Opinion
98 Civ. 2279 (DLC).
March 11, 2011
Jason Peter Hernandez, U.S. Attorney's Office, S.D.N.Y., New York, NY, Attorney for plaintiff.
OPINION ORDER
The Government moves to strike the claim of Sonia LaFontaine ("LaFontaine") to the property at issue in this in rem action, known as "479 Tamarind Drive." LaFontaine does not have standing to pursue her claim, so the Government's motion to strike is granted.
BACKGROUND
LaFontaine and her husband and former business associate, Arthur Froom, a.k.a. Arthur Kissel ("Froom"), were charged with conspiracy to commit health care fraud, among other related claims. LaFontaine was arrested on March 2, 1998. LaFontaine was convicted of conspiracy to commit mail fraud and healthcare fraud, mail fraud, healthcare fraud, witness tampering, and engaging in illegal financial transactions, and her sentence was 120 months. Correction of Sentence, United States v. LaFontaine, No. 98 Cr. 251, Dkt. No. 206 (S.D.N.Y. Aug. 18, 2006). In 1998, Froom fled to Canada to avoid arrest for his role in the healthcare fraud conspiracy. He was later extradited to the United States and pled guilty in his criminal case. On October 25, 2010, Froom was sentenced to 120 months of imprisonment.United States v. Froom, No. 98 Cr. 251, Dkt. No. 252 (S.D.N.Y. Nov. 2, 2010).
The Government alleges that 479 Tamarind Drive was purchased with the proceeds of the healthcare fraud and seeks forfeiture of the property. After the Government filed a Verified Complaint in this civil forfeiture action on March 30, 1998, claims were filed by Froom, Elliot Pearl, Susan Szilari, Medical Group Research Associates, Ltd. ("MGRA") and LaFontaine Rish Medical Group, Ltd. ("LRMG"). LaFontaine never filed her notice of claim with the Court, but instead sent the claim directly to the Government. Her claim asserts that she has an interest in 479 Tamarind Drive as a shareholder of MGRA. MGRA's claim states that it is owner of the title to 479 Tamarind Drive. LaFontaine has not filed an answer to the Verified Complaint.
On October 14, 2005, Judge Robert L. Carter, to whom this case had previously been assigned, issued an opinion and order that struck the claims filed by Elliot Pearl and Susan Szilari for lack of standing. U.S. v. 479 Tamarind Drive, No. 98 Civ. 2279 (RLC), 2005 WL 2649001, at **3-4 (S.D.N.Y. Oct. 14, 2005) (the "October 15, 2005 Opinion"). This order also struck Froom's claim under the fugitive disentitlement doctrine of the Civil Asset Forfeiture Reform Act of 2000 and deferred judgment on the claims of MGRA and LRMG at the request of the Government, which wished to take further discovery. Id. at **2-3. Judge Carter denied a motion for reconsideration of the October 15, 2005 Opinion. U.S. v. 479 Tamarind Drive, No. 98 Civ. 2279 (RLC), 2007 WL 3118660 (S.D.N.Y. Oct. 22, 2007).
PROCEDURAL HISTORY
This case was transferred to this Court on November 24, 2009. A discovery schedule that had been set on February 16, 2010 was stayed pending the sentencing of Froom. The stay was lifted on November 4. The Government filed a motion to strike LaFontaine's claim on December 10. Per this Court's Order of December 10, LaFontaine was to file her opposition to the motion by December 30. That opposition was never filed; instead, LaFontaine, represented by counsel who has yet to file a notice of appearance on her behalf, sent a letter on January 5, 2011 requesting an extension to file the opposition. It was then ordered on January 6 that LaFontaine's counsel had to file a notice of appearance on her behalf by January 11 and an opposition to the motion to strike by January 27 (the "January 6 Order"). As of March 11, neither a notice of appearance nor any opposition papers had been filed.
DISCUSSION
The Government's motion to strike is governed by Rule G of the Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions ("Supp. R."). 18 U.S.C. § 981. Pursuant to that rule, a motion to strike "may be presented as a motion for judgment on the pleadings or as a motion to determine after a hearing or by summary judgment whether the claimant can carry the burden of establishing standing by a preponderance of the evidence." Supp. R. G(8)(c)(ii)(B). No discovery has been taken on the issue of LaFontaine's standing and the Court can only review LaFontaine's notice of claim and the motion papers of the Government; LaFontaine has not filed any papers opposing this motion to strike. Therefore, this motion will be treated as one for judgment on the pleadings.
In December 2006, Supp. R. C(6), which controlled at the time LaFontaine's claim was filed, was amended, and parts of Supp. R. G were newly created to govern these types of forfeiture proceedings. See U.S. v. All Funds on Deposit at Citigroup Smith Barney Account No. 600-00338, 617 F.Supp.2d 103, 109 n. 1 (E.D.N.Y. 2007).
