11-3153-cv
Space Hunters v. United States

                             UNITED STATES COURT OF APPEALS
                                 FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 17th day
of October, two thousand twelve.

Present:
         CHESTER J. STRAUB,
         ROBERT D. SACK,
         ROBERT A. KATZMANN,
                     Circuit Judges.
________________________________________________

SPACE HUNTERS, INC., JOHN McDERMOTT,

           Plaintiffs-Appellants,

                  v.                                                   No. 11-3153-cv

UNITED STATES OF AMERICA,

         Defendant-Appellee.
_______________________________________________

For Plaintiffs-Appellants:               JOSEPH CAPOBIANCO (Marc Jarrett Sackin, on the
                                         brief), Reisman Peirez Reisman & Capobianco, LLP,
                                         Garden City, N.Y.

For Defendant-Appellee:                  LARA K. ESHKENAZI (Benjamin H. Torrance, on the
                                         brief), Assistant United States Attorneys, for Preet
                                         Bharara, United States Attorney for the Southern
                                         District of New York, New York, N.Y.
     Appeal from the United States District Court for the Southern District of New York
(McMahon, J.).

       ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court be and hereby is AFFIRMED.

       Plaintiffs-appellants Space Hunters, Inc. (“Space Hunters”) and John McDermott

(“McDermott”) (collectively, the “plaintiffs”) appeal from the May 18, 2011 judgment of the

United States District Court for the Southern District of New York (McMahon, J.), following a

May 17, 2011 Decision and Order granting the government’s motion to dismiss the complaint.

The plaintiffs commenced this action in order to set aside the 2002 judgment awarded against

them in United States v. Space Hunters, Inc., John McDermott, 00 Civ. 1781, (the “Space

Hunters Case”) based on their contention that the judgment was procured by the perjured

testimony of the government’s key witness, Keith Toto. We assume the parties’ familiarity with

the relevant facts, the procedural history, and the issues presented for review.

       We review de novo a district court’s dismissal of a complaint for failure to state a claim

upon which relief can be granted, “accepting all factual allegations in the complaint as true, and

drawing all reasonable inferences in the plaintiff’s favor.” Holmes v. Grubman, 568 F.3d 329,

335 (2d Cir. 2009) (internal quotation marks omitted). “To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks

omitted).

       We first address whether the district court erred in dismissing the plaintiffs’ complaint

for failing to plausibly plead that the government’s attorneys suborned perjury in order to prevail

in the Space Hunters Case. To state a claim for relief under Federal Rule of Civil Procedure


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60(d)(3), a complaint must allege a “‘fraud on the court’” that “seriously affects the integrity of

the normal process of adjudication.” Gleason v. Jandrucko, 860 F.2d 556, 559 (2d Cir. 1988)

(quoting Fed. R. Civ. P. 60(d)(3)). The type of fraud that is sufficient to support an independent

action attacking the finality of a judgment is “narrower in scope than that which is sufficient for

relief” under a timely Rule 60(b) motion, id. at 558, and “embraces only that species of fraud

which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court

so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging

cases,” Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1325 (2d Cir. 1995) (internal quotation

marks omitted). A plaintiff must also show that the Rule 60(d) action is necessary “to prevent a

grave miscarriage of justice.” United States v. Beggerly, 524 U.S. 38, 47 (1998).

       Federal Rule of Civil Procedure 9(b) imposes a heightened standard of pleading for

allegations of fraud, requiring such claims to be “stated with particularity.” Fed. R. Civ. P. 9(b).

To survive a motion to dismiss, a complaint alleging fraud must “allege facts that give rise to a

strong inference of fraudulent intent.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d

Cir. 1994). An inference of fraudulent intent “may be established either (a) by alleging facts to

show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts

that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Id.

“[M]ere general allegations that there was fraud, corruption or conspiracy or characterizations of

acts or conduct in these terms are not enough [to survive a Rule 12(b)(6) motion] no matter how

frequently repeated.” Segal v. Gordon, 467 F.2d 602, 607 (2d Cir. 1972) (internal quotation

marks omitted).

