that the State
routinely outsources criminal investigation under the IFPA.
Id.
at ¶¶9, 11-13. It is further alleged that the use of SIUs and
parallel civil litigation under the IFPA to conduct criminal
investigations tramples on the constitutional rights of the
targets of the criminal investigations. Id. at ¶¶14-15 (citing
Aviva Abramovsky, An Unholy
Alliance: Perceptions of Influence
in Insurance Fraud Prosecutions and the Need for Safeguards, 98
J. CRIM. L. & CRIMINOLOGY 363 (2008)).
Plaintiff asserts that because they place defendants in the
position of choosing between losing a civil litigation that may
have no merit and waiving their Fifth Amendment protection for a
later criminal prosecution, insurance company SIUs act as an arm
5
of the OIFP and the Attorney General. Complaint at X21.
Plaintiff also claims that because insurance companies have a
financial interest in the criminal conviction of Defendants
investigated by SIUs, there is an appearance of prosecutorial
partiality. Id. at ¶23. Finally, the Complaint alleges that
Defendants Hoffman and Chillemi are liable because they "have
been deliberately indifferent to the constitutional and legal
infirmities inherent in the routine practice of outsourcing
criminal investigations under the IFPA." Id. at ¶31.
Count One of the Complaint seeks a Declaratory Judgment
that, "the practice of outsourcing criminal investigations by
the OIFP and the Attorney General to insurance company SIUs
violates the U.S. and New Jersey Constitutional protections."
Id. at ¶33.
Count Two of the Complaint seeks injunctive relief
"enjoining the defendants from continuing to participate and
engage in the outsourcing of criminal investigations to
insurance company SIUs." Id. at ¶35.
Count Three of the Complaint seeks monetary damages "on
account of [Plaintiff] having to defend against assertions of
criminal conduct and having (sic) been placed in jeopardy of
facing criminal prosecution without being afforded the
protections afforded to them by the Constitution and the laws of
the State of New Jersey." Id. at ¶37.
LEGAL ARGUMENT
POINT I
BECAUSE THE COMPLAINT IS NOT BASED UPON A REASONABLE
INQUIRY INTO THE LAW OR THE FACTS, IT VIOLATES RULE 11.
Pursuant to Fed. R. Civ. P. 11(b), whenever an attorney
files a pleading with the court, he or she is certifying to the
best of his or her knowledge, information, and belief, formed
after reasonable inquiry under the circumstances, that:
(1) it is not being presented for any improper purpose,
such as to harass or to cause unnecessary or needless
increase in the cost of litigation;
(2) the claims, defenses and other legal contentions
therein are warranted by existing law or by a non-frivolous
argument for the extension, modification, or reversal of
existing law or the establishment of new law;
(3) the allegations and other factual contentions have
evidentiary support after a reasonable opportunity for
further investigation or discovery; and
(4) the denials of factual contentions are warranted on the
evidence, or if specifically so identified, are reasonably
based on a lack of information or belief.
This rule can be judicially viewed as "impos[ing] on
counsel a duty to look before leaping" or as a "litigation
version of the familiar railroad crossing admonition to 'stop,
look, and listen.' " Lieb v. Topstone Indus., Inc., 788 F.2d
151, 157 (3d Cir. 1986). Stated differently, Rule 11 requires
that an attorney who files a complaint certifies that there is a
reasonable basis in fact and law for the claims.
To comply with the mandates of the rule, counsel is
7
required to conduct a "reasonable inquiry into both the facts
and law supporting a particular pleading." In re Prudential Ins.
Co. Am. Sales Practice Litig. Actions, 278 F.3d 175, 187 n. 7
(3d Cir. 2002). "The legal standard to be applied when
evaluating conduct allegedly violative of Rule 11 is
reasonableness under the circumstances." Ford Motor Co. v.
Summit Motor Prod., Inc., 930 F.2d 277, 289 (3d Cir. 1991).
