Callahan v. Moneta Capital Corp.

United States Court of Appeals
For the First Circuit

No. 04-1950

JAMES C. CALLAHAN; FRANCIS DIMENTO; RITA DIMENTO; HENRY D. VARA,

Claimants, Appellants,

____________________

UNITED STATES,

Plaintiff,

v.

MONETA CAPITAL CORPORATION,

Defendant, Appellee,

____________________

No. 04-1951

NANCY TROY LOVETT, THE NANCY TROY LOVETT SELF-DIRECTED
INDIVIDUAL RETIREMENT ACCOUNT, RAUL L. LOVETT MARITAL TRUST,

Claimants, Appellants,

____________________

UNITED STATES,

Plaintiff,

v.

MONETA CAPITAL CORPORATION,

Defendant, Appellee.
 APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ronald R. Lagueux, Senior U.S. District Judge]

Before

Lipez, Circuit Judge,
Stahl, Senior Circuit Judge,
and Oberdorfer, Senior District Judge.*

Robert K. Taylor, with whom Jeffrey H. Gladstone and Partridge
Snow & Hahn LLP were on brief, for appellant Lovett, et al.
Kevin D. Heitke, with whom Law Office of Kevin D. Heitke was
on brief, for appellant Callahan, et al.
Arlene M. Embrey, Attorney, Office of General Counsel, U.S.
Small Business Administration, with whom Thomas E. Carlotto and
Shechtman Halperin Savage, LLP were on brief, for appellee.

June 29, 2005

____________________
*Of the District of Columbia, sitting by designation.
 STAHL, Senior Circuit Judge. This case consists of two

consolidated appeals arising from a receivership proceeding

initiated by the United States Small Business Administration

("SBA") against Moneta Capital Corporation ("Moneta"), a small

business investment corporation established in 1984. Appellants

Nancy Troy Lovett, the Nancy Troy Lovett Individual Retirement

Account, and the Raul L. Lovett Marital Trust (the "Lovett

Appellants") appeal from a district court order rejecting their

objection to the final disposition of claims against the

receivership based on lack of standing. Appellants James C.

Callahan, Francis DiMento, Rita DiMento, and Henry D. Vara (the

"Callahan Appellants") appeal from a district court order denying

their request for leave to either amend their existing claim or to

file a claim out of time, and denying their motion to reconsider.

Finding no error in the district court's decisions, we affirm.

I.

We begin with a recitation of the facts as they relate

to all appellants. On or about November 15, 1999, the SBA filed a

complaint for receivership in the United States District Court for

the District of Rhode Island against Moneta. The complaint alleged

that Moneta had failed to repay SBA debentures and had violated

certain SBA regulations regarding the transfer of assets.1 The

1
Specifically, it was alleged that Moneta has violated the
Small Business Investment Act of 1958, 15 U.S.C. § 687, and the
regulations promulgated thereunder at 13 C.F.R. § 107.1 et. seq.

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complaint also sought injunctive relief to prevent further

dispositions of Moneta's assets in violation of SBA regulations.

Pursuant to the Small Business Investment Act of 1958,

the district court took exclusive jurisdiction of Moneta and all of

its assets and appointed the SBA as receiver ("Moneta Receiver")

for the "purposes of administering and liquidating all of Moneta's

assets and satisfying the claims of creditors therefrom in the

order of priority as determined by this Court." The District Court

then entered an order establishing a "claims bar date process" by

which creditors were given notice ("Notice to Creditors") to

present their claims to the Moneta Receiver by a certain date

("Claims Bar Date"), or their claims would be barred.

Pursuant to court order, the Moneta Receiver sent the

Notice to Creditors on April 19, 2001. The notice gave the Claims

Bar Date as May 23, 2001, and stated that any written claims

against Moneta or the Moneta Receiver had to be filed by that date.

Notice was also published in the Providence Journal and the St.

Croix Avis on April 16 and April 23, 2001. The Claims Bar Date was

extended by court order twice, with a final Claims Bar Date of

August 23, 2001.

On December 1, 2003, the Moneta Receiver filed a motion,

memorandum and report in support of its recommendations for the

disposition of each claim received. The district court granted the

Moneta Receiver's motion on December 19, 2003, and issued an order

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accepting the Moneta Receiver's recommended disposition of the

claims ("Claims Disposition Order"). The Claims Disposition Order

provided that any claimant failing to object to the recommended

disposition within thirty days would be permanently barred from

asserting claims against Moneta.

II.

