The opinion of the court was delivered by: CHARLES S. HAIGHT, JR.
In this action alleging civil liability under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 161-1963, 1964(c), to which state law claims are appended, plaintiff seeks an award of over $ 18,000,000 representing the alleged amount of trebled damages to plaintiff's property caused by an alleged fraudulent scheme to divert plaintiff's marital assets to defendant, engineered by defendant and plaintiff's husband. Defendant has asked this Court to abstain from exercising jurisdiction over the case, or in the alternative, to dismiss the RICO claims pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim for relief, and for failure to plead fraud with particularity as required by Rule 9(b). For the reasons explained below, I conclude that abstention is proper because difficult state law issues are pending in a matrimonial action filed by plaintiff in state court which materially impact on a key issue in this case. The case will therefore be placed on this Court's suspense docket until the conclusion of the state matrimonial action.
The complaint alleges that between 1974 and 1989, in violation of his fiduciary duties to plaintiff and with D'Oca's willing participation, Bruce Farkas concealed from plaintiff a variety of material facts including the continuation of his relationship with D'Oca and his diversion to her of millions of dollars of marital funds. D'Oca is alleged to have used the mails and the interstate wires in furtherance of the fraudulent scheme in violation of the wire and mail fraud statutes, 18 U.S.C. § 1341, § 1343. Each use of the mails or interstate wires is alleged to constitute a predicate act under RICO.
Plaintiff commenced a matrimonial action against Bruce, D'Oca and First American Bank of New York in New York State Supreme Court in June of 1991. The amended complaint in that action, filed April 8, 1992, also alleges that Bruce diverted marital assets to D'Oca and seeks an accounting of the disposition of marital funds allegedly wastefully dissipated. PP 58-62. To date, the action is still pending against Bruce.
Defendant argues that the circumstances of this case make abstention appropriate under several different judicially crafted theories. Defendant urges that abstention pursuant to Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971) is appropriate to avoid this Court's interference with the pending state proceeding, and that "exceptional circumstances" warrant abstention pursuant to Colorado River Water Conservation District v. United States, 424 U.S. 800, 47 L. Ed. 2d 483, 96 S. Ct. 1236, reh'g denied, 426 U.S. 912, 48 L. Ed. 2d 839, 96 S. Ct. 2239 (1976). I disagree. This case does not fit into the narrow categories of abstention created under those doctrines.
None of the relief sought here would restrain or interfere with the state court proceedings, an element which must be present for Younger abstention to be appropriate. See Lawrence v. Cohn, 778 F. Supp. 678, 685 (S.D.N.Y. 1991), vacated on other grounds, 816 F. Supp. 191 (S.D.N.Y. 1993). One of the forms of relief plaintiff seeks in this action is an order setting aside allegedly fraudulent transfers pursuant to New York's Debtor Creditor Law. Defendant argues that such relief would unduly interfere with the state court's equitable distribution of marital property given that in making an equitable distribution the state court is required to determine whether either spouse has wastefully dissipated any assets. I am not persuaded. A determination that a fraudulent transfer has been made and should be set aside may involve issues overlapping those the state court would analyze in determining whether wasteful dissipation of assets has occurred. Nonetheless, even if this Court were to grant the requested relief, an order of this Court setting aside a fraudulent transfer of marital property would not prevent the state court from identifying marital property and making an equitable distribution, whether or not the property is subject to a set aside order of this Court. Therefore, the exercise of federal jurisdiction over this case would not conflict with the exercise of state jurisdiction. See Hoai v. Sun Refining and Marketing Co., Inc., 275 U.S. App. D.C. 397, 866 F.2d 1515, 1517 (D.C. Cir. 1989) (discussing Younger abstention).
"We emphasize that our task in cases such as this is not to find some substantial reason for the exercise of jurisdiction by the district court' rather, the task is to ascertain whether there exist 'exceptional' circumstances, 'the clearest of justifications,' that can suffice under Colorado River to justify the surrender of that jurisdiction."
Moses H. Cone Hospital v. Mercury Construction Co., 460 U.S. 1, 25-26, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983) (emphasis in original).
If the state and federal proceedings are not concurrent Colorado River abstention is unquestionably not appropriate. See Sheerbonnet, Ltd. v. American Express Bank, Ltd., 17 F.3d 46, 49 (2d Cir. 1994); cf. Alliance of American Insurers v. Cuomo, 854 F.2d 591, 603 (2d Cir. 1988) (in determining that district court's decision to abstain was unwarranted, court noted "most importantly, it is not at all clear that this case and the state court actions are 'concurrent'"). The action at bar is a civil RICO action alleging that defendant participated in a fraudulent scheme to divert marital funds. Plaintiff seeks $ 18,000,000 in treble damages and an order setting aside allegedly fraudulent conveyances. In the state action, plaintiff seeks against Bruce relief commonly sought in a matrimonial action: an equitable distribution of marital property, $ 750,000 for "necessaries", an accounting of wrongfully dissipated property and a judgment of divorce, as well as $ 600,000 for breach of contract and $ 600,000 in compensatory damages for fraud. While the issue of wrongful transfer of marital funds is present in both actions, the nature of the claims are vastly different. Moreover, the defendants in both actions are not identical: it appears ...