Schwartz v. Morgenthau — 7 N.Y.3d 427

Majority

p. 427

[857 NE2d 56, 823 NYS2d 761]

In the Matter of Lawrence Schwartz, Appellant, v Robert M. Morgenthau, as District Attorney of the County of New York, Respondent.

Argued September 12, 2006;

decided October 17, 2006

p. 428

POINTS OF COUNSEL

Stein Riso Mantel, LLP, New York City (Gerard A. Riso, Roger K. Marion and. George L. Schwab of counsel), for appellant.

I. The Appellate Division incorrectly found that appellant was guilty of laches. (Matter of Fischer v Roche, 81 AD2d 541 , 54 NY2d 962 ; 90-92 Wadsworth Ave. Tenants Assn. v City of N.Y. Dept. of Hous. Preserv. & Dev., 227 AD2d 331 ; Matter of Rapess v Ortiz, 99 AD2d 413 ; Local 851 of Intl. Bhd. of Teamsters v State of New York, 7 Misc 3d 1013 [A], 2005 NY Slip Op 50584 [U]; Matter of Barabash, 31 NY2d 76 ; General Elec. Capital Corp. v Pacheco & Lugo, 300 AD2d 185 ; Matter of Sori-Goalya Realty v New York City Loft Bd., 284 AD2d 137 ; Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801 ; Galyn v Schwartz, 56 NY2d 969 ; Sorrentino v Mierzwa, 25 NY2d 59 .) II. The Appellate Division incorrectly found that appellant lacked standing to bring the petition. (Matter of District Attorney of Suffolk County, 58 NY2d 436 ; Chester Civic Improvement Assn. v New York City Tr. Auth., 122 AD2d 715 ; Matter of Fritz v Huntington Hosp., 39 NY2d 339 ; Matter of Coastal Oil N.Y. v Newton, 231 AD2d 55 ; Hammer v American Kennel Club, 304 AD2d 74 ; New York County Lawyers’ Assn. v Pataki, 188 Misc 2d 776 ; People v Davis, 94 AD2d 610 .) III. Respondent should be compelled to apply the $250,000 payment pursuant to the dictates of CPLR 1349. (Council of Regulated Adult Liq. Licensees v City of N.Y. Police Dept., 300 AD2d 17 ; Matter of Davila v New York City Hous. Auth., 190 AD2d 511 ; Briedis v Village of Tuxedo Park, 156 AD2d 744 ; Matter of Bayswater Health Related Facility v New York State Dept. of Health, 57 AD2d 996 ; Matter of Hurst v Board of Educ. for Ithaca City

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School Dist., 242 AD2d 130 ; Matter of Clark v Board of Educ. for Kingston City School Dist., 236 AD2d 709 , 90 NY2d 662 .)

Robert M. Morgenthau, District Attorney, New York City (Michael S. Morgan and Mark Dwyer of counsel), respondent pro se.

I. The Appellate Division correctly found that petitioner’s CPLR article 78 petition was untimely. (Matter of Bottom v Goord, 96 NY2d 870 ; Austin v Board of Higher Educ. of City of N.Y., 5 NY2d 430 ; Matter of Waterside Assoc. v New York State Dept. of Envtl. Conservation, 72 NY2d 1009 ; Matter of De Milio v Borghard, 55 NY2d 216 ; Matter of Rapess v Ortiz, 99 AD2d 413 ; Matter of Central School Dist. No. 2 v New York State Teachers’ Retirement Sys., 23 NY2d 213 ; Matter of Blue v Commissioner of Social Servs., 306 AD2d 527 ; Matter of Thomas v Stone, 284 AD2d 627 ; Matter of Densmore v Altmar-Parish-Williamstown Cent. School Dist., 265 AD2d 838 ; Matter of Devens v Gokey, 12 AD2d 135 .) II. The Appellate Division correctly found that petitioner lacks standing to challenge District Attorney Morgenthau’s alleged noncompliance with his obligations under the state forfeiture statute. (Matter of Schulz v State of New York, 81 NY2d 336 ; Merrill v Albany Med. Ctr. Hosp., 71 NY2d 990 ; Matter of Attorney Gen. of State of N.Y. v Firetog, 94 NY2d 477 ; People v Davis, 94 AD2d 610 ; People v Selikoff, 35 NY2d 227 ; People v McConnell, 49 NY2d 340 ; Matter of Farrow v Hynes, 259 AD2d 545 ; People v Gasbarro, 114 AD2d 594 , 67 NY2d 1002 ; People v Danny G., 61 NY2d 169 ; Matter of Dairylea Coop. v Walkley, 38 NY2d 6 .) III. Because District Attorney Morgenthau fully complied with his obligations under the state forfeiture statute, petitioner is not entitled to mandamus relief. (Matter of Harper v Angiolillo, 89 NY2d 761 ; Klostermann v Cuomo, 61 NY2d 525 ; Matter of Legal Aid Socy. of Sullivan County v Scheinman, 53 NY2d 12 ; Matter of Brusco v Braun, 84 NY2d 674 ; Matter of Altamore v Barrios-Paoli, 90 NY2d 378 ; Matter of Morgenthau v Gold, 69 NY2d 735 ; Morgenthau v Citisource, Inc., 68 NY2d 211 ; Matter of Nassau BO-CES Cent. Council of Teachers v Board of Coop. Educ. Servs. of Nassau County, 63 NY2d 100 ; Matter of Williams v Cornelius, 76 NY2d 542 .)

