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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Callahan v. Moneta Capital Corp.
Court: Court of Appeals for the First Circuit
Date filed: 2005-06-29
Citations: 415 F.3d 114
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