Morse v. Fusto
| Decision Date | 27 August 2013 |
| Docket Number | 07-CV-4793 (CBA) (RML) |
| Parties | LEONARD MORSE, Plaintiff, v. JOHN FUSTO and JOSE CASTILLO, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
NOT FOR PUBLICATION
Plaintiff Leonard Morse brought this action pursuant to 42 U.S.C. § 1983 against Defendants Jose Castillo and John Fusto, former employees of the New York State Attorney General's Office. Morse claimed the defendants fabricated evidence, which resulted in his being deprived of liberty. The Court held a jury trial between February 4, 2013 and February 12, 2013. On February 12, 2013, the jury returned a verdict in favor of plaintiff. The jury awarded Morse $6,724,936 in compensatory damages and $1,000,000 in punitive damages. Now pending before the Court is defendants' motion for judgment as a matter of law pursuant to Fed. R. Civ. P. 50 or, in the alternative, new trial pursuant to Fed. R. Civ. P. 59 or reduced damages.
In 2006, following an investigation by the Medicaid Fraud Control Unit of the New York State Attorney General's Office, Morse was indicted by a grand jury for Grand Larceny in the First Degree and Offering a False Instrument in the First Degree. He was ultimately acquitted of all charges after a bench trial. Morse subsequently commenced this action pursuant to 42 U.S.C. § 1983 against various current and former New York state employees, asserting claims of, inter alia, false arrest, malicious prosecution, and deprivation of liberty due to fabrication ofevidence.1 (DE 63.)
This Court granted summary judgment to defendants on Morse's false arrest and malicious prosecution claims and denied summary judgment on Morse's deprivation of liberty claim, Morse v. Spitzer, No. 07-CV-4793 CBA RML, 2011 WL 4625996 (E.D.N.Y. Sept. 30, 2011), as amended, 2013 WL 359326 (E.D.N.Y. Jan. 29, 2013) (), and adhered to its decision on reconsideration, Morse v. Spitzer, No. 07-CV-4793 CBA RML, 2012 WL 3202963 (E.D.N.Y. Aug. 3, 2012) (). The Court found that Morse had presented evidence sufficient to raise a genuine issue of fact regarding whether defendants intentionally fabricated and/or altered billing summaries for use before the grand jury and whether such fabricated evidence was material in securing the indictment. (DE 123 at 4.) On reconsideration, defendants raised for the first time an absolute immunity defense. The Court considered the argument and found that genuine issues of fact precluded a finding as a matter of law as to whether defendants allegedly fabricated records during the investigatory phase, when they were building a case against Morse, or only in preparation for presentation of evidence to the grand jury. (DE 124 at 15-16.) As fact issues precluded determining whether defendants were engaged in an investigatory or advocacy function, defendants' motion for reconsideration on absolute immunity grounds was denied. The Court also granted summary judgment to defendants on Morse's claims relating to a press release issued by the Attorney General's office regarding his indictment. (DE 108.)
Morse then proceeded to a jury trial on his one remaining claim—deprivation of libertydue to fabrication of evidence—against remaining defendants Jose Castillo, an audit-investigator in the Medicaid Fraud Control Unit, and Special Assistant Attorney General John Fusto, the prosecutor responsible for overseeing the investigation, grand jury proceedings, and prosecution of Morse.
According to the testimony elicited at trial, Morse, a dentist, practiced in the Park Slope neighborhood of Brooklyn for 30 years under the business name 580 Dental, P.C. Ninety-five percent of his patient base was insured through the Medicaid program. (Trial Tr. 834-36.) In 2002, Morse came to the attention of the Medicaid Fraud Control Unit ("MCFU") of the New York State Attorney General's office. (Trial Tr. 562-63, 689.) MFCU suspected Morse of billing for denture repairs and services that were never rendered. (Trial Tr. 691.) In particular, it appeared that 580 Dental was billing for dentures and denture repairs for young patients. (Trial Tr. 563-64, 691.) Defendant Fusto was assigned to the case, along with investigator Robert Flynn and auditor Tim Johnson. (Trial Tr. 487, 691.) At some point in the investigation, in 2004 or 2005, auditor Jose Castillo replaced Tim Johnson on the case. (Trial Tr. 174.) Investigator James Serra was also assigned to the case to provide assistance to Flynn. (Trial Tr. 443, 488-89.)
