In an opinion today, Judge Pauley largely denied a motion to dismiss a civil case brought by David Ganek, the former head of hedge fund Level Global.  Mr. Ganek accuses U.S. Attorney Preet Bharara and various other government officials of using a fabricated affidavit – which was later contradicted by trial testimony – as the basis for a search warrant and office raid that ultimately caused the collapse of Level Global.   According to Mr. Ganek, the government tipped off the Wall Street Journal about the raid, so as to inflict the maximum harm, and without any legitimate law enforcement purpose.  Judge Pauley described the allegations as “grave” and allowed most of the claims, based on the Fourth and Fifth Amendments, to proceed.

He ruled that the claims could even proceed against supervisors in the U.S. attorney’s office because the detailed facts alleged made it at least plausible that they were involved:

Ganek pleads that the Supervisor Defendants were kept abreast of developments, prioritized the prosecution of high level executives, and tipped the Wall Street Journal. Moreover, the Complaint contains thorough allegations establishing the high priority placed by the Supervisor Defendants on the insider trading investigation. These allegations include specific facts establishing the plausibility of the Supervisor Defendants’ involvement prior to the raid, including admissions by certain defendants that the raid’s consequences “had been carefully considered at the highest levels,” and DOJ policy indicating that any decision to tip the press required supervisory approval.

In short, given the high-profile nature of the investigation and involvement of the Supervisor Defendants, as alleged in great detail in the Complaint, it is plausible that some of the Supervisor Defendants would have learned [the true facts] and, at the very least, “entertained serious doubts as to the truth of the [allegations] in the Affidavit.”

One claim that was dismissed, however, was Mr. Ganek’s claim that tipping off the Journal was itself a violation of Mr. Ganek’s rights.  Judge Pauley distinguished cases in which “television cameras or newspaper photographers recorded individuals and their personal effects inside their homes during a search”:

Here, even accepting Ganek’s allegations as true, the Wall Street Journal reporters did not enter a private home or play any direct role in the investigation. Moreover, it cannot be said that it is “clearly established” that advising the media that a search warrant would be executed violates the Fourth Amendment’s prohibition on unreasonable searches and seizures . . . . At a minimum, Defendants are entitled to qualified immunity on this claim.

Our prior post on the case is here.