Schwartz v. U.S.
| Decision Date | 28 September 1992 |
| Docket Number | 90-6061 and 90-6162,Nos. 90-6043,s. 90-6043 |
| Citation | 976 F.2d 213 |
| Parties | Irving T. SCHWARTZ, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee (Three Cases). UNITED STATES of America, Plaintiff, v. Marvin MANDEL, et al., Defendant (Two Cases). |
| Court | U.S. Court of Appeals — Fourth Circuit |
Ransom J. Davis, argued (H. Russell Smouse and Nancy S. Allen, on brief), Whiteford, Taylor & Preston, Baltimore, Md., for appellant.
Jefferson McClure Gray, Asst. U.S. Atty., Baltimore, Md., argued (Richard D. Bennett, U.S. Atty., on brief), for appellee.
Before RUSSELL, WIDENER, and HALL, Circuit Judges.
I
These three consolidated appeals are the latest chapter in fifteen years of litigation spawned by the indictment and conviction of Marvin Mandel and his co-defendants (the Mandel defendants) under the federal mail fraud statute and the Racketeer Influenced and Corrupt Organizations Act (RICO). At the time of the convictions, the United States asserted a RICO forfeiture claim to a block of stock in the Southern Maryland Agricultural Association (SMAA), contending that Irvin Kovens, one of the Mandel defendants, was the true owner. Appellant, Irving Schwartz, who was not indicted in the Mandel case, argued then and argues now, that he, not Kovens, owned the stock. Schwartz and the United States settled their dispute over the stock, and on March 26, 1984 the district court entered a judgment giving effect to the terms of the settlement.
In 1988 this court affirmed the grant of a writ of error coram nobis in favor of all Mandel defendants vacating their convictions. Schwartz now seeks to reassert his claim to the stock. * In this appeal, Schwartz seeks to reverse the district court's refusal to grant relief from the judgment of March 26, 1984. For reasons stated below, we affirm.
II
By indictment returned in November, 1975, the United States charged that certain of the defendants named in the indictment, including Irvin Kovens, had operated the Marlboro Race Track through a pattern of racketeering activity in violation of 18 U.S.C. § 1962. Pursuant to the provisions of 18 U.S.C. § 1962(c) and 1963(a), the United States sought forfeiture of the interests of the named defendants in the Marlboro Race Track, including interests held in the form of SMAA stock. The Government contended that Schwartz held the stock as nominee for the true owner, Irvin Kovens, so that Kovens could avoid the effect of a restrictive covenant prohibiting him from owning an interest in a competing racetrack. Both Kovens and Schwartz claimed that Schwartz was the true owner.
A jury returned guilty verdicts against all defendants and found, by special verdict, that Kovens owned the stock through Schwartz as nominee. On October 7, 1977, a forfeiture order was entered ordering Kovens to forfeit his interest in SMAA. The order further directed all interested parties to show cause why the forfeiture should not become final.
On October 26, 1977, Schwartz filed a response to the show cause portion of the October 7 forfeiture order and a claim to ownership of the stock. On December 12, 1977, the district court ruled that Schwartz's claim to the stock should be addressed in a civil forfeiture proceeding by the assigned judge. The court ordered the stock placed in escrow with the clerk of the court pending further court order. Schwartz appealed to this court but we dismissed because the December 12 order was not final and appealable under 28 U.S.C. § 1291.
During 1979, this court issued three decisions, the net effect of which was to affirm the convictions of the Mandel defendants, including Irvin Kovens. United States v. Mandel, 591 F.2d 1347 (4th Cir.1979), 602 F.2d 653 (4th Cir.1979) (en banc), 609 F.2d 1076 (4th Cir.1979) (en banc). The Supreme Court denied certiorari. Mandel v. United States, 445 U.S. 961, 100 S.Ct. 1647, 64 L.Ed.2d 236 (1980).
On January 21, 1981, the judge assigned to handle the civil forfeitures ordered that the stock be forfeited but that the forfeiture be stayed while Schwartz pursued an administrative remedy in the form of a request for remission or mitigation of the forfeiture before the Attorney General. United States v. Mandel, 505 F.Supp. 189, 192 (D.Md.1981). Schwartz's Petition for Remission or Mitigation of Forfeiture was denied by the Attorney General.
Schwartz filed a suit for declaratory judgment on February 20, 1981, seeking to assert his ownership of the stock. An appeal from the order of January 21, 1981 was remanded by this court for consolidation with the declaratory judgment action.
