U.S. v. All Funds Dist, to or On Behalf, Weiss

• Decision Date: 17 September 2003
• Docket Number: Docket No. 01-6232.
• Citation: 345 F.3d 49
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. All Funds Distributed to, or On Behalf of, Edward Weiss and/or Rosemary Weiss from the B.R. Ambulance Service, Inc. Pension Plan and All Monies and Properties Traceable Thereto, Defendants, Edward Weiss, from the B.R. Ambulance Services, Inc. & Rosemary Weiss, from the B.R. Ambulance Services, Inc., Claimants-Appellees, Pryor & Mandelup, L.L.P., Jacqueline Acampora & Internal Revenue Service, Claimants.
• Court: U.S. Court of Appeals — Second Circuit

345 F.3d 49

UNITED STATES of America, Plaintiff-Appellant, v. All Funds Distributed to, or On Behalf of, Edward Weiss and/or Rosemary Weiss from the B.R. Ambulance Service, Inc. Pension Plan and All Monies and Properties Traceable Thereto, Defendants Edward Weiss, from the B.R. Ambulance Services, Inc. & Rosemary Weiss, from the B.R. Ambulance Services, Inc., Claimants-Appellees Pryor & Mandelup, L.L.P., Jacqueline Acampora & Internal Revenue Service, Claimants.

Docket No. 01-6232.

United States Court of Appeals, Second Circuit.

Argued: September 9, 2002.

Decided: September 17, 2003.

COPYRIGHT MATERIAL OMITTED

CAROLYN LISA MILLER, Assistant U.S. Attorney for the Eastern District of New York, (ALAN VINEGRAD, U.S. Attorney for the Eastern District of New York, VARUNI NELSON, ARTHUR P. HUI, Assistant U.S. Attorneys for the Eastern District of New York, on the brief), Brooklyn, NY, for Appellant.

KENNETH J. RUBINSTEIN, Rubinstein & Rubinstein, New York, NY, for Appellees.

Before: WALKER, Chief Judge, NEWMAN and F.I. PARKER, Circuit Judges.

F.I. Parker, Circuit Judge^*.

Plaintiff-appellant, the United States of America, appeals from the September 28, 2001 judgment of the United States District Court for the Eastern District of New York (Frederic Block, Judge), granting summary judgment in favor of claimants-appellees, Edward Weiss and Rosemary Weiss, in the government's forfeiture action against the proceeds of the claimants' pension plans. The district court held that the action was governed by the one year statute of limitations contained in 18 U.S.C. § 984,¹ that section 984's statute of limitations had run, and that the government was not entitled to equitable tolling. We hold that it was error for the district court to deny plaintiffs' equitable tolling of the limitations period during the time that the defendant funds were in the pension plan, and hence disagree with the ruling that section 984's statute of limitations had necessarily run. We therefore do not address the other issues ruled upon by the district court, namely, whether the funds are traceable to a criminal offense or whether, as a result of such traceability, the longer statute of limitations in another forfeiture section, 18 U.S.C. § 981(d), might also apply in this case. The judgment of the district court is VACATED and the case is REMANDED for further proceedings consistent with this opinion.

I. BACKGROUND

For several years, claimants Edward Weiss and Rosemary Weiss operated BR Ambulance Services, Inc. ("BR"), a corporation engaged in the business of transporting Medicare beneficiaries to and from dialysis centers, doctors' offices, clinics and hospitals. Edward was BR's president and his wife, Rosemary, was BR's secretary-treasurer. Additionally, both claimants were directors of the corporation, and together they owned 100 percent of BR's stock.

A government investigation revealed that between 1990 and 1994, under Edward's leadership and direction, BR had improperly billed Medicare for services that were never provided. Subsequently, on August 22, 1996, Edward pleaded guilty to an information charging him with making false claims and causing false claims to be made against the United States, in violation of 18 U.S.C. § 287. The amount of money in question is significant; according to a government audit agency, Medicare fees paid to BR totaled $21,510,922, which represented two thirds of BR's total revenue, between 1990 and 1994. Of these fees, the audit agency estimated that approximately 87 percent ($18,714,502) were fraudulently obtained.

During the course of its operation, BR deposited its fraudulent Medicare proceeds into its bank accounts together with legitimate revenues, and over the course of multiple bank deposits and withdrawals, the commingled funds were utilized to run BR's business. Using these commingled funds, BR established a pension plan—the proceeds of which are here at issue—to provide retirement benefits for certain of its employees, including Edward and Rosemary. Once funded, the plan invested and reinvested the funds in various securities. Thus, the pension plan, which began in January of 1989 and continued until the corporation dissolved in 1998, was funded from accounts which contained a combination of the proceeds of Medicare fraud and legitimate BR revenue.