OPINION OF THE COURT

On May 15, 2000, petitioner Lawrence Schwartz pleaded guilty in the United States District Court for the Southern District of New York to a two-count federal information charg

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ing insider trading. On June 9, 2000, he was sentenced to 18 months in prison, followed by supervised release for a term of three years. As a condition of the supervised release, petitioner was required to pay $786,402 in restitution “no later than 90 days prior to the end of [his] supervised release.”

Shortly thereafter, on June 16, 2000, petitioner pleaded guilty in Supreme Court to one count of scheme to defraud in the first degree (Penal Law § 190.65) in satisfaction of state charges pending against him in New York County. He admitted that he had “schemed and conspired” with his son and certain rival contractors and others to rig bids, thereby inflating prices of construction-related contracts at various residential and commercial buildings in the New York metropolitan area.

Petitioner was sentenced on August 29, 2000, to an indeterminate prison term of 1 to 3 years, to be served concurrently with his federal sentence. He agreed to pay $750,000 in restitution and $250,000 in lieu of forfeiture, the former payable in installments and the latter payable in full on or before the date of sentence. The forfeiture stipulation specified that the $250,000 “shall be forfeited pursuant to CPL § 220.50 (6) and, in accordance therewith, distributed pursuant to CPLR § 1349.”

On May 6, 2003, while petitioner was still under the supervision of the New York State Division of Parole and on federal supervised release, his attorney wrote to the District Attorney, seeking information as to how petitioner’s restitution and forfeiture payments had been disbursed. Noting that petitioner still owed more than $250,000 in federal restitution, his attorney asked the District Attorney to verify that the $250,000 state forfeiture payment would be applied to the federal restitution obligation “as required by the order of priority set forth in CPLR § 1349.” As relevant, this provision states at subdivision (2) (c) that

“moneys realized as a consequence of any forfeiture pursuant to this article shall be apportioned and paid in the following descending order of priority:

“(c) Amounts ordered to be paid by the defendant in any other action or proceeding as restitution, reparations or damages to a victim of any crime committed by the defendant even though such crime did not constitute the basis for forfeiture under this article, to the extent that such amounts remain unpaid.”

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On July 24, 2003, the District Attorney responded, informing petitioner that $80,000 of the forfeited amount had been sent to the state substance abuse service fund (see CPLR 1349 [2] [g]), with the remainder retained by the District Attorney in his capacity as claiming agent and claiming authority. The District Attorney refused to apply any portion of the forfeited moneys to satisfy petitioner’s federal restitution debt, noting that CPLR 1349 (2) (c) “was clearly designed to protect victims of crimes— not the defendants who commit them.” Further, if petitioner’s “assets were totally depleted (an allegation that has not been made) and he were to default upon his agreed upon payments, then the unpaid victims may have standing to claim money from the District Attorney’s Office.”

On September 24, 2003, petitioner commenced a CPLR article 78 proceeding in the nature of mandamus, seeking to compel the District Attorney to apply the $250,000 forfeiture payment, “together with appropriate interest,” to his federal restitution debt. Petitioner claimed that the District Attorney had violated CPLR 1349 (2) (c) when “[i]nstead of paying the money to the benefit of the [federal] victims,” he “retained $170,000 for [his] own purposes and donated $80,000 to a substance abuse program.” On October 8, 2003, the District Attorney moved to dismiss the petition on the grounds that it was untimely and petitioner lacked standing, and thus had failed to establish a clear legal right to the requested relief. In the event the petition was not dismissed, the District Attorney requested a reasonable time to file an answer as CPLR 7804 (f) requires.

On July 8, 2004, Supreme Court denied the motion to dismiss and granted the petition, first rejecting the District Attorney’s statute-of-limitations and laches defenses. The court also concluded that petitioner had standing because

“a plain reading of CPLR § 1349 shows that the legislature, in establishing the order of priority set forth in the statute, intended not only to benefit the victims of crimes, but ‘arguably’ to provide an indirect benefit to the perpetrators of crime by allowing funds forfeited by them to be applied to other unrelated crimes that they committed.”

