Global Network Comm. v. City of New York, 03 Civ. 7934 (LLS).
| Decision Date | 30 August 2007 |
| Docket Number | No. 03 Civ. 7934 (LLS).,03 Civ. 7934 (LLS). |
| Citation | 507 F.Supp.2d 365 |
| Parties | GLOBAL NETWORK COMMUNICATIONS, INC., Plaintiff, v. CITY OF NEW YORK; City of New York Department of Information Technology and Telecommunications, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Law Offices of Joseph P. Garland (Joseph P. Garland, of Counsel), New York City, for Plaintiff.
Michael A. Cardozo, Corporation Counsel of the City of New York (Diana M. Murray, of Counsel), New York City, for Defendants.
Defendants move for summary judgment dismissing the complaint.
Plaintiff Global Network Communications, Inc. ("Global") claims that the defendant City of New York's ("City") regulations governing public pay telephones ("PPTs"), its denial of Global's application for a franchise to operate PPTs on City sidewalks and its removal of some of Global's PPTs violated federal law and Global's constitutional rights.
On June 9, 2005, this Court dismissed Global's claims, holding that when it denied Global's application, the City properly relied on the testimony of Global's sole owner and chief executive, Ronald Massie, an associate of the Bonanno organized crime family, who had a flagrant history of criminal activity, including defrauding the owners of business that let Global place its PPTs on their property. 373 F.Supp.2d 378 (S.D.N.Y.2005). The Court of Appeals vacated and remanded, holding that Massie's testimony and the City's final denial of Global's application were not properly considered on a motion to dismiss. 458 F.3d 150, 158 (2d Cir.2006).
On remand, the City's motion was converted into one for summary judgment so that both parties could present all materials pertinent to such a motion under Fed. R.Civ.P. 56.
Local Law 78, adopted by the City in 1959, made it illegal to operate PPTs on City streets without a license. Nevertheless, by the early 1990s several companies had installed PPTs on City streets without licenses. Local Law 68 of 1995 legalized previously installed, unlicensed PPTs on City streets, provided that their owner place such PPTs on an interim registry list, pay $75 per telephone per year in interim registry fees, and obtain a franchise from the City Department of Information Technology and Telecommunications ("DoITT") qualifying the company to obtain permits to operate PPTs on City streets in exchange for fees. Local Law 68, § 6.1 A company whose franchise application is denied must either remove its PPTs from City streets or sell its PPTs to a company that has a franchise within a specified time. Id.
Global was one of the companies that operated unlicensed PPTs on City streets before the PPT Regulations were enacted. In 1996 Global submitted approximately 1,000 of its PPTs located on or near City sidewalks to the City's interim registry, and in June 1997 submitted its application for a franchise.
As part of DoITT's evaluation of Global's application, an August 21, 1998 internal DoITT .memorandum reported that a criminal investigation into Global's operations was pending, and noted that Global had a history of complaints for vandalism, threats of physical violence and intimidation, and installation of unauthorized telephones. (Murray March 28, 2007 Aff. ("Murray Aff."), Ex. J.) On May 30, 2000, after further investigation, the Commissioner of DoITT ("Commissioner") denied Global's franchise application, stating that Massie, along with Global's vice-president and bookkeeper, Alan Roth, had been arrested by the FBI on March 1, 2000. (Murray Aff., Ex. L at 2.) The Feb. 29, 2000 criminal Complaint and Affidavit in Support of Arrest Warrants identified Massie as an associate of the Bonanno organized crime family and detailed his illegal loan-sharking activities. (United States v. Massie, No. 00-0358M (E.D.N.Y.) (Murray Aff., Ex. K.)) The Commissioner also cited a search warrant affidavit which alleged that Massie had laundered money, including the proceeds of illegal loansharking, through Global to organized crime members, and that he had directed Roth to skim more than $4,000 per week in cash receipts from Global's PPTs for Massie's personal use by falsely reducing the receipts and altering computer records. (Murray Aff., Ex. L at 3-4.)
Global challenged DoITT's decision in a proceeding in the Supreme Court of the State of New York pursuant to N.Y. C.P.L.R. Art. 78. That Court remanded Global's application to DoITT, to give Global an opportunity to respond to the criminal allegations and to explain what relationship, if any, they had to Global's business operations. Global Network Communications, Inc. v. Dorbin, No. 120402/00, at 9 (LGG) (N.Y.Sup.Ct. July 1, 2002) (Murray Aff., Ex. M) (the "Article 78 Proceeding"). The Court stated that if Global separated itself from Massie and resubmitted its application, DoITT must reevaluate its decision in light of Global's new ownership and management. Id. at 11. The Court also stated that "The allegations of criminality and ties to organized crime are most serious, and, if supported by proper proof, would establish a rational basis for finding lack of responsibility and denial of the franchise and permit." Id. at 9.
On November 7, 2001, while the Article 78 Proceeding was pending, Massie pled guilty to mail fraud, mortgage fraud and conspiracy to collect extortionate extensions of credit.2 At his plea allocution, Massie admitted that he defrauded businesses who were entitled to commissions for allowing Global's PPTs to be placed on their property by paying them less than what they were owed under their agreements with Global. United States v. Massie, No. 00 Cr. 0440 (E.D.N.Y.) (Nov. 7, 2001 Tr. 24-25) (Murray Aff., Ex. 0.)
On remand from the Article 78 proceeding, the Commissioner notified Global on February 28, 2003 that he was, considering again denying its application, citing Massie's guilty plea, and gave Global ten days to submit any arguments' or evidence challenging the proposed decision. (Murray Aff., Ex. Q.) Global responded by demanding a hearing and an opportunity to update its franchise application, and arguing that the City's franchise regulations were preempted by federal law. (March 28, 2003 letter to DoITT Commissioner, Murray Aff., Ex. R.) However, Global did not challenge Massie's plea allocution, and acknowledged that a criminal charge to which Massie had pleaded guilty related to Global's financial operations (id. at 4).
DoITT discovered more evidence of Global's involvement with organized crime. On April 23, 2003, Massie testified as a cooperating government witness against an alleged organized crime member. He testified that approximately 20 to 30 percent of Global's business derived from PPT locations that were enlisted or identified by members of the Bonanno" organized crime family, that Global paid those family members monthly commissions, and that Massie was allowed to use the name of Frank Lino, a "made" member of the Bonanno organization, to "intervene in any problems that we came across in the course of [Global's] business." (United States v. George Lombardozzi, Apr. 23, 2005 Trial Tr. 537-543) (Murray Aff., Ex. S.) Massie also admitted that over a period of three years the amount he skimmed from the PPT commissions totaled approximately $1,800,000:
(Id. at 526.) He also admitted other crimes, including running a multi-million dollar international cocaine smuggling ring:
(Id. at 550.)
DoITT's staff recommended that Global's PPT franchise application be denied. (Recommendation attached to October 28, 2004 letter from DoITT Commissioner to Massie, Murray Aff., Ex. T.) It relied on several grounds, including:
1) Global benefited from organized crime intimidation; 2) Global has defrauded property owners who authorized use of their property for Global PPTs; 3) Global has been repeatedly delinquent in payment of registry fees and thus cannot, be reliably trusted to pay franchise compensation[.]
(Id. at 5.) It further stated:
Global cannot be reasonably trusted to timely and fully pay the City the reasonable compensation to which it would be entitled under a franchise contract or to otherwise abide by the terms of a franchise contract with the City. Were the City to grant Global a franchise to use City street...
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