Opinion
98 Civ. 2279 (RLC).
October 10, 2007
Michael J. Garcia, United States Attorney for the Southern District of New York, New York, New York, Christina Paglia Bischoff Of Counsel.
Arthur Froom, Toronto, Ontario.
Elliot Pearl c/o LaFontaine Rish Medical Group, Ltd., Toronto, Ontario.
Susan Szilazi c/o David Cousins, Esq., Toronto, Ontario.
OPINION
Individual claimants Elliot Pearl ("Pearl"), Susan Szilazi ("Szilazi") and Arthur Froom ("Froom"), collectively referred to as "Claimants", request reconsideration of the court's Opinion dated October 14, 2005 ("Opinion"). They have also brought this motion for reconsideration on behalf of the corporations affected by Froom's status. (Claimants' Brief at page 1). These corporations are LaFontaine Rish Medical Group, Ltd. ("LRMG") and Medical Group Research Associates, Ltd. ("MGRA"), each incorporated in Ontario, Canada. Claimants assert that the court's previous Opinion contained material errors of fact and law warranting reconsideration. The Government submits that the motion is wholly without merit and should be summarily denied.
BACKGROUND
A criminal complaint was filed against Sonia LaFontaine ("LaFontaine") and her husband Arthur Kissel, also known as "Arthur Froom", on February 27, 1998. They were charged with conspiracy to commit health care fraud. On March 2, 1998 LaFontaine was arrested based on that complaint. Froom was in Canada when LaFontaine was arrested and has remained there since LaFontaine's arrest. After LaFontaine was apprehended, Froom and LaFontaine were indicted on March 20, 1998.
The Government filed the Verified Complaint in this civil forfeiture action on March 30, 1998, seeking forfeiture of real property that was allegedly purchased with the proceeds of health care fraud. LaFontaine was the first person to contest the forfeiture, filing a claim on April 14, 1998. MGRA, the record owner of the property, filed a claim contesting forfeiture on April 20, 1998. On May 11, 1998 MGRA sought dismissal of the Verified Complaint for lack of particularity pursuant to Rule E(2)(a) of the Supplemental Rules for Certain Admiralty and Maritime Claims and Rule 9(b) F.R. Civ. P., which LaFontaine joined in on May 12, 1998. Froom filed a claim on May 13, 1998. He claimed an interest in the property as a shareholder of MGRA. Pearl eventually filed a similar claim on November 3, 1998. Like Froom, Pearl claimed an interest in the property as a shareholder of MGRA.
On May 18, 1998 Froom filed a motion to dismiss the Verified Complaint citing the same grounds as MGRA and LaFontaine. The court denied the motions to dismiss the Verified Complaint on July 29, 1998. Then the court denied MGRA's motion for reconsideration on August 11, 1998 and its amended motion for reconsideration on August 27, 1998. The court also denied MGRA's second amended motion for reconsideration on October 22, 1998.
Per the Government's request, the court stayed this civil forfeiture action on June 7, 1999 pending the resolution of the criminal case against LaFontaine. In July of 2000 LaFontaine was convicted on all 17 counts of an Indictment resulting from a scheme to defraud private health care companies. LaFontaine's conviction included the following charges: conspiracy to commit mail and health care fraud; substantive mail and health care fraud; and engaging in illegal financial transactions. The Honorable Michael B. Mukasey sentenced LaFontaine to 135 months in prison. Judgment, United States v. LaFontaine, No. 98 Cr. 251 (S.D.N.Y. March 15, 2002). LaFontaine was also ordered to forfeit $105,784.00 and to pay restitution of $918,209.00. Id.
After LaFontaine's sentencing, the court lifted the stay on June 12, 2002. MGRA and its affiliate LRMG filed their Answer to the Verified Complaint on October 28, 2002. On December 10, 2002 the Government filed notice of its cross-motion to dismiss Claimants from this action under Rule 12(c) F.R. Civ. P. After some delay MGRA, LRMG and Claimants moved for summary judgment per Rule 56 F.R. Civ. P.
The court's Opinion dated October 14, 2005 granted the Government's motion to dismiss the individual claims of Froom, Pearl and Szilazi to the property, denying the individual claimants' motions to dismiss and for summary judgment. The court deferred judgment on Pearl and Szilazi's claims on behalf of MGRA and LRMG until further discovery. Moreover, the court converted the motion to dismiss brought on behalf of MGRA and LRMG into a motion for summary judgment, consolidating it with the pending motion for summary judgment. On December 16, 2005 Claimants, MGRA and LRMG filed the motion at bar for reconsideration of the court's Opinion, alleging material errors of law and fact warranting correction.
DISCUSSION
A motion for reconsideration (pursuant to Rules 59 and 60, F.R. Civ. P.) will be denied unless the moving party can identify controlling decisions or data that the court failed to consider which might have reasonably altered the court's previous decision. Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Generally, the court will grant a motion for reconsideration in three limited circumstances: (1) an intervening change in the controlling law; (2) new evidence becomes available; (3) where the court must correct clear error or prevent manifest injustice. Virgin Atlantic Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992). A motion for reconsideration is not a vehicle for litigants to make repetitive arguments that the court has already considered and it cannot be used to fill in the gaps of a losing argument. Range Road Music, Inc. v. Music Sales Corp., 90 F.Supp.2d 390, 391-92 (S.D.N.Y. 2000) (Sprizzo, J.).