In July 1998, BR was dissolved as a result of a bankruptcy proceeding, and arrangements were made for the pension plan to be terminated. A standard termination notice for the pension plan was filed with the Pension Benefits Guarantee Corporation in November 1998. Several months later, when the pension plan's assets were converted to cash, $ 45,809.81 was distributed to Edward, $ 546,477.73 to Rosemary, and the remainder to BR's other employees. The payments to Edward and Rosemary were deposited into separate Individual Retirement Accounts ("IRAs") in North Fork Bank on August 19, 1999 and were seized by the government shortly thereafter.

The government acknowledges that it learned that the pension plan contained assets derived from the fraudulent Medicare claims in 1996, after BR had begun bankruptcy proceedings. However, the government did not commence its civil forfeiture action against the pension fund monies until March of 1999, when it obtained a court order authorizing the arrest and seizure of Edward and Rosemary Weiss's North Fork Bank IRA funds—the defendant property in this litigation. When the government initiated the seizure of Edward's and Rosemary's IRAs, it alleged that the funds therein were being used to commit or facilitate the commission of violations of 18 U.S.C. § 1956(a)(1)(A)(I) (money laundering) by virtue of the funds being the proceeds of, or derived from mail and/or wire fraud (18 U.S.C. §§ 1341, 1343). Mail fraud and wire fraud are predicate crimes under the money laundering statute.² See 18 U.S.C. §§ 1956(c)(7)(C), 1961(1)(B); 21 U.S.C. § 848. The government further alleged that as a result of the foregoing, the funds were property involved in a financial transaction in violation of the money laundering statute, traceable to mail fraud and wire fraud violations, and therefore liable to forfeiture in accordance with 18 U.S.C. § 981(a)(1).³

In the district court, the claimants accepted the government's facts, as alleged in its complaint, but moved for summary judgment, arguing that the government's forfeiture action was governed by the one year statute of limitations contained in 18 U.S.C. § 984 and was not timely filed.⁴ The district court agreed, granted the claimants' motion and dismissed the government's complaint, holding that because the subject property is fungible, the government's action was necessarily governed by the one year statute of limitations in section 984, under which the action was time-barred. The court also denied the government's alternative request that it apply equitable tolling principles in the event that it decided to apply the one year statute of limitations.

II. STANDARD OF REVIEW

We review a grant of summary judgment de novo, Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir.2001), and construe the evidence in the light most favorable to the nonmoving party, Tenenbaum v. Williams, 193 F.3d 581, 593 (2d Cir.1999). Summary judgment is appropriate only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

The district court's decision to grant summary judgment in this case turned on its application of a particular forfeiture statute and the applicable statute of limitations, which is a question of law and thus also is reviewed de novo. Golden Pac. Bancorp v. F.D.I.C., 273 F.3d 509, 514 (2d Cir.2001). However, "[w]e review the district court's ruling on equitable tolling for abuse of discretion." Alli-Balogun v. United States, 281 F.3d 362, 367-68 (2d Cir.2002); see also Dixon v. Shalala, 54 F.3d 1019, 1031 (2d Cir.1995). A discretionary ruling based on an error of law is necessarily an abuse of discretion. See Monegasque De Reassurances S.A.M. v. Nak Naftogaz Of Ukraine, 311 F.3d 488, 498 (2d Cir.2002).

III. DISCUSSION

The issue before us on appeal is whether the government's civil forfeiture proceeding against the allegedly tainted pension funds is time-barred. We hold that it was an error of law for the district court not to permit equitable tolling during the time that the government was prevented from filing successfully against the defendant funds by constraints on the alienation of pension funds imposed by the Employment Retirement Income Security Act of 1974 ("ERISA"). See 29 U.S.C. §§ 1001-1168. As a result of our holding, the action may now proceed under section 984(c), and we need not resolve the parties' disagreement over whether section 981 and its five year statute of limitations could also govern this action.⁵ Therefore, we do not reach the factual question of whether the funds may be traceable, thus allowing the government to bring the action under section 981, with its traceability requirements and five year statute of limitations. Further, we express no opinion on whether the government's forfeiture claim will ultimately succeed.

A. Equitable Tolling and Implications of ERISA

Generally, equitable tolling is difficult to attain, as it is reserved for "extraordinary or exceptional circumstances." Smith v. McGinnis, 208 F.3d 13, 17 (2d Cir.2000). "Equitable tolling . . . permits courts to extend a statute of limitations on a case-by-case basis to prevent inequity," Chao v. Russell P. Le Frois Builder, Inc., 291 F.3d 219, 223 (2d Cir.2002) (quoting Warren v. Garvin, 219 F.3d 111, 113 (2d Cir.2000)), even when the limitations period would otherwise have expired. "We have defined equitable tolling rules as those that allow a court `under compelling circumstances, [to] make narrow exceptions to the statute of limitations in order to prevent inequity.'" M.D. v. Southington Bd. of Educ.,...