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As to the second line of inquiry, the Plaintiffs had a full and fair opportunity in the English Action to litigate their breach of contract claim against the underwriters. "[A] full and fair opportunity to litigate a prior determination must concentrate on 'the various elements which make up the realities of litigation.' Factors listed by the New York Court of Appeals to assist in this inquiry include the forum for the prior litigation, the competence and the experience of counsel, the foreseeability of future litigation, and the context and circumstances surrounding the prior litigation that may have deterred the party from fully litigating the matter." Conte v. Justice, 996 F.2d 1398, 1993 U.S. App. Decision(2d Cir. 1993) (citing Schwartz v. Public Adm'r of Bronx, 24 N.Y.2d 65 at 72, 298 N.Y.S.2d 955, 246 N.E.2d 725).
Here, Plaintiffs Cindy Royce and Maximus chose the English forum. The Plaintiffs were represented by competent counsel,5 consumed 152 hours, or 31 days, of trial time (Toulson Aff.; Def. Ex. C), submitted written statements and evidence, (Def. Ex. F-L), and caused an English Justice to travel to New York and back to examine relevant forensic evidence. Further, their corporations' principals -- Samuel Scheiner, Randy Scheiner, Morton Gold and Daniel Squillante -- personally testified in the English proceedings. It was the Plaintiffs that sought, but did not secure, a discontinuance. And ultimately, it was the Plaintiffs themselves who requested the dismissal. Based on these undisputed facts, this court cannot imagine a litigant receiving a fuller or fairer opportunity to pursue his or her day in court. Ackermann v. Levine, 788 F.2d 830, 837 (2d Cir. 1986) (its a "well-settled rule that a final judgment obtained through sound procedures in a foreign country is generally conclusive. . .").
Accordingly, given collateral estoppel effect of the English Action, Defendants are entitled to summary judgment on the Plaintiffs' breach of contract claim.
III. The New York Criminal Plea
Defendants contend the doctrine of collateral estoppel bars the Plaintiffs from pursuing their claims because corporate principals -- Samuel Scheiner, Morton Gold and Daniel Squillante -- pled guilty to Attempted Grand Larceny in the Fourth Degree.
A. Guilty Pleas do not Bar Subsequent Civil Litigation
Defendants argue that a guilty plea estops the Plaintiffs from raising claims in a subsequent {F. Supp. 696} civil lawsuit. "While for some years it has been well established that guilty pleas 'constitute[] estoppel in favor of the United States in a subsequent civil proceeding as to those matters determined by the judgment in the criminal case' United States v. Podell, 572 F.2d 31, 35 (2d Cir. 1978) (emphasis added) only recently, in Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 43 (2d Cir. 1986), cert denied, 480 U.S. 948, 94 L. Ed. 2d 794, 107 S. Ct. 1608 (1987), did the Court of Appeals hold that a criminal conviction could also have estoppel effect in a civil case in which the Government was not a party." Goodridge v. Harvey Group Inc., 728 F. Supp. 275, 278 (S.D.N.Y. 1990) (emphasis added).6
The distinction between a criminal conviction and criminal plea is subtle, yet important, especially if subsequent civil trial rights are implicated. The collateral estoppel effect of a conviction is clearly premised upon the notion that the government must bear a higher standard of proof in a criminal proceeding than the standard required to prevail in a civil proceeding. However, the motivations for a defendant to accept a criminal plea, especially a relatively nominal one, as in this case, lead to a more complex question of law.
The Second Circuit has not yet extended the doctrine of collateral estoppel to bar subsequent civil actions based on a guilty plea. See e.g. Golino v. City of New Haven, 950 F.2d 864 (2d Cir. 1991) (finding state court determination of probable cause for arrest in murder prosecution does not collaterally estop suspect from litigating existence of probable cause in subsequent § 1983 civil rights action for malicious prosecution).