A. Arnold Kilberg and the Kilberg Entities

Arnold Kilberg was Moneta's principal prior to the

establishment of the Moneta Receivership. Beginning in January

2002 (after the Claims Bar Date for the Moneta Receivership had

passed), the state and federal courts in Rhode Island issued a

series of orders and judgments finding that Kilberg and certain of

his entities had disregarded the corporate structure by utilizing

a common treasury and thus were deemed alter egos of one another.

The entities found to be using a common treasury included Acropolis

Enterprises, Inc., Pantheon Enterprises, Inc., Governor Financial,

LLC, Hamlet Properties, LLC, London Exchange, Arnold Kilberg & Co.,

Northeast Capital Corporation, and Rosedale Properties, LLC

(collectively, the "Kilberg Entities"). Moneta was not included in

the list of entities deemed alter egos.

B. The Lovett Appellants and the Fairway Receivership

Another entity controlled by Kilberg, the Fairway Capital

Corporation ("Fairway"), was also in receivership at the United

States District Court for the District of Rhode Island, with the

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SBA appointed as receiver ("Fairway Receiver"). In December 2003,

the Fairway Receiver filed a motion requesting that it be allowed

to participate in civil proceedings against Kilberg and/or the

Kilberg Entities. The motion claimed that there had been improper

transfers of assets by Kilberg from Fairway to the Kilberg

Entities. The Fairway Receiver also moved for partial

consolidation of the Fairway receivership estate because Fairway

owned two of the Kilberg Entities that had been deemed alter egos

of Kilberg, Acropolis and Pantheon. The records used in support of

the consolidation motion revealed transfers of funds between

Acropolis and the other Kilberg Entities, between Acropolis and

Fairway, and between Acropolis and Moneta.

On January 8, 2004, the District Court issued an order

granting the Fairway Receiver's consolidation motion

("Consolidation Order"). The Consolidation Order included a

finding that "Fairway is the true owner of [Acropolis] and

[Pantheon]" and that "Acropolis and Pantheon were alter egos of

Fairway up to March 13, 2000." The Consolidation Order also

authorized the Fairway Receiver to establish a supplemental claims

procedure to allow creditors of Acropolis and Pantheon to make

claims against the Fairway Receivership estate.

In a separate order, the district court found with

regards to the Fairway Receivership that the remainder of the

Kilberg Entities not addressed in the Consolidation Order were also

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alter egos of Kilberg and of each other, and that "the Fairway

Receiver may seek recovery from each of them on any valid claims it

has against any one of them, or against Arnold Kilberg." Even

though there was some indication that Moneta was involved in

suspicious transfers with the Kilberg Entities, at no time was

Moneta adjudicated an alter ego of the Kilberg Entities or of

Fairway.

Suspecting that Moneta was indeed an alter ego of Fairway

and/or the Kilberg Entities, the Lovett Appellants, all creditors

of Fairway, sought to assert a claim against Moneta. Instead,

however, of going through the process of trying to file a late

claim with the Moneta Receiver, or requesting leave from the

District Court to file a late claim, the Lovett Appellants chose to

file an objection to the Moneta Claims Distribution Order. The

district court dismissed the Lovett Appellants' objection to the

Claims Disposition Order for lack of standing, stating that "it is

clear that the Lovett entities had not complied with the bar date

as to Moneta; and, therefore, there's no claim pending, and there's

nothing for the Lovett entities to object to."

The Lovett Appellants timely appealed and now present us

with two arguments: first, they argue that they have standing to

object to the Claims Disposition Order; and second, that the notice

provided by the Moneta Receiver was insufficient. We address each

argument in turn.

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1. Standing of the Lovett Appellants

"Article III of the Constitution confines the federal

courts to deciding actual cases and controversies." Cotter v. City

of Boston, 323 F.3d 160, 166 (1st Cir. 2003). Part of this

requirement is that a plaintiff must have standing, that is, he

must establish that "(1) he or she personally has suffered some

actual or threatened injury as a result of the challenged conduct;

(2) the injury can fairly be traced to that conduct; and (3) the

injury likely will be redressed by a favorable decision from the

court." N.H. Right to Life Political Action Comm. v. Gardner, 99

F.3d 8, 13 (1st Cir. 1996). We review the district court's

decision on standing de novo, "crediting the plaintiff's factual

allegations to the extent that they are material and construing

those alleged facts, together with the reasonable inferences

therefrom, in favor of the plaintiff." Id. at 12.

The "challenged conduct" at issue in this case is the

disposition of the claims against the Moneta Receivership, as

presented by the Moneta Receiver, and approved by the district

court in the Claims Disposition Order. The Claims Disposition

Order invited anyone who had claims being adjudicated by the order

and was dissatisfied with the recommended disposition to object

within thirty days of the order; otherwise, the disposition of the

Moneta Receivership estate as to those claims would become final.

