Ganek v. Leibowitz

• Citation: 874 F.3d 73
• Decision Date: 17 October 2017
• Docket Number: No. 16-1463-cv August Term 2016.,16-1463-cv August Term 2016.
• Parties: David GANEK, Plaintiff–Appellee, v. David LEIBOWITZ, Reed Brodsky, David Makol, Matt Komar, James Hinkle, Holly J. Trask, David Chaves, Patrick Carroll, Rachel Rojas, Diego Rodriguez, Marc P. Berger, Christopher L. Garcia, Richard B. Zabel, Boyd M. Johnson, III, Preetinder S. Bharara, Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

874 F.3d 73

David GANEK, Plaintiff–Appellee,
v.
David LEIBOWITZ, Reed Brodsky, David Makol, Matt Komar, James Hinkle, Holly J. Trask, David Chaves, Patrick Carroll, Rachel Rojas, Diego Rodriguez, Marc P. Berger, Christopher L. Garcia, Richard B. Zabel, Boyd M. Johnson, III, Preetinder S. Bharara, Defendants–Appellants.

No. 16-1463-cv August Term 2016.

United States Court of Appeals, Second Circuit.

Argued: March 24, 2017
Decided: October 17, 2017

Sarah S. Normand , Assistant United States Attorney (Andrew E. Krause, Jeffrey S. Oestericher, Assistant United States Attorneys, on the brief), for Joon H. Kim, Acting United States Attorney for the Southern District of New York, New York, New York, for Defendants–Appellants.

874 F.3d 77

Nancy Gertner (Anna Benvenutti Hoffmann, Barry Scheck, Nick Brustin, Farhang Heydari, Alexandra Lampert, Rick Sawyer, on the brief), Neufeld Scheck & Brustin, LLP, New York, New York, for Plaintiff–Appellee.

Joshua L. Dratel, Law Offices of Joshua L. Dratel, P.C., New York, New York; John W. Keker, Brook Dooley, Keker & Van Nest LLP, San Francisco, California, for Amicus Curiae National Association of Criminal Defense Lawyers.

Before: Raggi, Chin, Carney, Circuit Judges.

Reena Raggi, Circuit Judge:

In this Bivens action, plaintiff David Ganek, a co-founding partner of investment fund Level Global Investors ("LG"), sues the named agents of the Federal Bureau of Investigation ("FBI") and federal prosecutors in the United States Attorney's Office for the Southern District of New York ("SDNY") for alleged violations of his Fourth and Fifth Amendment rights in procuring and executing a federal search warrant at LG's Manhattan offices on November 22, 2010. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics , 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Defendants now appeal from an order of the United States District Court for the Southern District of New York (William H. Pauley III, Judge ), denying their motion for qualified immunity and, therefore, for dismissal of the entirety of Ganek's complaint. See Ganek v. Leibowitz , 167 F.Supp.3d 623 (S.D.N.Y. 2016). Our jurisdiction to review this ruling under 28 U.S.C. § 1291 is undisputed. See Mitchell v. Forsyth , 472 U.S. 511, 530, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985) (holding that denial of qualified immunity, "to the extent that it turns on an issue of law, is an appealable ‘final decision’ within the meaning of 28 U.S.C. § 1291"); accord Ashcroft v. Iqbal , 556 U.S. 662, 672, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). For the reasons stated in this opinion, we conclude that defendants are entitled to qualified immunity and, accordingly, we reverse the district court's challenged order and direct the dismissal of all Ganek's outstanding claims.

BACKGROUND

I. The LG Search

The following facts are drawn from Ganek's complaint and must be credited on this appeal.

A. Sam Adondakis Admits Receiving and Communicating Inside Information to Persons at LG

David Ganek and Anthony Chiasson co-founded investment fund LG, with Ganek serving as LG's principal partner until the fund's closure in 2011. In 2010, LG's offices were located on the 27th floor of 888 Seventh Avenue in Manhattan, and the fund had approximately $4 billion under management.

From 2006 until 2010, Spyridon "Sam" Adondakis was employed by LG as a research analyst, with a particular focus on the technology industry. Adondakis was asked to leave LG in May 2010 when it was determined that he had violated the fund's internal compliance protocols.

On October 14, 2010, FBI defendants Hinkle and Makol confronted Adondakis with wiretap evidence collected from third parties, which implicated Adondakis in insider trading while at LG. Sometime thereafter, Adondakis agreed to cooperate with government authorities and, on November 2, 2010, he met with defendants Assistant United States Attorneys ("AUSAs") Brodsky and Leibowitz as well as FBI defendants Hinkle, Makol, and Komar.

