Opinion
S1 97 CR 639 (SAS)
April 1, 2004
George W. Galgano, Jr., Esq. Galgano White Plains, New York, For the Government: Lisa Korologos Marc Litt Assistant United States Attorneys United States Attorney's Office Southern District of New York One Saint Andrew's Plaza New York, New York
OPINION AND ORDER
On September 24, 2003, Judge John S. Martin of this Court issued an Opinion and Order finding that Gwen Bennett, Patrick Bennet's wife, does not have a legitimate interest in three parcels of property that are subject to forfeiture as a result of Patrick Bennett's conviction for securities fraud, bank fraud and money laundering. See United States v. Bennett, No. $197 Cr. 639, 2003 WL 22208286 (S.D.N.Y. Sept. 24, 2003). Gwen Bennett now moves to alter or amend that judgment, and for relief from the judgment, pursuant to Rules 59 and 60 of the Federal Rules of Civil Procedure.
This case was transferred to me following Judge Martin's resignation.
I. BACKGROUND
On June 10, 1999, a jury convicted Patrick Bennett of securities fraud, bank fraud and money laundering. The jury also returned a special verdict of forfeiture, requiring Patrick Bennett to forfeit to the United States $109,088,889.11. Judge Martin thereafter conducted a hearing to determine Patrick Bennett's interest in three parcels of real property.
At the conclusion of that hearing the Court determined that all of the properties in question had been purchased with funds belonging to Patrick Bennett and that the properties were put into the name of his wife Gwen Bennett `pursuant to a scheme and conspiracy in which he and his wife engaged to defraud potential creditors, starting with the purchase of the house, which occurred when the scheme was ongoing, massive, and defendant knew that ultimately this house of cards would have to collapse. Money that was derived through his illegal venture was turned over and used by his wife to purchase a home.' The Court also concluded that the Government had not been able to locate the $109,088,899, in the exercise of due diligence and [Patrick] Bennett's right, title and interest in these properties were forfeited to the United States as substitute assets.Bennett, 2003 WL 22208286, at *1 (quoting 3/31/00 Transcript ("Tr.") at 11-12). Gwen Bennett subsequently filed claims with respect to two of the properties ("the disputed properties"). On August 14 and 18, 2003, Judge Martin held a hearing, at which Gwen Bennett testified, to determine her interest in these properties. "[T]he Court found that her testimony concerning her extensive role in acquiring these properties and the lack of involvement of Patrick Bennett was not worthy of belief." Id. at *1. The Court thus concluded that (1) Gwen Bennett's interest in the properties was not superior to Patrick Bennett's, (2) Patrick Bennett purchased the properties with money procured by fraud and placed them in Gwen Bennett's name to deceive creditors, and (3) Patrick Bennett's transfers of the properties to Gwen Bennett constituted fraudulent conveyances under sections 275 and 276 of New York Debtor and Creditor Law. See id. at * 1-2.
The Andrick Trust, to which the third property was transferred following Patrick Bennett's indictment, filed a third-party claim in this matter with respect to that property. Judge Martin rejected the Andrick Trust's claim, Bennett, 2003 WL 22208286, at *5, and the Trust apparently does not join in Gwen Bennett's motions.
In the forfeiture order, Judge Martin determined that the properties were subject to forfeiture "as property traceable to money laundering in violation of 18 U.S.C. § 1956 and/or as substitute assets pursuant to 18 U.S.C. § 982(b)(1)." First Amended Order of Forfeiture as to Patrick R. Bennett's Interest in Property, Ex. A to the Government's Memorandum of Law in Opposition to Gwen Bennett's Motion ("Opp. Mem."), at 3-4. Thus, it is not entirely clear whether the disputed properties at issue now were forfeited because they are traceable to the crimes for which Patrick Bennett was convicted, or because the Government was unable to locate the $109,088,889.11, despite the exercise of due diligence.
II. APPLICABLE LAW
A. Standard Under Rule 59(e)
Motions pursuant to Rule 59(e) are governed by the same standards governing motions for reconsideration under Local Civil Rule 6.3. See Wells Fargo Financial, Inc. v. Fernandez, No. 98 Civ. 6635, 2001 WL 345226, at *1 (S.D.N. Y.Apr. 9, 2001).
