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LIBUTTI v. UNITED STATES

November 25, 1997

EDITH LIBUTTI, d/b/a LION CREST STABLE, a sole proprietorship, Plaintiff, against UNITED STATES OF AMERICA, Defendant.


The opinion of the court was delivered by: MCAVOY

 I. BACKGROUND

 A. Introduction

 Presently before the Court are motions by both the plaintiff Edith Libutti and the defendant United States of America. First, plaintiff moves, pursuant to Rule 59(a)(2) of the Federal Rules of Civil Procedure, for a new trial and amendment of judgment. Specifically, plaintiff requests that the Court vacate the judgment of this Court dated July 31, 1997, admit additional testimony from Robert Libutti, amend the Court's findings of fact and conclusions of law and enter a new judgment.

 Second, the government moves for limited discovery on the issue of whether this Court has personal jurisdiction over the Devil His Due Syndicate, Margaux Stallions, Inc. and other members of the Syndicate. Additionally, the government seeks to alter or amend portions of the Court's Memorandum-Decision & Order of August 4, 1997, for clarification of aspects of that Order, and for an injunction pending determination of this motion and any appeal that may be taken.

 For the reasons that follow, plaintiff's motion for a new trial and amendment of judgment is DENIED. Additionally, the government's motion for limited discovery on the issue of whether the Court has personal jurisdiction over Devil His Due Syndicate members is DENIED. Lastly, the government's motion to alter or amend the Court's Memorandum-Decision & Order of August 4, 1997 is DENIED, and the government's motion for an injunction pending appeal is DENIED.

 B. Facts

 The ownership of the racehorse Devil His Due has long been disputed by the plaintiff and the government. In Libutti v. United States, 894 F. Supp. 589 (N.D.N.Y. 1995), this Court held that the Internal Revenue Service (IRS) wrongfully levied upon Devil His Due because the government did not prove that the plaintiff owned Devil His Due as a nominee for her father, Robert Libutti ("Robert"). In reaching this decision, the Court refused to infer from Robert's (a non-party witness) assertion of the privilege against self-incrimination that he owned Devil His Due rather than the plaintiff.

 The government appealed the Court's decision. While the appeal was pending, plaintiff entered into a Syndicate Agreement with Margaux Stallions, Inc. ("Margaux"), *fn1" a Kentucky corporation that manages thoroughbred stallions. Pursuant to the Syndicate Agreement, plaintiff converted her ownership interest of Devil His Due into fifty fractional interests or shares. Plaintiff then sold twenty-five shares to Margaux for $ 1,224,000. Margaux, in turn, sold twelve of its twenty-five shares to various third parties.

 Thereafter, the Second Circuit decided the appeal, holding that adverse inferences may be drawn from a non-party's refusal to answer questions. Libutti v. United States, 107 F.3d 110, 124 (2d Cir. 1997). Accordingly, the Second Circuit remanded the case for this Court to determine whether adverse inferences should be drawn from Robert's refusal to testify. Id.

 On remand, this Court inferred that Robert was the de facto owner of Devil His Due, and that the plaintiff held ownership in the stable and horse as Robert's nominee. Libutti v. United States, 968 F. Supp. 71, 77 (N.D.N.Y. 1997). Accordingly, this Court lifted the injunction barring the government from enforcing the IRS levy against Devil His Due.

 Subsequently, the government sought to regain the benefits of owning Devil His Due by Order to Show Cause requesting, inter alia, to escrow all proceeds of any further transfer or earnings received or realized by plaintiff or any person or entity having an interest in Devil His Due, including any of plaintiff's successors in interest after August 3, 1995. The government also sought an accounting by plaintiff and her successors in interest of all proceeds relating to Devil His Due since August 3, 1995. In a Memorandum-Decision & Order filed August 4, 1997, this Court held that the government's recovery by restitution from the plaintiff would be limited to the plaintiff's interest in Devil His Due after July 2, 1997, plus any sums derived from that interest after July 2, 1997. Libutti v. United States, 1997 U.S. Dist. LEXIS 12326, 1997 WL 570493, at *3-5 (N.D.N.Y. Aug. 4, 1997).

 II. DISCUSSION

 A. Plaintiff's Motion for a New Trial or ...


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