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MONGELLI v. MONGELLI

March 30, 1994

JOANN MONGELLI, Plaintiff,
v.
ROBERT A. MONGELLI, Defendant, -and- UNITED STATES OF AMERICA, Intervenor.


KEENAN


The opinion of the court was delivered by: JOHN F. KEENAN

JOHN F. KEENAN, United States District Judge:

 Before this Court is defendant's motion to remand this action back to Supreme Court of the State of New York, County of New York, pursuant to 28 U.S.C. § 1447(c), for lack of jurisdiction in this Court. Also before the Court is defendant's application for a direction from this Court to the intervenor United States of America, directing the intervenor to pay for defendant's costs related to the removal, pursuant to 28 U.S.C. § 1447(c). Alternatively, if the Court determines that jurisdiction is appropriate in this Court, defendant moves for a stay of this Court's determination of the federal issues until after the New York State Court has divided the Mongelli's marital assets in accordance with state law. Plaintiff joins defendant in these motions. The intervenor opposes these motions. For the reasons that follow, the motion to remand is granted. The application for costs of removal is denied. The alternative application for a stay is denied as moot.

 Also before this Court is plaintiff's motion, by order to show cause, for a preliminary injunction: (1) restraining the defendant from in any manner disposing of the proceeds from the sale of the waste hauling businesses (Round Lake Sanitation Corp., I.S.A. in New Jersey, Inc., Orange County Sanitation, Inc., Continental Technology Corp., Lake Region Service Garage Corp., and AAA Recycling Corp.), except for the payment of RICO forfeitures, fines and tax obligations for which plaintiff is also liable (as set forth in the plea agreement dated September 25, 1992) pending equitable distribution of marital assets; (2) restraining the United States of America ("United States") from executing on its civil contempt judgment against defendant by way of attachment or garnishment against any of defendant's assets including, but not limited to, defendant's share of the proceeds of the sale of the waste hauling businesses and the marital residence, pending equitable distribution of the marital assets; (3) restraining the United States from attaching, garnishing or otherwise seizing the funds payable for the support and maintenance of plaintiff and the Mongellis' unemancipated children to satisfy the civil contempt fines and tax deficiencies imposed against defendant; (4) directing the state appointed receiver and sequestrator, Arnold Mazel, Esq., to use the proceeds of two IRS refund checks totalling $ 111,246.26 for the payment of court-ordered maintenance and support; and (5) restraining the United States from attaching, garnishing or otherwise seizing money paid by the receiver to satisfy judgments, fines, taxes, penalties or other money owed by the parties pending a final resolution of the divorce action. Defendant has not opposed this motion. The United States, as intervenor, opposes this motion. Because the motion to remand is granted, this motion is denied as moot.

 BACKGROUND

 This is a divorce action brought by plaintiff Joann Mongelli against her husband Robert A. Mongelli in the Supreme Court of the State of New York, County of New York. Justice David B. Saxe of the Supreme Court granted the United States the right to intervene in the state court action. This action was then removed by the intervenor from Supreme Court to the United States District Court, Southern District of New York.

 On September 23, 1992, defendant, among others including his brother Louis and his wife Joann, entered into a plea agreement with the United States. Defendant and his brother Louis pleaded guilty to a number of federal crimes including racketeering, bribery, tax evasion and money laundering, in connection with their waste hauling business. Under the plea agreement, defendant agreed to sell his interest in the waste hauling business and to use the proceeds of that sale to satisfy a five-million dollar RICO forfeiture and certain tax deficiencies. Instead of immediately seizing the waste hauling business, the government gave the Mongelli brothers one year to find an acceptable buyer, with the brothers retaining any sale proceeds in excess of the forfeiture and deficiencies due. The Mongellis' marital residence was pledged as security for payment of the RICO forfeiture and tax deficiencies. Defendant was thereafter sentenced to a fifty-month prison term, which he began serving in May 1993.

 In April 1993, prior to beginning to serve his prison term, the government obtained an order compelling defendant to testify before a federal grand jury under a grant of use immunity. Defendant refused to testify. Based on his refusal, on May 12, 1993, the District Court imposed a $ 4,000 per business day civil contempt fine against him. At the request of the government, on July 12, 1993, this fine was raised to $ 10,000 per day. The Second Circuit approved this fine order on August 23, 1993. See United States v. Mongelli, 2 F.3d 29 (2d Cir. 1993). On October 12, 1993, the government obtained a judgment of $ 442,000 plus 3.34 percent per annum interest thereafter for the outstanding contempt fines as of that date. These fines continue to accumulate. The judgment was filed in the Orange County Clerk's Office on December 21, 1993.

 On October 19, 1993, the United States moved to intervene in the state court divorce action. The intervenor sought an order barring the sequestration of the assets of the defendant.

 On January 11, 1994 Justice Saxe issued his ruling on the various motions. Plaintiff was awarded $ 4,685 per month in maintenance and $ 4,780 per month in child support, in addition to the middle child's college tuition and therapy costs. This award was to be paid out of the sequestered funds. Justice Saxe appointed Arnold Mazel, Esq. as receiver and sequestrator of defendant's assets. Justice Saxe also granted the motion to intervene but denied the government's motion seeking to bar the sequestration. Justice Saxe modified his previous order of sequestration--he made it permanent, but he limited the sequestration to those assets specifically enumerated in the complaint. Those enumerated assets include pension funds, cash value of life insurance, securities and other liquid assets. Justice Saxe refused to continue the temporary order requiring sequestration of "any and all" of defendants assets.

 In the midst of all this activity, on December 15, 1993, the IRS issued two refund checks to defendant totalling $ 111,246.26. Defendant delivered these checks to the receiver. The IRS subsequently discovered that the checks were issued erroneously. Joseph Mongelli, Sr., the defendant's father, repaid the IRS. The plaintiff wants these funds currently on deposit with the receiver to remain sequestered to satisfy Justice Saxe's January 11, 1994 order for support and maintenance. The Mongellis also maintain that the assets sequestered by Justice Saxe are assets that accumulated during their twenty-six year marriage and are the only assets available for plaintiff's support and maintenance and the support of the minor children.

 On January 21, 1994, the United States removed the divorce action to this Court. On February 17, 1994, pursuant to 28 U.S.C. section 3205, the United States obtained a Writ of Garnishment directing the receiver to withhold and retain any property in which the defendant has a substantial non-exempt interest, until further order of this Court.

 DISCUSSION

 A. Applicable Legal Standards in Motions to Remand

 Section 1447(c) of Article 28 of the United States Code ("U.S.C.") provides that "if at anytime before final judgment it appears that the district court lacks subject matter jurisdiction, ...


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