United States v. All Funds in the Account of Prop. Futures, Inc.

• Decision Date: 04 October 2011
• Docket Number: Case No. 08–81244–CIV.
• Citation: 820 F.Supp.2d 1305
• Parties: UNITED STATES of America, Plaintiff, v. 1. ALL FUNDS IN THE ACCOUNT OF PROPERTY FUTURES, INC., Account No. 213478, at Colonial Bank, and 2. The Real Properties Located at 2801 Gateway Drive, Pompano Beach, FL, 32100 U.S. Highway 19 North, Palm Harbor, FL, 3040 Industry Drive, East Hempfield, PA, and 111 Windsor Drive, Oak Brook, IL, and All Lease Payment Monies Being Held in Escrow by the United States Marshals Service for These Real Properties, Defendants.
• Court: U.S. District Court — Southern District of Florida

820 F.Supp.2d 1305

UNITED STATES of America, Plaintiff,

v.1. ALL FUNDS IN THE ACCOUNT OF PROPERTY FUTURES, INC., Account No. 213478, at Colonial Bank, and 2. The Real Properties Located at 2801 Gateway Drive, Pompano Beach, FL, 32100 U.S. Highway 19 North, Palm Harbor, FL, 3040 Industry Drive, East Hempfield, PA, and 111 Windsor Drive, Oak Brook, IL, and All Lease Payment Monies Being Held in Escrow by the United States Marshals Service for These Real Properties, Defendants.

Case No. 08–81244–CIV.

United States District Court, S.D. Florida.

Oct. 4, 2011.

William H. Beckerleg, Jr., William T. Shockley, United States Attorney's Office, Fort Lauderdale, FL, for Plaintiff.

ORDER

KENNETH A. MARRA, District Judge.

This cause comes before the Court upon Plaintiff's Motion to Strike Claims of Gannon Family Company, LLC and Bayhill Development, LLC for Lack of Standing and/or for Partial Summary Judgment (DE 198).

THIS MATTER was referred to the Honorable Linnea R. Johnson, United States Magistrate Judge, Southern District of Florida. A Report and Recommendation, dated July 23, 2010, has been filed, recommending that the District Court grant in part and deny in part the motion. Specifically, the Magistrate Judge recommends that (1) the portion of the motion seeking partial summary judgment be granted; (2) the portion of the motion seeking an order striking the claims be denied as moot; and (3) the motion for attorney's fees be denied without prejudice. (DE 271.)

The Court has conducted a de novo review of the entire file and record herein. The Court has considered the objections and the responses to the objections. Accordingly, it is hereby ORDERED AND ADJUDGED that:

1) United States Magistrate Judge Johnson's Report and Recommendation be, and the same is RATIFIED, AFFIRMED and APPROVED in its entirety

2) Plaintiff's Motion to Strike Claims of Gannon Family Company, LLC and Bayhill Development, LLC for Lack of Standing and/or for Partial Summary Judgment (DE 198) is GRANTED IN PART AND DENIED IN PART. Partial summary judgment is GRANTED. The motion to strike is DENIED AS MOOT. The motion for attorney's fees is DENIED WITHOUT PREJUDICE.

3) Plaintiff shall submit a proposed judgment within 10 days of the date of entry of this Order.

DONE AND ORDERED.

REPORT AND RECOMMENDATION

LINNEA R. JOHNSON, United States Magistrate Judge.

THIS CAUSE is before the Court ¹ on Plaintiff United States of America's (“Plaintiff” or “Government”) Motion to Strike Claims of Gannon Family Company, LLC (“Gannon”) and Bayhill Development, LLC (“Bayhill”) for Lack of Standing and/or for Partial Summary Judgment (D.E. # 198), which is now ripe for adjudication.² On May 17, 2010, the Court conducted a hearing on the Motion. Present at that hearing were counsel for Bayhill and for Gannon, as well as counsel for Claimant ADT, the current lessor of the Defendant Properties, who observed the proceedings.³ Upon the request of Bayhill, the Court allowed the parties to file post-hearing submissions discussing the issues raised at the hearing. Upon consideration of the pleadings filed by parties, the evidence submitted, the arguments presented by the parties at the hearing and the relevant case law, the undersigned has decided to resolve the Motion by way of summary judgment and, for the following reasons, recommends said Motion be granted.

I. BACKGROUND

A. PROCEDURAL HISTORY

This is an in rem forfeiture action filed by the Government against two categories of property referred to in the caption of the Second Amended Verified Complaint as Defendant Property 1 and Defendant Property 2. The property referred to as Defendant Property 1 concerns all funds in the account of Property Futures, Inc. (“Property Futures”), Account No. 213478, at Colonial Bank. The property referred to as Defendant Property 2 concerns four parcels of real property located in Pompano Beach, Florida, Palm Harbor, Florida, East Hempfield, Pennsylvania, and Oakbrook, Illinois, as well as all lease payment monies being held in Escrow by the United States Marshall's Service incident to said properties (the “Defendant Properties”). The Defendant Properties were purchased from and leased back to ADT Security Services, Inc. (“ADT”), an alleged victim of fraud in the underlying criminal case of United States v. Vincent F. Artuso, et. al., Case No. 08–60014–CR–MIDDLEBROOKS,⁴ by four limited liability companies (the “Buyer/Lessor LLCs”).⁵ It is the Notices of Claim filed against the Defendant Properties to which the instant Motion to Strike and/or for Partial Summary Judgment filed by the Government (D.E. # 198) relates.

