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CURIALE v. CAPOLINO

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


April 4, 1995

SALVATORE R. CURIALE, SUPERINTENDENT OF INSURANCE, STATE OF NEW YORK INSURANCE DEPARTMENT, in his capacity as liquidator, Plaintiff, against THOMAS N. CAPOLINO, JOSEPH R. CORTAPASSO, ADVANTAGE SECURITY CONTROL SYSTEMS INCORPORATED, ADVANTAGE SECURITY & PROTECTION CORPORATION, and T.N. CAPOLINO TRUCKING CORP., Defendants.

The opinion of the court was delivered by: LEWIS A. KAPLAN

MEMORANDUM OPINION

 KAPLAN, District Judge.

 This is an action by the Superintendent of Insurance of the State of New York against several defendants pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. ยงยง 1961 et seq. ("RICO") and various state law theories. The Superintendent alleges that defendant Thomas N. Capolino ("Capolino") bribed employees of the Liquidation Bureau of the New York State Department of Insurance in an effort to secure contracts to supply the Bureau with goods, services and real estate. The Superintendent brought this action against Capolino, three companies allegedly owned or controlled by him -- Advantage Security Controls Systems, Inc. ("Advantage Security"), Advantage Security & Protection Corp. ("Advantage Protection"), and T.N. Capolino Trucking Corp ("TNC") -- and Joseph R. Cortapasso, and employee of the Liquidation Bureau. Prior to trial, Advantage Security and Advantage Protection filed petitions for protection under the Bankruptcy Code. As a result, the action has been stayed as against them. On the morning of trial, January 3, 1995, counsel for Capolino and TNC stated that his clients would not defend the action and consented to the entry of a default against them. The Superintendent then asked that the Court assess damages against Capolino and TNC on the basis of the trial record rather than refer the matter to a Magistrate Judge for an inquest. The case against Cortapasso then was tried to the Court and decided by an opinion dated March 31, 1995, familiarity with which is assumed.

 After trial, the Superintendent renewed the request that the Court enter a default judgment and assess damages against Capolino and TNC on the basis of the trial record. The submissions made on behalf of the Superintendent were served on counsel for the defaulting defendants. (See Dkt. item 181) On January 25 1995, the Court ordered the defaulting defendants to any file papers in opposition to plaintiff's requests on or before February 14, 1995. (Dkt. item 184) No response was filed. As the matter before us is now ripe for decision, we assess damages on the basis of the trial record and our previous findings, which are incorporated by reference.

 Damages

 1. 123 William Street commission. A brokerage commission of $ 692,739 was paid by the landlord to Capolino. For the reasons set forth in our previous opinion, the Superintendent is entitled to recover his $ 450,000 commission under RICO. He is entitled also to recover the $ 242,739 balance on his State law claims under the rule of S.T. Grand, Inc. v. City of New York, 32 N.Y.2d 300, 344 N.Y.S.2d 938, 298 N.E.2d 105 (1973), although this increment is not subject to trebling.

 2. Cortapasso's Salary. The Superintendent seeks to recover the salary paid to Cortapasso during his period of dishonesty. We have found Cortapasso's salary during the relevant period to have been $ 193,132. (See PX 39) We hold that the Superintendent is entitled to recover from Capolino the salary paid to Cortapasso on the theory that one who participates in an agent's or an employee's breach of fiduciary duty is liable for that breach. See Musico v. Champion Credit Corp., 764 F.2d 102, 112-13 (2d Cir. 1985). Therefore, Capolino is liable for the disgorgement of all compensation paid to Cortapasso, a faithless agent.

 3. DePrima's Salary. The Superintendent seeks to recover the salary of John DePrima, Cortapasso's deputy at the Bureau. While employed at the Bureau, DePrima was on the payroll of Advantage Protection, one of Capolino's companies. (See PX 149, 172) We find this to have been a "no show" job and, in essence, a payoff. We hold Capolino liable for the salary paid to DePrima by the Bureau during the period of his dishonesty on the theory that Capolino participated in DePrima's breach of his fiduciary duty to the Bureau. We find this period began on the earliest date that DePrima was on Capolino's payroll, June 21, 1987 (see PX 149), and ended when Cortapasso left the Bureau under a cloud, which was in July 1987.

 We find the salary paid to DePrima during this period to have been $ 7,587. (See PX 40) We therefore hold that the Superintendent is liable to recover $ 7,587, before trebling, from Capolino.