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At that meeting, Adondakis admitted to having knowingly received sensitive, non-public information from various insiders and to having passed on that information to persons at LG, including Ganek, Chiasson, and another LG employee, Greg Brenner.¹ All three persons referenced by Adondakis in fact used the information conveyed to them to make trading decisions. But whereas Adondakis told defendants that he specifically advised Chiasson and Brenner that the information conveyed came from an inside source, Adondakis "never" said he so advised Ganek. J.A. 36, ¶ 86. To the contrary, Adondakis told defendants that "he had never told Mr. Ganek the source of the information he provided." Id. (emphasis in original).

B. The LG Search Warrant

On November 21, 2010, FBI defendant Trask applied to an SDNY Magistrate Judge for a warrant to search certain areas within LG, including Ganek's, Chiasson's, and Brenner's offices; desktop and laptop computers used by Adondakis while employed at LG; and LG's investors' servers. In support, Trask submitted a signed affidavit that contains the alleged misrepresentation at the heart of this case, i.e. , that "ADONDAKIS informed GANEK ... of the sources of the Inside Information" provided to him. J.A. 98, ¶ 13.c; see id. at 99, ¶ 13.e (same).² Trask professed to have obtained this information from FBI colleagues.

The magistrate judge authorized the requested search warrant, which was executed at LG the following day, November 22, 2010. In the course of doing so, FBI agents and/or SDNY AUSAs searched Ganek's office, files, and electronic devices, and made an electronic copy of the contents of his personal cellphone. Defendants provided advance notice of the LG search to the Wall Street Journal , which took and published photographs of FBI agents carrying boxes out of LG.

C. Defendants' Post–Search Assurances

Ganek feared that media reports about the LG search and attending federal investigation into insider trading would prompt LG investors to divest from the fund. Accordingly, on December 20, 2010, LG representatives met with AUSA defendants Zabel and Leibowitz, in the course of which meeting defendants stated that the LG search "had been carefully considered at the highest levels, with full appreciation for the likely commercial consequences, and ... that all necessary precautions had been taken." J.A. 41, ¶ 110. Some months later, on February 4, 2011, an LG attorney contacted defendant U.S. Attorney Bharara to ask that he publicly clarify that "Mr.

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Ganek was not a target of the investigation or that the search warrant did not allege probable cause that Mr. Ganek had engaged in insider trading." Id. at 43–44, ¶ 121. Bharara declined, asserting that his office had not pursued the LG search "without thinking through the consequences of doing so." Id. at 44, ¶ 123.

D. Reiteration of the Misrepresentation and Further Adondakis Interview

At and about this same time, on February 3, 2011, one of the FBI defendants drafted a report of the November 2 meeting that repeated the misstatement contained in the Trask affidavit, i.e. , that Adondakis had told defendants that he had advised Ganek of the inside source of the information conveyed to him, specifically, that it "came directly from contacts at Dell." J.A. 42, ¶ 111.

Later that month, defendants again met with Adondakis, who "reiterated that he had never told Mr. Ganek anything about the source of his information." Id. at 45, ¶ 130.

Meanwhile, on February 11, 2011, approximately three months after the LG search, Ganek announced that, due to the flight of investors from LG, he was forced to close the fund.

E. Indictments and Disclosure of the Trask Affidavit

Adondakis was indicted for insider trading on April 25, 2011, but his indictment was not unsealed until January 18, 2012, the same day on which Bharara announced the indictment of Chiasson, among others, for insider trading. Ganek was never indicted.

On March 1, 2012, the district court issued a protective order permitting certain documents, including those supporting the LG search, to be disclosed to defendants and other specified categories of persons, which ultimately included Ganek's counsel.

Chiasson stood trial in the fall of 2012, and was found guilty of conspiratorial and substantive securities fraud based on his insider trading.³ Testifying as a prosecution witness, Adondakis acknowledged telling Chiasson and Brenner that the information he passed on to them came from an inside source, but suggested that he had not so told Ganek. In his trial testimony, FBI defendant Makol also stated that Adondakis had not told defendants that he informed Ganek of the inside source for information communicated to him.

II. The Instant Action

Ganek filed this action on February 26, 2015, pleading Fourth and Fifth Amendment claims against defendants Trask, Makol, Hinkle, Komar, Brodsky, and Leibowitz; a...