UNITED STATES of America, Plaintiff-Appellee, v. Sholam WEISS, Defendant, The Stonewell Corporation, Claimant-Appellant.
Nos. 05-13661, 05-13955 and 05-14012
United States Court of Appeals, Eleventh Circuit
Oct. 18, 2006
467 F.3d 1300
ALARCÓN, Circuit Judge:
The Stonewell Corporation (“Stonewell“) appeals from 1) the Summary Judgment in favor of the Government, 2) the Second Amended Preliminary Order of Forfeiture, and 3) the Final Order of Forfeiture, giving the United States the proceeds of the sale of a property known as the Center Mall (“the Center Mall property“). These orders effectuate the District Court‘s order on Stonewell‘s petition filed pursuant to
The District Court determined that Stonewell lacked standing to claim an interest in a mortgage on the Center Mall property (“Center Mall mortgage“) and was otherwise “unable to establish any of the criteria necessary to defeat the Government‘s entitlement under the Second Amended Preliminary Order of Forfeiture.” Thus, the District Court concluded that the Government was entitled to “all right, title, and interest of Defendant, Sholam Weiss, in the proceeds of the sale of the Center Mall located in Monmouth County, New Jersey,” free and clear of any claim of Stonewell. The District Court ordered the forfeiture of the Center Mall mortgage as a substitute asset pursuant to
Matthew Dollinger, Dollinger, Gonski & Grossman, Carle Place, NY, for Claimant-Appellant.
Peggy Morris Ronca, Jacksonville, FL, Anita M. Cream, Asst. U.S. Atty., Tampa, FL, for Plaintiff-Appellee.
*Honorable Arthur L. Alarcon, United States Circuit Judge for the Ninth Circuit, sitting by designation.
Sholam Weiss, Michael Blutrich, Lyle Pfeffer, and others schemed to defraud the National Heritage Life Insurance Company (“NHLIC“) of millions of dollars and to use the stolen funds to commit further frauds. The conspiracy began around 1990 and was carried out for nearly a decade. Part of the scheme involved laundering money stolen from NHLIC through a series of property purchases and resales to corporations set up by nominees of Mr. Weiss.1 Stonewell was one such nominee who, through its officer, director and shareholder, Richard Gladstone, knowingly became involved in Mr. Weiss‘s money laundering scheme.
A
On April 29, 1998, a grand jury in the Middle District of Florida indicted Mr. Weiss on charges of violating the Racketeer Influenced and Corrupt Organizations Act (“RICO“),
B
As a result of the special verdict, the District Court for the Middle District of Florida filed a preliminary order of forfeiture on November 2, 1999. An amended order was filed on May 12, 2000. The order forfeited, inter alia, “all right, title and interest of defendant, Sholam Weiss” in “Stonewell Corp.” and $3.1 million which “sum represents the amount of money involved in [the Center Mall transaction] ... that was obtained by defendant or that the defendant could reasonably foresee would be obtained by other members of the ... conspiracy, during the course of the criminal conduct.”
On April 5, 2000, Mr. Gladstone filed a petition of innocent owner in the Middle District of Florida forfeiture proceeding (“Gladstone Petition“), contesting the forfeiture of Stonewell. In his petition, Mr. Gladstone asserted that he was the “sole shareholder, officer and director” of Stonewell and therefore Stonewell should be surrendered to him. On April 27, 2001,
Magistrate Judge Spaulding held extensive evidentiary hearings in the Gladstone Petition proceeding.3 The testimony of Mr. Gladstone, Mr. Pfeffer, Mr. Blutrich, and Ms. Schneiderman established that in early 1997, Mr. Gladstone was introduced to Mr. Weiss through a mutual acquaintance. Mr. Weiss suggested to Mr. Gladstone that he buy an assignment of the mortgage on the Center Mall property, owned at the time by Mr. Weiss‘s nominee, Jasper Properties, Inc. (“the Jasper mortgage“). Mr. Weiss proposed selling the Jasper mortgage to Mr. Gladstone at a discount, in exchange for the forgiveness of an unpaid loan Mr. Gladstone had made to New Contenders, a company with which Mr. Blutrich was affiliated. Mr. Pfeffer told Mr. Gladstone that the mortgage was non-performing and that tax payments were delinquent. Mr. Gladstone understood that in order for him to recover any funds from a non-performing mortgage, he would have to foreclose on the property. Mr. Pfeffer also told Mr. Gladstone, in the presence of Mr. Blutrich and Mr. Weiss, that there was a lis pendens on the property.
