JACK B. WEINSTEIN, Senior District Judge.
Table of Contents I. Introduction.............................................................300 II. Factual Allegations and Procedural History...............................301 III. Law......................................................................301 A. Rule 12(b)(6) Standard...............................................301 B. Adjournment in Contemplation of Dismissal............................302 C. Relevant Provisions of New York Human Rights Law ....................302 D. Applicable Federal Banking Law.......................................303 IV. Application of Law to Facts .............................................304 A. Section 296(15) of New York's Executive Law..........................304 B. Section 296(16) of New York's Executive Law..........................304 V. Conclusion ..............................................................306
In this case a federal statute frustrates New York's much-admired adjournment in contemplation of dismissal ("ACD") program. The ACD process is designed to avoid persons charged with minor offenses being permanently designated as criminals. It provides a second chance for a lawful life. The federal statute mandated the defendant bank's refusal to hire plaintiff because of a shoplifting prosecution that was nullified by an ACD. Otherwise, it would have employed her. The federal statute and its administration should be revised to bring them into line with the highly laudable state policy.
Plaintiff Jennifer Smith sues defendants Bank of America Corporation and Bank of America, N.A. (collectively, "Bank of America"). Jurisdiction is premised on diversity of citizenship. See 28 U.S.C. § 1332. Ms. Smith contends that she was discriminated against by Bank of America, in violation of New York law, when an offer of employment was withdrawn after a background check revealed that she had been arrested and charged with petit larceny.
She had been offered — and rather than go to trial, accepted — an ACD. Her conduct was appropriate and noncriminal during the adjournment period, so the case was dismissed and the record stricken.
Her state criminal attorney did not inform her of the adverse collateral consequences of an ACD respecting future employment. Nor was she told of her right to apply for a waiver of the federal bar from the agency that administers the federal statute. See May 14, 2012 H'rg Tr. These were serious omissions by counsel. Cf. Padilla v. Kentucky, ___ U.S. ___, 130 S.Ct. 1473, 176 L.Ed.2d 284 (2010) (counsel was constitutionally ineffective for failing to inform defendant of automatic deportation that would follow guilty plea). A preferred practice would be to have the protection against adverse collateral consequences operate automatically. Cf. Model Penal Code: Sentencing § 6.02A(11) (Discussion Draft No. 4, Apr. 16, 2012) (automatic application). The ability to earn a living is an important factor in avoiding criminality. The present federal rule unnecessarily excludes from the economy and tax-base people who would make a useful contribution to society.
Plaintiff sues Bank of America on behalf of all others similarly situated. She seeks to have a class certified. See Fed.R.Civ.P. 23. The defendants have moved to dismiss
Plaintiff, a resident of Nassau County, New York, worked as a temporary employee at Bank of America's Melville, New York office from February 2009 to September 2011. See Complaint ("Compl.") ¶ 10, Smith v. Bank of America Corp. et al., No. 11-CV-6368 (E.D.N.Y. Dec. 30, 2011), CM/ECF No. 1. She held a number of positions as a temporary employee at Bank of America; at the time she sought permanent employment, she was working as a mortgage coordinator. See id. ¶ 36. In this position, Ms. Smith assisted in Bank of America's loan production; her responsibilities included providing assistance to customers and ensuring that paperwork was correctly processed. See id.
According to plaintiff, she was encouraged by her supervisor to apply for full-time
On September 9, 2011, she was offered the position. See id. ¶ 43. She was sent a congratulatory email and an offer of employment; the offer was promptly accepted. See id. ¶¶ 44-45. Ms. Smith was to begin full-time employment in late September. See id. ¶ 45.
In mid-September 2011, plaintiff received a letter from Bank of America's regional manager responsible for criminal screening. She was informed that she was not eligible to be considered for employment because of information regarding her criminal history obtained from a Federal Bureau of Investigation ("FBI") background check. See Decl. of Lori A. McCarthy Lopez ("Lopez Decl.") 13, Smith v. Bank of America Corp. et al., No. 11-CV-6368 (E.D.N.Y. Feb. 17, 2012), CM/ECF No. 11-4. The letter and its attachments stated — accurately — that plaintiff had been arrested and charged with petit larceny in April 2010; no other illegal activity was listed. See Compl. ¶¶ 46-47.
Ms. Smith was informed that she had the right to challenge the background check if she believed it to be inaccurate. See Lopez Decl. 13 (citing Procedure to Obtain Change, Correction or Updating of Identification Records, 28 C.F.R. § 16.34 (2011)). She did so, explaining that the charges against her had been dismissed after the ACD. Plaintiff also provided documentation of the dismissal and correspondence from her attorney that confirmed that the charge had been dismissed. See id. ¶¶ 48-49. Bank of America refused to change its decision. See id. ¶ 50.
Contending that defendants' refusal to hire her violated New York antidiscrimination law, Ms. Smith initiated this litigation by filing a complaint in December 2011.