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 The Lovett Appellants did not make a claim to the Moneta

Receiver prior to the Claims Bar Date, and therefore, they do not

have standing to object to the adjudication of a pending claim in

the Claims Disposition Order. Moreover, even though the Lovett

Appellants may have not known prior to the Claims Bar Date that

they possibly had a claim against the Moneta Receiver due to the

complex nature of Fairway and Moneta's involvement with the Kilberg

Entities, once such evidence began to surface, they did not attempt

to file a late claim with the Moneta Receiver. And, with the

newly-acquired evidence that they might have a claim against

Moneta, the Lovett Appellants could have asked the district court

directly to allow their late claim by presenting their theory that

Moneta is an alter ego of the Kilberg Entities as its reasonable

excuse for delay. See 3 Ralph E. Clark, A Treatise on the Law and

Practice of Receivers § 652 (3d ed. 1959) ("If a reasonable excuse

for delaying to make an earlier claim is shown, the creditor will

be admitted at any time before actual distribution, or even after

partial payment, if there be a surplus in the hands of the

receivers, so as not to interfere with payments already made.").

What they could not do was file an objection to the Claims

Disposition Order without having a claim that would be affected by

that Order. See Claims Disposition Order (stating that "any

claimant who opposes the Receiver's recommended disposition of its

claim" must file a motion within thirty days) (emphasis added).

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Such a claim is essential because it "submits [the claimant] to the

court's jurisdiction in respect of all defenses that might be made

by the receivers, and of all objections that other claimants might

interpose to the validity, amount, or priorities of their claim,

and the claimant puts himself in a position, should his interest

warrant, to challenge the receiver's acts and demands of other

claimants or creditors." Clark, supra, § 626. And, despite the

Lovett Appellants' contention, there is nothing in their objection

to the Claims Disposition Order that can be construed as a motion

for leave to file a late claim with the Moneta Receiver. The

district court was correct to dismiss the Lovett Appellants'

objection to the Claims Disposition Order for lack of standing.

2. Improper Notice

The Lovett Appellants next contend that the Moneta Notice

to Creditors did not provide them with fair and reasonable notice

and an opportunity to be heard, in violation of the Due Process

Clause of the Fourteenth Amendment to the United States

Constitution. They argue that this is so because the Notice to

Creditors "did not alert claimants to the relationship between

Moneta and certain Kilberg entities . . . so as to afford them a

reasonable opportunity to submit claims against Moneta based on the

conduct of those entities." This, however, is an argument that the

Lovett Appellants must make to the district court in their request

to file a late claim as evidence of their "reasonable excuse for

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delay[]." The District Court correctly dismissed the Lovett

Appellants' objection.

C. The Callahan Appellants and C.R. Amusements, Inc.

We next turn to the claims of the Callahan Appellants.

The Callahan Appellants are the minority shareholders of C.R.

Amusements, LLC, an entity of which Moneta was the majority

shareholder. C.R. Amusements filed a Chapter 7 bankruptcy petition

in the United States Bankruptcy Court for the District of Rhode

Island on January 14, 1999. As part of the bankruptcy proceedings,

the Callahan Appellants, as minority shareholders of C.R.

Amusements, intervened in an adversarial proceeding between

Acropolis (successor-in-interest to Moneta as majority shareholder)

and C.R. Amusements in the bankruptcy court ("Acropolis

Proceeding"), seeking to equitably subordinate the security

interest of Acropolis in certain assets of C.R. Amusements. See

Acropolis Enters. v. C.R. Amusements (In re C.R. Amusements), 259

B.R. 523 (Bankr. D.R.I. 2001). The Callahan Appellants lost their

subordination request and appealed to the United States District

Court for the District of Rhode Island. While the appeal was

pending, the Callahan Appellants received the Notice to Creditors

from the Moneta Receiver, and filed a claim with the Moneta

Receiver that stated "[t]he claims asserted are the same claims as

set forth in the [Acropolis Proceeding]," and incorporated by

reference the arguments and filings made by the Callahan Appellants

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in that proceeding. After the claim was filed, the Callahan

Appellants withdrew their appeal of the adverse decision in the

Acropolis Proceeding to the District Court, and the judgment of the

bankruptcy court became final. Even though, by their own assertion

to the Moneta Receiver, their claims against Moneta were based on

the same claims asserted in the Acropolis Proceeding, and those

claims had been finally adjudicated against them, the Callahan

Appellants did not at this time request leave to file a new claim

or to amend its existing claim with the Moneta Receiver.

