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LEOGRANDE v. LEOGRANDE

August 11, 1992

JOSEPH LEOGRANDE, SR., Plaintiff, against DONALD LEOGRANDE, individually and as Trustee of the Windsor Fuel Co., Inc. Pension Trust and the Windsor Fuel Co., Inc. Superimposed Pension Trust, JOSEPH LEOGRANDE, JR., individually and as Trustee of the Windsor Fuel Co., Inc. Pension Trust and the Windsor Fuel Co., Inc. Superimposed Pension Trust, SUE ANN LEOGRANDE, WINDSOR FUEL CO, INC., A.J. SAVASTA, INC., EDWARD M. GORDON, the WINDSOR FUEL CO., INC. PENSION TRUST and the WINDSOR FUEL CO., INC. SUPERIMPOSED PENSION TRUST, Defendants. DONALD LEOGRANDE, individually and as Trustee of the Windsor Fuel Co., Inc. Pension Trust and Superimposed Pension Trust, JOSEPH LEOGRANDE, JR., individually and as Trustee of the Windsor Fuel Co., Inc. Pension Trust and Superimposed Pension Trust, WINDSOR FUEL CO., INC., the WINDSOR FUEL CO., INC. PENSION TRUST and the WINDSOR FUEL CO., INC. SUPERIMPOSED PENSION TRUST, Counter/Cross-Claimants, - against - JOSEPH LEOGRANDE, SR., ALLAN BAKST, and JOHN DOES 1-5, Counterclaim Defendants - and - A.J. SAVASTA, INC., PENSION PARAMETERS, INC., and A.J. SAVASTA PENSION PARAMETERS OF LONG ISLAND, INC., Cross-Claim Defendants. ALLAN BAKST, Cross-Claimant, - against - JANE SAVASTA, as Executrix of the Estate of Anthony J. Savasta, deceased, Cross-Claim Defendant. WILLIAM LEOGRANDE, personally and in the right of Windsor Fuel Co., Inc., a corporation, Intervenor-Plaintiff, - against - WINDSOR FUEL CO., INC., JOSEPH LEOGRANDE, SR., JOSEPH LEOGRANDE, JR. and DONALD LEOGRANDE, each individually and as trustees of the defendants Windsor Fuel Co., Inc. Pension Trust, The Windsor Fuel Co., Inc. Superimposed Pension, The Donald and Joseph LeoGrande Irrevocable Trust and the LeoGrande Family Irrevocable Trust, Intervenor-Defendants.


The opinion of the court was delivered by: I. LEO GLASSER

 GLASSER, United States District Judge:

 One of the remaining parties in this action, Allan Bakst, has moved to file an amended and supplemental pleading against several of the original defendants. These defendants have moved for sanctions under Federal Rule of Civil Procedure 11. For the reasons set forth below, the motion of Bakst is denied and the motion for sanctions is granted.

 FACTS

 In 1988, Joseph LeoGrande, Sr. brought this action against his sons, Donald LeoGrande and Joseph LeoGrande, Jr. (the "trustees"), and against other defendants -- among which were the Windsor Fuel Co., Inc. ("Windsor") (Windsor is the LeoGrande family business) and several pension trusts sponsored by Windsor. In this action, Joseph LeoGrande, Sr. sought to remove his sons as trustees for the defendant pension trusts. The plaintiff had earlier begun an action in the New York State Supreme Court to set aside a certain inter vivos trust in which he had placed extensive wealth. In both actions, Joseph LeoGrande, Sr. alleged extensive wrongdoing by his sons in their management of Windsor and in the discharge of their duties as trustees of the pension trusts. The trustees, the pension trusts, and Windsor counterclaimed against Joseph LeoGrande, Sr. and against Allan Bakst. Bakst, who had long advised Windsor as a trust attorney, had not been a party to this action before the defendants asserted a counterclaim against him; Bakst himself counterclaimed against the trustees and against the pension trusts for indemnification. William LeoGrande, a brother of the plaintiff, also intervened in this action.

 In February of 1991, the trustees, the pension trusts, and other parties (which included Windsor, actuaries, and pension administrators) settled their claims with the intervenor, William LeoGrande. The settling parties moved for a court order to approve their agreement, but Joseph LeoGrande, Sr. and Bakst opposed the settlement. Bakst and the plaintiff also noticed a motion to remove the trustees from their positions, in the pension trusts and to appoint a temporary receiver. At a hearing on February 15, 1991, this court approved the settlement agreement offered by the intervenor and by the other settling parties. At that hearing, this court strongly criticized Bakst's opposition to the settlement; the court observed that Bakst had no interest in the underlying pension trusts and that, for this reason, he had no standing to contest the settlement. Transcript of 2/15/91 at 29. Additionally, this court suggested that counsel for the plaintiff might wish to reconsider the motion that the plaintiff had made with Bakst to remove the trustees. *fn1" Id. at 26-27. That motion was subsequently withdrawn. On November 4, 1991, this court approved an agreement among the remaining parties by which they dismissed with prejudice all claims and counterclaims in this action -- except those against Bakst. Accordingly, the trustees, the pension trusts, and Bakst are, apparently, the only remaining parties in this matter.

