Lurie v. Wittner

Citations: 228 F.3d 113; 2000 WL 1399149Docket: Nos. 1186, 1449, Dockets 99-2425, 99-2426

Court: Court of Appeals for the Second Circuit; September 26, 2000; Federal Appellate Court

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Petitioner Brett K. Lurie, former sponsor and manager of five cooperative apartment buildings in Queens, New York, was convicted of multiple offenses, including schemes to defraud, real estate securities fraud, larceny, and offering a false instrument. He misapplied tenants' maintenance payments and sold apartment shares without disclosing the cooperative's deteriorating financial condition. Lurie sought a writ of habeas corpus in the U.S. District Court for the Southern District of New York, which granted the motion in part. The court identified two main issues: (1) the jury's exposure to a misinterpretation of uncharged real estate law violated the fair-notice requirement, constituting a constitutional issue; and (2) the state trial court's preclusion of Lurie’s former attorney from testifying on an advice-of-counsel defense interfered with Lurie's right to present a defense. The State appealed the district court's judgment, arguing that Lurie failed to exhaust his fair-notice claim in state court, that such a claim did not present a constitutional issue suitable for federal review, and that the trial court's ruling did not infringe on Lurie's constitutional rights. The appellate court reversed the district court's judgment granting Lurie's petition while affirming the remainder. Lurie's wrongful acts included failing to make mortgage payments, neglecting maintenance costs, writing unauthorized checks, accumulating significant debts, and filing false information with state authorities, which misled both current apartment owners and potential buyers regarding the financial health of the cooperative.

On April 25, 1996, Lurie was convicted in the New York Supreme Court of multiple counts: eight counts of conducting a scheme to defraud (N.Y. Penal Law 190.65(l)(b)), nine counts of intentional real estate securities fraud (Martin Act, N.Y. Gen. Bus. Law 352-c(5, 6)), three counts of grand larceny in the second degree (N.Y. Penal Law 155.40), three counts of grand larceny in the third degree (N.Y. Penal Law 155.35), and one count of offering a false instrument for filing in the first degree (N.Y. Penal Law 175.35). Each count required proof of intent to defraud. The charges were categorized into purchaser counts (first three scheme-to-defraud counts, securities fraud counts, and larceny counts), maintenance counts (counts 4-8 of the scheme to defraud), and the separate false instrument count. Lurie received a total sentence of two to six years, with terms served concurrently. His conviction and sentence were affirmed by the Appellate Division, and the Court of Appeals denied further appeal.

In October 1998, Lurie filed a habeas corpus motion raising three claims: due process violation due to the admission of testimony regarding statutory obligations, violation of the rule of lenity based on the statute's ambiguous interpretation, and denial of the right to present a defense due to restrictions on his former lawyer's testimony. The district court heard arguments and, on April 26, 1999, granted habeas relief on all counts except the false instrument count, determining that the statute could be interpreted in a way that Lurie’s conduct did not violate it, thus applying the rule of lenity to vacate the purchaser-count convictions.

The district court determined that Lurie’s Sixth Amendment right to present a defense was violated by the state trial court's conditional refusal to allow testimony from Lurie’s former attorney, creating an unconstitutional dilemma between Lurie’s Fifth Amendment privilege against self-incrimination and his Sixth Amendment right. Consequently, Lurie’s maintenance convictions were vacated. However, the district court did not address the false instrument count in this initial ruling. Upon reconsideration, the district court maintained that the exclusion of the attorney's testimony did not necessitate vacating the false instrument count, reasoning that the proposed testimony was irrelevant to that charge and that excluding irrelevant evidence does not breach the Sixth Amendment. The district court also declined to revisit its decisions on the rule of lenity, the Sixth Amendment ruling, or Lurie’s exhaustion of state remedies.

On appeal, the State contends that Lurie failed to properly raise his fair-notice claim in the state courts, rendering it unexhausted and ineligible for federal habeas relief. The State further argues that the district court did not apply the appropriate standards for federal habeas review and wrongly recognized a new constitutional law in violation of the Teague precedent. Additionally, the State asserts that the evidentiary ruling regarding Lurie’s attorney's testimony was reasonable under Supreme Court precedent. Lurie cross-appeals, arguing that the refusal to allow his attorney to testify necessitates vacating the false instrument count. Since Lurie’s petition was filed post-AEDPA enactment, its provisions govern the case, and the court has jurisdiction over both appeals without needing a certificate of appealability for the State. The district court granted such a certificate for Lurie’s cross-appeal. The court’s review of the habeas corpus decision is de novo. Regarding fair notice, the district court found that the jury may have convicted Lurie based not on the required intent but solely on a witness’s interpretation of New York General Business Law § 352-e(2), which it deemed ambiguous and insufficient to notify cooperative building sponsors of potential criminal liability. The State argues that this finding is erroneous, as the ambiguous statute was not the one Lurie was charged under, contending that this ruling contradicts the standards for reviewing habeas corpus petitions and establishes new constitutional law contrary to Teague v. Lane.