Similarly, the courts in the Southern District are divided as to how to approach the issue.7 One line of cases has held that guilty pleas collaterally estop subsequent civil actions. See e.g. U.S. v. International Brotherhood of Teamsters, etc., 777 F. Supp. 1133 (S.D.N.Y. 1991) aff'd 970 F.2d 1132 (2d Cir. 1992) (holding that union official's guilty plea to criminal charges collaterally estopped him form contesting facts underlying disciplinary charge arising from same incident).
However, the majority of the courts in this District have not found such a bar. See e.g. Goodridge v. Harvey Group Inc., 728 F. Supp. 275 (S.D.N.Y. 1990) (finding corporate officer's plea of guilty to conspiracy to defraud United States through payments of unlawful bribes and kickbacks and to tax evasion did not establish material misrepresentation or omission, nor the detrimental reliance required to establish a Rule 10b-5 violation, so as to collaterally estop relitigation of the issue in a subsequent civil case); Bernstein v. IDT Corp., 638 F. Supp. 916 (S.D.N.Y. 1986) (holding collateral estoppel in a subsequent civil case only if shown that facts were necessarily found by a jury which previously convicted defendant of {F. Supp. 697} crime); Teachers Ins. and Annuity Ass'n v. Green, 636 F. Supp. 415 (S.D.N.Y. 1986) (judgment requiring defendant, who pled guilty to violations of mail fraud statute, to make restitution of embezzled funds, in part pursuant to payment schedule, did not have collateral estoppel effect with respect to victims' subsequent civil action for restitution, where payment schedule was not equivalent in present value terms to present judgment for remaining balance).
Accordingly, we concur with the majority in the Southern District in holding that a guilty plea, as a matter of law, should not collaterally estop a subsequent civil action.
B. Issue Identity
"The party asserting collateral estoppel based on a guilty plea has the burden of showing precisely which facts the plea establishes." Goodridge, 728 F. Supp. at 279 (relying on Appley v. West, 832 F.2d 1021, 1026 (7th Cir. 1987). See also Schwartz v. Public Administrator, 24 N.Y.2d 65, 73, 246 N.E.2d 725, 730, 298 N.Y.S.2d 955, 962. At the very least, the trial judge must ascertain the extent of the estoppel accrued from a prior criminal matter. Emich Motors v. General Motors, 340 U.S. 558, 569, 95 L. Ed. 534, 71 S. Ct. 408. "When a party invokes collateral estoppel based on a guilty plea, a court must examine the record of the criminal proceedings or plea colloquy to determine what issues were comprehended and decided." State Farm Mutual Automobile Insurance Co. v. Rosenfield, 683 F. Supp. 106, 108 (E.D.Pa. 1988) (citations omitted). But see Burks v. Jakubowski No. 90 Civ. 614, 1993 U.S. Dist. Decision(N.D.N.Y. 1993) ("guilty plea is accorded the same preclusive effect in a subsequent civil proceeding as is a conviction after trial") (citing U.S. v. Private Sanitation Industry Ass'n, 811 F. Supp. 808, 813 (E.D.N.Y. 1992)).
The Defendants contend the criminal indictment and subsequent pleas estops Plaintiffs' claims of Breach of Contract, violations of General Business Law § 349 and of RICO. Contrary to the Defendants' assertion, unsupported any citation to the law, a criminal indictment has no estoppel powers whatsoever. See e.g. National Union Fire Ins. Co. v. Mason Perrin & Kanovsky, 689 F. Supp. 303, 307 (S.D.N.Y. 1988) (Indictment of attorneys in New York, indicating that grand jury found acts by them in New York, could not be used to establish that they had transacted business in New York for purposes of long-arm statute.) In this case, even a cursory comparison of the indictment and the plea agreement reveals that the charges alleged in the indictment were dropped by the District Attorney's office.
