Farkas v. D'OCA

• Decision Date: 05 July 1994
• Docket Number: No. 92 Civ. 8153 (CSH).,92 Civ. 8153 (CSH).
• Citation: 857 F. Supp. 300
• Parties: Arlene FARKAS, Plaintiff, v. Dolores D'OCA, a/k/a Dolores Farkas, Defendant.
• Court: U.S. District Court — Southern District of New York

857 F. Supp. 300

Arlene FARKAS, Plaintiff, v. Dolores D'OCA, a/k/a Dolores Farkas, Defendant.

No. 92 Civ. 8153 (CSH).

United States District Court, S.D. New York.

July 5, 1994.

Judd Burstein, Judd Burstein, P.C., New York City, for plaintiff.

Henry M. Gargano, Brooklyn, NY, for defendant.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

In this action alleging civil liability under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-1963, 1964(c), to which state law claims are appended, plaintiff seeks an award of over $18,000,000 representing the alleged amount of trebled damages to plaintiff's property caused by an alleged fraudulent scheme to divert plaintiff's marital assets to defendant, engineered by defendant and plaintiff's husband. Defendant has asked this Court to abstain from exercising jurisdiction over the case, or in the alternative, to dismiss the RICO claims pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim for relief, and for failure to plead fraud with particularity as required by Rule 9(b). For the reasons explained below, I conclude that abstention is proper because difficult state law issues are pending in a matrimonial action filed by plaintiff in state court which materially impact on a key issue in this case. The case will therefore be placed on this Court's suspense docket until the conclusion of the state matrimonial action.

BACKGROUND

The allegations in this case tell a sad tale of marital strife and deception. Plaintiff Arlene Farkas ("Arlene") and her husband, Bruce Farkas ("Bruce") were married in 1959. The complaint alleges that sometime before 1974, Bruce became involved in an adulterous relationship with defendant Dolores D'Oca ("D'Oca") by whom he fathered two children, one in 1974 and one in 1982. In 1974, Bruce and D'Oca allegedly entered into a bigamous marriage. Plaintiff learned of the illicit relationship between Bruce and D'Oca in 1975 when Bruce admitted he fathered D'Oca's child and allegedly told plaintiff he would pay $1,000 per month in child support and was ending the relationship. The relationship allegedly continued unbeknownst to plaintiff until at least 1990 when Bruce left Arlene for D'Oca.

The complaint alleges that between 1974 and 1989, in violation of his fiduciary duties to plaintiff and with D'Oca's willing participation, Bruce Farkas concealed from plaintiff a variety of material facts including the continuation of his relationship with D'Oca and his diversion to her of millions of dollars of marital funds. D'Oca is alleged to have used the mails and the interstate wires in furtherance of the fraudulent scheme in violation of the wire and mail fraud statutes, 18 U.S.C. § 1341, § 1343. Each use of the mails or interstate wires is alleged to constitute a predicate act under RICO.

Plaintiff commenced a matrimonial action against Dolores D'Oca and First American Bank of New York in New York State Supreme Court in June of 1991. The amended complaint in that action, filed April 8, 1992, also alleges that Bruce diverted marital assets to D'Oca and seeks an accounting of the disposition of marital funds allegedly wastefully dissipated. ¶¶ 58-62. To date, the action is still pending against Bruce.¹

DISCUSSION

Defendant argues that the circumstances of this case make abstention appropriate under several different judicially crafted theories. Defendant urges that abstention pursuant to Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) is appropriate to avoid this Court's interference with the pending state proceeding, and that "exceptional circumstances" warrant abstention pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 reh'g denied, 426 U.S. 912, 96 S.Ct. 2239, 48 L.Ed.2d 839 (1976). I disagree. This case does not fit into the narrow categories of abstention created under those doctrines.

None of the relief sought here would restrain or interfere with the state court proceedings, an element which must be present for Younger abstention to be appropriate. See Lawrence v. Cohn, 778 F.Supp. 678, 685 (S.D.N.Y.1991), vacated on other grounds, 816 F.Supp. 191 (S.D.N.Y.1993). One of the forms of relief plaintiff seeks in this action is an order setting aside allegedly fraudulent transfers pursuant to New York's Debtor Creditor Law. Defendant argues that such relief would unduly interfere with the state court's equitable distribution of marital property given that in making an equitable distribution the state court is required to determine whether either spouse has wastefully dissipated any assets. I am not persuaded. A determination that a fraudulent transfer has been made and should be set aside may involve issues overlapping those the state court would analyze in determining whether wasteful dissipation of assets has occurred. Nonetheless, even if this Court were to grant the requested relief, an order of this Court setting aside a fraudulent transfer of marital property would not prevent the state court from identifying marital property and making an equitable distribution, whether or not the property is subject to a set aside order of this Court. Therefore, the exercise of federal jurisdiction over this case would not conflict with the exercise of state jurisdiction. See Hoai v. Sun Refining and Marketing Co., Inc., 866 F.2d 1515, 1517 (D.C.Cir.1989) (discussing Younger abstention).