"Reasonableness" in the context of Rule 11 has been defined as
"an objective knowledge or belief at the time of the filing of a
challenged paper that the claim was well-grounded in law and
fact." Id. at 289 (citations omitted).
Significantly, the moving party is not required to make a
showing of bad faith. Martin v. Brown, 63 F.3d 1252, 1264 (3d
Cir. 1995). An "empty head, pure heart" excuse cannot be used by
the accused party as justification for filing a frivolous
motion. Acevedo v. Donovan High School, 2006 U.S. Dist. LEXIS
64490 (D.N.J. 2006) at *5-6 (citations omitted); see also Langer
v. Monarch Life Ins. Co., 966 F.2d 786, 810 (3d Cir. 1992).
A. The Complaint is Not Well-Grounded in Law.
1.
Parallel Proceedings are Inherently Proper.
The Complaint is grounded on the incorrect legal assumption
that it is constitutionally improper for the State to conduct
parallel civil and criminal proceedings. To the contrary, the
propriety of parallel proceedings is a bed-rock principle of
both federal and New Jersey law. See United States v. Kordel,
397 U.S. 1, 11, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970)("it would
stultify enforcement of federal law to require a governmental
agency [to] choose to either forgo recommendation of a criminal
prosecution once it seeks civil relief, or to defer civil
proceedings pending the ultimate outcome of criminal trial");
Walsh v. Securities, Inc. v. Cristo Property Management, Ltd., 7
F.Supp.2d 523, 526 (D.N.J. 1998)(a stay of civil proceedings
when there is parallel criminal proceedings is not
constitutionally required); see also State v. Korbin Securities
Inc., 111 N.J. 307 (1988)(same under New Jersey law).
Building on this body of precedent, the IFPA specifically
requires the New Jersey Department of Banking and Insurance,
Bureau of Fraud Deterrence and the OIFP to develop a statewide
anti-fraud enforcement policy for all state and local agencies,
including criminal law enforcement agencies and civil
enforcement agencies, and to recommend regulatory and statutory
changes to fulfill the purposes of the IFPA. See N.J.S.A. §
17:33A-20 and -24b; see also N.J.S.A. § 2C:21-4.4(public policy
is to pursue appropriate administrative, civil, and criminal
actions to achieve the most effective resolution of insurance
fraud cases).
The IFPA was enacted in 1983 at which time the Department
of Banking and Insurance was charged with bringing civil penalty
D
actions against individuals who commit insurance fraud. The OIFP
was established in 1998 and
authority
to
combat
was given both criminal and civil
insurance
fraud.
In
2010,
the
civil
investigatory and penalty authority was transferred back to the
Department of Banking and Insurance through the creation of the
Bureau of Fraud Deterrence.
No court has found the comprehensive civil and criminal
provisions enacted by the New Jersey Department of Banking and
Insurance, Bureau of Fraud Deterrence and the OIFP to violate
the constitutional rights of defendants. To the contrary, the
New Jersey Supreme Court has praised the IFPA as an outstanding
weapon to combat the massive problem of insurance fraud in New
Jersey. See e.g. Merin v. Maglaki, 126 N.J. 430, 436
(1992)(upholding the IFPA upon a finding that the
"Commissioner's interpretation of the Act reasonably and
substantially effectuates the legislative intent to combat
insurance fraud aggressively"); State v. Fleishman, 189 N.J. 539
(2007)(upholding the addition of criminal sanctions in addition
to existing civil sanctions under the IFPA).
In lieu of citing case law, the Complaint cites a law
review article, Abramovsky, supra, 98 J. CRIM. L. & CRIMINOLOGY
363, as support for the proposition that "the use of SIUs and
parallel civil litigation under the IFPA to conduct criminal
investigations tramples on the constitutional rights of the
targets of criminal investigations." Complaint at ¶15.
