Goldsmit v. Massad (In re Fiorillo), 10-44179 MSH

• Court: United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
• Parties: In re: NICHOLAS J. FIORILLO Debtor In re: TRACY KROWEL Debtor JONATHAN R. GOLDSMIT, TRUSTEE IN BANKRUPTCY OF NICHOLAS J. FIORILLO and JOSEPH H. BALDIGA, TRUSTEE IN BANKRUPTCY OF TRACY KROWEL Plaintiffs v. DAVID MASSAD, MARCELLO MALLEGNI, COMMERCE BANK AND TRUST COMPANY, and LBM FINANCIAL, LLC. Defendants.
• Docket Number: Adversary Proceeding 12-4005,No. 10-44179 MSH,Adversary Proceeding 12-4006,No. 11-43854 MSH,10-44179 MSH,11-43854 MSH
• Decision Date: 03 June 2013

In re: NICHOLAS J. FIORILLO Debtor
In re: TRACY KROWEL Debtor
JONATHAN R. GOLDSMIT, TRUSTEE IN BANKRUPTCY OF NICHOLAS J. FIORILLO
and JOSEPH H. BALDIGA, TRUSTEE IN BANKRUPTCY OF TRACY KROWEL Plaintiffs
v.
DAVID MASSAD, MARCELLO MALLEGNI, COMMERCE BANK AND TRUST COMPANY,
and LBM FINANCIAL, LLC. Defendants.

No. 10-44179 MSH
No. 11-43854 MSH
Adversary Proceeding 12-4005
Adversary Proceeding 12-4006

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS CENTRAL DIVISION

Dated: June 3, 2013

Chapter 7
(consolidated)
MEMORANDUM OF DECISION ON THE MOTIONS TO DISMISS OF DEFENDANTS COMMERCE BANK & TRUST COMPANY, DAVID MASSAD, LBM FINANCIAL, LLC AND MARCELLO MALLEGNI

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Table of Contents

Introduction..................................................................................................................................... 4

Background.....................................................................................................................................5

Facts ................................................................................................................................................ 6

The Properties ............................................................................................................................. 8

23 A, B, C and D North Quinsigamond Avenue .................................................................... 8
425B Salisbury Street...........................................................................................................10
157 Shrewsbury Street..........................................................................................................14
88 Shrewsbury Street............................................................................................................16
249 Lincoln Street.................................................................................................................18
49 Old Colony Drive.............................................................................................................20

The Prior State and Federal Court Lawsuits............................................................................. 21
The Debtors' and SSDC's Bankruptcy History........................................................................24

Jurisdiction.................................................................................................................................... 26

The Rooker-Feldman Doctrine.................................................................................................26
Jurisdiction Generally............................................................................................................... 29

Positions of the Parties..................................................................................................................33

Motion to Dismiss Standards........................................................................................................35

Discussion..................................................................................................................................... 37

Civil RICO................................................................................................................................ 38

The Racketeering Enterprise................................................................................................. 39
The Impact on Interstate Commerce..................................................................................... 41
The Pattern of Racketeering Activities and the Predicate Acts ............................................ 42
RICO's Statute of Limitations .............................................................................................. 45

RICO Conspiracy...................................................................................................................... 47
Counts I and II- Violation of Civil RICO and RICO Conspiracy............................................. 48

23 A, B, C and D Quinsigamond Avenue.............................................................................48
425B Salisbury Street...........................................................................................................50
157 Shrewsbury Street..........................................................................................................51
88 Shrewsbury Street............................................................................................................52
249 Lincoln Street................................................................................................................. 53

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49 Old Colony Drive.............................................................................................................54

Claims Derivative of Those of Ms. Krowel.............................................................................. 54
Counts III and IV: Breach of Contract and Implied Covenant of Good Faith and Fair Dealing ................................................................................................................................................... 55
Res Judicata .............................................................................................................................. 57

Conclusion .................................................................................................................................... 59

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Introduction

Before me are three motions filed by the defendants in these consolidated adversary proceedings¹ to dismiss the identical four-count complaints filed by Jonathan Goldsmith and Joseph Baldiga, the chapter 7 trustees (the "Bankruptcy Trustees") of the bankruptcy estates of debtors, Nicholas Fiorillo and his wife, Tracy Krowel, (sometimes collectively referred to as the Fiorillos) respectively. Mr. Goldsmith asserts against the defendants certain claims of Mr. Fiorillo's bankruptcy estate as well as claims held by Mr. Goldsmith as the assignee of the Shrewsbury Street Development Companies, Inc. ("SSDC"), the Fiorillo Family Trust (the "Family Trust") and the 49 Old Colony Drive Trust (the "Colony Trust"). Mr. Baldiga maintains that he too is the assignee of the Family Trust's and the Colony Trust's claims against the defendants and in his complaint he asserts those claims along with claims of Ms. Krowel's bankruptcy estate. The complaints allege in counts I and II that defendants Marcello Mallegni and David Massad violated § 1962(c) and (d) of Title 18 of the U.S. Code, the Racketeering Influenced and Corrupt Organizations Act ("RICO") and in counts III and IV that all defendants breached certain contracts and the attendant duties of good faith and fair dealing implicit in them.² As discussed in more detail below, each motion raises common bases for dismissal: that

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the complaints fail to state claims under RICO, that the claims are time-barred, that the claims are barred by the doctrine of res judicata and that the bankruptcy court lacks subject matter jurisdiction under the Rooker-Feldman doctrine. In their joint response, the Bankruptcy Trustees concede that counts III and IV of the complaints against Commerce Bank and Trust Company and David Massad should be dismissed.

Background

These adversary proceedings are the latest in a series of lawsuits brought by Mr. Fiorillo, Ms. Krowel and SSDC in the Massachusetts state courts and in the United States District Court for the District of Massachusetts against some or all of these defendants. These adversary proceedings also follow an action or actions brought in state court against Ms. Krowel by a third party, Santo Arcuri, whose judgment against Ms. Krowel in at least one of the lawsuits plays a significant role in the complex web of dealings described below.³ The state and federal court lawsuits, all of which have been dismissed or settled (or in the case of one of the actions brought by Mr. Arcuri, in which final orders have entered), involve many of the same properties and facts upon which the Bankruptcy Trustees base their claims in these adversary proceedings. The Bankruptcy Trustees contend that at least some of the prior lawsuits were resolved as a result of ongoing racketeering activities.

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Facts

The facts are drawn from the complaints filed in the adversary proceedings, the exhibits to the motions to dismiss and to the Bankruptcy Trustees' joint response. All of the exhibits were incorporated by reference in the complaint or are public records. I have also taken judicial notice of the dockets and pleadings filed in the debtors' and SSDC's previous bankruptcy cases (which are detailed below) in order to present a more complete picture of the parties and properties at issue in these adversary proceedings.

Defendant, Marcello Mallegni, is the manager of and a substantial shareholder in defendant, LBM Financial, LLC ("LBM"). Defendant, David Massad, is the chairman of defendant, Commerce Bank, and also holds an interest in LBM. The complaints allege that Messrs. Mallegni and Massad controlled a racketeering enterprise through an association-in-fact composed of all of the defendants and two non-defendants, Michael Norris and Pamela...