Claimants argue that the Complaint fails to state a claim upon which relief can be granted. (Claimants' Br. at 2). The court rejected this argument by an order dated July 29, 1998 and subsequently rejected a motion for reconsideration. Claimants cannot point to an intervening change in the controlling law and they have not presented new evidence that would justify reconsideration of this issue. Furthermore, Claimants have not identified any clear error in the prior Opinion or a need to prevent manifest injustice that would warrant reconsideration of the Complaint's sufficiency. Claimants are improperly attempting to relitigate a previously unsuccessful argument. The court declines to revisit this issue for a third time.
Claimants also argue that the court must correct clear error regarding the insufficiency of the initial Indictment against LaFontaine and Froom. The Indictment charged conspiracy to commit mail fraud, which Claimants argue cannot be the basis for a civil forfeiture action. This argument is incorrect because the Verified Complaint commences a civil forfeiture action. U.S. v. $557,933.89, More or Less, in U.S. Funds, 287 F.3d 66, 72 (2d Cir. 2002). Therefore, the fact that the Verified Complaint raises different claims than the Indictment has no bearing on this action. The court has already concluded that the Verified Complaint contained sufficient factual allegations to commence civil forfeiture and Claimants do not offer any reasons to disturb this finding. It is clear that the Verified Complaint supplied the proper basis for civil forfeiture because it alleges laundering of the proceeds of mail fraud in violation of Sections 1956 and 1957 of Title 18. Both of these Sections provide the basis for civil forfeiture according to Section 981(a)(1)(A) of Title 18 of the United States Code.
Additionally, Claimants argue that the court must vacate its previous Opinion because the court looked to matters outside of the pleadings when it considered the motions to dismiss. (Claimants' Br. at 4). Assuming arguendo that the court relied on matters outside of the pleadings, the Opinion does not have to be vacated because the court can convert a motion to dismiss into a motion for summary judgment where matters outside of the pleadings are considered. Kramer v. Time Warner Inc., 937 F.2d 767, 773 (2d Cir. 1991). However, Rule 12(c) F.R. Civ. P. only allows this type of conversion where all parties are given a reasonable opportunity to present all material pertinent to a motion for summary judgment. The record demonstrates that Claimants have had ample opportunity to present pertinent evidence. Moreover, Claimants must "reasonably have recognized the possibility" that conversion was likely here because they have submitted multiple affidavits with their own pleadings. Gurary v. Winehouse, 190 F.3d 37, 43 (2d Cir. 1999). It is clear that when one party goes beyond the pleadings and files additional materials, which Claimants have done here, the court can treat a motion to dismiss as a motion for summary judgment without prejudice to that party.Sira v. Morton, 380 F.3d 57, 68 (2d Cir. 2004). Consequently, even if the Opinion looked to matters outside of the pleadings, Claimants have not pointed to any legal authority that would require the court to invalidate its prior judgment.
Claimants also challenge the court's characterization of Froom's fugitive status in its previous Opinion, arguing that the court ignored Froom's refugee status. The facts that Claimants rely on to contest Froom's fugitive status simply do not suggest that the court erred when it concluded that Froom was a fugitive under Section 2466 of the Civil Asset Forfeiture Reform Act of 2000. ("CAFRA"). Froom's refugee status is immaterial because Froom is a fugitive for declining to reenter the United States to submit to its jurisdiction after learning that he was charged here. This fact has not changed since the court's last Opinion, thus the court finds it unnecessary to reconsider Froom's legal status.
The court is unmoved by Claimants' argument that CAFRA's fugitive disentitlement provision cannot be applied retroactively to Froom. This argument conflicts with the plain language of the statute. The disentitlement provision applies to all cases "pending on or after the date of the enactment of this Act." Pub.L. 106-185, § 14(c), Apr. 25, 2000, 114 Stat. 219; Collazos v. U.S., 368 F.3d 190, 205 (2d Cir. 2004). This action has been pending since March 30, 1998 when the Complaint was filed, which means that CAFRA's fugitive disentitlement provision is fully applicable here.
Claimants also challenge the court's interpretation of Canadian corporate law. (Claimants' Br. at 30). In particular, Claimants contend that the court has ignored the relevant law pertaining to the status of corporate shareholders. Id. They cite Chilian v. Augdome Corp., 78 D.L.R. (4th) 129 (On. Ct. App. 1991) arguing that Ontario law allows shareholders such as Froom, Pearl and Szilazi to file as individual claimants in actions like the case at bar. Again, Claimants are unsuccessfully attempting to reargue an issue that the court has already decided. The court's previous Opinion considered this issue and claimants have not offered any new case law or evidence that would mandate reconsideration.
Claimants' remaining arguments do not raise any issues that would require the court to revise its previous decision. Claimants argue that this current action must yield to the North American Free Trade Agreement ("NAFTA"), yet they have not pointed to any specific provision of NAFTA or any case law to support this conclusion. In essence, Claimants assert that a civil forfeiture action directed at United States land implicated in illegal money laundering activity violates the general principles of NAFTA. Consequently, the court has no grounds to question its previous judgment because Claimants have not demonstrated that NAFTA is even applicable here. As for Claimants' argument that the absence of persons in this action undermines the prior decision, it misunderstands the nature of this lawsuit. This action is in rem, which means that this lawsuit is directed toward a particular property, not a particular person. Lastly, Claimants argue that the court lacks jurisdiction because the property at issue is located in Florida. Venue is proper in New York because the acts and omissions giving rise to the forfeiture, i.e. the alleged actions of the medical group, occurred in New York. See 18 U.S.C. § 1355(b).
For the foregoing reasons, Claimants' motion for reconsideration is denied.