Far from offering support for the Complaint, Professor
Abramovsky does not even discuss the type of action alleged by
Patel, a non-attorney, arising from potential parallel criminal
proceedings. In addition, the article specifically recognizes
that the vast majority of states have a system for the civil and
criminal prosecution of insurance fraud similar to that of the
IFPA, yet no court has found the structure to be
"constitutionally defective." Id. at 378, 415.1
2. The State is Immune from all ~ 1983 Claims Alleged Under
the Eleventh Amendment.
The Complaint names Hoffman and Chillemi in their
respective official capacities as Acting Attorney General and
Acting Insurance Fraud Prosecutor. No facts are alleged which
would place either Defendant outside of his official capacity.
1Professor Abramovsky refers to New Jersey as a "majority
model" state:
Currently, there are forty-seven "majority model" fraud
bureaus in thirty-nine states. In these jurisdictions,
of
cases
refer
suspected
companies
insurance
[t]he
insurance fraud to state insurance fraud bureaus, which in
turn investigate the cases and refer a percentage to state
bureaus
these
fraud
Since
authorities.
prosecutorial
agency,
of
state
some
under
auspices
the
function
typically
they are often imbued with law enforcement powers and their
agents may execute search warrants and carry weapons. In
2003, over 125,000 cases were referred by insurers to these
various state bureaus for the investigation of potential
insurance fraud. Id., 98 J. GRIM. L. & CRIMINOLOGY at 378379.
11
As such, any claim for damages brought against them in the
Complaint under 42 U.S.C. §1983 is barred in its entirety under
the Eleventh Amendment.
In that the Complaint has sued both Defendant Hoffman and
Defendant Chillemi in their "official capacity," it fails to
allege specific facts which would establish a plausible claim
for relief based upon their personal involvement in the alleged
constitutional violations. In order to maintain a cause of
action under 42 U.S.C. § 1983 a plaintiff must allege actual
specific conduct by a defendant which violates plaintiff's
clearly established constitutional rights. Aschcroft v. Iqbal,
556 U.S. 662, 675-676, 129 S.Ct. 1937, 172 L.Ed.2d 868 (2009)("a
plaintiff must plead that each Government-official defendant,
through the official's own individual actions, has violated the
Constitution"); see also Ruffin v. Beal, 468 F. Supp. 482, 490
(E.D. Pa. 1978)(citing Gittlemacker v. Prasse, 428 F.2d 1, 3 (3d
Cir. 1970) (same)). Because there is no respondeat superior
liability under 42 U.S.C. ~ 1983, claims against individual
public officials must fail in the absence of their personal
involvement in the alleged constitutional violation. Evancho v.
Fisher, 423 F.3d 347, 353 (3d Cir. 2005)(quoting Rode v.
Dellarciprete, 845 F.2d 1195, 1207 (3d Cir. 1988)).
The Eleventh Amendment is a jurisdictional bar which
deprives federal courts of subject matter jurisdiction over
12
actions against a state. Blanciak v. Allegheny Ludlum Corp., 77
F.3d 690, 693 n.2 (3d Cir. 1996) (citing Pennhurst State School
& Hosp. v. Halderman, 465 U.S. 89, 98-100, 104 S.Ct. 900, 79
L.Ed.2d 67 (1984)). "The state's sovereign immunity, moreover,
is preserved under Section 1983; "a suit against a state
official in his or her official capacity is not a suit against
the official but rather is a suit against the official's
office." Will v. Michigan Dep t of State Police, 491 U.S. 58,
71, 109 S.Ct. 2304, 105 L. Ed.2d 45 (1989)(citing Brandon v.
Holt, 469 U.S. 464, 471, 105 S.Ct. 873, 83 L.Ed.2d 878
(1985)(emphasis added)). Such a suit is thus no different from a
suit against the state itself. Id. (citing Kentucky v. Graham,
473 U.S. 159, 165-166, 105 S.Ct. 3099, 87 L.Ed.2d 114 (1985)).
Accordingly, Hoffman and Chillemi are immune from any claims
asserted in the Complaint.