Thus, to be entitled to reargument and reconsideration, the movant must demonstrate that the Court overlooked controlling decisions or factual matters that were put before it on the underlying motion. [The Rule] is to be narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the Court. In deciding a reconsideration and reargument motion, the Court must not allow a party to use the motion as a substitute for appealing from a final judgment.Dellefave v. Access Temporaries, Inc., No. 99 Civ. 6098, 2001 WL 286771, at *1 (S.D.N.Y.Mar.22, 2001).
B. Standard Under Rule 60(b)
Rule 60(b) provides that a court may relieve a party from a final judgment if there is "fraud (whether heretofore denominated extrinsic or intrinsic), misrepresentation, or other misconduct of an adverse party," or "the judgment is void." Fed.R.Civ.P. 60(b)(3) and (4). A court may not "lightly invoke the `extraordinary judicial relief of annulling a final judgment." Batac Dev. Corp. v. BR Consultants, Inc., No. 98 Civ. 721, 2000 WL307400, at *3 (S.D.N.Y. Mar. 23, 2000) (quoting Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986)). Such relief should only be granted in "exceptional circumstances." Batac, 2000 WL 307400, at *3. See also Employers Mut. Cas. Co. v. Key Pharm., 75 F.3d 815, 824-25 (2d Cir. 1996) ("A movant under Rule 60(b) must demonstrate `exceptional circumstances' justifying the extraordinary relief requested."); Dellefave, 2001 WL 286771, at *2 ("Rule 60(b) is `extraordinary judicial relief and can be granted `only upon a showing of exceptional circumstances.'") (quoting Nemaizer, 793 F.2d at 61). The decision whether to grant a Rule 60(b) motion lies in the discretion of the district court and will not be reversed on appeal absent an abuse of discretion. See Jones v. Trump, 971 F. Supp. 783, 786 (S.D.N.Y. 1997), aff'd, No. 97-9017, 1998 WL 1967891 (2d Cir. Sept. 21, 1998).
A Rule 60(b) motion is not a substitute for appeal. See Competex, S.A. v. Labow, 783 F.2d 333, 335 (2d Cir. 1986). Accordingly, Rule 60(b) motions that simply attempt to relitigate issues and thereby circumvent the appellate process are routinely dismissed. See, e.g., Hernandez v. United States, No. 99 Civ. 4303, 2000 WL 744148, at *1 (S.D.N.Y. June 8, 2000) (denying Rule 60(b) motion where "[t]he vast bulk of [movant's] argument constitutes nothing more than a futile effort to have this Court revisit its Opinion"); Batac, 2000 WL 307400, at *3 (holding that a party "may not . . . use Rule 60(b) as a substitute for appeal or to relitigate matters already resolved by the court adversely to that party").
1. Rule 60(b)(3)
It is well established that "a Rule 60(b)(3) motion cannot be granted absent clear and convincing evidence of material misrepresentations and cannot serve as an attempt to relitigate the merits." Fleming v. New York Univ., 865 F.2d 478,484 (2d Cir. 1989). See also King v. First Am. Investigations, Inc., 287 F.3d 91, 95 (2d Cir. 2002) ("Fraud upon the court must be established by clear and convincing evidence."). Fraud upon the court "is limited to fraud which seriously affects the integrity of the normal process of adjudication," and embraces "`only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases.'" H adges v. Yonkers Racing Corp., 48 F.3d 1320,1325 (2d Cir. 1995) (quoting Kupferman v. Consolidated Research and Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir. 1972) (internal quotation marks omitted)). Examples of conduct that meet the definition of fraud upon the court include bribery of a judge, jury tampering, or hiring an attorney for the sole purpose of improperly influencing the judge. See United States v. Buck, 281 F.3d 1336,1342 (10th Cir. 2002) (noting that fraud upon the court includes bribing a judge, tampering with a jury, or fraud by an officer of the court); In re Genesys Data Techs., Inc., 204 F.3d 124, 130 (4th Cir. 2000) (same).