       Having reviewed the allegations in the complaint as well as the documents attached to the

complaint, we cannot conclude that the district court erred in determining that the plaintiffs

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failed to allege facts giving “rise to a strong inference of fraudulent intent.” Shields, 25 F.3d at

1128. The plaintiffs principally allege that the government suborned perjury by instructing its

witness, Keith Toto, to untruthfully testify at trial that he was looking to rent a room instead of

an apartment. Because Space Hunters allegedly only assists customers seeking to rent rooms in

owner-occupied houses, plaintiffs contend that Space Hunters could not be found to have

discriminated against Toto if he was only interested in renting an apartment. Thus, according to

plaintiffs, the government had a motive to suborn perjury because in order to prevail at trial, it

would have to establish that Toto was seeking a room rather than apartment. This argument is

unpersuasive because whether Toto was seeking a room versus an apartment was immaterial to

the government’s case. After all, the evidence adduced at trial established that McDermott

ended Toto’s telephone calls before even speaking to Toto about what kind of dwelling he was

seeking. Indeed, McDermott’s own testimony demonstrated that Space Hunters had a policy and

practice of refusing to provide service to disabled individuals in violation of Section 806 of the

Fair Housing Act. As we observed in rejecting plaintiffs’ direct appeal of the jury verdict,

McDermott testified that “‘no relay calls will ever be taken by my office’” and that he will

“‘never have to change this practice.’” United States v. Space Hunters, 429 F.3d 416, 422 (2d

Cir. 2005) (quoting the record below).

       Plaintiffs have also failed to allege “facts that constitute strong circumstantial evidence of

conscious misbehavior or recklessness.” Shields, 25 F.3d at 1128. Plaintiffs contend that during

the 2002 trial Assistant United States Attorney Sara Shudofsky “intentionally fail[ed] to

differentiate the critical difference . . . between an apartment and a room,” Pls.’ Br. 32, by

ambiguously asking Toto during direct examination whether he was looking “for a place to live,”

App. 71. Plaintiffs further allege that Ms. Shudofsky falsely stated during her opening statement

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that Toto “was interested in finding furnished rooms to live in,” App. 69, and that the

government’s attorneys ambiguously drafted the Space Hunters Case complaint to allege that

Toto contacted Space Hunters “to inquire about rental properties,” id. at 13, in order to suggest

that Toto was looking for a room even though they knew that he was really only looking to rent

an apartment. We cannot conclude that these entirely innocuous incidents constitute strong

circumstantial evidence of conscious misbehavior or recklessness on the part of the government.

       In addition to failing to plausibly allege a fraud on the court, the plaintiffs cannot

demonstrate that their Rule 60(d) action, which seeks to overturn the 2002 judgment, is

necessary “to prevent a grave miscarriage of justice.” Beggerly, 524 U.S. at 47. As this Court

held in ruling against plaintiffs on direct appeal, the trial record against the plaintiffs was “awash

with evidence of egregious and outrageous acts by [plaintiffs] that could support an inference of

the requisite evil motive.” Space Hunters, 429 F.3d at 428 (internal quotation marks omitted).

“McDermott did not simply hang up on relay calls,” but also “used profanity to chase them away

from continuing to call back. He told Toto to ‘eat shit, asshole’ -- not the most judicious of

remarks -- and that Space Hunters does not do business with disabled people.” Id. (internal

quotation marks and citation omitted). McDermott also “told the [United States Department of

Housing and Urban Development] investigator that ‘if a disabled person, a hearing impaired

person would come to [his] office . . . they would not gain entry into the building.’” Id.

(alterations in original). Given that McDermott’s own testimony confirms that Space Hunters

and McDermott engaged in outrageous and illegal conduct, there would be no miscarriage of

justice in allowing the 2002 judgment to stand.

       We now consider whether the district court erred in denying plaintiffs’ request to amend

their complaint. Federal Rule of Civil Procedure 15 provides that “[t]he court should freely give

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leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, “[l]eave to

amend may properly be denied if the amendment would be futile, as when the proposed new

pleading fails to state a claim on which relief can be granted.” Anderson News, L.L.C. v. Am.

Media, Inc., 680 F.3d 162, 185 (2d Cir. 2012) (internal citation omitted).

       To support their argument that plaintiffs could allege additional facts if offered the

opportunity to amend, plaintiffs point to two declarations: a declaration from McDermott (the

“McDermott Declaration”) and a declaration from Andre Johnson (the “Johnson Declaration”).

As the district court correctly concluded, neither the Johnson Declaration nor the McDermott

Declaration “include[s] additional facts that supports a strong inference of fraudulent intent, as

required under Rule 9(b).” Space Hunters, Inc. v. United States, No. 10 Civ. 6335(CM), 2011

WL 1899627, at *6 (S.D.N.Y. May 17, 2011). Although the McDermott Declaration purports to

establish that all of the investigators for the Fair Housing Council of Northern New Jersey (the

“FHC”) confirmed that Space Hunters only rented rooms, “[n]one of the investigators gave

McDermott evidence to support Plaintiffs’ allegation that Toto lied at the Government’s behest.”

Id. at *7. Moreover, some statements in the transcripts attached to the McDermott Declaration

actually undermine the allegations in the complaint. For example, one statement suggests that

the FHC believed Space Hunters dealt with apartments. App. 122 (“[M]ost of the testing that I

really ever did was . . . apartments or house sales.”).