3. The Complaint Fails under the Younger Abstention
Doctrine.
Because the Complaint in essence requests injunctive relief
enjoining or interfering with the Lajara Action, it is barred
under the abstention doctrine set forth in Younger v. Harris,
401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). Younger
"espouse [s] a strong federal policy against federal-court
interference with state judicial proceedings absent
extraordinary circumstances." Middlesex Cnty. Ethics Comm. v.
13
Garden State Bar Ass n, 457 U.S. 423, 431, 102 S.Ct. 2515, 73
L.Ed.2d 116 (1982); see also Miller v. Mitchell, 598 F.3d 139,
145-146 (3d Cir. 2010)("Under Younger federal courts must
abstain in certain circumstances from exercising jurisdiction
over a claim where resolution of that claim would interfere with
an ongoing state proceeding.")
No exception to the Younger abstention doctrine applies, or
is even alleged here. To the contrary, Plaintiff has had and
still has every opportunity to litigate any claims raised here
in the pending Lajara Action. The Complaint's assertion that the
this court should enjoin the State from "continuing to use
parallel civil litigation" to conduct "criminal investigations"
amounts to an improper request to enjoin the Lajara Action in
state court and, as such, is squarely barred by the Younger
abstention doctrine.
Alternatively, the declaratory and injunctive prayers for
relief in Counts I and II of the Complaint are barred by the
Anti-Injunction Act, 28 U.S.C. § 2283, which provides that "[a]
court of the United States may not grant an injunction to stay
proceedings in a State court except as expressly authorized by
Act of Congress, or where necessary in aid of its jurisdiction,
or to protect or effectuate its judgments." When "declaratory
relief would produce the same effect as an injunction, a
declaratory judgment is barred if section 2283 would have
14
prohibited an injunction." U.S. Steel Corp. Plan for Emp. Ins.
Benefits v. Musisko, 885 F.2d 1170, 1175 (3d Cir. 1989)(citing
Thiokol Chem. Corp. v. Burlington Indus., Inc., 448 F.2d 1328,
1332 (3d Cir. 1971), cert. denied, 404 U.S. 1019, 92 S. Ct. 684,
30 L.Ed.2d 668 (1972)). Here, under both the Younger abstention
doctrine and the Anti-Injunction Act, the declaratory and
injunctive claims in the Complaint are baseless and frivolous.
B. The Complaint is Not Well-Grounded in Fact.
Factually, the Complaint fails to allege a plausible claim
for relief. Plaintiff has not been criminally charged and has
been represented by counsel throughout the Lajara Action.
Moreover, there are no plausible facts alleged to support the
bald allegation that the civil penalty action brought by the
Commissioner of Banking and Insurance is, in any way, tied to a
potential criminal investigation. Since he has not been
criminally charged, Plaintiff could not possibly have been
deprived of any constitutional rights. Therefore, the Complaint
amounts to a veiled threat intended to deter the State from
considering the future filing of criminal charges, or to be used
as leverage in the Lajara Action. Such litigation tactics are
clearly improper and subject to sanctions.
1. The Allegation of Outsourcing Has No Basis in Fact.
The Complaint alleges that the OIFP "outsources" its
criminal investigations based on nothing other than "information
15
and belief" and the existence of statutory referrals from
insurance company SIUs to the OIFP. See N.J.S.A. § 17:33A-9.
Compliance with the statutory scheme, however, is not evidence
of "outsourcing." Plaintiff's attempt to allege a violation of
his constitutional rights based solely on the number of private
party referrals to the OIFP is baseless.
2. Plaintiff Has Alleged No Injury-In-Fact.
Also fatal to Plaintiff's claim is the fact that he has not
been injured. Because Patel has not been charged with any crime,
he has not -- and cannot -- allege a constitutional violation of
his rights. The Complaint does not allege a particularized
"injury-in-fact" and is subject to immediate dismissal under the
"case or controversy" requirement of Article III of the United
States Constitution. See Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)("[T]he
`injury-in-fact test requires more than an injury to a
cognizable interest. It requires that the party seeking review
be himself among the injured." (citations omitted)); Toll Bros.,
Inc. v. Twp. of Readington, 555 F.3d 131, 138 (3d Cir. 2009).