 4. State Court Attorney's Fees. When the Liquidation Bureau stopped payments on various contracts and leases to Capolino entities in mid to late 1987, the Capolino entities sued the Superintendent in six State court actions. (PTO B-70 through 75) The Superintendent spent $ 593,972 defending against the Capolino suits. The general rule is that attorney's fees are not recoverable as damages in the absence of a contractual or statutory provision. Coopers & Lybrand v. Levitt, 52 A.D.2d 493, 496, 384 N.Y.S.2d 804, 806 (1st Dep't 1976). As there is no such provision here, the Superintendent is not entitled to recover from Capolino the cost of defending these suits.

 Payments to Capolino entities. The Superintendent seeks to recover from Capolino the gross amounts paid to Capolino entities by the Bureau in transactions tainted by corruption. Under a well-established New York rule, a public entity is entitled to recover from a vendor the full amount paid on an illegal municipal contract without regard to the value of the goods or services provided if the vendor has been paid. If the vendor has not been paid, it is not entitled to any payment on the contract. S.T. Grand, Inc. v. City of New York, 32 N.Y.2d 300, 305, 344 N.Y.S.2d 938, 942, 298 N.E.2d 105 (1973); Gerzof v. Sweeney, 22 N.Y.2d 297, 304-05, 292 N.Y.S.2d 640, 644, 239 N.E.2d 521 (1968). Based on this strict forfeiture principle, Capolino and TNC are liable to plaintiff for the full amounts paid on its corrupt contracts with the Liquidation Bureau.

 (a) Brooklyn warehouse lease. Capolino is liable for the full amount, $ 910,833, paid by the Bureau on the Brooklyn warehouse lease. (See PX 60, 57, 54)

 (b) Queens warehouse lease. The rent paid by the Bureau for the Queen warehouse was $ 683,438. (See PX 89, 85) We find Capolino liable for the full amount.

 (c) Operating the elevator and opening and closing the Brooklyn warehouse. According to invoices submitted by the Superintendent, the Bureau paid $ 101,872 to the Capolino entities for opening and closing the Brooklyn warehouse, operating the elevator, answering the telephones and accepting deliveries. (See PX 66) We find Capolino liable for $ 101,972, the full amount of the costs of these services.

 (d) Electrical and shelving work at Brooklyn warehouse. The Superintendent has submitted invoices for electrical and shelving work performed at the Brooklyn warehouse totalling $ 271,337. (PX 75, 104) We find Capolino liable for the full amount paid by the Bureau for this work.

 (e) Security guards. The Superintendent paid a total of $ 652,347 for security guards provided to the Bureau by Advantage Protection, a Capolino company. (See PX 143 through 148, 163) Capolino is liable for the full amount of these services.

 (f) Security equipment. The Bureau purchased security equipment from Advantage Security and Advantage Protection for $ 184,205. (PX 111, 112) We find Capolino liable for the full amount, $ 184,205.

 (g) Trucking. The Superintendent has submitted invoices for trucking services submitted by TNC to the Bureau (PX 99) as well as payment checks from the Bureau to TNC. (PX 173) The Bureau paid TNC a total of $ 357,531 for trucking services. Accordingly, we find Capolino and TNC jointly and severally liable for $ 357,531, the full cost of these services.

 (h) Cleaning services. The Bureau paid $ 89,242 to Capolino entities for cleaning services. (See PX 20, 25 30, 31, 32) Again, we find Capolino liable for the full amount.

 Summary

 In sum, the Superintendent is entitled to recover from Capolino alone $ 3,544,093, trebled, and $ 242,739 which is not subject to trebling, plus an additional $ 357,531, before trebling, from Capolino and TNC, jointly and severally. The Clerk therefore will enter judgment in favor of plaintiff and against Capolino in the amount of $ 10,875,018 and against Capolino and T.N. Capolino Trucking Corp., jointly and severally, in the total amount of $ 1,072,593.

 The foregoing, together with our prior opinion, constitutes our findings of fact and conclusions of law. This concludes all proceedings against Capolino and T.N. Capolino Trucking. Therefore, we hold that there is no just cause for delay and direct the Clerk to enter final judgment pursuant to Fed.R.Civ.P. 54(b).

 SO ORDERED.

 Dated: New York, New York

 April 4, 1995

 Lewis A. Kaplan

 United States District Judge

19950404

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