On March 12, 1997, Mr. Gladstone formed Stonewell to hold the assignment of the Jasper mortgage. Mr. Gladstone has been, at all times, the sole officer, director and shareholder of Stonewell. On March 20, 1997, Mr. Gladstone went to Mr. Pfeffer‘s office in New York. There, Mr. Pfeffer signed documents assigning the Jasper mortgage to Stonewell. Mr. Gladstone told Mr. Pfeffer that he was stepping into Mr. Pfeffer‘s shoes as Weiss‘s nominee in causing Stonewell to acquire the Center Mall mortgage. Mr. Gladstone also told Mr. Pfeffer that Mr. Weiss had agreed to return the money that Mr. Gladstone was paying to purchase the assignment.
After the assignment of the Jasper mortgage, Mr. Weiss told Mr. Pfeffer “not to worry” because they “were still at some point going to be able to realize a lot of money out of the property and that he was in control of everything.” After the Jasper mortgage was assigned to Stonewell, Mr. Gladstone did not send any demand letters to the owner of the Center Mall property or begin foreclosure proceedings.
The District Court denied the Gladstone Petition, holding instead that the Government was entitled to the Center Mall mortgage. The District Court held that Mr. Gladstone acted as one of Mr. Weiss‘s nominees when he created Stonewell to accept the Center Mall mortgage. Because Mr. Gladstone and Stonewell were nominees of Mr. Weiss, Stonewell never owned the mortgage in its own right. The District Court concluded that Mr. Gladstone did not have standing to contest the forfeiture of the Center Mall mortgage and ordered that the mortgage be forfeited to the Government.
On December 17, 2003, Mr. Gladstone filed a notice of appeal to this Court. On April 15, 2004, this Court reversed the Middle District of Florida‘s ruling, in part, holding that it exceeded the scope of its authority in awarding the Center Mall mortgage to the Government. The special verdict form from Mr. Weiss‘s criminal trial directed that Mr. Weiss‘s interest in
On July 20, 2004, the District Court issued a second amended preliminary order of forfeiture upon application by the Government. The Government‘s application sought forfeiture of the proceeds of the sale of the Center Mall property based on a substitute assets theory pursuant to
On August 18, 2004, Stonewell, but not Mr. Gladstone, challenged the second amended preliminary order of forfeiture by filing a petition of innocent owner-claim to property (“Stonewell Petition“). Stonewell claimed full ownership of the mortgage and argued that it was entitled to the proceeds of the sale of the Center Mall property.
On March 11, 2005, the Government moved for summary judgment on its application for a second amended preliminary order of forfeiture. Its motion was granted by the District Court on May 6, 2005. The District Court concluded that the Government was entitled to the proceeds from the mortgage on the substitute asset theory and entered a second amended preliminary order of forfeiture. The District Court also held that Stonewell lacked standing to bring a petition because (1) the Center Mall mortgage was not an asset of Stonewell and (2) Mr. Gladstone adequately represented Stonewell‘s interests when he filed the Petition in April 2000. Stonewell has timely appealed from the District Court‘s judgment.
C
In a separate action, Donna L. Williams, Insurance Commissioner for the State of Delaware and statutory receiver for NHLIC (“Receiver“), brought a civil action against Mr. Pfeffer and other associates and nominees of Mr. Weiss (“the LPDA defendants“) in the United States District Court for the Southern District of New
In November of 1997, the Receiver in the Williams action sought leave to sell the Center Mall property free of all liens and mortgages based on the Notice of Lis Pendens filed in New Jersey. On November 7, 1997, the court in the Williams action issued an Order to Show Cause why an order should not be made and entered authorizing the Receiver to: (a) enter into, execute and perform the contract of sale for the Center Point Mall; (b) enter into, execute and perform such other and further agreements and instruments as may be necessary to accomplish the sale of the property; and (c) sell the property free and clear of the Jasper Mortgage which attached to the proceeds of the sale pending the determination of whether this mortgage constitutes a valid and enforceable lien on the property.
On November 13, 1997, Stonewell was notified of the action by copy of the Order to Show Cause. On November 14, 1997, the LPDA defendants in the Williams action filed an Opposition to the Receiver‘s application to sell the property free and clear of all liens. In the opposition, the LPDA defendants argued that allowing the Receiver to sell the property would infringe on the rights of third party mortgagees, such as Stonewell, who were not before the court.
On November 18, 1997, Stonewell filed a non-party memorandum of law in the Williams action, in opposition to the Receiver‘s application to allow the sale of the property free and clear of mortgages. On November 20, 1997, the court in the Williams action ordered Stonewell to show cause why an order should not be entered authorizing the Receiver to sell the property free and clear of Stonewell‘s mortgage, with such mortgage to attach to the proceeds of the sale pending the determination of whether the mortgage constitutes a valid and enforceable lien on the property. On November 20, 1997, oral argument was heard on the Receiver‘s Supplemental Order to Show Cause. On December 2, 1997, Stonewell filed a supplemental memorandum of law in opposition to the Receiver‘s application to allow sale of property free and clear of mortgages in the Williams action.
