Mail Fraud, Visual Artists Act, Jury Tampering
This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Judge I. Leo Glasser, dismissing mail fraud charges relating to a scheme to help applicants cheat in passing the written test for commercial drivers' licenses, found that the mailings of the licenses were not really the "mechanism of deceit." Judge Raymond J. Dearie decided that plaintiff's state law contract claims against British Airways were not preempted by the Airline Deregulation Act. Judge Frederic Block declined to grant an injunction prohibiting a landlord from demolishing a building that contained works of graffiti art. And Judge Denis R. Hurley granted defendant's motion for a new trial because of possible jury tampering.
Mail Fraud Statute
In United States v. Ng, 12 CR 553 (EDNY, Sept. 25, 2013). Glasser held that a particular scheme did not violate the mail fraud statute, 18 U.S.C. §1349, where the use of the mails was not part of the execution of the fraud. The court therefore granted defendants' motions to withdraw both their waivers of indictment and their guilty pleas to an Information, and to dismiss the Information.
Ying Wai Phillip Ng and Pui Kuen Ng pleaded guilty to an Information charging a conspiracy to commit mail fraud based on the following facts. Defendants owned and ran a driving school serving mostly Chinese immigrants. While providing legitimate training, they also devised a scheme to help Chinese-speaking applicants with limited proficiency in English to pass the written portion of the Commercial Drivers' License (CDL) test. That test was given only in English and Spanish.
The scheme involved placing a concealed camera on the test-taker conveying an image of the written test to a receiver in a nearby van in which Mr. Ng sat and transmitted the answers to a listening device worn by the applicant. After the applicants passed the written test, the Department of Motor Vehicles (DMV) mailed them a permit to take the driving test, which they could pass without subterfuge. The DMV then mailed the CDL to the applicants. The mailings of the permit and CDL triggered the alleged mail fraud. The alleged victims of the fraud were the applicants' prospective employers. (The DMV was not a suitable victim because the licenses were not their "property" under §1349.)
At sentencing the court, sua sponte, raised concerns about the existence of mail fraud here, and the parties submitted extensive briefing.
Defendants' conduct clearly violated §392 of N.Y. Vehicle & Traffic Law, which makes this sort of deception a misdemeanor. But absent clear congressional intent, a court should not assume federal jurisdiction, via the mail fraud statute, over conduct traditionally policed by the states. Slip op. 7. As Justice Antonin Scalia stated in Schmuck v. United States, 459 U.S. 705, 722-23 (1989) (dissenting opinion):
This federal statute is not violated by a fraudulent scheme in which, at some point, a mailing happens to occur—nor even by one in which a mailing predictably and necessarily occurs. The mailing must be in furtherance of the fraud.
During the investigation, the government had tried to strengthen its jurisdictional argument by using an undercover agent, who told defendants he needed the CDL to drive a bus and had them agree, if contacted by his prospective employer, not to reveal the trick used to pass the written test. The Information charged that Mr. and Mrs. Ng conspired with others to defraud the "prospective employers" by obtaining their money through false representations and causing mailings of fraudulently acquired licenses and permits.
This theory, in Glasser's view, did not amount to mail fraud. In Toulabi v. United States, 875 F.2d 122, 123 (7th Cir. 1989), defendant fraudulently obtained a license to drive a taxi in Chicago, and the license was mailed to him. As the U.S. Court of Appeals for the Seventh Circuit stated there, "Why the United States should be so interested in enforcing the 'laws of the City of Chicago' is something of a mystery. The mailings here were not the mechanism of deceit." See also, Cleveland v. United States, 531 U.S. 12.
Here, too, the statute was not violated merely because a mailing happened to take place. "The objective of the scheme here was to deceive the DMV and was accomplished when the CDL test was passed and not when the mailing occurred…" Slip op. 9. On these facts the court saw no reason to enforce New York law with a felony statute carrying a jail term of up to 20 years. Slip op. 18-19.
Claims Against Airline
In Dover v. British Airways (UK), 12 CV 5567 (EDNY, Nov. 7, 2013), Dearie denied defendant's motion to dismiss the complaint of putative class plaintiffs, finding that plaintiffs' contract claims were not preempted by federal law and pleaded sufficient detail to state a claim.
Plaintiffs are members of the "Executive Club," a frequent flyer program offered by British Airways. Upon joining the Executive Club, they agreed that, when exchanging accrued points for air travel, they would have to pay various charges, including "fuel surcharges." The essence of their complaint is that the "fuel surcharges" were used to extract hundreds of dollars from Executive Club members for each ticket accessed through the program, without reference to any actual fuel costs. In support of this proposition, they pleaded that (1) statistical analysis showed little relationship between the fuel charges and the price of fuel, and (2) the fuel charges were excessive as, for example, in identified instances when they were greater than the cost of an economy ticket on the same flight. Slip op. 2-4.