Finally, in early 1984, the parties reached a settlement. The settlement agreement, dated February 2, 1984, allocated 60% of the disputed stock to the United States and 40% to Schwartz. Each party "relinquish[ed] any and all further claim of ownership and/or of a proprietary interest of any kind or character in the portion of the stock allocated to the other party."
On March 20, obviously unaware, and not advised, of the settlement agreement, the district court issued a pre-trial order. The order denied Schwartz's motion for a jury trial and for exclusion of the verdicts in the criminal trial, and placed the burden of proving ownership on Schwartz.
On March 26, 1984, the district court entered the order which is the judgment at issue in this appeal. "[H]aving been apprised by counsel for the respective parties that a settlement ha[d] been reached ... respecting the appropriate division of" the stock at issue in this appeal and "having been provided with a copy of [the settlement agreement] dated February 2, 1984" and "recognizing that certain actions [were] necessary to implement the settlement" and "intending by its actions to give effect to the settlement", the district court ordered the clerk of court, with whom the stock was in escrow, to make arrangements so that the liquidation value of SMAA would be distributed in accordance with the settlement, 60% to the United States and 40% to Schwartz. The order further provided that the district court would retain jurisdiction over the matter until all actions necessary to effectuate the settlement had been taken.
In 1987 the Supreme Court decided McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), rejecting the intangible rights doctrine. The Court held in McNally that the federal mail fraud statute did not make it a crime to defraud citizens of their intangible right to an honest and impartial state government. The Mandel defendants, including Kovens, had been convicted of mail fraud on the same intangible rights theory rejected in McNally, and mail fraud was used as a RICO predicate offense. Accordingly, the district court issued a writ of error coram nobis to all of the Mandel defendants vacating all of their convictions. U.S. v. Mandel, 672 F.Supp. 864 (D.Md.1987). The court found that McNally did not change the scope of the mail fraud statute, but merely announced that from its inception the statute had not protected the intangible right to honest government. Therefore, the Mandel defendants' conduct had never been, even at the time that they were convicted, a violation of the mail fraud statute. Id. at 873, 875. As Schwartz asserts, the convictions were void ab initio. This court affirmed. United States v. Mandel, 862 F.2d 1067 (4th Cir.1988), cert. denied, 491 U.S. 906, 109 S.Ct. 3190, 105 L.Ed.2d 699 (1989).
After three of the Mandel defendants moved to modify the order forfeiting their SMAA stock and to require the Government to repay the value of their forfeited stock, the United States agreed to repay them the value of their forfeited shares. Irvin Kovens, however, was not among the three. To our knowledge, neither Kovens nor his estate has made any claim to the SMAA stock at issue in this appeal.
III
Schwartz instituted three separate proceedings seeking to recover the stock in light of the vacation of Kovens conviction. Schwartz argues that issuance of the writ of error coram nobis rendered Kovens' RICO conviction and the RICO forfeitures based on it void ab initio; that the Government does not have, and never had, any right to keep the stock; that the Government holds the stock in constructive trust for the rightful owner, Schwartz; and that Schwartz should have relief from the settlement agreement and the judgment entered pursuant to it because when they made the settlement both the Government and Schwartz mistakenly assumed that Kovens' RICO convictions were valid. All three proceedings requested relief from the district court's judgment of March 26, 1984 entered pursuant to the settlement agreement and the turnover to Schwartz of the 60% share taken by the Government under the settlement. The first motion argued that relief should be granted under Rule 60(b)(5) and (6); the second sought to add a claim for relief based on Rule 60(b)(4); and the third was a complaint for a declaratory judgment.
The district court denied relief in each instance and entered judgment for the Government in the declaratory judgment action. Schwartz appeals each of the three decisions which we have consolidated on appeal.
IV
We first discuss the claim that the Government holds the stock pursuant to a void RICO forfeiture. So far as Schwartz is concerned, the Government does not hold the stock merely pursuant to the judgment of forfeiture. The initial forfeiture was expressly conditioned on the failure of any interested parties to show cause why the forfeiture should not become final. The subsequent forfeiture order was stayed to allow Schwartz's challenge to it. Until the parties settled their dispute in early 1984, the stock was held in escrow by the clerk of court pending the outcome of Schwartz's challenge to the forfeiture. It was in the face of Schwartz's declaratory judgment action in which Schwartz had sued the United States that...
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