On December 3, 1997, the Williams court granted leave to the Receiver to sell the Center Mall property free and clear of all liens and mortgages. On December 4, 1997, in response to a request by counsel for Stonewell, the Williams court entered a supplemental order, directing the Receiver to deposit the proceeds of the sale of the Center Mall into an interest bearing escrow account; and that no withdrawals may be made from the escrow account without further order of the Court on notice to the parties to this action and to Stonewell. The Receiver sold the Center Mall for over $2.2 million to CRL Realty Associates, L.P., placing the net proceeds of $1.8 million in an escrow account.6
Stonewell contends, without citing any authority, that this Court lacks jurisdiction to hear this appeal because the United States District Court, Southern District of New York, has exclusive jurisdiction over the Proceeds of the Sale of the Center Mall Property which are being held in escrow pending the outcome of the Williams action, and the District Court does not have jurisdiction over them as a matter of law.
“Jurisdictional issues are questions of law which we decide de novo.” Malowney v. Fed. Collection Deposit Group, 193 F.3d 1342, 1346 (11th Cir. 1999).
Stonewell‘s contention that the District Court does not have jurisdiction over the proceeds from the sale of the Center Mall property misstates the issue. The instant forfeiture proceedings are not in rem proceedings. United States v. Gilbert, 244 F.3d 888, 919 (11th Cir. 2001) (“Criminal forfeiture under RICO is in personam.“). The District Court had jurisdiction over this in personam criminal forfeiture proceeding pursuant to
The Williams action, also an in personam suit, was filed in the District Court for the Southern District of New York pursuant to that court‘s diversity jurisdiction under
III
The Government contends that this Court does not have jurisdiction to hear this appeal because Stonewell lacks standing to bring a petition of innocent owner claiming an interest in the Center Mall mortgage. Standing is a threshold issue that is subject to de novo review.
[t]he party invoking federal jurisdiction bears the burden of establishing [standing]. Since they are not mere pleading requirements but rather an indispensable part of the plaintiff‘s case, each element [of standing] must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (citations omitted).
The Government maintains that Stonewell lacks standing to challenge the forfeiture of the Center Mall property proceeds because Stonewell is bound by the District Court‘s ruling in the Gladstone Petition proceedings that Stonewell never owned the Center Mall mortgage. The government argues that under the doctrine of collateral estoppel, Stonewell is precluded from relitigating issues decided by the District Court when it denied the Gladstone Petition, including the issue of who owned the Center Mall mortgage. The District Court held that the doctrine of collateral estoppel barred Stonewell from relitigating the ownership issue. We review de novo a district court‘s decision about whether collateral estoppel applies. Quinn v. Monroe County, 330 F.3d 1320, 1328 (11th Cir. 2003). A “district court‘s factual determinations underlying its legal conclusion are upheld unless clearly erroneous.” Id.
“Collateral estoppel bars relitigation of an issue previously decided if the party against whom the prior decision is asserted had ‘a full and fair opportunity’ to litigate that issue in an earlier case.” Blohm v. Comm‘r of Internal Revenue, 994 F.2d 1542, 1553 (11th Cir. 1993) (quoting Allen v. McCurry, 449 U.S. 90, 94-95 (1980)). The party seeking to invoke collateral estoppel must establish that (1) the issue in the pending case is identical to that decided in a prior proceeding; (2) the issue was necessarily decided in the prior proceeding; (3) the party to be estopped was a party or was adequately represented by a party in the prior proceeding; and (4) the precluded issue was actually litigated in the prior proceeding. Blohm, 994 F.2d at 1553 (citing In re Raiford, 695 F.2d 521, 523 (11th Cir.1983)).