Plaintiff cannot simply bring a claim on behalf of unidentified
persons based entirely on hypothetical or abstract harms not yet
suffered. Railway Mail Ass n v. Corsi, 326 U.S. 88, 93, 65 S.Ct.
1483, 89 L.Ed. 2072 (1945). To do so is to request that this
court issue an advisory opinion, which is disallowed. See
16
Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126-27, 127
S.Ct. 764, 166 L.Ed.2d 604 (2007).
(a)
Plaintiff has not been deprived of his right to
counsel.
The Complaint asserts, in hypothetical fashion, that the
alleged "outsourcing" of criminal investigations deprives
defendants of the constitutional right to counsel. Complaint at
¶¶18, 24. This claim has no basis in law or fact particularly as
to Patel, who has been represented by counsel throughout the
Lajara Action. Moreover, Plaintiff has not cited to a single
fact to support his reckless claim that OIFP has outsourced any
criminal investigation to an insurance company. Accordingly,
this claim is subject to sanctions under the Rule.
(b)
Plaintiff has not been deprived of his right
against self-incrimination.
The Complaint also alleges that Plaintiff has been deprived
of his right against self-incrimination. Precisely because he
has been represented by counsel throughout the Lajara Action,
Patel has had every opportunity to assert his Fifth Amendment
privilege. Moreover, as a general rule, the state has no
obligation to notify the Defendant of the Fifth Amendment
privilege against self-incrimination unless there is a custodial
interrogation. See generally Miranda v. Arizona, 384 U.S. 436,
85 S.Ct. 1602, 16 L.Ed.2d 654 (1966). Further, the privilege is
not violated as a matter of law if the only consequence to an
17
assertion of the Fifth Amendment is that the trier of fact in a
civil proceeding may draw an adverse inference. State v. P.Z.,
152 N.J. 86, 107-108 (1997); Arthur v. Sterns, 560 F.2d 477, 478
(lst Cir. 1977). Here, Plaintiff has not alleged a custodial
interrogation by either the State or Allstate. Further, he has
not been charged with a crime. Finally, he has not actually pled
the Fifth Amendment in the Lajara Action. Accordingly, this
claim has no basis in law of fact as to Patel. Moreover,
Plaintiff's irresponsible assertion that private actors, such as
Allstate, must read a person his constitutional rights during a
claims investigation warrants the imposition of sanctions.
(c)
Plaintiff has not been deprived of his right to
indictment by grand jury.
Finally, the Complaint alleges that Plaintiff has been
deprived of his right under New Jersey law that he be provided
with notice that he is the target of a criminal investigation
and the requirement to convene a grand jury. Complaint, at ¶¶18,
24. There is no such notice requirement. In addition, precisely
because he has not been charged with a crime, Plaintiff has no
grand jury rights under the Federal or State Constitutions. A
request for this court to issue an injunction or assess damages
in regard to this hypothetical right of indictment by grand jury
is speculative and frivolous.
A requirement that a state civil investigator or private
insurance company investigator must advise a suspect that he is
under criminal investigation would have no basis in law, and
would impose a duty on a civil investigation that does not exist
in a criminal investigation itself. Plaintiff's constitutional
claims must be summarily rejected because it is firmly
established that the protections of the United States and New
Jersey Constitutions are directed only at "state action." Am.
Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 49-50, 119 S.Ct.
977, 143 L.Ed.2d 130 (1999)(no constitutional violation because
action taken by insurance company with mere approval or
acquiescence of the state is not "state action"); see also
Kinsella v. Welch, 362 N.J.Super. 143, 156 (N.J. App. Div.
