Steele-Warrick v. Microgenics Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

NADEZDA STEELE-WARRICK and

DARRYL SCHULTZ, individually and

MEMORANDUM AND ORDER

on behalf of all others similarly situated,

Case No. 19-CV-6558 (FB) (VMS)

Plaintiffs,

-against-

MICROGENICS CORPORATION

AND THERMO FISHER SCIENTIFIC

INC., ANTHONY ANNUCCI, JAMES

O’GORMAN, CHARLES KELLY,

RICHARD FINNEGAN, DONALD

VENETTOZZI, ANTHONY

RODRIGUEZ, COREY BEDARD, and

JENNIFER BOOTH

Defendants.

Appearances:

For the Plaintiffs: For the Microgenics Defendants:

EMERY CELLI BRINCKERHOFF CHRIS R. CARTON

Abady Ward & Maazel LLP ERICA S. MEKLES

600 Fifth Avenue, 10th Floor Bowman and Brooke LLP

New York, New York 10020 317 George Street, Suite 320

(212) 763-5000 New Brunswick, NJ 08901

BLOCK, Senior District Judge:

Defendants Microgenics Corporation (“Microgenics”) and Thermo Fisher

Scientific Inc.’s (“Thermo Fisher”) (collectively, the “Microgenics Defendants”)

move to alter or amend the Court’s June 13, 2023, denial of their motion to dismiss

Plaintiffs’ claims, except as to the Eight Amendment claim, which the Court

dismissed. See Steele-Warrick v. Microgenics Corp., No. 19-CV-6558, 2023 WL

3959100 (E.D.N.Y. June 12, 2023). For the following reasons, the motion is

DENIED.

I. BACKGROUND

The parties’ familiarity with the factual allegations is assumed. In short,

Plaintiffs allege that while they were under Department of Corrections and

Community Supervision (“DOCCS”) custody, Microgenics Defendants failed to

adhere to the relevant professional standards in performing their contractual

obligations involving the inmate urinalysis drug-testing program. Consequently,

Plaintiffs received false positive drug test reports and suffered undeserved

discipline. In a putative class action, Plaintiffs sued the Microgenics Defendants,

as well as eight current and former DOCCS employees (“DOCCS Defendants”).

On April 26, 2023, as against the DOCCS Defendants, this Court dismissed

Plaintiffs’ Eight Amendment claim but held that Plaintiffs stated a substantive due

process claim for which the DOCCS Defendants were not entitled to qualified

immunity. See Steele-Warrick v. Microgenics Corp., No. 19-CV-6558-FB-VMS,

2023 WL 3081290 (E.D.N.Y. Apr. 26, 2023).

Then, as against the Microgenics Defendants on June 12, 2023 —the

decision at issue here — the Court dismissed Plaintiffs’ Eight Amendment claim

but denied Microgenics Defendants’ motion to dismiss as to Plaintiffs’ negligence,

New York General Business Law § 349, and § 1983 claims for substantive due

process. See Steele-Warrick, 2023 WL 3959100. Microgenics Defendants have

brought this motion for reconsideration challenging several aspects of the Court’s

opinion.

II. DISCUSSION

Federal Rule of Civil Procedure 59(e) enables parties to timely file motions

to alter or amend a judgment to “correct a clear error of law or prevent manifest

injustice.” Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 153 (2d Cir. 2008).

Such motions must “request a substantive alteration of the judgment, not merely

the correction of a clerical error, or relief of a type wholly collateral to the

judgment.” ING Glob. v. United Parcel Serv. Oasis Supply Corp., 757 F.3d 92, 96

(2d Cir. 2014) (quoting id.). Local Rule 6.3 is similar, with both standards being

“demanding,” and the remedy to be used “sparingly.” Benny v. City of Long

Beach, No. 20-CV-1908 (KAM)(ST), 2022 WL 9446910, at *1 (E.D.N.Y. Oct. 14,

2022). The movant may neither seek to relitigate an issue already decided, see

Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995), nor raise new

arguments. Nat’l Union Fire Ins. Co. of Pittsburgh v. Stroh Cos., Inc., 265 F.3d

97, 115 (2d Cir. 2001). Microgenics Defendants argue that the Court’s decision

made several clear errors.

A. Microgenics Defendants’ Status as State Actors

The Court denied Microgenics Defendants’ motion to dismiss as to

Plaintiffs’ § 1983 claim for substantive due process, finding that Microgenics

Defendants could be liable under § 1983 because Plaintiffs plausibly alleged “state

action under the public function test,” which Microgenics Defendants now dispute.

The Court did not err. As the Court explained, the only court to examine

similar facts — the liability of a private corporation that designs and manufactures

urine drug tests, which it sells to be administered to inmates — held that “drug-

testing in a prison may be considered a traditional state function.” See Amig v.

Cnty. of Juniata, 432 F. Supp. 3d 481, 483 (M.D. Pa. 2020). As the Amig court

explained, the state is constitutionally required to provide humane conditions of

confinement, which includes a safe environment; this environment, in turn,

necessitates maintaining a drug-free setting. Thus, because maintaining a drug-

free setting in incarceration is a traditional state function, “[t]he Facility cannot

then delegate the duty to monitor drug use a private party and absolve inmates of

constitutional rights by doing so.” Id. at 487.