Supreme Court held that “[t]hrough [his] failure to apply the funds to the restitution debt remaining in the Federal Case, . . . [the District Attorney] failed to comply with the order of priority set forth in CPLR § 1349 and adopted by the Stipula

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tion.” The court ordered the District Attorney to apply the full $250,000 forfeiture payment to petitioner’s federal restitution obligation.

The Appellate Division subsequently reversed Supreme Court’s judgment on the law, granted the District Attorney’s motion, denied the petition, and dismissed the proceeding. The Appellate Division concluded that the petition was untimely, and that petitioner lacked standing. We subsequently granted petitioner permission to appeal, and now affirm the Appellate Division on the ground that petitioner lacks standing to press a claim for violation of CPLR 1349 in this CPLR article 78 proceeding.

“[T]he contemporary rule is that a party has standing to enforce a statutory right if its abuse will cause him injury and it may fall within the ‘zone of interest’ protected by the legislation” (Matter of District Attorney of Suffolk County, 58 NY2d 436 , 442 [1983]). “Simply stated, a party must show that the in-fact injury of which it complains (its aggrievement, or the adverse effect upon it) falls within the ‘zone of interests,’ or concerns, sought to be promoted or protected by the statutory provision under which the agency has acted” (Society of Plastics Indus. v County of Suffolk, 77 NY2d 761 , 773 [1991]).

Here, petitioner’s purported injury — the windfall he failed to realize when the District Attorney refused to apply the state forfeiture to satisfy petitioner’s federal restitution obligations— does not fall within the zone of interests protected by CPLR 1349. The Legislature restructured forfeiture procedures in 1984 to create a “forfeiture statute [that] can be used by law enforcement agencies throughout the state as an effective tool to take the profit out of crime” (Governor’s Mem approving L 1984, ch 669, Bill Jacket, at 7). In 1990, the Legislature strengthened forfeiture yet again to allow state and local agencies to receive a share of forfeited property so as to recover some of their expenses in investigating and preparing forfeiture actions (see Governor’s Program Bill Mem, Bill Jacket, L 1990, ch 655). Legislation does not “take the profit out of crime” or encourage district attorneys to pursue forfeiture by empowering a criminal defendant like petitioner to direct forfeited moneys so as to suit his own best interests.

Further, CPLR 1349 (2) (c) requires the claiming authority to apply forfeited moneys to restitution debts “to the extent that such amounts remain unpaid.” Thus, a criminal defendant must exhaust his resources before forfeited moneys may be tapped to

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pay off his restitution debts. To interpret the statute otherwise, as petitioner urges, would risk rendering forfeiture meaningless. Here, petitioner has not even alleged that he lacks the funds to pay his federal restitution obligations, much less proven this. As the District Attorney intimated in his letter to petitioner, any unpaid victims of petitioner’s other crimes, as the intended beneficiaries of CPLR 1349 (2) (c), have standing to enforce the statute by making a claim against the District Attorney for the forfeited moneys. Petitioner, however, does not. He has standing to enforce his plea agreement, but in this case the plea agreement says no more than that the District Attorney will comply with CPLR 1349. The plea agreement does not compel the District Attorney to use petitioner’s state forfeiture to satisfy his federal restitution obligations. In short, petitioner may not bootstrap the reference to CPLR 1349 in his plea agreement into standing to enforce this statute.

As a final matter, in this case the District Attorney seems to have committed forfeited moneys to lower-priority purposes before he had any reason to know whether petitioner had sufficient resources to pay federal claimants. While this course of action appears somewhat risky, here we have no way of knowing why the District Attorney proceeded as he did because an answer was never filed.

The order of the Appellate Division should be affirmed, without costs.

Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo and R.S. Smith concur; Judge Pigott taking no part.

Order affirmed, without costs.