The Notices of Claim which are the subject matter of the instant Motion to Strike and/or for Partial Summary Judgment have been filed by Gannon Family Company, LLC (“Gannon”) (D.E. # 103) and Bayhill Development, LLC/Bayhill Development, Inc. (collectively “Bayhill”) ⁶ (D.E. # 105), each of which assert a minority interest in the Defendant Properties owned by the Buyer/Lessor LLCs.⁷ On September 4, 2009, Gannon filed a Verified Notice of Claim related to an alleged 9.9% ownership interest in the four Defendant Properties (DE 103). Bayhill filed a claim for a 10% interest in three of the Defendant Properties on September 7, 2009 (DE 105).⁸ On April 6,2010, the Government filed the Motion at bar, entitled the Government's Motion to Strike and/or for Partial Summary Judgment, which seeks partial summary judgment on, or an order striking, the Notices of Claim filed by Gannon and Bayhill.⁹ The Record also contains a Response by Bayhill Development, LLC (which the Gannon Family Company adopted (DEs 220 and 221)),¹⁰ as well as a Reply (DE 226) and a Supplemental Reply (DE 233).

B. THE UNDISPUTED FACTS

The following facts have been taken directly from the Government's Statement of Undisputed Facts (D.E. # 198), which unless otherwise noted, the Court finds either are not or can not reasonably be disputed:

1. On or about February 5, 2002, ADT sold three properties to three difference companies, and entered into lease agreements with the three companies, which leased the properties back to ADT. Those three sale and leaseback transactions were as follows: (1) the office building and property at 2801 Gateway Drive, Pompano Beach, Florida (hereinafter referred to as the “Pompano Beach property”) was sold to Efficient Realty & Development L.L.C., a Florida limited liability company (hereinafter referred to as “Efficient Realty FL”); (2) the office building and property at 32100 U.S. Highway 19 North, Palm Harbor, Florida (hereinafter referred to as the “Palm Harbor property”) was sold to Westmore Properties, LLC, a Florida limited liability company; and (3) the office building and property at 3040 Industry Drive, West Hempfield, Lancaster County, Pennsylvania (hereinafter referred to as the “Lancaster property”) was sold to Efficient Realty & Development, LLC, a Pennsylvania limited liability company (hereinafter referred to as “Efficient Realty PA”). See Attachments 1, 2, 3. These are the first three real estate properties listed in Defendant Property 2. (DE 198 at 3–4.)

2. At the time of the sales, the Operating Agreements of Efficient Realty FL and Efficient Realty PA indicated that Robert Gannon was the sole member and had a 100% ownership interest in both companies (Attachment 5, Bates labels GE2–1.356 and 358, and Attachment 6, Bates labels GE3–1.352 and 354), and the Operating Agreement of Westmore Properties, LLC indicated that John Artuso was the sole member and had a 100% ownership interest in Westmore Properties, LLC (Attachment 7, Bates labels GE 1–1.407 and 409). (DE 198 at 4.)

3. After the February 2002 closings, however, an attorney prepared Amended and Restated Operating Agreements changing the ownership of all three companies and sent a letter dated April 11, 2002 to Gregory Orr ¹¹ (Attachment 8) requesting that the respective parties sign the Amended and Restated Operating Agreements for Efficient Realty FL (Attachment 9), Westmore properties, LLC (Attachment 10), and Efficient Realty PA (Attachment 11). The Amended and Restated Operating Agreements for Efficient Realty FL and Westmore Properties, LLC, although executed on or after April 11, 2002, indicated that they were “effective as of the 5th day of February, 2002.” The Amended and Restated Operating Agreement for Efficient Realty PA, although executed on or after April 11, 2002, indicated that it was “effective as of the 4th day of February, 2002.” Each of the [ sic ] these three Amended and Restated Operating Agreements reflected that the percentage ownership interests of the three companies were divided among the following five member companies in the indicated percentages: J & G Associates, LLC (50.1%), Longhill Holdings, LLC (20%), CAE Enterprises, Inc. (10%), Bayhill Development, LLC (10%) and Property Futures, Inc. (9.9%). See Attachment 9 at G–104 to 106; Attachment 10 at G–35 to 37; and Attachment 11 at G–174 to 176. In July 2004, the ownership interests of Property Futures, Inc., in each of the three companies were assigned to Gannon Family Company, LLC. See Attachment 14. (DE 198 at 5.)

4. On or about September 18, 2003, ADT sold the office building and property at 111 Windsor Drive, Oak Brook, Illinois (hereinafter referred to as the “OakBrook property”) to OakBrook Properties, LLC, an Illinois limited liability company, and entered into a lease agreement with OakBrook Properties, LLC, which leased the property back to ADT. See Attachment 4. This property is the fourth property listed in Defendant Property 2 in the caption of this case. ( Id.)

5. At the time of the sale, the Operating Agreement of OakBrook Properties, LLC reflected that the sole member of OakBrook Properties, LLC was OakBrook Property Management, LLC, whose three members were GJO Associates, LLC, Longhill Holdings, LLC, and Robert M. Gannon (Attachment 12, BB & T–1521 to 1522). The Operating Agreement of OakBrook...