Here, Plaintiffs allege Microgenics Defendants were so involved in

implementing, overseeing, and directing drug test that they were effectively

delegated authority to monitor drug use. Thus, while a contractor selling products

to the government alone does not create state action under § 1983, Microgenics

Defendants’ alleged “involvement in virtually all stages of drug testing” satisfies

the public function test. Steele-Warrick, 2023 WL 3959100, at *5.

B. Plaintiffs’ Injuries

Microgenics Defendants next contend that Plaintiffs failed to suffer

constitutional injuries. The Court has already rejected this argument twice, in both

its motion-to-dismiss opinions, finding that Plaintiffs plausibly alleged a

deprivation of a cognizable liberty interest, specifically “freedom from arbitrary

discipline while in state custody.” See Steele-Warrick, 2023 WL 3959100, at *6

(citing Steele-Warrick, 2023 WL 3081290, at *7). The two, non-binding, district

court cases Microgenics Defendants now cite as the Court having “overlooked,”

see Taylor v. Microgenics Corp., No. 21 CV 6452 (VB), 2023 WL 1865274

(S.D.N.Y. Feb. 9, 2023) and Moreland v. Microgenics Corp., No. 21-CV-00748

(EN) (VLB), 2022 WL 2657287 (E.D.N.Y. June 1, 2022), neither control the

Court’s finding nor support Microgenics Defendants’ argument.1

Taylor did not consider whether the alleged injury was cognizable, instead

dismissing the substantive due process claim on Plaintiff’s failure to plead personal

involvement. See Taylor, 2023 WL 1865274, at *11. And Moreland’s substantive

due process analysis was limited to a footnote stating that the plaintiffs did not

1 Both Taylor and Moreland involved the same Microgenics Defendants and same

counsel as this case and were rendered before the Court’s June 12 decision.

Curiously, Microgenics Defendants’ counsel cited neither case in their papers.

demonstrate that the action shocked the conscience. See Moreland, 2022 WL

2657287, at *6 n.14. Here, Microgenics Defendants do not contest the Court’s

finding that Plaintiffs plausibly alleged conscience-shocking action, and the Court

need not revisit its finding, even if the Moreland court took a different view. See

Steele-Warrick, 2023 WL 3959100, at *7 (“These allegations are sufficiently

conscience-shocking.”).

C. Microgenics Defendants’ Involvement

Microgenics Defendants argue that they did not directly participate in

allegedly unconstitutional deprivations, relying on Taylor and Moreland.

Plaintiffs contend, correctly, that Microgenics Defendants failed to raise this

argument in their motion to dismiss, rendering the motion for reconsideration an

improper vehicle for raising this argument. See Wechsler v. Hunt Health Sys., Ltd.,

186 F. Supp. 2d 402, 410 (S.D.N.Y. 2002) (a party may not “advance new theories

or adduce new evidence in response to the court's rulings” on a motion for

reconsideration).

Regardless, Plaintiffs have plausibly alleged sufficient personal involvement

by the Microgenics Defendants. It is of no moment that DOCCS Defendants,

rather than Microgenics Defendants, imposed the discipline: a party can

nonetheless face § 1983 liability if it was “a direct and proximate cause” of the

constitutional deprivation, even if that party did not make the “ultimate

determination.” See Whiting v. Inc. Vill. of Old Brookville, 79 F. Supp. 2d 133,

137 (E.D.N.Y. 1999), aff'd sub nom. Whiting v. Old Brookville Bd. of Police

Comm’rs, 4 F. App’x 11 (2d Cir. 2001). Plaintiffs’ allegations that, inter alia,

Microgenics Defendants urged DOCCS to rely on their test to impose punishment

on the inmates, as well as their testimony at disciplinary hearings that the tests

were sufficiently reliable enough to impose discipline, suffice to show personal

involvement.

Once again, neither Taylor nor Moreland changes the Court’s analysis. In

contrast to Plaintiffs’ allegations, the Taylor court found that “DOCCS was no

longer relying on the Microgenics Defendants’ representations or training as to the

reliability of IPUA tests,” which thus failed to support “a reasonable inference that

the Microgenics Defendants directly participated in imposing the allegedly

unconstitutional discipline.” Taylor, 2023 WL 1865274, at *6. And unlike the

Moreland court — which found “nothing in the complaint [that] suggests

defendants were involved in the conduct that each plaintiff claims caused their

injury,” see Moreland, 2022 WL 2657287, at *6 — this Court found repeated

instances of Microgenics “downplaying, ignoring, or actively misleading DOCCS

personnel as to the need for confirmatory testing and evidence regarding Indiko

Plus’s inaccuracy.” Steele-Warrick, 2023 WL 3959100, at *6. Accordingly, under

these facts, the Court did not err.

D. Qualified Immunity

Microgenics Defendants next argue that if they are state actors for the

purposes of Plaintiffs’ substantive due process claim brought pursuant to § 1983,

they are entitled to qualified immunity.