       The Johnson Declaration similarly fails to offer plausible evidence in support of

plaintiffs’ allegations. As an initial matter, Andre Johnson does not identify himself beyond his

name and does not set forth his employer, his connection to the case, or how he came to

interview Toto on “approximately 50 occasions.” App. 222. Moreover, the notes attached to the

Johnson Declaration, which are identified as Toto’s notarized handwritten notes, were not

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submitted under the “penalty of perjury,” 28 U.S.C. § 1746, and thus likely constitute

inadmissible hearsay. See Capobianco v. City of N.Y., 422 F.3d 47, 55 (2d Cir. 2005) (“As a

general matter . . . unsworn letters . . . are inadmissible hearsay.”). Finally, as the district court

noted, many of the allegations in the Johnson Declaration are implausible on their face, such as

the claim that the government paid a sum of money to Toto’s attorney to “take over [Toto’s] case

against Space Hunters and John McDermott.” App. 224. As the district court correctly

observed, once Space Hunters opted to transfer the administrative complaint to federal court, the

government was obligated to represent Toto. See 42 U.S.C. § 3612(o)(1) (requiring the Attorney

General to “commence and maintain[] a civil action on behalf of the aggrieved person” in federal

court if a party elects to have an administrative complaint filed under the Fair Housing Act

transferred to federal court). Accordingly, because these declarations do not set forth additional

facts establishing the government’s motive to suborn perjury, the district court did not err in

concluding that amendment would be futile.

        We finally turn to whether the district court erred in denying plaintiffs’ motion for

reconsideration. Federal Rule of Civil Procedure 59(e) permits a party to file a “motion to alter

or amend a judgment . . . no later than 28 days after the entry of judgment.” Local Rule 6.3

permits a party to move for reconsideration based on “matters or controlling decisions which

counsel believes the court has overlooked.” S.D.N.Y. Local R. 6.3. “The standard for granting

such a motion is strict, and reconsideration will generally be denied unless the moving party can

point to controlling decisions or data that the court overlooked -- matters, in other words, that

might reasonably be expected to alter the conclusion reached by the court.” Shrader v. CSX

Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). “The major grounds justifying reconsideration

are an intervening change of controlling law, the availability of new evidence, or the need to

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correct a clear error or prevent manifest injustice.” Virgin Atl. Airways, Ltd. v. Nat’l Mediation

Bd., 956 F.2d 1245, 1255 (2d Cir. 1992) (internal quotation marks omitted). We review the

district court’s denial of a motion for reconsideration for abuse of discretion. RJE Corp. v.

Northville Indus. Corp., 329 F.3d 310, 316 (2d Cir. 2003).

       Plaintiffs contend that the district court erred in denying their motion for reconsideration

because they presented new evidence, a declaration from Keith Toto (the “Toto Declaration”), in

which Toto attests that the government instructed him to lie during the 2002 trial.1 Because this

declaration cannot be considered “new evidence” -- evidence that was “truly newly discovered

or could not have been found by due diligence,” United States v. Potamkin Cadillac Corp., 697

F.2d 491, 493 (2d Cir. 1983) (internal quotation marks and alterations omitted) -- we cannot

conclude that the district court abused its discretion in denying the motion for reconsideration.

Plaintiffs fail to provide a convincing explanation as to why they could not have obtained the

Toto Declaration prior to January 5, 2011 -- more than eight years after the conclusion of the

2002 trial. While plaintiffs allege that Toto did not sign the declaration in December 2010

because the government improperly subpoenaed him in order to intimidate him, this allegation

does not explain why plaintiffs were unable to secure his declaration years earlier, especially

since plaintiffs have been arguing that Toto was seeking an apartment rather than a room since

before the 2002 trial even commenced. Accordingly, because the district court was not obligated



       1
         While we need not consider the content of the Toto Declaration in affirming the district
court’s denial of plaintiffs’ motion for reconsideration, it is interesting to note that at least one
statement in the Toto Declaration actually undermines plaintiffs’ allegation that the government
knowingly suborned perjury. After all, the declaration indicates that Toto told the government’s
attorneys that he was searching for a “room”: “I told [the government’s attorneys] that I was
looking for a room however I use the word ‘room’ to mean a place to stay not a type of
apartment.” App. 354.

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to consider plaintiffs’ untimely submission, the district court did not abuse its discretion in

denying plaintiffs’ motion for reconsideration.

       We have considered plaintiffs’ remaining arguments and find them to be without merit.

For the reasons stated herein, the judgment of the district court is AFFIRMED.

                                           FOR THE COURT:
                                           CATHERINE O’HAGAN WOLFE, CLERK




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