2. Rule 60(b)(4)
Rule 60(b)(4) provides that a court may relieve a party from a judgment when "the judgment is void." See Fed.R.Civ.P. 60(b)(4). A judgment is void if the court lacked personal or subject matter jurisdiction. See Triad Energy Corp. v. McNell, 110 F.R.D. 382, 385 (S.D.N.Y. 1986). While other motions to vacate under Rule 60(b) are left to the district court's discretion, a 60(b)(4) motion must be granted if it is found that the court initially lacked jurisdiction. See id. at 384; see also Popper v. Podhragy, 48 F. Supp.2d 268, 271 (S.D.N.Y. 1998). III. DISCUSSION A. Gwen Bennett Is Not Entitled to Relief Under Rule 59
Gwen Bennett contends that Judge Martin's September 24, 2003 Opinion and Order is flawed in four respects, each constituting manifest error warranting the extraordinary relief provided for in Rule 59. First, she argues that the Court improperly held that section 1961 of Title 18 of the United States Code governs the forfeiture of the disputed properties. Second, Gwen Bennett submits that the Court erred in dismissing her claim to the properties because the properties were acquired prior to the conduct that gave rise to Patrick Bennett's conviction, and are not traceable to his crimes. Third, Gwen Bennett claims that the Court erred in concluding that Patrick Bennett fraudulently conveyed the properties to Gwen Bennett. And fourth, Ms. Bennett argues that the Court made a mistake of law by ordering forfeiture of "marital properties."
In her moving papers, Gwen Bennett erroneously states that the September 24, 2003 Opinion and Order relies on section 1961 of Title 21. This is incorrect. See Bennett, 2003 WL 22208286, at *1. For purposes of this motion, I will assume that she intended to refer to Title 18.
Although Judge Martin's September 23 Opinion and Order relied upon section 1961 of Title 18, in an amendment dated October 20, 2003, Judge Loretta A. Preska, sitting as the Part I Judge, deleted the reference to section 1961 of Title 18, and replaced it with a citation to section 853(n)(6) of Title 21. See Amended Opinion Order, Ex. E to Opp. Mem. Thus, Gwen Bennett's contention that the reference to section 1961 of Title 18, contained in the September 23, 2003 Opinion and Order, constitutes "manifest error," is entirely without merit.
Gwen Bennett's claims that the properties (1) were acquired prior to Patrick Bennett's criminal conduct, (2) are not traceable to his crimes, and (3) were not fraudulently conveyed from Patrick Bennett to Gwen Bennett, are all claims that were raised before Judge Martin, and rejected. Gwen Bennett points to no facts or controlling law that Judge Martin overlooked in reaching his conclusions. She merely argues that the Court's findings were incorrect. But Ms. Bennett may not simply repeat now, by way of a Rule 59 motion, arguments that she previously made unsuccessfully before Judge Martin. See Dellefave, 2001 WL 286771, at *1.
Finally, Gwen Bennett's contention that the forfeited properties were "marital properties" that are not subject to forfeiture was also raised before Judge Martin. See Opp. Mem. at 12. Though not specifically addressed in the September 24, 2003 Opinion and Order, this argument was implicitly rejected by the Court. Again, Ms. Bennett points to no law or facts that the Court overlooked in reaching its conclusion.
Moreover, the cases upon which Ms. Bennett relies in support of her argument regarding "marital property" are distinguishable. Specifically, in United States, v. Lee, 232 F.3d 556 (7th Cir. 2000) and United States v. Jimerson, 5 F.3d 1453 (11th Cir. 1993), the Seventh and Eleventh Circuits interpreted Florida law, and concluded that properties not traceable to the husbands' crimes, and held by the spouses in tenancies by the entirety, were not subject to forfeiture following the husbands' criminal convictions. Similarly, in United States v. Lester, 85 F.3d 1409 (9th Cir. 1996), the Ninth Circuit interpreted California law and concluded that property held by a husband and wife as community property, and not traceable to the husband's criminal conduct, was not subject to criminal forfeiture. Interpretations of Florida and California law obviously have no application to the case now before the Court, Gwen and Patrick Bennett did not hold the properties in a tenancy by the entirety or as community property, and Judge Martin concluded that the properties were traceable to Patrick Bennett's criminal acts. Thus, Lee, Jimerson, and Lester are not instructive.
In United States v. 221 Dinna Ave., 261 F.3d 65 (1st Cir. 2001), the First Circuit held that the "innocent owner" defense applies to properties subject to forfeiture under the former federal civil forfeiture statute, 21 U.S.C. § 881(a)(7) (1999) (amended 2000). However, the properties forfeited as a result of Patrick Bennett's criminal conduct were forfeited pursuant to section 853(n)(6) of Title 21, not former section 881(a)(7). Moreover, as noted in a case cited by Ms. Bennett, the innocent owner defense is a defense to civil forfeiture, and may not be relied upon as a defense to criminal forfeiture. See Jimerson, 5 F.3d at 1455.