The issue before the District Court in the Gladstone Petition, the “prior proceeding” for collateral estoppel purposes, was identical to the issue in this case: namely, the ownership of the Center Mall mortgage. In adjudicating the Gladstone Petition, the District Court necessarily decided the ownership issue because it had to determine which assets, if any, Stonewell owned in order to decide whether Mr. Weiss had any interest in Stonewell. In the Gladstone Petition ruling, the District Court determined that Mr. Gladstone, through Stonewell, was acting as Mr. Weiss‘s nominee. Because a person or entity cannot have a vested interest in property if that person or entity is found
The record also demonstrates that the issue was actually litigated in the prior proceeding, as evidenced by the lengthy testimony of Mr. Gladstone and others at the evidentiary hearings held before Magistrate Judge Spaulding. In denying the Gladstone Petition, the District Court held, in part, that:
[w]ithin the context of the Center Mall mortgage scam, the evidence clearly reflects that Richard Gladstone, through Stonewell Corporation, acted as Sholam Weiss‘s nominee;
[w]hen Gladstone caused Stonewell to take an assignment of [the Center Mall] mortgage in 1997, he and Stonewell not only acted as another nominee of Weiss, but also Stonewell as assignee stood in the shoes of the assignor and took the mortgage subject to all the defects known to the assignor, in this case Sholam Weiss acting through Jasper and Pfeffer; and,
... the evidence shows that [the mortgage] was not an asset owned by Stonewell. Gladstone, using this corporation, acted as Weiss‘s nominee to hide Weiss‘s interest in this mortgage. The asset, the mortgage, was never owned by Stonewell in its own right. Therefore, Stonewell has no standing to contest the Magistrate‘s finding that the mortgage on, and the proceeds of the sale of, the Center Mall Property should be forfeited to the United States.
In the order on appeal, the District Court concluded that Stonewell lacked standing to claim an interest in the Center Mall mortgage and was collaterally estopped from relitigating the issue of its ownership because
[t]he issue of the ownership of the Center Mall mortgage was necessarily decided and actually litigated in the proceeding on Gladstone‘s Petition because it was necessary for the Court to determine the ownership [issue] in determining the ownership of the Stonewell Corporation and the assets of the Stonewell Corporation, and extensive evidence was presented by Gladstone and the Government on these issues.9
Additionally, the District Court held that “Stonewell was adequately represented by Gladstone in the earlier proceeding” because Stonewell is a closely held corporation. Mr. Gladstone both alleged in his petition and testified at the evidentiary hearing, held in connection therewith, that he is the sole officer, director and shareholder of Stonewell. Stonewell raised the same allegations in its petition that Mr. Gladstone raised in his petition.
The District Court addressed the evidentiary issues and correctly concluded that the purported additional evidence Stonewell would present in support of its position was either inadmissible or unpersuasive. For example, the affidavit of Matthew Dollinger, attorney for Stonewell, is inadmissible because it alleges facts about which Mr. Dollinger lacks personal knowledge. Stonewell also offered in support of its petition, the deposition testimony of Isaac Nussen taken in the Williams action. Stonewell‘s counsel admitted, however, that Mr. Nussen‘s testimony in the Williams action was substantially the
Stonewell contends that the doctrine of collateral estoppel does not apply to strip it of standing in this case because the District Court‘s conclusions in deciding the Gladstone Petition are dicta. According to Stonewell, this Court‘s earlier determination that “the district court had no jurisdiction to award the mortgage to the United States because the jury did not find that the mortgage was forfeit, and the district court did not include the forfeiture of the mortgage in Weiss‘s sentence” constitutes a “mandate” from the Eleventh Circuit, making the District Court‘s conclusions in the Gladstone Petition ruling dicta. This argument is not persuasive.
This Court did not issue a “mandate” to the District Court, nor did it conclude that the District Court lacked jurisdiction to determine the ownership of the Center Mall mortgage. Instead, this Court “reverse[d] that portion of the district court‘s judgment, entered under
Stonewell also argues that it has standing because, under Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975), it is entitled to have the court decide the merits of its claim because the invasion of legal rights created by the forfeiture statutes creates Article III
These cases do not support Stonewell‘s theory. While it is true that “Congress may enact statutes creating legal rights, the invasion of which creates standing, even though no injury would exist without the statute,” Linda R. S., 410 U.S. at 617, 93 S.Ct. 1146 n. 3, “[a] federal court‘s jurisdiction ... can be invoked only when the plaintiff himself has suffered ‘some threatened or actual injury resulting from the putatively illegal action....‘” Warth, 422 U.S. at 499, 95 S.Ct. 2197 (quoting Linda R. S., 410 U.S. at 617, 93 S.Ct. 1146). As the Supreme Court pointed out in Linda R. S., “[e]ven though the past law of standing is so cluttered and confused that almost every proposition has some exception, the federal courts have consistently adhered to one major proposition without exception: One who has no interest of his own at stake always lacks standing.” Linda R. S., 410 U.S. at 617, 93 S.Ct. 1146 n. 4 (quoting K. Davis, Administrative Law Text 428-429 (3d ed.1972)) (emphasis added).
Stonewell has not demonstrated that it has an interest in the Center Mall mortgage and therefore lacks standing to bring this appeal challenging the forfeiture of the proceeds of the sale of the Center Mall property.
This appeal is DISMISSED for lack of jurisdiction.