Colorado River abstention is clearly not appropriate because the case at bar is not parallel to the state matrimonial action. The Colorado River Court recognized that under "exceptional circumstances" federal district courts may abstain out of deference to pending parallel state court proceedings. 424 U.S. at 818, 96 S.Ct. at 1246. In a subsequent case, the Court clarified the duty of district courts in determining whether to abstain because of concurrent state and federal suits:

"We emphasize that our task in cases such as this is not to find some substantial reason for the exercise of jurisdiction by the district court' rather, the task is to ascertain whether there exist `exceptional' circumstances, `the clearest of justifications,' that can suffice under Colorado River to justify the surrender of that jurisdiction."

Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, 25-26, 103 S.Ct. 927, 942, 74 L.Ed.2d 765 (1983) (emphasis in original).

If the state and federal proceedings are not concurrent Colorado River abstention is unquestionably not appropriate. See Sheerbonnet, Ltd. v. American Express Bank, Ltd., 17 F.3d 46, 49 (2d Cir.1994); cf. Alliance of American Insurers v. Cuomo, 854 F.2d 591, 603 (2d Cir.1988) (in determining that district court's decision to abstain was unwarranted, court noted "most importantly, it is not at all clear that this case and the state court actions are `concurrent'"). The action at bar is a civil RICO action alleging that defendant participated in a fraudulent scheme to divert marital funds. Plaintiff seeks $18,000,000 in treble damages and an order setting aside allegedly fraudulent conveyances. In the state action, plaintiff seeks against Bruce relief commonly sought in a matrimonial action: an equitable distribution of marital property, $750,000 for "necessaries", an accounting of wrongfully dissipated property and a judgment of divorce, as well as $600,000 for breach of contract and $600,000 in compensatory damages for fraud. While the issue of wrongful transfer of marital funds is present in both actions, the nature of the claims are vastly different. Moreover, the defendants in both actions are not identical: it appears that D'Oca has been dismissed from the state action. Finally, the fact that both actions arise out of a similar set of circumstances is not sufficient justification for abstention where the claims are not concurrent. Accordingly, because the cases are not parallel, Colorado River abstention is not appropriate.

Defendant lastly argues that abstention is warranted under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 reh'g denied, 320 U.S. 214, 63 S.Ct. 1442, 87 L.Ed. 1851 (1943). "The aim of Burford abstention is to `avoid resolving difficult state law issues involving important public policies or avoid interfering with state efforts to maintain a coherent policy in an area of comprehensive regulation or administration.'" Bethphage Lutheran Service, Inc. v. Weicker, 965 F.2d 1239, 1243 (2d Cir.1992) (quoting American Disposal Services, Inc. v. O'Brien, 839 F.2d 84, 87 (2d Cir.1987)). Burford abstention has long been held appropriate when adjudication of the federal case "would interfere with state policy in an important matter of local concern." Petersen v. Petersen, 640 F.Supp. 719, 721 (S.D.N.Y.1986) (citing Burford). Domestic relations matters, including divorce, are subject to extensive state regulation and state courts are specially competent to adjudicate such matters. See id.

Defendant argues that this Court's resolution of the issues in the case at bar would constitute inappropriate intrusion into the domestic relations sphere, an area of comprehensive state regulation. As a preliminary matter, I disagree with defendant's contention that abstention is required because this case is essentially a domestic relations matter and would "enmesh" this Court in domestic relations matters. Nevertheless, I agree that abstention is warranted because a key issue in the RICO action, explained as follows, is inextricably involved in the matrimonial action and is better left for resolution by that court.

In order to have standing to bring a civil RICO action, a person must show that he was "injured in his business or property by reason of a violation of section 1962 of this chapter". 18 U.S.C. § 1964(c). Plaintiff alleges that by engaging in their fraudulent scheme, D'Oca and Bruce defrauded plaintiff of (a) assets which jointly belonged to plaintiff...