As part of its investigation, MFCU conducted an audit of Morse's billings for the years 2000, 2001, and 2002, based on patient charts obtained from Morse and invoices from the dental labs to which Morse sent out his denture repair work, Nu-Life and Design Dental. (Trial Tr. 61, 693-94, 697-98, 841-42.) The invoices obtained from Nu-Life and Design Dental were then analyzed to determine whether they substantiated Morse's Medicaid billings during the audit period of 2000-2002. In addition to the invoice analysis, patient interviews were conducted by phone. Flynn interviewed twelve of Morse's patients, all in their mid to late 20s. (Trial Tr. 575.)Some of these patients stated that they never had denture work done by Morse. (Trial Tr. 592-93.) Flynn memorialized these interviews in memos that were forwarded to Fusto. (Trial Tr. 572-74.) Fusto also found suspicious the fact that Morse did not have any patient prescriptions for the audit period. Fusto had requested these prescriptions in April 2004, and, under Medicaid regulations, a provider was required to keep such records for six years. (Trial Tr. 700-01.)
The investigation spanned from about April 2002 until late 2005. (Trial Tr. 689, 727.) Fusto testified that he had decided to seek a grand jury indictment in December 2005. (Trial Tr. 729.) Fusto sought an indictment charging Morse with one count of grand larceny in the first degree (alleging theft of $1.1 million from Medicaid) based on the invoice analysis (Trial Tr. 719) and eleven counts of offering a false instrument for filing (alleging the submission of a written false statement to a public office with the intent to defraud the State of New York) based on patient interviews (Trial Tr. 720-21).
The case was presented to a grand jury in March 2006. In support of his case, Fusto called Castillo to testify about the invoice analysis and that the amount of fraud was $1.1 million. (Trial Tr. 61.) Fusto also called several of Morse's patients for whom Morse had submitted bills for denture work. (Trial Tr. 746.) These patients testified that they had not had denture work done by 580 Dental. (Trial Tr. 746-53.) Fusto also presented to the grand jury billing summaries of eight of Morse's patients, designated as Grand Jury Exhibits 7 and 11 (Trial Exhibits 44 and 133, respectively). (Trial Tr. 731.) Grand Jury Exhibit 7 consisted of six sheets of paper, containing the information of the following six patients (one patient per sheet): Sawsan Suliman, Intisar Ahiri, Nassa Ahiri, Sara Charles, Stacy Rodriguez, and Asi Othman. Grand Jury Exhibit 11 was identical to Grand Jury Exhibit 7 except that it included 2 more patients, Miriam Perez and Edwin Gonzalez. (Trial Tr. 731.) These billing summaries were arranged in the form ofspreadsheets that included the following fields: (1) Client Identification Number ("CIN number," an identification number given to each Medicaid recipient), (2) patient last name, (3) patient first name, (4) amount paid, (5) date of service, (6) invoice number, (7) Julian date, (8) procedure code, and (9) procedure description. The procedure descriptions described services such as "repair or replace broken clasp" and "add tooth to existing partial denture." Using Grand Jury Exhibit 7, Fusto elicited testimony from Dr. Linda DeLuca, a dentist, as to her opinion of whether the billings made sense. (Trial Tr. 753-54.) Dr. DeLuca testified that the billings seemed unusual and excessive to her. (Trial Tr. 651-667.)
On April 5, 2006, the grand jury returned an indictment on all twelve counts sought by Fusto: one count of grand larceny in the first degree and eleven counts of filing a false instrument. (Trial Tr. 767, 847; Trial Ex. I.) The eleven false filing charges were based upon billings submitted for the six patients listed in Grand Jury Exhibit 7: Sawsan Suliman, Intisar Ahiri, Nassa Ahiri, Sara Charles, Stacy Rodriguez, and Asi Othman. Morse's criminal trial began in June 2007. (Trial Tr. 873.) During the 15-month interval between the indictment and trial, Morse was under court supervision and made several mandatory court appearances. (Trial Tr. 873-74.) Morse was ultimately acquitted of all counts in August 2007. (Trial Tr. 865, 887-88.)
Morse's theory at trial was that the investigation and criminal case against him were deeply flawed and that Fusto and Castillo fabricated some of the evidence against him. The accuracy (or lack thereof) of Castillo's invoice analysis was vigorously contested, and much of the trial focused on the various shortcomings in Castillo's invoice analysis, including the fact that Castillo had arrived at several different numbers before determining $1.1 million to be the fraud amount and that the analysis did not account for several months for which invoices werenot produced. (E.g., Trial Tr. 72-89, 222-32, 380-87, 705-18.) The basis of the fabrication of evidence claim, however, was Grand Jury Exhibits 7 and 11, the billing summaries. According to plaintiff, Fusto and Castillo, acting under the direction of Fusto, made or altered these billing summaries to create the false impression that Morse had billed repeatedly for the same services. Morse argued that the documents were false in three distinct ways. First, the billing summary for patient Stacy Rodriguez (one page of...
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