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Monteleone v. Leverage Group

June 16, 2009

FRANCES MONTELEONE ET AL. PLAINTIFFS,
v.
THE LEVERAGE GROUP, LEVERAGE OPTION MANAGEMENT CO., INC., LEVERAGE MANAGEMENT LLC, NORTH AMERICAN FINANCIAL, PHILIP BARRY LLC, PHILIP BARRY, HK HOLDINGS, LLC, AND JOSEPH'S DEVELOPMENT CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Sifton, Senior Judge

MEMORANDUM OPINION AND ORDER

Various groups of plaintiffs,*fn1 including the Del Monaco plaintiffs, commenced actions against defendants the Leverage Group, Leverage Option Management Co., Inc., Leverage Management, LLC, North American Financial, Philip Barry ("Barry"), and Philip Barry, LLC. These cases were consolidated for pretrial purposes on November 17, 2008. On December 24, 2008, all plaintiffs filed an Amended Consolidated Complaint, which included the following additional defendants: Saint Joseph's Development Corporation and HK Holdings, LLC. The Amended Consolidated Complaint asserted RICO, fraud, conversion, misrepresentation, and breach of contract claims. Now before the court are a motion for partial summary judgment on damages against Philip Barry by plaintiffs Karamchad Balkaran, Keith Pennington, and the Estate of Joseph Fontana against defendant Philip Barry only, and motions to amend the complaint and for partial summary judgment on liability and summary judgment on damages by John Marini, Anna Marini (the "Marinis"). The aforementioned plaintiffs are all part of the Del Monaco plaintiffs' group. For the reasons stated below, the motions are granted in part and denied in part. BACKGROUND

Familiarity with the procedural history, parties, investment scheme, and prior summary judgment motions made in this case is assumed.*fn2

On January 29, 2009, I granted the Monteleone, Barglow, Gambello, Greenberger, Bianco, and Bray plaintiffs' motions for summary judgment. Pursuant to my consolidation order, these six motions for summary judgment were treated as having been filed on behalf of all plaintiffs. Karamchad Balkaran, Keith Pennington, and the Estate of Joseph Fontana, along with other Del Monaco plaintiffs, submitted affidavits indicating that their exposure to defendants' investment scheme mirrored that of the Monteleone, Barglow, Bianco, Gambello, Greenberger, and Bray plaintiffs. On February 6, 2009, I granted summary judgment as to liability to the Del Monaco and Delia plaintiffs. However, I denied summary judgment as to damages to all Del Monaco plaintiffs on the ground that they had submitted insufficient proofs to permit the calculation of damages.

At the same time as these proceedings were occurring in the District Court, a bankruptcy proceeding filed by Philip Barry on October 31, 2008 was taking place in the Eastern District of New York Bankruptcy Court. On January 23, 2009, several plaintiffs from the various plaintiff groups, including Karamchad Balkaran, Keith Pennington, and the Estate of Joseph Fontana, obtained relief from the automatic stay put in place by the bankruptcy court in favor of Barry,*fn3 which enabled them to proceed against Barry in the District Court. However, Judge Milton ordered that any collection efforts of the creditors for whose benefit the stay was lifted against Barry and his assets must occur in the Bankruptcy Court.

At the time Bankruptcy Court Judge Milton lifted the stay on actions against Barry, no stay was in place in favor of companies associated with Barry, as none of those companies had declared bankruptcy. On March 5, 2009, upon petition of the Trustee in the Bankruptcy Court, Judge Milton extended the automatic stay in place over Philip Barry, individual, to cover all companies controlled by him.*fn4 The Trustee appointed by Judge Milton to marshal and manage the debtor's assets stated in a letter to the court of April 7, 2009 that "the automatic stay is indefinitely applicable to stay any actions taken against all of the Debtor's Affiliated Entities," with no exception listed for those in whose favor the stay had previously been lifted (emphasis added).

On April 14, 2009, the Marinis filed a motion to amend the consolidated complaint to include them as plaintiffs and for summary judgment. In their papers, the Marinis included an affidavit attesting to the fact that they were subject to the same fraudulent scheme alleged by all other plaintiffs to this action.*fn5 On April 28, 2009, I denied the motion on the ground that the Marinis had not been granted relief from the stay of proceedings against Philip Barry and companies controlled by him put in place by the bankruptcy court, and therefor they could not proceed in any action against defendants. On June 4, 2009, Judge Milton of the bankruptcy court extended to the Marinis the relief from the automatic stay previously granted to other plaintiffs as to Philip Barry.

Plaintiffs Karamchad Balkaran, Keith Pennington, and the Estate of Joseph Fontana have now submitted affidavits in support of their application for summary judgment on damages. Plaintiffs John and Anna Marini informed the court that the bankruptcy court had granted them relief from the stay of proceedings against Philip Barry, and now seek consideration of their previously filed motions to amend the complaint to permit them to join the action and for summary judgment in their favor.

DISCUSSION

I. Amendment of Complaint

The decision whether to permit or disallow amendment of a complaint is within the district court's discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 28 L.Ed. 2d 77, 91 S.Ct. 795 (1971). Rule 15(a) of the Federal Rules of Civil Procedure instructs courts that leave to amend should be "freely given when justice so requires." Fed. R. Civ. P. 15(a). In this case, the Marinis seek to amend the consolidated complaint so that they may become parties to this action. The claims made by the Marini plaintiffs are identical to those of the existing plaintiffs, and the facts asserted by the Marini plaintiffs are substantially similar. There is no indication that the late assertion of their claims would unfairly prejudice the defendants. Given the liberality in amending pleadings and the absence of any claim of bad faith or undue delay, the motion by the Marini plaintiffs to amend the complaint to join the action is granted.

II. Liability

For the reasons stated in my January 29, 2009 opinion, I grant partial summary judgment to John and Anna Marini on the issue of liability, limited to the claims stated in the previous ruling. Pursuant to the order of the Bankruptcy Court of March 5, 2009 extending the automatic stay over all companies controlled by Philip Barry, which makes no exceptions for claimants who were granted relief from the ...


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