The real question, then, is whether the fact that Samuel Scheiner's, Morton Gold's and Daniel Squillante's plea to a class A Misdemeanor for Attempted Grand Larceny of an amount somewhere between $1,000 and $3,000 estops a subsequent civil suit against their insurers for breach of contract and a variety of other claims. The Plaintiffs argue that the pleas merely represent an admission of inflating their insurance claims by an amount between one and three thousand dollars that is not material to this civil action.
Following the two prong test for collateral estoppel, this court finds that the issues presented in the plea bargain and the civil action are not so identical as to warrant a summary judgment on this set of facts. First, we find that the plea colloquy does not establish a bar to this suit.
THE COURT: All right, Mr. Scheiner, Mr. Squillante, please listen to me carefully. Your attorneys have told me that you now wish to plead guilty under Count Three of this indictment to the Class A Misdemeanor of Attempted Grand Larceny in the Fourth degree, Is that in fact what you want to do Mr. Scheiner?
DEFENDANT SCHEINER: Yes.
* * *
THE COURT: Now, it is charged in this indictment that you both, in the County of New York and elsewhere, on or about March 25, 1992 intentionally, you knowingly attempted to steal property with a value in excess of one thousand dollars from Lloyd's of London, by causing a false and fraudulent Proof of Loss Claim to be filed which overstated the value of goods allegedly {F. Supp. 698} stolen from the premises of Cindy Ross (sic) Creations on August 18, 1989 by a sum in excess of one thousand dollars, is that true, Mr. Scheiner?
DEFENDANT SCHEINER: Yes.
THE COURT: Mr. Squillante?
DEFENDANT SQUILLANTE: Yes.
See Defendant's Exhibit EE. In exchange for this plea, the first and second counts concerning Insurance Fraud, Grand Larceny in the First Degree, and the charges against Plaintiffs Randy Scheiner, Cindy Royce and Maximus were all dropped. Thus, the Plaintiffs' contention that two principals merely pled guilty to inflating their insurance claim by a maximum of $3,000 on a $ 5 million claim is technically correct.
The Plaintiffs further argue the plea for Attempted Larceny in the Fourth Degree, the inflation of an insurance claim, is not "material" enough to bar Plaintiffs' civil action. Plaintiffs cite two fire insurance cases for their assertion regarding the materiality. They correctly argue that the current disposition of New York law requires insurers to prove insured's false statements are material and willful. The first case, Deitsch, held that an insurer failed to establish the defense of fraudulent Proof of Loss absent proof of insured's intent to defraud, despite insurer's contention that insured's inventories of goods damaged after fire were speculative. Deitsch Textiles, Inc. v. New York Property Ins. Underwriting Ass'n, 62 N.Y.2d 999, 468 N.E.2d 669, 479 N.Y.S.2d 487 (1984). In the second case, Fine, the Second Circuit refers to Dietsch in declaring that the "New York Court of Appeals reaffirmed that in addition to materiality, an insurance company must prove willfulness to void a fire insurance policy." Fine v. Bellefonte Underwriters Ins. Co., 758 F.2d 50, 52 (2d Cir. 1985) (citations omitted).
The Defendants have cited two Second Circuit cases that stand for the proposition that under New York law, submission of fraudulent Proof of Loss statements releases an insurer from its obligation under insurance polices. Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 43 (2d Cir. 1986); Fine, 758 F.2d at 51. However, it must be noted that New York insurance statutes require false swearing clauses in the fire insurance contract language.8
The case before this court is distinguishable from Gelb in several essential ways. First, the principal holding of Gelb is "federal law governs the collateral estoppel effect of a federal criminal conviction in a subsequent diversity action." Gelb, 798 F.2d at 43. In Gelb, the Plaintiff had been convicted before a federal jury of "grossly inflating the losses claimed." Gelb at 40. Here, as the Plaintiffs point out, the state court plea was for an inflation of at most three thousand dollars on an alleged five million dollar claim -- hardly a significant drop in the proverbial bucket.
