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Media Alerts - Ganek v. Leibowitz - Second Circuit
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October 18, 2017
  Ganek v. Leibowitz - Second Circuit
Headline: Second Circuit Reverses Denial of Qualified Immunity and Dismisses Case Against FBI Agents and Federal Prosecutors Seeking Damages Arising From Alleged Improper Search of Manhattan Investment Fund
Area of Law: Constitutional

Issue(s) Presented:
Whether defendant federal agents and prosecutors were entitled to qualified immunity from plaintiff's damages suit alleging Fourth and Fifth Amendment violations arising from defendants' having procured and executed a federal search warrant of the plaintiff's investment fund office secured by a supporting affidavit containing a false statement.

Brief Summary: David Ganek, cofounder of the now-closed Manhattan-based Level Global (LG) Investors investment fund, sued several named Federal Bureau of Investigation ("FBI") agents and federal prosecutors from the Southern District of New York for damages resulting from alleged violations of his Fourth and Fifth Amendments arising from their procuring and executing a federal search warrant of his LG office as part of a 2010 insider trading probe. The defendants moved to dismiss Ganek's claims in the United States District Court for the Southern District of New York on the grounds that they were protected from liability for damages by qualified immunity. The district court denied the dismissal on all but two of Ganek's claims, rejecting the agents' and prosecutors' claims of qualified immunity on most of the claims. On timely appeal, the Second Circuit reversed the district court's ruling, holding that the agents and prosecutors were, in fact, entitled to qualified immunity on the remaining claims.

To read the full opinion, please visit:
">http://www.ca2.uscourt.../de.....0/1/hilite/


Extended Summary: David Ganek is a co-founder of the now-defunct multi-billion dollar New York-based Level Global (LG) Investors investment fund. In October 2010, Spyridon Adondakis, a research analyst who had been employed by LG until his dismissal just months earlier, was approached by three FBI agents, defendants in this case, with wiretap evidence that they alleged proved he was guilty of engaging in insider trading while he was still employed at LG. Adondakis admitted to knowingly participating in insider trading and subsequently sharing that sensitive information with three employees at LG, including Ganek. Adondakis agreed to cooperate with the federal authorities and subsequently met with the FBI agents and two Assistant United States Attorneys (AUSAs), also defendants here. In that meeting, Adondakis told the prosecutors and agents that he provided inside information to LG co-founder Anthony Chiasson, Ganek, and a third employee. Adondakis further stated that he informed Chiasson and the third employee that the information he was providing to them came from an inside source, however, he explicitly stated that he did not tell Ganek the source of this information.

In November 2010, FBI agent defendants applied to a Southern District of New York Magistrate Judge for a warrant to search LG offices. The affidavit submitted in support of the warrant application included the misstatement that Adondakis had informed Ganek, as well as the other two LG employees, that the information he was conveying to him was from inside sources, despite Adondakis's statements to the agents to the contrary as to Ganek. The magistrate judge authorized the warrant and on November 22, 2010, federal agents executed its search of the LG office, including a search of Ganek's office, computer and telephone. In subsequent exchanges with AUSAs involved in the investigation, named here as defendants, as well as with United States Attorney Preet Bharara, also a named defendant, LG representatives expressed concern that the search would cause investors to withdraw from the fund and asked that the prosecutor's office issue a statement that Ganek was not a target of the probe and that the office search did not constitute probable cause that Ganek engaged in insider trading. That request was denied and LG representatives were told that the search with initiated with full consideration at the highest levels of the possible financial consequences to LG. Co-founder Chiasson was subsequently tried and convicted of securities fraud based upon insider trading, with Adondakis testifying as a cooperating witness at his trial. Ganek was never charged with insider trading, however, in February 2011 he closed the LG fund due, he said, to the flight of investors.

In February 2015, Ganek filed this complaint in the United States District Court for the Southern District of New York seeking money damages to recover the loss in value of the LG fund. In it, he charged named FBI agents and federal prosecutors with Fourth and Fifth Amendment violations arising from improperly procuring and executing the 2010 search warrant, alleged failure-to-intercede claims against all defendants, and asserted a claim for supervisory liability against specific named AUSAs and United States Attorney Bharara. Specifically, Ganek alleged that procuring and ultimately executing the office search pursuant to a supporting affidavit falsely stating that Ganek had been told by Adondakis that the information was from inside sources constituted an unreasonable search and seizure under the Fourth Amendment as well as the deprivation of property without due process in violation of the Fifth Amendment. Defendants moved to dismiss all of Ganek's claims on the theory that they were protected from suit by qualified immunity. The district court denied the motion as to all but two of Ganek's claims. On appeal, the Second Circuit reversed the lower court's finding, ruling that the defendants were entitled to qualified immunity and remanding the case for dismissal.

Qualified immunity is meant to protect law enforcement officers from claims for money damages in connection with carrying out their professional duties. A plaintiff may circumvent this protection and move forward with their claims if he or she is able to plead facts showing that "the official violated a statutory or constitutional right;" and "that the right was clearly established at the time of the challenged conduct." The Second Circuit found, in this case, that Ganek failed to plead facts supporting a Fourth Amendment unreasonable search and seizure claim or a Fifth Amendment claim of deprivation of property without due process because a hypothetical corrected affidavit would nevertheless have supported probable cause for the search warrant. The court reasoned specifically that, even assuming the statement that Ganek had been told Adondakis's information came from insider sources in the affidavit was false, that statement was not central to finding probable cause for the search and therefore there was no constitutional violation. The Court further found that, because Ganek's Fourth and Fifth Amendment claims failed, his failure to intercede claim must also fail. Lastly, the Court ruled that the Ganek did not provide sufficient facts to prove that the named supervisors had enough personal involvement with the submission of the misstatement to the magistrate judge for the search warrant to support allegations for supervisory liability.

To read the full opinion, please visit:
">http://www.ca2.uscourt.../de.....0/1/hilite/


Panel: Judges Raggi, Chin, and Carney

Argument Date:
3/24/2017

Argument Location: New York, NY

Date of Issued Opinion:
10/17/2017

Docket Number: No. 16-1463-cv

Decided:
Reversed and Remanded

Case Alert Author:
Ollia Pappas

Counsel:
Nancy Gertner (Anna Benvenutti Hoffmann, Barry Scheck, Nick Brustin, Farhang Heydari, Alexandra Lampert, Rick Sawyer, on the brief); Neufeld Scheck & Brustin, LLP for Plaintiff-Appellee; Sarah S. Normand (Andrew E. Krause, Jeffrey S. Oestericher, Assistant United States Attorneys, on the brief), Assistant United States Attorney for Joon H. Kim, Acting United States Attorney for the Southern District of New York, for Defendants-Appellants.

Author of Opinion: Judge Raggi

Case Alert Circuit Supervisor: Professor Elyse Diamond

Edited: 10/18/2017 at 01:47 PM by Elyse Diamond

    Posted By: Elyse Diamond @ 10/18/2017 09:55 AM     2nd Circuit  

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