B. Gwen Bennett Is Not Entitled to Relief Under Rule 60
1. No Relief Is Warranted Under Rule 60(b)(3)
Ms. Bennett contends that she is entitled to relief pursuant to Rule 60(b)(3) of the Federal Rules of Civil Procedure because "the Government knowingly engaged in misconduct before the district court. . . ." See Memorandum of Law in Support of Gwen K. Bennett's Motions ("Mem.") at 6. Specifically, Gwen Bennett claims that on May 9, 2000, Assistant United States Attorney Serene Nakano stated, on the record, that, "As a result of acts and omissions of the defendant, the Government upon the exercise of due diligence, has been unable to locate said $109,088,889.00." Id. (quoting 5/9/00 Transcript at 3). According to Ms. Bennett, Nakano's statement was false and misleading, and was made so that the Government could seize the disputed properties as substitute assets. See id. Gwen Bennett further claims that the Government has "stonewalled" discovery requests regarding (1) the acts and omissions committed by Patrick Bennett that led to the Government's inability to locate the money, and (2) the due diligence undertaken by the Government in its efforts to locate the money.
As an initial matter, this argument is not properly raised by Gwen Bennett because the September 24, 2003 Opinion and Order from which Ms. Bennett seeks relief made no finding with respect to the Government's ability to locate the $109,088,889.00. To the contrary, the Opinion and Order dealt exclusively with Gwen Bennett's alleged interest in the disputed properties. In its October 5, 2000 forfeiture order, the Court did conclude that "as a result of acts and omissions of [Patrick Bennett], the Government, upon the exercise of due diligence, has been unable to locate said $109,088,889.00." See First Amended Order of Forfeiture as to Defendant Patrick R. Bennett's Interest in Property, Ex. A to Opp. Mem., at 3. However, Gwen Bennett was not a party to the proceedings that gave rise to that forfeiture order, and may not seek relief, pursuant to Rules 59 and 60, from the October 5, 2000 order.
Moreover, even if Gwen Bennett's claims were properly raised in this motion, they would not warrant the extraordinary relief provided for under Rule 60. As noted above, the disputed properties were forfeited either as property traceable to Patrick Bennett's crimes, or as substitute assets. See supra, n. 3. Thus, Gwen Bennett's claim that the Government made a misrepresentation so that the Court would order the forfeiture of substitute assets is tenuous, at best. Even assuming, arguendo, that the disputed properties were forfeited as substitute assets, Ms. Bennett has not produced any evidence that the Government's statements constituted a misrepresentation, let alone "clear and convincing evidence of [a] material misrepresentation." Fleming, 865 F.2d at 484. These bald allegations, without any factual support whatsoever, simply do not establish that the Government engaged in "fraud which seriously affects the integrity of the normal process of adjudication," Hadges, 48 F.3d at 1325, as required for relief under Rule 60(b)(3).
2. No Relief Is Warranted Under Rule 60(b)(4)
Finally, Gwen Bennett argues that the Court lacked subject matter jurisdiction over the disputed properties because "Patrick Bennett does not, nor has [he] ever, had an ownership interest in, or held any legal title in, these properties." Mem. at 10. According to Ms. Bennett, she owns the disputed properties, which are located in the Northern District of New York. Therefore, the "appropriate legal proceeding for the Government to pursue an interest in this property was through the applicable civil (in rem) forfeiture statute, in the Northern District of New York where the property is located." Id. at 11.
This entire argument is premised on Ms. Bennett's contention that she, rather than Patrick Bennett, owned the disputed properties. But, as noted above, the Court held a hearing with respect to this claim, and rejected it; Judge Martin specifically found that Ms. Bennett's testimony regarding her purchase of the disputed properties was not credible, and concluded that Patrick Bennett purchased the properties and fraudulently transferred them to Gwen Bennett. See Bennett, 2003 WL 22208286, at *1; see also supra, Part I. Based on that finding, the disputed properties were subject to criminal forfeiture pursuant to section 853 of Title 21, and the Court had jurisdiction over the properties that it ordered forfeited.
IV. CONCLUSION
For the foregoing reasons, Gwen Bennett's motion to alter or amend the judgment, pursuant to Rule 59, and for relief from the judgment, pursuant to Rule 60, is denied. The Clerk of the Court is directed to close this motion [docket #211].
SO ORDERED.