The State contends that the district court incorrectly determined that Lurie had exhausted his fair-notice claim in state courts. Expert witness Mary DiStephan, Assistant Attorney General, testified regarding the requirements for filing and amending real estate securities offering plans, emphasizing the sponsor's obligation to provide current and accurate information to prospective purchasers. DiStephan explained that sponsors must refrain from selling properties while amendments to offering plans are pending to avoid misleading buyers, which aligns with the interpretation of New York General Business Law § 352-e(2). This statute, while addressing offering plans, was interpreted by DiStephan to impose a moratorium on sales during amendment review. Although violation of § 352-e(2) is a misdemeanor, Lurie was not charged under this statute. The district court agreed with Lurie that the rule of lenity should apply, based on two points: the statute only mentions offerings and not amendments, and a prior ruling by Acting Justice Patricia Williams allowed sales during amendment review. The State argues that Lurie did not exhaust his fair-notice claim, as he did not raise it in his initial direct appeal to the Appellate Division; he first invoked the rule of lenity in his reply brief.

Lurie previously argued that the trial court misinterpreted New York's 352-e(2) statute, referencing Justice Williams's ruling on its applicability to pending amendments, but did not invoke the rule of lenity as a basis for fair notice. The Appellate Division affirmed the trial court's decision without addressing the lenity rule. Lurie later attempted to raise the rule of lenity in a footnote while seeking permission to appeal to the New York Court of Appeals, but the State contends that this argument was inadequately presented, as it was only raised in a reply brief on direct appeal and as a footnote in a failed discretionary appeal, resulting in a failure to exhaust state remedies.

Lurie claims the State waived the exhaustion issue based on comments made by government counsel during a district court hearing, but the State argues those comments pertained to Lurie's substantive arguments and did not constitute an express waiver of the exhaustion requirement. Under the Antiterrorism and Effective Death Penalty Act (AEDPA), a federal court can only grant a writ of habeas corpus if the applicant has exhausted state remedies, there are no available state corrective processes, or such processes are ineffective. The AEDPA exhaustion standard aligns with the pre-AEDPA standard, which requires that a constitutional claim be "fairly presented" to state courts. In Lurie's case, he has exhausted all direct appeal avenues, including a single request for leave to appeal to the Court of Appeals, and cannot pursue collateral review for claims that could have been raised on direct appeal.

Lurie raised the fair-notice issue before two state courts, but since it was presented in a reply brief in the Appellate Division, it was not considered properly presented under New York law.

Raising a new substantive legal issue in a reply brief is considered improper, thus Lurie did not adequately present his rule-of-lenity argument during his appeal. In his petition to the New York Court of Appeals, he mentioned the rule-of-lenity in a footnote, but the court's review is discretionary and was declined. Presenting a claim for the first time in a discretionary review court does not exhaust the claim unless the court considers it. Lurie's references to the rule of lenity were insufficient for proper claim raising in New York courts. He argued that his rule-of-lenity argument was implied in his initial brief to the Appellate Division, but it was unclear whether his arguments specifically required the consideration of the rule of lenity. Regardless, his fair-notice claim was found to lack merit. Under the Antiterrorism and Effective Death Penalty Act (AEDPA), a writ under § 2254 is permissible only if a state court's ruling conflicts with or unreasonably applies clearly established federal law as determined by the Supreme Court. The threshold issue is whether Lurie's claim is based on a principle of Supreme Court law that was clearly established when his state conviction became final. The term “clearly established Federal law” refers solely to the Supreme Court's holdings at the time of the relevant state-court decision. The rule of lenity resolves ambiguities in criminal statutes in favor of defendants and is applied when doubts about a statute’s intended scope persist after examining its language, legislative history, and policies. It serves to protect the constitutional right to fair warning, ensuring that criminal statutes provide clear notice of illegal conduct. The Supreme Court outlines three manifestations of the fair warning requirement: first, the vagueness doctrine prohibits enforcement of overly vague statutes; second, the rule of lenity limits enforcement to conduct clearly covered by ambiguous statutes; and third, due process prevents the application of novel interpretations of statutes to conduct not clearly indicated by the statute or prior judicial decisions.

