United States v. Modanlo, 954 F. Supp. 2d 384

Modanlo allegedly brokered an Iran–Russia deal for a satellite with POLYOT and was paid $10,000,000 via a Swiss front company connected to Iran.
Govt alleges Modanlo helped form the Swiss front and lied about his participation in its formation during bankruptcy proceedings.
Modanlo challenged collateral estoppel to bar criminal prosecutions for bankruptcy obstruction, citing a prior ruling in bankruptcy court.
Modanlo now argues all Governmental allegations in the current indictments mirror those litigated in a Maryland state court derivative action.
The Government contends no collateral estoppel applies because the U.S. Attorney is not a party or in privity with the state court litigants and the U.S. Trustee is different from the U.S. Attorney.
The court denied Modanlo’s motion to dismiss the Third Superseding Indictment as barred by the Constitution, applying state law on collateral estoppel.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether collateral estoppel bars the federal prosecution.	Modanlo asserts privity via DOJ divisions; U.S. Trustee represented interests.	Government argues no privity; U.S. Attorney and U.S. Trustee are distinct entities with different roles.	No collateral estoppel; U.S. Attorney not in privity with state litigants.
Whether the U.S. Trustee or DOJ divisions are the same party for estoppel purposes.	U.S. Trustee and U.S. Attorney are divisions of DOJ and the Trustee participated in Modanlo's bankruptcy.	Even as DOJ components, they are not the same party or in privity because of differing powers and interests.	They are not the same party or in privity for preclusion.
Whether Maryland law or federal common law governs collateral estoppel in this context.	State court judgments should bind as estoppel under state law and 28 U.S.C. § 1738.	Court should use federal common law for preclusion in criminal prosecutions.	Maryland law governs collateral estoppel; 28 U.S.C. § 1738 applies.

Kutzik v. Young, 730 F.2d 149 (4th Cir. 1984) (privity test is substance over form)
Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (Supreme Court 1940) (prior representatives' authority governs privity)
United States v. Hickey, 367 F.3d 888 (9th Cir. 2004) (SEC not in privity with U.S. Attorney for preclusion)
United States v. Alky Enterprises, Inc., 969 F.2d 1309 (1st Cir. 1992) (agency not in privity with Attorney General)
United Artists Theatre Co. v. Walton, 315 F.3d 217 (3d Cir. 2003) (U.S. Trustees as bankruptcy officers; distinct interests from Attorney)
Jones v. S.E.C., 115 F.3d 1173 (4th Cir. 1997) (distinct interests; private litigants not privies to federal agencies)
United States v. Kor del, 397 U.S. 1 (1970) (not required to defer civil proceedings when criminal investigation ongoing)
In re Genesys Data Technologies, Inc., 204 F.3d 124 (4th Cir. 2000) (28 U.S.C. § 1738 requires applying state preclusion law)