The second case referred to in the Defendants' Reply Memorandum, Fine, held that a false statement made on examination under oath must be both material and willful in order to void a fire insurance policy. Fine 758 F.2d at 52. The fire insurance policy in question had a specific "False Swearing Clause." This clause states that "the entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact . . ." Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d 179, 181, n.4 (2d Cir. 1984); aff'd 758 F.2d 50 (2d Cir 1988). As the Defendants have not alleged a breach of the false swearing clause,9 it is not necessary to {F. Supp. 699} reach the issue of whether the policies are void if the Proof of Loss is fraudulently inflated by a relatively minimal sum.
C. Full and Fair Opportunity
In Gelb, the Plaintiff was previously convicted before a federal jury of causing the fire in his premises, misrepresenting to his insurance company that he did not cause the fire, and of grossly inflating his claims. Gelb's convictions were affirmed by the Second Circuit on appeal. There is no question in his case that he was fully and fairly afforded an opportunity to litigate all the relevant issues in his prior action. Gelb v. Royal

Globe Ins. Co., 798 F.2d 38 (2d Cir. 1986).


Here, some of the parties have not had a chance to fully and fairly litigate their claims and "due process prohibits estopping them despite one or more existing adjudications of the identical issue which stand square against their position." Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 329, 28 L. Ed. 2d 788, 91 S. Ct. 1434 (1971) (citations omitted). See also Kremer v. Chemical Construction Corp., 456 U.S. 461, 484, 72 L. Ed. 2d 262, 102 S. Ct. 1883 (1982) (in permitting estoppel a panoply of procedures, complemented by administrative as well as judicial review, is sufficient under the Due Process Clause); Conte v. Justice, 996 F.2d 1398, 1993 U.S. App. Decision(2d Cir. 1993) (factors for finding no estoppel to the second suit included new attorneys and a different property interest). As the parties have not had a full and fair opportunity to litigate their claims, and due to the concerns outlined in III.A., supra, their guilty plea does not bar the Plaintiffs from pursuing a subsequent civil action.
Therefore, Defendants' motion for summary judgment as to the collateral estoppel effect of the New York Criminal pleas, is denied.
IV. Federal Claims
A. RICO Claims
To state a cause of action under RICO, the Plaintiffs must allege:
(1) that the defendants (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which affect interstate commerce.
Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir. 1983), cert denied, 465 U.S. 1025 (1984); Zaro Licensing, Inc. v. Cinmar, Inc., 779 F. Supp. 276 (S.D.N.Y. 1991). The failure of any one element is fatal to a RICO claim.
1. Plaintiffs Inadequately Plead Predicate Acts Requirement
This Court has previously held that predicate acts of a RICO claim sounding in fraud must satisfy the particularity requirements of Rule 9(b). Fed.R.Civ.P. 9(b). Browning Ave. Realty Corp v. Rosenshein, 142 F.R.D. 85 (S.D.N.Y. 1992); Morin v. Trupin, 711 F. Supp. 97, 111 (S.D.N.Y. 1989). "Indeed, 'all of the concerns that dictate that fraud be pleaded with particularity exist with even greater urgency in civil RICO actions.'" Browning, 142 F.R.D. at 89 (quoting Plount v. American Home Assurance Co., 668 F. Supp. 204, 205 (S.D.N.Y. 1987); see also O'Brien v. National Property Analysts Partners, 719 F. Supp. 222, 230 (S.D.N.Y. 1989); Lou v. Belzberg, 728 F. Supp. 1010 (S.D.N.Y. 1990).
To find violations of mail and wire fraud statutes that satisfy the "predicate acts" requirement of RICO, Plaintiffs must satisfactorily allege: first, participation in a scheme to defraud; and second, knowing use of the interstate mails or interstate wires in furthering the scheme. Connors v. Lexington Ins. Co., 666 F. Supp. 434, 450 (E.D.N.Y. 1987) (citing United States v. Gelb, 700 F.2d 875, 879 (2d Cir. 1983), cert. denied, 464 U.S. 853 (1983)).
