167 F. Supp. 3d 623
S.D.N.Y.2016Background
- In November 2010 the FBI executed a high‑profile search warrant and raid on Level Global Investors and David Ganek’s office, seizing personal files and triggering publicity that preceded the firm’s closure in February 2011.
- The search warrant was supported by a 37‑page affidavit (signed by Agent Trask) that, among other allegations, stated that cooperating witness Sam Adondakis told agents he had informed Ganek of sources of “Inside Information.”
- At trial in 2012 (the Newman proceedings), Adondakis and Agent Makol testified that Adondakis never told Ganek about sources; that testimony contradicted the affidavit and prompted Ganek to sue federal agents and prosecutors under Bivens for Fourth and Fifth Amendment violations, supervisory liability, and failure to intercede.
- Defendants moved to dismiss, arguing the claims were time‑barred, failed to plead falsehoods material to probable cause, and were subject to qualified immunity; they also contended use of a warrant (vs. subpoena) and media notice were lawful.
- The court held the suit timely (equitable tolling until affidavit unsealed/trial testimony), denied dismissal of most claims (plausible allegations that affidavit contained materially false statements/omissions necessary to probable cause and that supervisory and failure‑to‑intercede claims were adequately pled), but dismissed stigma‑plus and substantive due process theories and rejected a separate Fourth Amendment challenge to the warrant method/media tip on qualified immunity grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations accrual | Claims accrued when plaintiff learned of contradictions (late 2012 trial testimony); equitable tolling applies | Claims accrued at time of the raid (Nov 2010) so suit untimely | Court: accrual tolled until affidavit unsealed/trial testimony; suit timely |
| Probable cause / fabricated affidavit | Affidavit falsely stated Adondakis told Ganek about sources; falsehoods were necessary to probable cause to search Ganek’s devices and emails | Affidavit language used defined term “Inside Information”; alleged discrepancy immaterial or not necessary to probable cause | Court: plausible allegations that affidavit contained materially false/misleading statements and that corrected affidavit could change probable‑cause analysis; claim survives dismissal |
| Reasonableness of search method & media tip | Raid (vs subpoena) and tip to Wall Street Journal were aimed at maximizing publicity and harming business | Warrant use is lawful (Zurcher); tipping press not clearly established as unconstitutional; qualified immunity applies | Court: decision to use warrant not a clear violation (qualified immunity); media tip claim dismissed at pleading stage (qualified immunity) |
| Fifth Amendment / stigma‑plus and supervisory failure to intercede | Fabricated evidence deprived Ganek of property/business and reputation; supervisors had duty to correct and intervene | No stigmatizing public statement by defendants; post‑deprivation remedies available; supervisors entitled to qualified immunity | Court: procedural due process fabrication claim as to seizure survives; stigma‑plus and substantive due process theories dismissed; supervisory and failure‑to‑intercede claims survive to discovery |
Key Cases Cited
- Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (establishes implied damages action against federal officers for certain constitutional violations)
- Franks v. Delaware, 438 U.S. 154 (requiring a substantial showing of false statements to obtain a hearing in criminal suppression contexts)
- Pearson v. Callahan, 555 U.S. 223 (qualified immunity framework)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards and limits on supervisory liability)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Velardi v. Walsh, 40 F.3d 569 (elements for challenging a warrant based on false statements/omissions)
- Southerland v. City of New York, 680 F.3d 127 (corrected‑affidavit doctrine analyzing materiality of falsehoods for qualified immunity)
- Zurcher v. Stanford Daily, 436 U.S. 547 (warrant use vs. subpoenas; warrants may be used against third parties)
- Lauro v. Charles, 219 F.3d 202 (limits on staging publicity/perp walks and media treatment)
- Turkmen v. Hasty, 789 F.3d 218 (standards for plausible supervisory liability allegations against high‑level officials)