LaFontaine's notice of claim has not been filed with the Court, and so could be struck for failing to be filed pursuant to the Supp. R. G(5)(a). See United States v. Khan, 497 F.3d 204, 207 (2d Cir. 2007). The Government, however, did not move to strike the claim on this basis, so for the purposes of this Opinion the notice of claim will be treated as if it had been properly filed.
"In order to contest a governmental forfeiture action, claimants must have both standing under the statute or statutes governing their claims and standing under Article III of the Constitution as required for any action brought in federal court." United States v. Cambio Exacto, S.A., 166 F.3d 522, 526 (2d Cir. 1999). On the face of LaFontaine's notice of claim, LaFontaine lacks both Article III and statutory standing to pursue her alleged claim in 479 Tamarind Drive. Therefore, the Government's motion to strike is granted.
I. Lack of Article III Standing
In forfeiture actions, as in other litigation, a claimant must "demonstrate constitutional standing: a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy." Cambio Exacto, 166 F.3d at 526 (citation omitted). The burden of proof in making a demonstration of standing rests with the claimants. Mercado v. United States Customs Service, 873 F.2d 641, 644 (2d Cir. 1989). "In determining standing to challenge a forfeiture, we look to ownership and possession because they are often reliable indicators of injury that occurs when property is seized." Cambio Exacto, 166 F.3d at 527. The possessory or ownership interest must be in the specific forfeited property. Id.
LaFontaine's claim states that her interest in the property is through her shareholder interest in the assets of MGRA. As Judge Carter held with regard to the claims of Elliot Pearl and Susan Szilari, who had similarly filed claims on 479 Tamarind Drive through their roles as MGRA shareholders, a shareholder has no standing to contest the forfeiture of an asset of a corporation because shareholders do not have an ownership interest in any specific property owned by that corporation. October 15, 2005 Opinion, at *4; see also United States v. Amiel, 995 F.2d 367, 371 (2d Cir. 1993) (suggesting that where title to defendant property in rem is held by corporations, various individual claimants would not have standing to challenge the forfeitures); United States v. New Silver Palace Restaurant, Inc., 810 F. Supp. 440, 442 (E.D.N.Y. 1992). This is true whether the law being applied is that of New York or of Ontario, where MGRA is registered. EM Ltd. v. Republic of Argentina, 473 F.3d 463, 475-76 (2d Cir. 2007); October 15, 2005 Opinion, at *4; 5303 Realty Corp. v. O Y Equity Corp., 64 N.Y.2d 313, 323, 476 N.E.2d 276, 283 (1984); Chilian v. Augdome Corp., (1994) 78 D.L.R. 4th 129 (Can. Ont. C.A.), construed in Seville Properties Ltd. v. Coutre, 2005 CarswellBC 1844, at ¶ 16 (Can. B.C. Sup. Ct.) (WL) ("Chilian is authority for the proposition that a corporate shareholder does not have an estate or interest in assets held by the corporation."). This same analysis applies here; LaFontaine presents no other basis for a claim in the property other than as a shareholder of MGRA, and no other potential ownership or possessory interest is evident from the record available. LaFontaine's lack of Article III standing alone justifies dismissal of her claim.
II. Lack of Statutory Standing
In order to establish statutory standing, a claimant must follow the procedural rules in the Supp. R. See Cambio Exacto, 166 F.3d at 526. "Strict compliance" with the Supp. R. is "typically required" for standing, and it is not an abuse of discretion for a district court to refuse to allow claimants to avoid the requirements of Supp. R. G. Id. at 529. Among the requirements is to file an answer to the forfeiture complaint within 21 days of filing the claim. Supp. R. G(5)(b) (previously 20 days under Supp. R. C(6)). When a claimant fails to file an answer, he or she does not have statutory standing to bring a claim. See United States v. $138,381, 240 F. Supp. 2d 220, 229-30 (E.D.N.Y. 2003); United States v. $205,991.00 in U.S. Currency, No. 97 Civ. 3520 (SAS), 1997 WL 669839, at *2 (S.D.N.Y. Oct. 28, 1997); see also United States v. Amiel, 995 F.2d 367, 371 (2d Cir. 1993) (suggesting failure to answer pursuant to Supp. R. would justify denial of claim).
Nearly thirteen years into these proceedings, LaFontaine has never filed an answer to the Government's Verified Complaint, not even within the extended time period allowed by Judge Carter. See 479 Tamarind Drive, No. 07 Civ. 2279 (Order of July 16, 2002). Even if "strict compliance" with Supp. R. G were not expected, this complete failure to comply with the procedural requirements clearly deprives LaFontaine of statutory standing to pursue her claim.
CONCLUSION
The Government's December 10 motion to strike LaFontaine's claim is granted for lack of standing.
SO ORDERED: