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Lankford v. United States Department of Justice

United States District Court, D. New Mexico

November 17, 2017

DAVID LANKFORD and LEE ANN LANKFORD, Plaintiffs,
v.
UNITED STATES DEPARTMENT OF JUSTICE, Defendant.

          MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND SUA SPONTE DISMISSING PLAINTIFFS' REMAINING CLAIMS

         THIS MATTER comes before the Court upon Defendant's Motion to Dismiss, filed September 28, 2017 (Doc. 11), and Plaintiffs' Motion for Leave to File Sur-reply (Doc. 20), filed November 8, 2017. Having reviewed the parties' pleadings and the applicable law, the Court finds that Defendant's motion is well-taken and, therefore, is granted. Furthermore, the Court sua sponte dismisses Plaintiffs' remaining claims.

         BACKGROUND[1]

         Plaintiffs are suing the Department of Justice for compensatory and punitive damages, alleging that the DOJ denied them their due process rights by allowing corruption or bias in the courts. Plaintiffs also appear to ask this court to review or overturn a summary judgment issued by the bankruptcy court, on the basis of fraud on the court.

         The Vaughan Company, Realtors (“Vaughan Company”) filed a chapter 11 bankruptcy petition on February 22, 2010. On the basis that Vaughan Company was operating a Ponzi scheme, the bankruptcy court entered an order approving the appointment of Judith Wagner as the chapter 11 trustee for the debtor's bankruptcy estate (the “Trustee”).

         The Plaintiffs invested in the Vaughan Company Ponzi scheme, and were “net winners”, meaning they received more money from the scheme than they put in. On February 21, 2012, the Trustee filed an adversary proceeding, seeking the turnover of these net winnings under 11 U.S.C. § 548 and New Mexico state law.

         On May 27, 2014, U.S. Bankruptcy Judge Robert Jacobvitz entered summary judgment against the Plaintiffs and determined that the Trustee was entitled to turnover of a total of $67, 404.39 under 11 U.S.C. § 548(a)(1)(B) and NMSA § 56-10-18(A)(2). This amount was their “net winnings.” Plaintiffs did not appeal.

         Instead, seven months later Plaintiffs filed a motion to vacate the summary judgment under Fed.R.Civ.P. 60(b)(3) and 60(d)(3), arguing that the Trustee committed fraud and fraud on the court by intentionally submitting a “miscalculation” in the complaint of how much they owed. The bankruptcy court denied the motion, pointing out that it did not rely on the miscalculation in the complaint, and that the Trustee had corrected the amount prior to the court ruling on summary judgment. Moreover, the bankruptcy court declined to consider a new argument that the amount subject to turnover should be offset by net losses in her IRA investment account of $4, 127.75.

         Plaintiffs appealed the denial of the motion to vacate to this Court. In both the motion to vacate and the appeal thereto, which was referred to U.S. Magistrate Judge Carmen Garza, Judge Garza addressed Plaintiffs' fraud on the court claims and denied them. On August 25, 2015, Judge Brack issued an order adopting Judge Carmen Garza's recommendation to affirm the bankruptcy court. Plaintiffs did not appeal that decision to the U.S. Court of Appeals for the Tenth Circuit.

         On November 6, 2015, the Plaintiffs filed a complaint in this Court against the Trustee and her attorneys, alleging fraud and attempting to assert criminal charges against the trustee and judicial officers. They also sought to set aside the summary judgment under Fed.R.Civ.P. 60(d)(3) for fraud on the court. The Court dismissed the case under the Barton doctrine and under the doctrine of judicial immunity. This decision was appealed to the Tenth Circuit and the decision was affirmed.

         The Plaintiffs twice moved for permission to sue the Trustee based on alleged misconduct or fraud in the adversary proceeding. The bankruptcy court considered and denied Plaintiffs request as frivolous or futile.

         On April 2, 2017, the Plaintiffs moved to reopen the adversary proceeding and vacate the summary judgments. The bankruptcy court denied the motion to reopen, and further addressed and denied Plaintiffs' claim for fraud on the court. The bankruptcy court considered and denied the theory that the summary judgment should be modified to take into account Ms. Lankford's IRA losses.

         In their complaint, Plaintiffs seek compensatory and punitive damages from the United States Department of Justice for failure to promote justice or protect the Plaintiffs from “cronyism, obstruction of justice, collusion, bias, and corruption” in the courts. Plaintiffs seek damages from the United States for allegedly being denied due process in the courts.

         Plaintiffs argue that the bankruptcy court's summary judgment should be overturned for fraud on the court because (1) the Trustee intentionally miscalculated the net winnings in connection with the summary judgment, (2) the bankruptcy court did not consider Ms. Lankford's IRA losses in calculating the net winnings, (3) the Trustee withheld or fabricated evidence, (4) the Court fabricated documents, and (5) general bias or corruption in not ruling in their favor.

         Defendant filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1), asserting sovereign immunity. In a response, Plaintiffs alleged that sovereign immunity is waived under the Federal Tort Claims Act. Plaintiffs also filed a motion for permission to file a sur-reply, along with the sur-reply. In the sur-reply, Plaintiffs allege that sovereign immunity is waived as to due process violations, but do not point to any explicit statutory waiver of immunity.

         DISCUSSION

         I. The United States is Immune to Plaintiffs' Claim for Damages.

         Defendant argues that claims for compensatory and punitive damages against United States for due process violations should be dismissed, as the United States has not waived immunity.

         A. Standard for dismissal for ...


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