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noting that "parties may not present new facts or theories" on a motion for reconsideration
Summary of this case from Wilder v. News Corp.Opinion
00 CV 7898 (RCC)
May 31, 2001
OPINION AND ORDER
Before the Court are Sandra Bentley's motions to reconsider its entry of the preliminary injunction against her and for the return of property and living expenses. The Court will treat each in turn.
I. Background
On October 17, 2000, the Securities and Exchange Commission ("SEC") brought this suit against Ashbury Capital Partners, L.P., Ashbury Capital Management, L.L.C., and Mark Yagalla (collectively "Defendants") with respect to an alleged ongoing securities fraud costing investors between $30 and $50 million. By order dated November 7, 2000, the Court appointed Michael Armstrong as Receiver for Ashbury Capital Partners, Ashbury Capital Management, and the assets of Defendant Yagalla, including the assets of Apex Investments, an alter ego of Yagalla. The order, which was restated on January 30, 2001, directs the Receiver to marshal and preserve the assets of the Receivership estate so as to ultimately return property to the defrauded investors.
Sandra Bentley is a former girlfriend of Yagalla. She and members of her family received millions of dollars in gifts and property from him during the course of their thirteen month relationship. For example, just weeks after Yagalla met Ms. Bentley, in October 1999 he bought her a $1.625 million house in Las Vegas. He spent an additional $1,313,738 in renovations on that residence. Between September 1999 and September 2000, Yagalla gave Ms. Bentley seven luxury cars, including two Mercedes, two Ferraris, a Cadillac, a Bentley and a Range Rover; over $84,000 in furs; several pieces of expensive jewelry, including three Rolex watches, a Chopard watch, a diamond ring worth $500,000 and approximately ten other pieces with diamonds and other precious stones; checks totaling $470,000 and credit card payments of approximately $1 million. Feb 1, 2001 Ho Decl. The Receiver sought to freeze these assets and submits that Yagalla improperly purchased or financed the gifts using investor funds. Ms. Bentley has never disputed that Yagalla paid for these gifts.
On February 5, 2001, the Court granted the Receiver's request for a Temporary Restraining Order ("TRO") freezing certain assets in the Bentleys' possession. Pursuant to the TRO, on February 7, 2001, Ms. Bentley vacated the Las Vegas residence, allegedly leaving behind possessions and personal effects she had acquired independently of Yagalla. The TRO also froze Ms. Bentley's bank accounts, which, according to her counsel contained approximately $30,000. The Court heard oral argument on March 7, 2001 and entered the preliminary injunction on that date.
Sandra Bentley now moves for reconsideration of the preliminary injunction order. Additionally, she requests the Court's assistance in retrieving property she alleges she owned before becoming involved with Yagalla. Finally, she moves for an award of ordinary and necessary living expenses.
II. Discussion
A. Motion for Reconsideration
Under Local Rule 6.3, which governs motions for reconsideration, the moving party must demonstrate controlling law or factual matters which it believes the court overlooked and that might reasonably be expected to alter the court's decision. ATT Corp. v. Comty. Network Servs., Inc., No. 00 Civ. 316 (BSJ), 2000 WL 1174992, at *1 (S.D.N.Y. Aug. 18, 2000); Local Rule 6.3. Rule 6.3 is intended to "ensure the finality of decisions and to prevent the practice of a losing party examining a decision and then plugging the gaps of a lost motion with additional matters." Carolco Pictures, Inc. v. Sirota, 700 F. Supp. 169, 170 (S.D.N.Y. 1988). The parties may not present new facts or theories at this stage. Ralph Oldsmobile Inc. v. General Motors Corp., No. 99 Civ. 4567 (AGS), 2001 WL 55729, at *2 (S.D.N.Y. Jan. 23, 2001). Local Rule 6.3 must be narrowly construed and strictly applied so as to avoid duplicative rulings on previously considered issues, and may not be employed as a substitute for appealing a final judgment. Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 150 (S.D.N.Y. 1999).
Here, Ms. Bentley maintains that the Court does not have jurisdiction to enter the preliminary injunction. The Court addressed this matter in its March 7 bench opinion and Ms. Bentley does not now offer controlling law or factual matters overlooked by the Court with regard to this issue. Accordingly, there will be no reconsideration of the matter. Second, Ms. Bentley submits that the Court, over her objections, erroneously relied on factual assertions by the Receiver's counsel and that it should have held an evidentiary hearing to resolve the dispute. Specifically, Ms. Bentley maintains that she did not leave the Las Vegas residence in the Cadillac listed in the TRO. She also submits that she did not take four pieces of jewelry with her to Los Angeles as they were already in Los Angeles when the TRO was entered.
Prior to the entry of the preliminary injunction, the Receiver argued that Ms. Bentley took the Cadillac from Las Vegas to Los Angeles when she vacated the residence on February 7, 2001. At oral argument the Receiver's counsel stated that according to surveillance in front of the Las Vegas house Ms. Bentley left in a Cadillac that had not been seen entering the driveway. Thus, the Receiver maintained that Ms. Bentley took the car to Los Angeles in contravention of this Court's order. However, Ms. Bentley is now prepared to offer an affidavit from a friend who picked up the Cadillac in Los Angeles, drove to Las Vegas to retrieve Ms. Bentley and her pets and returned the car to Los Angeles, at which time Ms. Bentley turned it over to the Receiver. Thus, it appears the Receiver and, as a result, the Court, may have been misinformed with respect to the Cadillac. Ms. Bentley did not in fact take the Cadillac from the Las Vegas house, she had it brought to her in Las Vegas from Los Angeles.