Cases cited

Fischer v. Roche 54 NY2d 962 N.Y. 1981-10-27 p. 428
90-92 Wadsworth Avenue Tenants Ass'n v. City of New York Department of Housing Preservation & Development 227 AD2d 331 N.Y. App. Div. 1996-05-30 p. 428
Rapess v. Ortiz 99 AD2d 413 N.Y. App. Div. 1984-01-05 p. 428, p. 429
In re the Estate of Barabash 31 NY2d 76 N.Y. 1972-07-06 p. 428
General Electric Capital Corp. v. Pacheco & Lugo, P.L.L.C. 300 AD2d 185 N.Y. App. Div. 2002-12-24 p. 428
Saratoga County Chamber of Commerce, Inc. v. Pataki 100 NY2d 801 N.Y. 2003-06-12 p. 428
Galyn v. Schwartz 56 NY2d 969 N.Y. 1982-06-17 p. 428
Sorrentino v. Mierzwa 25 NY2d 59 N.Y. 1969-07-01 p. 428
In re District Attorney 58 NY2d 436 N.Y. 1983-03-31 at 442 p. 428, p. 432
Chester Civic Improvement Ass'n v. New York City Transit Authority 122 AD2d 715 N.Y. App. Div. 1986-08-14 p. 428
Fritz v. Huntington Hospital 39 NY2d 339 N.Y. 1976-04-08 p. 428
Coastal Oil New York, Inc. v. Newton 231 AD2d 55 N.Y. App. Div. 1997-07-17 p. 428
Hammer v. American Kennel Club 304 AD2d 74 N.Y. App. Div. 2003-02-27 p. 428
New York County Lawyers' Ass'n v. Pataki 188 Misc 2d 776 N.Y. Sup. Ct. 2001-01-16 p. 428
People v. Davis 94 AD2d 610 N.Y. App. Div. 1983-05-05 p. 428, p. 429
Council of Regulated Adult Liquor Licensees v. City of New York Police Department 300 AD2d 17 N.Y. App. Div. 2002-12-03 p. 428
Davila v. New York City Housing Authority 190 AD2d 511 N.Y. App. Div. 1993-02-02 p. 428
Briedis v. Village of Tuxedo Park 156 AD2d 744 N.Y. App. Div. 1989-12-29 p. 428
Bayswater Health Related Facility v. New York State Department of Health 57 AD2d 996 N.Y. App. Div. 1977-05-12 p. 428
Hurst v. Board of Education for the Ithaca City School District 242 AD2d 130 N.Y. App. Div. 1998-05-14 p. 429
Clark v. Board of Education for the Kingston City School District 236 AD2d 709 N.Y. App. Div. 1997-02-13 p. 429
Scanlan v. Buffalo Public School System 90 NY2d 662 N.Y. 1997-10-23 p. 429
Bottom v. Goord 96 NY2d 870 N.Y. 2001-05-08 p. 429
Austin v. Board of Higher Education 5 NY2d 430 N.Y. 1969-04-09 p. 429
Waterside Associates v. New York State Department of Environmental Conservation 72 NY2d 1009 N.Y. 1988-10-20 p. 429
De Milio v. Borghard 55 NY2d 216 N.Y. 1982-02-23 p. 429
Central School District No. 2 v. New York State Teacher's Retirement System 23 NY2d 213 N.Y. 1968-11-21 p. 429
Blue v. Commissioner of Social Services 306 AD2d 527 N.Y. App. Div. 2003-06-30 p. 429
Thomas v. Stone 284 AD2d 627 N.Y. App. Div. 2001-06-07 p. 429
Devens v. Gokey 12 AD2d 135 N.Y. App. Div. 1961-01-05 p. 429
Schulz v. State 81 NY2d 336 N.Y. 1993-05-11 p. 429
Merrill v. Albany Medical Center Hospital 71 NY2d 990 N.Y. 1988-05-03 p. 429
Attorney General v. Firetog 94 NY2d 477 N.Y. 2000-02-24 p. 429
People v. Selikoff 35 NY2d 227 N.Y. 1974-10-07 p. 429
People v. McConnell 49 NY2d 340 N.Y. 1980-02-20 p. 429
Farrow v. Hynes 259 AD2d 545 N.Y. App. Div. 1999-03-08 p. 429
People v. Gasbarro 114 AD2d 594 N.Y. App. Div. 1985-10-17 p. 429
People v. Gasbarro 67 NY2d 1002 N.Y. 1986-05-08 p. 429
People v. Danny G. 61 NY2d 169 N.Y. 1984-02-21 p. 429
Dairylea Cooperative, Inc. v. Walkley 38 NY2d 6 N.Y. 1975-10-28 p. 429
Harper v. Angiolillo 89 NY2d 761 N.Y. 1997-05-06 p. 429
Klostermann v. Cuomo 61 NY2d 525 N.Y. 1984-03-27 p. 429
Legal Aid Society of Sullivan County, Inc. v. Scheinman 53 NY2d 12 N.Y. 1981-05-12 p. 429
Brusco v. Braun 84 NY2d 674 N.Y. 1994-12-22 p. 429
Altamore v. Barrios-Paoli 90 NY2d 378 N.Y. 1997-06-12 p. 429
Morgenthau v. Gold 69 NY2d 735 N.Y. 1987-01-20 p. 429
Morgenthau v. Citisource, Inc. 68 NY2d 211 N.Y. 1986-10-16 p. 429
Nassau Boces Central Council of Teachers v. Board of Cooperative Educational Services 63 NY2d 100 N.Y. 1984-09-20 p. 429
Williams v. Cornelius 76 NY2d 542 N.Y. 1990-10-23 p. 429
Society of Plastics Industry, Inc. v. County of Suffolk 77 NY2d 761 N.Y. 1991-05-09 at 773 p. 432