To survive a motion to dismiss made pursuant to Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief
A court ruling on a 12(b)(6) motion is to "accept as true the facts alleged in the complaint, and may consider documents incorporated by reference in the complaint and documents upon which the complaint relies heavily." In re Citigroup, 662 F.3d at 135 (internal quotation marks omitted). All reasonable inferences are drawn in the plaintiffs favor. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002).
New York's criminal procedure law provides that certain types of cases may be dismissed in furtherance of justice using the ACD procedure. Section One of the applicable provision states that:
N.Y.Crim. Proc. Law § 170.55(1) (emphasis added).
Section Two reads:
Id. § 170.55(2) (emphasis added).
The statute requires that the arrest and prosecution leading to the ACD "be deemed a nullity." Id. § 170.55(8). The "granting of an adjournment in contemplation of dismissal shall not be deemed to be a conviction or an admission of guilt. No person shall suffer any disability or forfeiture as a result of such an order. Upon the dismissal of the accusatory instrument..., the arrest and prosecution shall be deemed a nullity and the defendant shall be restored, in contemplation of law, to the status he occupied before his arrest and prosecution." Id. (emphasis added).
"The purpose of the statutory ACD procedure was to provide a shield against the criminal stigma that would attach to a defendant accepting such an adjournment." Lancaster v. Kindor, 98 A.D.2d 300, 471 N.Y.S.2d 573, 579 (1984).
New York's Human Rights Law (the "NYSHRL") limits the ability of employers
N.Y. Exec. Law § 296(15).
The NYSHRL also limits the right of employers to consider or ask questions about arrests or criminal charges terminated in an applicant or employee's favor:
Id. § 296(16). An order entered — or deemed entered — that dismisses the entire accusatory instrument after an ACD is a termination in favor of the accused for this purpose. See N.Y.Crim. Proc. Law § 160.50(3)(b). But cf. Green v. Mattingly, 585 F.3d 97, 103-04 (2d Cir.2009) (noting that an ACD is not deemed a favorable termination for purposes of a malicious prosecution claim).
Federal law deems those banks and savings associations that carry federal insurance on their deposits to be "insured depository institutions." See 12 U.S.C. § 1813(c)(2). Employees of insured depository institutions are termed "institution-affiliated parties." See id. § 1813(u)(1).
Imposed on banks that carry federal deposit insurance are a number of conditions. Among them is a limitation on the ability of banks to hire individuals who have been accused or convicted of certain crimes.
The statute provides an escape from its rigors by consent of the Federal Deposit Insurance Corporation ("FDIC"). But except "with the prior written consent of the [FDIC]," any person "who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with the prosecution for such offense, may not ... become ... an institution-affiliated party with respect to any insured depository institution." Id. § 1829(a)(1)(A)(i) (emphasis added).
The FDIC is empowered to interpret this subsection. See 12 U.S.C. § 1819(a). Federal courts will defer to agency interpretations of ambiguous statutes when the interpretation is reasonable, the agency has been empowered to issue interpretations with the force of law, and the agency has so acted. See, e.g., United
In an opinion letter, the FDIC's Division of Supervision and Consumer Protection has stated that the "granting of an ACD [pursuant to Section 170.55 of New York's Criminal Procedure Law] constitutes entry into a pretrial diversion or similar program within the meaning of 12 U.S.C. § 1829. See May 13, 2009 Opinion Letter ("May 2009 Opinion Letter") 1, Smith v. Bank of America Corp. et al., No. 11-CV-6368 (E.D.N.Y. Mar. 26, 2012), CM/ECF No. 23-1. Following the lead of the Supreme Court of the United States, the Court of Appeals for the Second Circuit has stated that an agency's interpretation of law made by way of an opinion letter is not entitled to Chevron deference. See, e.g., Lopez v. Terrell, 654 F.3d 176, 182 (2d Cir.2011) (citing Christensen v. Harris Cnty., 529 U.S. 576, 587-88, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000)). Nevertheless, an agency's interpretation of law made in this fashion is given deference to the extent that the court finds it persuasive. See, e.g., Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944); Estate of Landers v. Leavitt, 545 F.3d 98, 105 (2d Cir.2008).
Banks must make reasonable inquiries, pursuant to 12 U.S.C. § 1829, into the backgrounds of potential employees, so as to avoid hiring or permitting participation in their affairs by persons barred from employment by federal law. See FDIC Statement of Policy, 63 Fed.Reg. 66,177, 66,182-85 (Dec. 1, 1998). Assistance to federally-insured banking institutions is provided by the FBI, which helps conduct background checks on prospective and current employees. See Exchange of FBI Identification Records, 28 C.F.R. § 50.12 (2011).
It is not clear from the complaint whether plaintiffs claim is brought pursuant to Section 296(15) or Section 296(16) of New York's Executive Law. Compare Compl. ¶ 3, with id. ¶¶ 58-61. It does not matter. For the reasons set out below, her claim must be dismissed.