Whatever the merits of their qualified immunity argument, a motion for

reconsideration is the improper mechanism for the Court to address it. Because

Microgenics Defendants failed to raise — let alone mention — qualified immunity

in their motion to dismiss, the Court will not address this new argument now. See

Analytical Survs., Inc. v. Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012), as

amended (July 13, 2012) (motion for reconsideration does not enable consideration

of a new argument).

Microgenics Defendants’ attempt to cast the Court as having “overlooked”

the qualified immunity argument misses the mark. They contend that their

classification as state actors “necessarily implicates the qualified immunity

protections typically afforded to state actors,” which the Court should have

considered.

But had Microgenics Defendants wanted the Court to address qualified

immunity, they should have simply raised it in their motion to dismiss, rather than

in a motion for reconsideration. Qualified immunity is, after all, an affirmative

defense that a party can waive. See Harris v. Miller, 818 F.3d 49, 63 (2d Cir.

2016). Thus, because the Court did not “overlook” an affirmative defense that

Microgenics Defendants failed to raise, see Henderson v. City of New York, No.

05-CV-2588 FB CLP, 2011 WL 5513228, at *1 (E.D.N.Y. Nov. 10, 2011) (“In

order to have been ‘overlooked,’ the decisions or data in question must have been

put before the court on the underlying motion.”) (cleaned up), the Court rejects

their attempt “to plug gaps in an original argument or to argue in the alternative,”

see Chow v. Shorefront Operating LLC, No. 1:19-CV-3541-FB-SJB, 2021 WL

2646329, at *1 (E.D.N.Y. June 28, 2021), and will not consider qualified immunity

now.

E. Injury Element of the General Business Law (“GBL”) § 349 Claim

Finally, Microgenics Defendants contend that the Court failed to consider

the third required element of a GBL § 349 claim, that “plaintiff suffered injury as a

result of the allegedly deceptive act or practice.” See City of New York v. Smoke-

Spirits.Com, Inc., 12 N.Y.3d 616, 621 (2009). Microgenics Defendants argue that

Plaintiffs’ damages from the drug tests were too indirect to constitute injury under

GBL § 349, relying on two New York Court of Appeals cases, City of New York v.

Smokes-Spirits.Com, Inc., 12 N.Y.3d 616, 622–24 (2009) and Blue Cross & Blue

Shield of N.J., Inc. v. Philip Morris USA Inc., 3 N.Y.3d 200, 206–08 (2004).

Again, Microgenics Defendants appear to be advancing a new argument.

Nonetheless, Plaintiffs plausibly allege sufficient injury under GBL § 349,

which is “intentionally broad, applying to virtually all economic activity” and

permitting recovery by any party — not limited to consumers — injured “by

reason of a deceptive business practice.” Philip Morris, 3 N.Y.3d at 205-07

(internal quotation and citation omitted). Plaintiffs must “plead that they have

suffered actual injury caused by a materially misleading or deceptive act or

practice” see Smokes-Spirits, 12 N.Y.3d at 623, which Plaintiffs do: they claim that

they suffered injury because of Microgenics Defendants’ sale of the urinalysis

system, as well as Defendants’ statements as to the accuracy and reliability of that

system at disciplinary hearings.

Neither Philip Morris nor Smokes-Spirits compels a different result.

Together, these cases stand for the proposition that plaintiffs lack standing under

the statute when their injury is “indirect or derivative,” i.e., it “arises solely as a

result of injuries sustained by another party.” Smokes-Spirits, 12 N.Y.3d at 622

(quoting Philip Morris, 3 N.Y.3d at 207).

The factual circumstances are further inapposite. Philip Morris considered,

and rejected, whether insurers or other third-party payers of expenditures could

bring their own actions based upon injuries to their insureds. See Philip Morris, 3

N.Y.3d at 207-08. Because the injury was directly suffered by their insureds, not

them, and they had another remedy, equitable subrogation for insurance, the court

held they lacked standing. Id. Similarly, in Smokes-Spirits, the court dismissed a

suit by the City of New York against defendants who sold cigarettes online,

alleging that they misrepresented that their cigarette sales were tax-free. Smokes-

Spirits, 12 N.Y.3d at 622. The City’s purported injury was a sum of unpaid

cigarette taxes, which the court determined was too indirect because it was based

entirely on the injury suffered by mislead consumers. Id. at 622-24.

In both cases, a party asserted injury “several steps removed from the

deceptive act.” See M.V.B. Collision, Inc. v. Allstate Ins. Co., 728 F. Supp. 2d 205,

217 (E.D.N.Y. 2010) (summarizing caselaw). By contrast, under the Philip Morris

test for whether an injury is indirect or derivate — whether the loss “arises solely

as a result of injuries sustained by another party,” see Philip Morris, 3 N.Y.3d at

207 — Plaintiffs clearly allege direct injury that does not rely on injuries sustained

by others. Accordingly, Microgenics Defendants’ argument fails.

III. CONCLUSION

For the foregoing reasons, Microgenics Defendants’ motion for

reconsideration is DENIED.

SO ORDERED.

_/S/ Frederic Block__________

FREDERIC BLOCK

Senior United States District Judge

Brooklyn, New York

January 23, 2024