2003)(complaint fails to allege a prima facie state
constitutional claim against the New York Times and its
employees who are private actors).
Plaintiff fails to state a prima facie constitutional claim
even if he could establish that the alleged violations were the
result of "state action." Where, as here, the constitutional
violations are allegedly committed by the Allstate SIU, a
private actor, the claims fail on multiple counts and should be
summarily dismissed as frivolous. In addition, Plaintiff's
irresponsible assertion that a private party such as Allstate
19
must read a person constitutional rights during a claims
investigation warrants the imposition of sanctions.
nnTwTm
TT
SANCTIONS SHOULD ISSUE PURSUANT TO RULE 11(C).
Given that it fails to allege a viable, recognized cause of
action or good faith extension of existing law, the only
objective purpose of the Complaint is to harass or threaten the
State. Therefore, this court should assess sanctions.
The purpose of Rule 11 is deterrence. Doering v. Union
County Bd. of Chosen Freeholders, 857 F.2d 191, 194 (3d Cir.
1988). The intended goal and purpose of Rule 11 is
accountability. Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90,
94 (3d Cir. 1988). "The rule imposes on counsel a duty to look
before leaping and may be seen as a litigation version of the
familiar railroad crossing admonition to 'stop, look, and
listen."' Oxfurth v. Siemens, A.G., 142 F.R.D. 424, 427 (D.N.J.
1991)(quoting Lieb, supra, 788 F.2d at 157). Rule 11 does not
permit the use of the "pure heart and empty head" defense.
Gaiardo v. Ethyl Corp., 835 F.2d 479, 482 (3d Cir.
1987)(citations omitted).
In determining compliance with the rule, the court must
apply an objective standard of reasonableness under the
circumstances. Lieb, su ra, 788 F.2d at 157. Courts should apply
Rule 11 sanctions only in "exceptional circumstances," Gaiardo,
20
F.2d at 483, and sanctions are "'appropriate when it is the
minimum that will serve to adequately deter the undesirable
behavior."'2 Doering, 857 F.2d at 194 (citations omitted).
Here, there is no objective reasonable basis in law or fact
to support the allegations in the Complaint.
This filing has
clearly been made for an improper purpose which is either a
veiled threat intended to deter the State from the filing of
criminal charges, or to be used as leverage in the Lajara
Action. Plaintiff's counsel was placed on notice as to the
frivolous nature of the Complaint through a letter served by the
State with a draft copy of this brief on August 25, 2014.
Plaintiff's counsel has not responded in any way. In sum, this
is an exceptional case and circumstance which this court should
not let go unpunished and undeterred. This court should assess
sanctions as necessary and appropriate to deter such conduct in
the future.
Fed. R. Civ. P. 11(c) states in relevant part: 4) Nature of a
Sanction. A sanction imposed under this rule must be limited to
what suffices to deter repetition of the conduct or comparable
conduct by others similarly situated. The sanction may include
nonmonetary directives; an order to pay a penalty into court;
or, if imposed on motion and warranted for effective deterrence,
an order directing payment to the movant of part or all of the
reasonable attorney's fees and other expenses directly resulting
from the violation.
2
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CONCLUSION
For all the foregoing reasons, the Complaint is not based
upon an objectively reasonable inquiry into the law and the
facts. Indeed, it does not allege a cause of action that has
been recognized by any court, anywhere. The Complaint requests
this court to issue an advisory opinion on hypothetical claims
relative to which the State clearly has immunity and to which
this court should abstain from entertaining under wellestablished doctrine. As such, the filing amounts to an improper
attempt to threaten or harass the State. Accordingly, this court
should impose sanctions under Fed. R. Civ. P. 11(c).
JOHN J. HOFFMAN
ACTING ATTORNEY GENERAL OF NEW JERSEY
By:/s/ Richard E. Wegryn, Jr.
Richard E. Wegryn, Jr.
Deputy Attorney General
DATED: September 15, 2014
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