Section 296(15) is inapplicable to this case, since its protections only apply to individuals who have been convicted of crimes. See N.Y. Exec. Law § 296(15). Ms. Smith concedes that she has not been convicted of a crime. That was the ground on which her opposition to Bank of America's decision to rescind her offer of employment was founded. See Compl. ¶ 49; see also Lopez Decl. 5-6. She therefore cannot recover under Section 296(15).
Whether plaintiff's complaint sufficiently states a claim under the NYSHRL pursuant to Section 296(16) presents a somewhat more complicated question. The answer depends on the interplay between the NYSHRL, the federal banking statute, and the FDIC's pronouncements regarding that statute's meaning.
The NYSHRL provides in relevant part that it "shall be an unlawful discriminatory practice, unless specifically required or permitted by statute, for any ... corporation
The critical issue in resolving the instant motion is whether Bank of America's refusal to hire plaintiff is protected by the NYSHRL's exception — i.e., whether the refusal to hire was "required or permitted by statute." See N.Y. Exec. Law § 296(16).
As noted in Part III.D, supra, federal law prohibits insured banks — except with the prior written consent of the FDIC (not relevant here, since there has been no suggestion that the FDIC's consent was ever sought) — from hiring as an employee any person who "has agreed to enter into a pretrial diversion or similar program in connection with the prosecution of any criminal offense involving dishonesty, a breach of trust, or money laundering. See 12 U.S.C. § 1829(a)(1)(A)(i). Plaintiff claims that she did not apply for a waiver from the FDIC because she did not know that she could do so. See May 14, 2012 H'rg Tr.; see also Part I, supra (discussing defense counsel's failure to inform plaintiff of the consequences of accepting an ACD).
Presented by the federal statute are two legal questions that must be resolved to determine whether Bank of America's refusal to hire Ms. Smith satisfied the exception in Section 296(16). First, does New York's ACD program constitute a "pretrial diversion or similar program" within the meaning of 12 U.S.C. § 1829? (If this question is answered in the negative, then Bank of America cannot use Section 1829 as a shield in this litigation.) Second, if New York's ACD program is a "pretrial diversion or similar program," was the crime with which plaintiff was charged one involving "dishonesty?" (If the answer is no, then Section 1829 affords Bank of America no protection.) Since, as explained below, both questions must be answered in the affirmative, the defendants did not violate New York law in refusing to hire Ms. Smith; they were required by federal law not to do so.
The FDIC has already attempted to answer the first query set out above by way of the May 2009 Opinion Letter referenced in Part III.D, supra. In that letter, the agency concluded that the "granting of an ACD constitutes entry into a pretrial diversion or similar program within the meaning of" 12 U.S.C. § 1829(a)(1)(A). See May 2009 Opinion Letter 1. And the FDIC has opined — in a statement published in the Federal Register — that a "pretrial diversion or similar program" is "characterized by a suspension or eventual dismissal of charges or criminal prosecution upon agreement by the accused to treatment, rehabilitation, restitution, or other noncriminal or nonpunitive alternatives." FDIC Statement of Policy, 63 Fed. Reg. 66,177, 66,184-85 (Dec. 1, 1998). The agency did note in that statement, however, that whether "a program constitutes a pretrial diversion ... will be considered by the FDIC on a case-by case-basis," id. at 66,185; hence, the May 2009 Opinion Letter.
The agency's suggested legal interpretation of Section 1829 in the May 2009 Opinion Letter, however, is correct; New York's ACD program is a "pretrial diversion or similar program" within the meaning of 12 U.S.C. § 1829(a)(1)(A). The ACD program allows for the
The answer to the second question — whether the crime with which Ms. Smith was charged was one of "dishonesty" — has already effectively been provided by the FDIC's construction of Section 1829. The agency has concluded that crimes of dishonesty include those in which the defendant is accused of wrongfully taking property from another in violation of any criminal statute. See FDIC Statement of Policy, 63 Fed.Reg. 66,177, 66,185 (Dec. 1, 1998). Deference under Chevron is appropriate with respect to this interpretation. See United States v. Mead Corp., 533 U.S. 218, 227-31, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001).
The crime of which Ms. Smith was accused — petit larceny, see Lopez Decl. 6 — qualifies as a crime of dishonesty pursuant to the agency's interpretation of the statute. Under New York law, a "person is guilty of petit larceny when he steals property." N.Y. Penal Law § 155.25. Bank of America was therefore required by federal law — specifically, 12 U.S.C. § 1829 — not to hire plaintiff after being informed of the results of her background check. It did not violate Section 296(16) by refusing to hire her in the absence of a waiver by the FDIC.
The same result would obtain with respect to the second question even if Chevron deference is not due to the FDIC's interpretation of the statutory term; its interpretation is persuasive under Skidmore. See Part III.D, supra.
Defendants' motion to dismiss the complaint is granted. No costs or disbursements are granted to the defendants.
SO ORDERED.