A complaint must delineate the specifics of each purported use of the mail and wires, including the time, place, speaker, and content of the alleged fraudulent misrepresentations, as well as the manner in which the misrepresentations were fraudulent. {F. Supp. 700} Luce v. Edelstein, 802 F.2d 49, 54 (2d Cir. 1986); Di Vittorio v. Equidyne Extractive Indus. Inc., 822 F.2d 1242, 1247 (2d Cir. 1987); "Under Rule 9(b), the complaint must allege '(1) specific facts; (2) sources that support the alleged specific facts; and (3) a basis from which an inference of fraud may fairly be drawn."' Morin v. Trupin, 778 F. Supp. 711, 716 (S.D.N.Y. 1991) (quoting Crystal v. Foy, 562 F. Supp. 422, 425 (S.D.N.Y. 1983)).
According to Plaintiffs two alleged incidents constitute the predicate acts in support of their RICO claims. The first alleged incident10 consists of a filmed visit to the safe at the at the police warehouse by the District Attorneys Office on an unspecified date with K. Duncel, Detective McNicholas, Dennis Wade and Karl Alizade. However, the Plaintiffs failed to properly plead either the time of this meeting or identify who from the District Attorney's office was present. In a pleading error fatal to their claims, the Plaintiffs do not state the exact nature of the fraud perpetrated in this meeting. The Plaintiffs' Memorandum of Law does not cite any case law or statute establishing, or even arguing, the illegality of such a meeting.
The second alleged incident consists of:
On or about August 19, 1989 Karl Alizade and City Safe, Inc. appeared at the premises of Cindy Royce and Maximus to inspect the damage to the vault and safe. Mr. Alizade immediately sold the plaintiffs a new vault door and two safes for approximately $ 21,000 and offered to remove and discard the old vault door and safe. Unbeknownst to plaintiffs, Karl Alizade and City Safe, Inc., were in fact working for Lloyd's. Instead of disposing of the vault door and safe, Alizade manipulated the same and retained them on his premises in furtherance of the conspiracy.
(Complaint P 88). The facts asserted in Paragraph 88 of Complaint fail to establish a predicate act or any taint of illegality.
As in Morin, we find the complaint fails to plead with requisite particularity:
the relation of individual defendant to predicate act and to the conduct supporting ascription of such act to the defendant. As pleaded, it is simply too difficult a task to determine the specific predicate acts each defendant is charged with committing (or aiding and abetting) and which factual allegations establish their connection to such predicate acts.
Morin v. Trupin 747 F. Supp. 1051, 1065 (S.D.N.Y. 1990).
2. Mail and Wire Fraud Claims
To plead mail and wire fraud as RICO violations, the Plaintiffs must allege participation in a scheme to defraud and knowing use of the interstate mails or interstate wires to further the scheme. See Zaro Licensing, Inc. v. Cinmar, Inc., 779 F. Supp. 276, 282 (S.D.N.Y. 1991); Browning Ave. Realty Corp v. Rosenshein, 142 F.R.D. 85, 89 (S.D.N.Y. 1992). Allegations of mail and wire fraud must specify the use of mails and wires with particularity. Frota v. Prudential-Bache Secur., Inc. 639 F. Supp. 1186, 1192 (S.D.N.Y. 1986).
In their complaint, the Plaintiffs fail to articulate a single fraudulent statement that was allegedly transmitted or received by wire. (See Complaint PP 79-93). The Plaintiffs' Memorandum of Law discusses RICO generally, but does not illuminate any set of facts that establish RICO violations. (Pl. Mem. of Law, at 38-45). The Plaintiffs' reliance on the wire fraud statute to satisfy the predicate acts requirement of RICO is therefore futile.