The key issue is whether the relevant statute provided clear notice that the defendant’s conduct was criminal, a requirement rooted in due process and established by the Supreme Court. Fair notice is essential for a criminal statute to be constitutionally valid. At least two circuits have ruled that federal courts cannot overturn state convictions based on the rule of lenity unless the state statute is unconstitutionally vague or lacks fair notice. Lurie's claim is based on this constitutional right, and under the Antiterrorism and Effective Death Penalty Act (AEDPA), it must be evaluated against federal law standards. The court must determine if the state trial court's ruling was contrary to or an unreasonable application of clearly established federal law. The statute allows federal habeas relief if the state court's decision contradicts Supreme Court law or misapplies it. For Lurie's appeal, he does not claim the statutes were ambiguous, so it cannot be concluded that the New York courts contradicted Supreme Court precedent. Thus, the state court's decision aligns with established federal law. Additionally, when assessing "unreasonable application," the standard is objective, requiring federal courts to evaluate whether the state court's application of federal law was objectively unreasonable, rather than simply comparing it to other jurists' decisions.

An unreasonable application of federal law, as defined under 28 U.S.C. § 2254(d)(1), is distinct from a mere incorrect application; it must be proven that the state court’s application was unreasonable rather than just erroneous. The Supreme Court in Williams v. Taylor clarified that a federal habeas court cannot issue a writ solely based on its own judgment of a state court's incorrect application of clearly established federal law. Instead, it must determine if the state's application was unreasonable. The case referenced involved a prisoner arguing that the state court correctly identified the governing legal rule but applied it unreasonably to the facts of his case. The Supreme Court emphasized that a valid claim of unreasonable application would qualify for relief under § 2254(d)(1). The current appeal raises the issue of whether the Supreme Court's fair-notice caselaw should apply in a different context, specifically where the petitioner was not charged under an ambiguous statute. The Court in Williams v. Taylor did not decide if an unreasonable refusal to extend a constitutional doctrine warrants federal habeas relief. The Fourth Circuit previously indicated that unreasonable extensions or refusals to extend legal principles should be analyzed under the same clause, but the current case does not require a definitive ruling on this classification. It suffices to state that if a state court unreasonably applies this Court's law to a prisoner’s case, a federal court may rule it falls under the “unreasonable application” clause.

Justice O’Connor addressed the "problems of precision" regarding the Fourth Circuit's ruling. In a recent Supreme Court plurality opinion, four Justices concluded that a state court's determination may be overturned under the Antiterrorism and Effective Death Penalty Act (AEDPA) if it is deemed unreasonable in failing to extend a legal principle to a relevant context. Although this view did not secure a majority, Justice O’Connor’s concurring opinion was narrower and is considered the Court's holding. She emphasized that the state court’s decision was neither contrary to nor an unreasonable application of existing Supreme Court law.

The Court avoided resolving whether an unreasonable refusal to extend Supreme Court precedents meets AEDPA’s "unreasonable application" standard, instead assuming for argument's sake that it might. The analysis focused on whether the refusal to extend the precedent in this case was unreasonable. The petitioner, Lurie, argued that he was not charged under a specific statute and that his claim relied on a more complex interpretation of the law. He contended that the fraud statutes were sufficiently clear and that the jury should not have considered a broader interpretation of an uncharged statute to infer fraudulent intent regarding the charged statutes. Lurie sought a ruling that it is "objectively unreasonable" for state courts to accept evidence about a defendant's state of mind based on uncharged statutes, particularly when such obligations could be interpreted in a way that indicated compliance.

The excerpt articulates a legal analysis regarding the application of fair-notice precedents in a case involving Lurie, who was charged with fraud and larceny. The court assessed whether the state courts' decision to reject an extension of these precedents was objectively unreasonable, concluding that it was not. The fair-notice requirement aims to prevent convictions based on ambiguous interpretations of statutes. In Lurie’s case, he was charged under specific statutes for fraud and larceny, rather than for violations of a technical statutory requirement that was not explicitly charged. 

The Appellate Division emphasized that the jury was not influenced by any uncharged technical violations when reaching its verdict. Testimony from DiStephan clarified the statutory requirements and the nature of defendants’ disclosures, allowing the jury to determine if Lurie intentionally engaged in fraudulent conduct. Lurie argued that the jury might have improperly concluded that any statutory violation constituted fraud; however, the court found no evidence suggesting the jury relied on such reasoning. DiStephan's testimony, which reflected the attorney general’s regulatory policy, was admitted to establish Lurie’s awareness of industry norms and the implications of knowingly misleading purchasers. 

The court also clarified that while the evidentiary ruling regarding the testimony might have been debatable, it did not constitute an unreasonable application of Supreme Court fair-notice jurisprudence. The jury retained the responsibility to establish that Lurie possessed the necessary intent to commit fraud, independent of any regulatory assumptions presented. Overall, the refusal to apply the rule of lenity to the uncharged statute was deemed consistent with established legal standards.