However, as it was when Ms. Bentley's counsel requested one on March 7, an evidentiary hearing is unnecessary. Resolving the factual dispute in Ms. Bentley's favor does not change the outcome. The TRO required Ms. Bentley to "immediately surrender possession to the Receiver of any and all Receivership property in [her] possession, including . . . the Cadillac. . . ." TRO at 3 (emphasis added). Ms. Bentley's present arguments demonstrate she did not do that, as she appears to have used the Cadillac to transport herself and her animals from Las Vegas to Los Angeles. Turning over the car after first using it for a 460 mile round trip journey cannot be considered immediate surrender.
Next, Ms. Bentley argues, and the Receiver admits, that the Court misunderstood the Receiver's argument concerning four pieces of jewelry that the Court believed Ms. Bentley took with her from Las Vegas to Los Angeles in contravention of the TRO. As with the apparent error about the Cadillac, the Court's misunderstanding about the jewelry will be corrected by this opinion on the record. However, these mistakes are not bases for reconsideration or reargument. Nor are they worthy of diminishing investors' resources by holding an evidentiary hearing. Excluding the Cadillac and jewelry examples, on the record before it on March 7, the Court had ample authority to grant the preliminary injunction. It is happy to provide that authority here.
As stated in the March 7 bench opinion, a receiver moving for preliminary injunctive relief must demonstrate 1) absent injunctive relief, it will suffer irreparable harm, and 2) either a) that it is likely to succeed on the merits, or b) that there are sufficiently serious questions going to the merits to make them a fair ground for litigation, and that the balance of the hardships tips decidedly in favor of the moving party. SEC v. Milan, No. 00 Civ. 108 (DLC), 2000 WL 236374, at *2 (S.D.N.Y. Mar. 1, 2000) (citing Otokoyama Co. v. Wine of Japan Import, Inc., 175 F.3d 266, 270 (2d. Cir. 1999); SEC v. Princeton Econ. Int'l. Ltd., 73 F. Supp.2d 420, 424-25 (S.D.N.Y. 1999)).
The irreparable harm requirement, which Ms. Bentley takes issue with, is satisfied "where the evidence shows that a party intends to frustrate any judgment on the merits by making it uncollectible." Pashaian v. Eccelston Props., Ltd., 88 F.3d 77, 87 (2d Cir. 1996). Further, courts in this district have found irreparable harm when, "[w]ithout a preliminary injunction, there is a substantial likelihood that [the Defendant] will be unable to recover, and return to investors, investor funds that have been misappropriated and provided to [third parties]." SEC v. Milan, No. 00 Civ. 108 (DLC), 2000 WL 520653, at *2 (S.D.N.Y. Apr. 28, 2000) (granting preliminary injunction freezing assets of third party where defendant-broker fraudulently deposited investors' funds into the third party's business account instead of investing in initial public offerings).
Ignoring the examples the Court recited regarding the Cadillac and jewelry, there remains a substantial likelihood that absent the preliminary injunction the Receiver would be unable to recover investors' funds that were being enjoyed by Ms. Bentley in the form of a mansion, luxury cars, furs, jewelry and cash. Yagalla admitted during an October 12, 2000 taped telephone conversation with an FBI informant that the Defendants have insufficient assets to repay the investors. Feb 1, 2001 Ho Decl. Ex. L. The Defendants' financial inability to return funds to the investors without recovering the gratuitous transfers to Ms. Bentley is sufficient to uphold the preliminary injunction. See SEC v. Milan, No. 00 Civ. 108 (DLC), 2000 WL 520653, at *2 (S.D.N.Y. Apr. 28, 2000). Accordingly, since Ms. Bentley has not offered any law or facts that could reasonably be expected to alter this Court's decision, there is no reason to reconsider the issuance of the preliminary injunction.
B. Motion for Return of Property and Living Expenses
In a separate motion, Ms. Bentley requests the Court's assistance in obtaining those possessions she left in Las Vegas that she alleges she owned before meeting Yagalla. Additionally, she makes an application for ordinary and necessary living expenses. The Receiver informed the Court in its response papers that arrangements have been made with Ms. Bentley's counsel for her to retrieve that property from the Las Vegas home that is clearly personal. The Court trusts that counsel for the Receiver and Ms. Bentley will continue to cooperate professionally and return to Ms. Bentley the property she obtained independently of Yagalla. However, Ms. Bentley must provide adequate documentation for this property. For example, her blanket request for "clothing" is inappropriate as the statements of the credit card paid for by Yagalla demonstrate that some of this clothing was purchased with investors' funds. See Feb 1, 2001 Ho Decl. Ex. E.
In the spirit of professional cooperation, the Court notes that counsel for Ms. Bentley has avoided responding to the Receiver's inquiry as to whether Ms. Bentley has placed money on account with her counsel.
Finally, Ms. Bentley requests $6,300 per month in living expenses and a one time $2,500 in moving costs. Besides the fact that the request would deplete her frozen bank account in under five months, the Court will not approve this outrageous application. While the Court comprehends the luxurious standard of living that young Ms. Bentley has become accustomed to, it will not permit the investors to finance this level of upkeep. Ms. Bentley is twenty-two and fully employable. She does not have a mortgage, nor is she responsible for supporting anyone other than herself. It is only appropriate for her to live within her means, and not the means of the defrauded investors. While Ms. Bentley argues that she received generous gifts from another benefactor and earned salaries from previous modeling assignments, she has not proffered any evidence demonstrating those funds are represented in the frozen bank accounts. Thus, a hearing on this matter is unnecessary and the request is denied. Ms. Bentley is encouraged to obtain gainful employment.
III. Conclusion
After the Court's careful review of the record, it finds no reason to reconsider its entry of a preliminary injunction. Further, it is hereby ordered that counsel for Ms. Bentley and the Receiver work together to return to Ms. Bentley the property that she can demonstrate she owns independently of Mark Yagalla.
So ordered.