When the Moneta Receiver eventually filed its

recommendations for the disposition of the claims against the

Moneta Receivership estate (more than two years after the decision

in the Acropolis Proceeding became final), it recommended that the

claim filed by the Callahan Appellants be denied. The Moneta

Receiver supported this denial on the basis that "[t]hese issues

and claims were finally and conclusively decided in Moneta's favor

in [the Acropolis Proceeding]," and that "[c]laimants are therefore

estopped from raising these issues." The District Court approved

this recommendation in its Claims Disposition Order. The Callahan

Appellants filed a timely objection to the Claims Disposition

Order, stating that there were only two issues addressed in the

Acropolis Proceeding, and that "[c]laimants' claim [with the Moneta

Receiver] extends beyond a subrogation claim against Moneta

relative to a loan made to CR Amusements," and requesting leave to

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either amend or otherwise supplement their claim. The Callahan

Appellants provided no explanation or legal justification in their

memorandum of law in support of the objection to the Claims

Disposition Order, beyond the statement that "[w]ith [the district

court's] proposed denial of various participation interests as set

forth in the Receiver's recommendations, uncertainty exists as to

Claimants' rights or the Creditors of CR Investments as to returns

on their minority interest."

On May 27, 2004, the District Court conducted a hearing

on pending objections to the Claims Disposition Order. The

Callahan Appellants did not attend the hearing (they claim there

was a mixup with their attorney) and the District Court denied

their objection on the grounds that their claim was res judicata

and that the Callahan Appellants were time-barred from filing any

new claims. The Callahan Appellants filed a Motion for

Reconsideration requesting a new hearing on their objection. In

support of their request for a new hearing, the Callahan Appellants

simply stated that there "existed valid and plausible" objections

to the Claims Disposition Order. The Callahan Appellants did not

explain why they had not requested leave to amend their claim to

the Moneta Receiver prior to the claim's denial, and what exactly

had changed to convert their denied claim into a viable claim. The

District Court denied the Motion for Reconsideration, and the

Callahan Appellants filed this timely appeal.

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 On appeal, the Callahan Appellants argue that it was it

was an abuse of discretion for the District Court to deny their

objection, essentially identifying the error as the court's refusal

to allow them to amend their original claim or to file a new claim.

The Callahan Appellants do not contend that the District Court

erred in denying the claim as originally submitted; that is, on the

basis that the claim against the Moneta Receiver was res judicata.

Thus, we deem the argument that it was error for the district court

to deny the original claim on the basis of res judicata as waived.

See, e.g., Smilow v. Southwestern Bell Mobile Sys., Inc., 323 F.3d

32, 43 (1st Cir. 2003) ("Issues raised on appeal in a perfunctory

manner (or not at all) are waived.").

Moving to whether the district court erred in denying the

Callahan Appellants request for leave to either amend its existing

claim or to file a late claim, we note that a District Court acting

as a receivership court has broad discretion in determining whether

to permit a claimant to file a late claim or to amend a timely

filed claim. See Clark, supra, § 652. We thus review the district

court's denial of the Callahan Appellants' request to either amend

its existing claim or to file a late claim for abuse of discretion.

Id. ("[T]he court's discretion refusing to allow claims to be

filed afterward will not be set aside on review unless plainly

wrong.").

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 In their objection to the Claims Disposition Order, the

Callahan Appellants provided no explanation, nor legal

justification, for their request to amend their existing claim or

to file a late claim. They simply made a conclusory statement that

the factual circumstances had changed during the time between their

original filing of the claim and the district court's denial of

their claim. In addition, the Callahan Appellants provided no

explanation why they waited until after the claim had been denied

to request leave to amend their claim. This is particularly

confusing considering that they must have known that factual

circumstances had changed at the time they withdrew the appeal of

the adverse decision in the Acropolis Proceeding. Furthermore, the

Callahan Appellants had an opportunity to argue their case when the

district court held a hearing on their objection to the Claims

Disposition Order. It was not an abuse of discretion for the

District Court to deny the Callahan Appellants' objection to the

Claims Disposition Order.

The Callahan Appellants had yet another opportunity to

present the factual and legal circumstances supporting their

request to either amend their existing claim or to file a new claim

out of time when they moved for reconsideration of the denial of

their objection to the Claims Disposition Order. We review the

district court's denial of the motion for reconsideration for abuse

of discretion. See Douglas v. York County, 360 F.3d 286, 290 (1st

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Cir. 2004). Once again, the Callahan Appellants presented no

cognizable justification for their request for leave to amend their

existing claim or to file a late claim, and the district court

properly denied their motion for reconsideration.

III.

For the above-mentioned reasons, the district court's

denial of both the Lovett Appellants' and the Callahan Appellants'

objections to the Claims Disposition Order, and the denial of the

Callahan Appellants' motion to reconsider the denial of their

objection, is AFFIRMED.

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