The United States Court of Appeals for the Second Circuit on June 23 reversed Theodore “Teddy” Rothstein’s verdict on a charge of malicious prosecution against Leisure Time Entertainment owner Mark Carriere, and ordered District Court judge Nina Gershon to enter judgment for Carriere on all claims.
This highly contentious case, which in a sense has its origins nearly 15 years ago, revolves around multiple federal indictments of Carriere and his Indiana-based distribution company, Multi-Media Distribution, and statements Carriere made to federal authorities in exchange for more lenient sentencing in a guilty plea to obscenity charges brought in 1994. That indictment, in the Western District of Kentucky, was Carriere’s third in as many years, and according to the Second Circuit opinion, he was almost certainly facing prison absent his cooperation.
In October, 1990, however, pursuant to an FBI raid on Multi-Media’s Indiana offices, federal agents came across evidence that the company was doing business with Bizarre Video, a New York-based video producer. At that time, they also noted, according to the appellate opinion, that several invoices from Bizarre had the preprinted name “Star” crossed out and “Bizarre” written in by hand, which led the FBI to suspect that Bizarre Video was in some way related to Star Distributors, a New York distribution company that had offices on the same floor in the same building as Bizarre. According to the feds, Star Distributors was owned by Teddy Rothstein, and they suspected he also had at least some ownership in Bizarre Video.
Carriere confirmed the relationship between Bizarre and Rothstein in an interview that took place on March 18, 1994, in which Carriere claimed that his company had sold Bizarre videos through a cash deal with Rothstein, with Donald “Sandy” Sarnblad, Carriere’s former sales manager and Rothstein’s friend, acting as the broker of the deal.
Nearly two years after Carriere’s interview, a federal grand jury in Tallahassee, Florida returned a seven-count indictment against Bizarre, Rothstein, Sarnblad and Morty Gordon (who was commonly known in the adult industry as the owner of Bizarre) for, among other things, conspiracy to distribute obscene Bizarre tapes.
The government dismissed the indictments against Rothstein and Sarnblad, however, apparently in exchange for an affidavit from Sarnblad in which Sarnblad stated that as a Multi-Media employee, he had provided cash to another employee “to deliver as partial payment for the videos to Morton Gordon, the principal of Bizarre Video.”
Sarnblad’s statement conflicted with what Carriere had told federal investigators, and it was Sarnblad’s statement and the dismissal of the indictment against he and Rothstein that formed the basis of Rothstein’s suit in federal court in late 1997 for malicious prosecution. The case came to trial in 2002, and Rothstein won more than $100,000 in compensatory damages, and $1 million in punitive damages.
In reversing that verdict, the Second Circuit relied on Smith-Hunter v. Harvey, a 2000 case that sets out a four-part test that malicious prosecution plaintiffs have to meet.
“In order to prevail, they must establish four elements,” wrote District Judge John Gleeson, sitting by designation, for the Court. “First, the plaintiff must prove that the defendant initiated a criminal proceeding. Second, the proceeding must have been terminated favorably to the plaintiff. Third, the plaintiff must prove that there was no probable cause for the criminal charge. Finally, the defendant must have acted maliciously.”
The Court never commented on whether they thought Carriere “acted maliciously,” but that
didn’t impact their opinion since they found that Rothstein’s victory failed the first three parts of the test.
“‘Once a suspect has been indicted... the law holds that the Grand Jury action creates a presumption of probable cause,’” the opinion said, citing the case of Colon v. City of New York to refute the argument that there had been no probable cause to indict Rothstein. Among the few exceptions the Court found to the presumption would have been if police witnesses had withheld facts or offered perjured testimony to the Grand Jury or the District Attorney, and no such evidence was presented here.
“[U]nless the plaintiff can demonstrate that the proceedings before the grand jury were tainted, an indictment extinguishes the claim.” [Opinion, p. 22]
The Second Circuit also found that Rothstein’s indictment had not been favorably terminated, noting that one exception to a finding of favorable termination would be, “... if the charge is withdrawn or the prosecution abandoned pursuant to a compromise with the accused.” The Court cited Sarnblad’s statement to the feds in exchange for charges being dropped against him and Rothstein as tantamount to just such a compromise.
“The undisputed facts of this case preclude Rothstein from carrying his burden of proof that he obtained a favorable termination of his criminal case,” wrote Judge Gleeson. “As set forth below, Rothstein fought hard and successfully to suppress the testimony of Malpas (the prosecutor) and Pellegrino (the FBI agent) about why the government moved to dismiss the charges against him. Notwithstanding those efforts, the record shows that Rothstein and Sarnblad compromised the criminal case in a way that precludes Rothstein’s malicious prosecution claim against Carriere.”
The appeals court also found that the trial judge had committed several procedural errors, largely due, they said, to “an unduly narrow focus on Carriere’s March 18, 1994, interview with the FBI.”
“The trial court’s charge focused solely on that interview as determinative of whether there was probably cause to arrest Rothstein and whether Carriere initiated the criminal proceeding against him,” Judge Gleeson wrote. “Specifically, the jury was told that if it found that Carriere lied to the FBI on March 18, 1994, then it should further find that there was no probable cause to arrest Rothstein and that Carriere initiated the prosecution. As discussed below, these instructions were erroneous. Moreover, on the evidence presented at trial, a properly instructed jury could have reached but one conclusion on each of these issues, i.e., there was probable cause to arrest Rothstein, and Carriere did not initiate the criminal proceeding.”
At press time, neither Rothstein nor Carriere could be reached for comment.
