Morse v. Fusto, 2015 U.S. App. LEXIS 16154

Background

In 2002–2006 New York Medicaid Fraud Control Unit investigators John Fusto and Jose Castillo audited Dr. Leonard Morse’s billing and prepared spreadsheet summary charts for eight patients; those spreadsheets were shown to a Kings County grand jury leading to Morse’s indictment.
Morse was acquitted at a 2007 bench trial but sued Fusto and Castillo under 42 U.S.C. § 1983 for fabricating evidence and violating his right to a fair trial; the district court denied summary judgment on the fabrication claim and the case went to jury trial.
At trial Morse relied on three assertedly misleading aspects of the spreadsheets: (1) Stacy Rodriguez entries that suggested nine procedures though records showed three; (2) an “Edwin Gonzalez” spreadsheet that merged three different patients into one; and (3) omission of tooth numbers that made repeated per-tooth billing look like duplicate billing.
The jury found the defendants knowingly created false or fraudulently altered documents and awarded substantial compensatory and punitive damages; the district court post-trial ruled the Stacy Rodriguez page was legally insufficient but upheld the verdict because other bases supported it, and reduced damages by remittitur.
On appeal defendants argued they were entitled to qualified (and alternatively absolute) immunity and that the district court should have ordered a new trial under the general-verdict rule because one factual basis (Stacy Rodriguez) was legally insufficient.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether knowingly creating misleading summary spreadsheets in an investigation can constitute fabrication of evidence violative of the right to a fair trial	Morse: knowingly creating false or materially misleading summaries that were presented to the grand jury deprived him of liberty and violated clearly established rights	Defs: grand jury proceedings may be one-sided; summaries omitted but did not fabricate evidence; omissions are permissible and not equivalent to falsification	Court: Such knowing material omissions that render documents false can constitute fabrication of evidence and violate constitutional rights (no immunity)
Whether defendants are entitled to qualified immunity	Morse: Ricciuti/Zahrey and progeny make clear that knowingly fabricating evidence by investigators is unconstitutional	Defs: law didn’t clearly prohibit omission-based summaries; one-sided grand jury presentations permissible; reasonable officials would not know this conduct was unlawful	Court: The right was clearly established; qualified immunity denied because omissions that knowingly make statements false are unlawful
Whether absolute immunity applies to the defendants’ conduct	Morse: conduct was investigative, not protected advocacy	Defs: prosecution-related advocacy entitled to absolute immunity	Court: Absolute immunity not available for investigatory functions; district court’s finding that jury could disbelieve timing of creation supports denying absolute immunity (defendants do not appeal this ruling)
Whether the general-verdict rule required a new trial because one factual theory (Stacy Rodriguez) was insufficient	Morse: defendants waived the general-verdict challenge by failing to request special verdicts/interrogatories or object pre-deliberation	Defs: impossible to know jury relied on the deficient theory; general-verdict rule requires new trial	Held: General-verdict rule is waivable; defendants failed to preserve it, so new trial not required; remaining bases supported the verdict

Key Cases Cited

Zahrey v. Coffey, 221 F.3d 342 (2d Cir. 2000) (prosecutorial fabrication of evidence by an investigator violates the right not to be deprived of liberty)
Ricciuti v. N.Y.C. Transit Auth., 124 F.3d 123 (2d Cir. 1997) (false information likely to influence a jury undermines the right to a fair trial)
Buckley v. Fitzsimmons, 509 U.S. 259 (U.S. 1993) (prosecutors performing investigative functions do not receive absolute immunity for investigatory acts)
Manganiello v. City of New York, 612 F.3d 149 (2d Cir. 2010) (material omissions or misrepresentations by investigators can support fabrication-of-evidence liability)
United States v. Williams, 504 U.S. 36 (U.S. 1992) (grand jury proceedings traditionally one-sided; prosecutor may present only his case)
Pearson v. Callahan, 555 U.S. 223 (U.S. 2009) (qualified immunity framework: objective legal reasonableness assessed against clearly established law)
Napue v. Illinois, 360 U.S. 264 (U.S. 1959) (state may not knowingly use false evidence to obtain a conviction)
Anderson v. Creighton, 483 U.S. 635 (U.S. 1987) (clearly established rights standard for qualified immunity)