3. § 1962(a), (c) and (d) Violations Insufficiently Plead
A finding of a pattern of "racketeering activity" requires indictable criminal conduct, as defined in the federal statutes. 18 U.S.C. § 1961(1); see also Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L. Ed. 2d 532 (1992) (O'Connor, J., concurring in part and concurring in the judgment). Courts have struck down RICO claims for failing to establish a {F. Supp. 701} pattern of racketeering activities.11 See e.g. Creative Bath Products Inc. v. Connecticut General Life Ins. Co., 837 F.2d 561 (2d Cir. 1988) cert. denied 492 U.S. 918, 106 L. Ed. 2d 588, 109 S. Ct. 3241 (1989) (finding insurance company and agent did not engage in any "pattern of racketeering activity" actionable under RICO when, in order to induce partnership into purchasing life insurance policies on partners, agent allegedly made three distinct fraudulent representations through use of mails and wires.); Airlines Reporting Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579 (S.D.N.Y. 1989) (holding air carriers' agent failed to state RICO claim against travel agency arising out of agency's alleged failure to report or pay for airline ticket sold; pleading did not indicate that agency's conduct presented threat of continuity sufficient to establish pattern of racketeering activity, as it alleged single scheme which covered 13 month period.).
In their complaint, the Plaintiffs inappropriately substitute broad conclusory statements for specific racketeering claims:
86. Defendants have engaged in or conspired in the commission of two or more predicate acts of mail andor wire fraud, all of which predicate acts took place since August 18, 1989, and have engaged in a "pattern of racketeering activity" within the meaning of 18 U.S.C. § 1961(5).
* * *
92. Defendants and each of them, knowingly used and conspired in the use of the United States mails andor interstate wire communications on more than two occasions since August 18, 1989 in the furtherance of their scheme or artifice to defraud, abuse process, maliciously prosecute and violate the civil rights of Cindy Royce Maximus, and Randy Scheiner as alleged in this complaint and thus engaged in acts indictable under the federal mail fraud statute, 18 U.S.C. § 1343, thereby committing predicate acts of racketeering activity within the meaning of 18 U.S.C. § 1961(1)(B).
(Complaint PP 86, 93). As noted above, the Complaint fails to cite a specific single date on which the Defendants used either the mails or the wires to perpetrate their alleged racketeering activity. Plaintiffs' pleadings, in short, attempt to "talk the talk" without walking the proverbial walk.12
Plaintiffs also allege that Lloyd's paid specified sums to various co-Defendants, and that the Defendants "have directly or indirectly used or invested income derived . . . in violation of 18 U.S.C. § 1962(a). (Complaint P 84-85). However, a § 1962(a) violation is not established by showing participation in the alleged pattern of racketeering activity, or in the derivation of income from that pattern. Rather, a violation is found by exposing the use or investment of the income in acquiring, establishing or operating an enterprise. Zaro Licensing, Inc. v. Cinmar, Inc. 779 F. Supp. 276, 283 (S.D.N.Y. 1991) (citing Ouaknine, 897 F.2d at 82).
The Complaint does not describe the illicit acts or set of facts that generated the payments in question, how such use or investment caused the injuries alleged, or how the alleged payments constitute a claim under § 1962(a). Ouaknine v. MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990); Zaro 779 F. Supp. at 283; Williamson v. Simon and Schuster, Div. of Gulf & Western Corp, 735 F. Supp. 565, 568 (S.D.N.Y. 1990); Azurite Corp. v. Amster & Co., 730 F. Supp. 571, 579 (S.D.N.Y. 1990). Plaintiffs' conclusory statement that "as a result of these violations of {F. Supp. 702} § 1962, Cindy Royce and Maximus have been injured in their business or property and have suffered actual damages in an amount that will be proved at trial, but which amount is currently believed to be equal to or in excess of Twenty Million Dollars" fails to meet this standard. (Complaint P 93).



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