The district court's decision was reversed because it failed to show that it applied Supreme Court precedents regarding the Antiterrorism and Effective Death Penalty Act (AEDPA). The refusal of New York courts to implement the Supreme Court's fair-notice standards in this context was not deemed an "unreasonable application" of precedent. Regarding the advice-of-counsel defense, Lurie sought to introduce testimony from his former attorney, Richard Koral, to demonstrate his state of mind and reliance on legal advice concerning disclosure obligations. The trial court conditionally excluded Koral’s testimony, citing its irrelevance without Lurie's own testimony about his state of mind. The district court granted Lurie's habeas petition, asserting that the trial court's ruling violated Lurie's constitutional rights by effectively forcing him to testify to allow Koral’s testimony, thus infringing on his Fifth and Sixth Amendment rights. The State argued that requiring Lurie to establish a foundation for the testimony was a reasonable restriction balancing the right to present a defense with the state's interests. The district court found no Supreme Court rule mandating the admission of the disputed evidence, indicating the state court's decision was not "contrary to" established federal law. The analysis proceeded to determine whether the state court's ruling constituted an "unreasonable application" of Supreme Court precedent, which affirms the defendant's right to a full defense, subject to reasonable limitations. It emphasized that this right is not absolute and that relevant testimony can be excluded under certain circumstances without violating due process.

The accused does not have an unrestricted right to present evidence deemed incompetent, privileged, or inadmissible under standard evidentiary rules. Relevant evidence may be excluded by state courts if it risks confusing issues or misleading the jury, as supported by precedent (e.g., Michigan v. Lucas, 500 U.S. 145, 1991). While a foundational basis is required for evidence admission, the trial court's exclusion of Koral's testimony was justified because Lurie needed to establish reliance on his attorney's advice to admit such testimony. There is no Supreme Court precedent mandating the inclusion of an advice-of-counsel defense in state courts, and the circumstances in which this defense can be applied are limited. Koral's anticipated testimony was deemed immaterial, as it would not counter the significant evidence showing Lurie’s failure to fully disclose information, and reliance on attorney advice does not absolve one from wrongdoing. The trial judge clarified that the case focused on fraud and deceit, not merely on procedural issues like late filing. The court concluded that the trial court’s decision did not contradict Supreme Court precedent or misapply it. Lurie’s cross-appeal, which argued that the exclusion of his attorney's testimony should vacate the false instrument charge, was denied, as the preclusion did not necessitate vacatur of the other charges.

The judgment of the district court is partially reversed regarding Lurie's petition for a writ of habeas corpus, which was granted, but the denial of that petition is affirmed. A stay issued on November 5, 1998, preventing Lurie's surrender to the New York State Department of Correctional Services is vacated, unless still in effect. The district court's decision to overturn the purchaser-count convictions before addressing the maintenance-count convictions raises ambiguity about the applicability of habeas relief concerning the lawyer's testimony to both sets of counts. Lurie's appeal referenced a denied motion to reargue based on the Rule of Lenity, but no such motion is found in the records, and its relevance is not clarified in the brief. The State argues that the Rule of Lenity is a statutory presumption without constitutional implications and that its invocation did not sufficiently notify the federal nature of the claim. However, the Supreme Court has recognized a due process aspect to the Rule of Lenity regarding fair warning rights for defendants. Relevant provisions from 28 U.S.C. § 2254 emphasize that a writ of habeas corpus cannot be granted unless state remedies have been exhausted, although it can be denied on merits regardless of exhaustion. The State must expressly waive the exhaustion requirement to be estopped from relying on it, and an applicant is not deemed to have exhausted remedies if they can raise the issue through available state procedures. Two cautions are suggested to avoid confusion.

Williams v. Taylor involved two separate cases decided by the Supreme Court on April 18, 2000, with petitioners Terry Williams and Michael Wayne Williams. The opinion was delivered by a split majority, with Justice Stevens leading a coalition of six Justices in three parts of the decision, while Justice O’Connor's opinion, particularly addressing the standard for federal habeas review, was supported by four Justices.

The Court highlighted the challenges in distinguishing between unreasonable extensions and applications of legal principles in state-court decisions. It noted the complexities in categorizing decisions that may extend legal principles or reach conclusions contrary to those of the Supreme Court.

In assessing the sufficiency of evidence related to DiStephan's testimony, the district court found that the jury's potential overvaluation of that testimony did not equate to a due process violation. The district court's reliance on United States v. D’Alessio was critiqued, as it was a federal district court ruling rather than a Supreme Court decision and lacked the necessary analysis to support a grant of habeas relief for Lurie.

Furthermore, the relevance of proposed testimony by Koral was dismissed by the trial court, and this determination was not contested in the habeas petition, indicating a lack of challenge to the trial court's rulings on witness relevance.