 Bakst now moves pursuant to Federal Rules of Civil Procedure 15(a) and 15(d) to file an "amended and supplemental pleading" (the "proposed pleading"). He seeks to assert counterclaims against Donald LeoGrande, Joseph LeoGrande, Jr., The Windsor Fuel Co., Inc. Pension Trust, the Windsor Fuel Co., Inc. Superimposed Pension Trust, and Windsor (collectively, the "defendants") both under the Racketeer-Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. ("RICO"), and under the common law tort of abuse of process. Bakst asserts four causes of action against these defendants: first, that Donald LeoGrande and Joseph LeoGrande, Jr. "acquired interests, directly and indirectly, in Windsor, [a RICO enterprise], through [a] pattern of racketeering activity" in violation of 18 U.S.C. § 1962(b), proposed pleading P 65; second, that Donald LeoGrande and Joseph LeoGrande, Jr. have "participated directly and indirectly in the affairs of Windsor and the [named pension trusts] through [a] pattern of racketeering activity" in violation of 18 U.S.C. § 1962(c), ids. P 68; third, that Donald LeoGrande and Joseph LeoGrande, Jr. have, in violation of 18 U.S.C. § 1962(d), conspired to violate Sections 1962(b) and 1962(c), id. P 71; and, fourth, that the "defendants" *fn2" have "misused and misapplied process . . . against Allan Bakst to obtain a collateral advantage and corresponding detriment to [him], outside the legitimate ends of the legal process used against him," id. P 74.

 In the RICO allegations of his proposed pleading, Bakst alleges a complex "pattern of racketeering activity" by Donald LeoGrande and by Joseph LeoGrande, Jr. The alleged acts of racketeering activity -- acts of mail fraud under 18 U.S.C. § 1341, acts of wire fraud under 18 U.S.C. § 1343, and acts of embezzlement of pension funds under 18 U.S.C. § 664, id. P 1 -- are set forth in eight different schemes. In the first such alleged scheme, Bakst claims that the trustees committed acts of mail fraud and of wire fraud with respect to creating "sham" employment of Sue Ann LeoGrande by Windsor. These racketeering acts allegedly included the mailing of fraudulent tax returns and of false tax information to the Internal Revenue Service and to the New York State Department of Taxation and Finance. Id. PP 9-13. The second scheme alleges that the trustees committed similar acts of mail fraud in the creation of "fictitious compensation figures" for Donald LeoGrande. Id. PP 14-15. The third scheme alleges fraudulent "backdating" of certain pension trust amendments; again, the alleged racketeering activity includes acts of mail fraud. Id. PP 16-19. The fourth scheme alleges acts of mail fraud, of wire fraud, and of pension fund embezzlement in connection with self-dealing by Donald LeoGrande as a trustee of certain Windsor pension funds. Id. PP 20-27. The fifth scheme sets forth allegations of embezzlement of pension trust funds by Donald LeoGrande and by Joseph LeoGrande, Jr.; Bakst also alleges acts of mail fraud and of wire fraud to further this scheme. Id. PP 28-37. The sixth scheme alleges predicate acts of fraud by the trustees in "other acts of self-dealing" with respect to the pension trusts. Id. PP 38-46. The seventh scheme alleges mail fraud in an attempt to "wrestle away from [Joseph LeoGrande, Sr.] all dominion and control of his own assets and wealth." Id. PP 47-50. Of these first seven schemes of alleged racketeering activity, none alleges a single act of racketeering that even arguably affected Allan Bakst.

 In the eighth alleged scheme of racketeering activity, Bakst claims that the trustees and their attorneys "have attempted to cover up the illicit pattern of racketeering set forth above and have attempted to silence Allan Bakst and frustrate his defense in this matter so that information regarding their illicit acts would remain concealed." Id. P 51. Bakst alleges that the trustees committed acts of mail fraud and of wire fraud during discovery in this action:

 As part of their cover up [of the alleged pattern of racketeering activity] in this litigation, Donald [LeoGrande] and [Joseph LeoGrande, Jr.] attempted to withhold documents which could lead to the unravelling of their fraud and which were requested in discovery by . . . Bakst on several occasions. Donald and Joe Jr., through their attorneys, used the United States mail and the telephone lines to continue this fraud. From March 1989 to and including the present, Donald and Joe Jr. have, through their attorneys, written to and spoken by telephone with . . . Bakst's attorneys and to the Court in an effort to withhold the documents requested. Specifically, in response to a letter motion filed by . . . Bakst regarding the wrongful refusal by Donald and Joe Jr. to produce documents, their attorney sent several letters to the court and to . . . Bakst's co-counsel in an attempt to withhold the documents. To date, Donald and Joe Jr. have still not produced the documents -- despite being directed to do so by the Court in May 1991.

 Id. P 55. Bakst thus does not allege that the content of the mail and wire communications from the defendants to him in connection with his discovery request was in itself fraudulent; rather, he alleges that the trustees and their attorneys used the mail and the telephone to refuse his request for documents that he claims might have revealed earlier acts of fraud and of embezzlement by the trustees.

 For each of the RICO claims, Bakst alleges that "as a direct and proximate result of the [alleged RICO violations], [he] has been injured in his business and his property. . . ." Id. PP 66 (first claim), 69 (second claim), and 72 (third claim). On each of his four claims, Bakst seeks compensatory damages "in the amount of at least $ 250,000" -- such damages, of course, to be trebled for the RICO claims id "wherefore" clause P 1. He also seeks punitive ...


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