Colella v. The Republic of Argentina

Background

The memorandum and order addresses three related actions:

- In the Colella case, Michele Colella and Denise Dussault claimed ownership of $3.7 million of one Argentine bond and $850,000 of another. In 2006, the court entered a judgment for them for $6,787,965.28. - In the Rigueiro case, Colella and Dussault, with others, claimed co-ownership of $1.3 million of the same bond. The court later entered an amended judgment in that action. - In the Forgione case, a plaintiff identified as Antonio Forgione claimed ownership of $1.3 million of the bond. No judgment had been entered for Forgione.

The cases concerned the plaintiffs’ purported ownership of bond ISIN US040114AN02 and related bonds. In 2016, Colella and Dussault also entered a settlement agreement with Argentina under which they would receive $7,610,658 after delivering documents showing ownership of the bonds. They did not produce documents that satisfied Argentina, and they gave different explanations for the delay.

Argentina’s Motion

Argentina moved to dismiss the claims in all three actions and to vacate the judgments in the Colella and Rigueiro cases. It relied primarily on statements from Banca di Credito Cooperativo Terra di Lavoro and UniCredit S.p.A. stating that bank statements submitted by the plaintiffs were not authentic. Argentina also pointed to discrepancies in another BCC-Lavoro statement, the plaintiffs’ earlier objections about their bond documentation, their changing explanations concerning the settlement, and evidence that a bank statement submitted in the Forgione case had been created by altering Colella and Dussault’s statements.

The plaintiffs opposed the motion. They challenged the statements from BCC-Lavoro and UniCredit, submitted additional documents, filed a police complaint against a BCC-Lavoro official, and argued that the bank’s statement was unreliable. They also maintained that they still held the bonds involved in the Rigueiro case.

Fraud on the Court

The court held that the BCC-Lavoro declaration and UniCredit letter established by clear and convincing evidence that the plaintiffs had submitted fraudulent documents to the court. It accepted the BCC-Lavoro declaration because the plaintiffs had not provided evidence that the bank had withdrawn or disclaimed it. It likewise accepted UniCredit’s statement that the submitted documents did not conform to the bank’s standards, were not in its records, and had not been issued in Colella’s name.

The court found that the second BCC-Lavoro statement also supported its finding of misconduct because of spelling, formatting, spacing, and page-numbering inconsistencies. It further found that the plaintiffs’ earlier submission of possibly fraudulent documents, their changing explanations for failing to complete the settlement, and the fraudulent statements submitted in the Forgione case supported a broader pattern of misconduct.

The court concluded that the plaintiffs had committed fraud on the court by submitting false documents and making other untruthful statements. It found that the conduct was intentional and in bad faith, prejudiced Argentina, was not corrected after the plaintiffs were confronted with contrary evidence, and was part of a repeated pattern. The court determined that vacating the judgments and dismissing the claims were appropriate sanctions under Federal Rule of Civil Procedure 60(b)(6) and the court’s inherent authority.

Rigueiro Case

The court rejected the argument that the Rigueiro claims should survive because Argentina allegedly acknowledged that Colella still held those bonds. It reasoned that the finding of fraud required a complete denial of relief, that the fraud in the Colella case disrupted the Rigueiro case, and that allowing the Rigueiro claims to continue would not adequately punish or deter the misconduct. The court also considered the similarity between documents in the Rigueiro and Forgione cases.

Forgione Case

The court dismissed the Forgione case under Federal Rule of Civil Procedure 41(b) for failure to prosecute. It found that Forgione had not been heard from since 2011, had received notice that the case could be dismissed, and had caused substantial delay. The court found that Argentina was prejudiced by the delay, that clearing the case from the court’s calendar outweighed Forgione’s interest in continuing it, and that lesser sanctions would not likely be effective. Because the court dismissed the Forgione case for failure to prosecute, it did not decide Argentina’s fraud arguments concerning that case.

Disposition

Judge Loretta A. Preska granted Argentina’s motion in full. In the Colella case, she vacated the judgment and dismissed Colella and Dussault’s claims with prejudice. In the Rigueiro case, she vacated the amended judgment and dismissed Colella and Dussault’s claims with prejudice. In the Forgione case, she dismissed all claims with prejudice for failure to prosecute. The clerk was directed to close all three actions, and pending motions were denied as moot.