THE GOVERNMENT OF THE VIRGIN ISLANDS v. LANSDALE, (D.V.I. 2002)

THOMAS K. MOORE, U.S. District Judge.

Plaintiff Virgin Islands Bureau of Internal Revenue ["VIBIR" or "plaintiff"] moves for entry of final judgment based on this Court's July 30, 2001, memorandum in the matter of Government of the Virgin Islands v. Lansdale, 172 F. Supp.2d 636 (D.V.I. 2001). Defendants William and Marianthi Lansdale [collectively "Lansdales" or "defendants"] oppose plaintiff's motion. For the reasons set forth below, this Court will deny plaintiff's motion for entry of final judgment and will grant defendants' outstanding Rule 56(f) motion in part.

As the facts of this case were extensively detailed in this Court's July 30th memorandum, see Lansdale, 172 F. Supp.2d at 640-44, I need not rehash them here. A brief summary of the procedural history of this case, however, may be helpful.

On December 2, 1998, the VIBIR filed a complaint alleging that: (1) it was entitled to the tax deficiency assessed against La Isla Virgen; (2) Marina Pacifica and Lonesome Dove had, by agreement and operation of law, assumed all of the liabilities of La Isla Virgen; (3) as La Isla Virgen, Marina Pacifica and Lonesome Dove were the alter egos of the Lansdales, the Lansdales were personally liable for any tax obligations; and (4) the Lansdales were the nominees of the corporations and thus personally liable for any tax obligations. The Lansdales never answered this complaint, but instead moved to dismiss it or in the alternative for summary judgment. On June 3, 1999, the VIBIR opposed the Lansdales' motion and filed a cross-motion for summary judgment. On August 24, 1999, the Lansdales moved to stay their response to the VIBIR's cross-motion pursuant to Rule 56(f) of the Federal Rules of Civil Procedure. On May 31, 2000, the VIBIR sought to amend its complaint to include an additional count of fraudulent conveyance. This Court granted the VIBIR's motion to amend its complaint on January 31, 2001. See VIBIR v. Lansdale, Civ. No. 1998-243 (D.V.I. Jan. 31, 2001) (mem. and order granting leave to file amended complaint), available at Opinions, www.vid.uscourts.gov. Finally, on July 31, 2001, this Court denied defendants' motion to dismiss or for summary judgment. See Lansdale, 172 F. Supp.2d at 656.

A. Plaintiff's Motion for Entry of Final Judgment

The VIBIR relies on my July 30th decision to support its motion for entry of final judgment. In particular, plaintiff emphasizes my ruling that the Lansdales used their various corporations for their own personal benefit, see id. at 645, to establish that it is entitled to a judgment on the merits to that effect. Entry of such a final judgment at this stage of the proceedings, however, would be premature.

My July 30th decision only determined that this Court had personal jurisdiction over the Lansdales. I did not reach the merits of VIBIR's cross-motion for summary judgment because it was not ripe for decision at that time. For one thing, the motion is based on the VIBIR's 1998 complaint, which has since been amended to add a new count for fraudulent conveyance, and has not been renewed. Thus, neither party has briefed this new count. Indeed, the VIBIR's pending cross-motion may well be moot. See Gress v. PNC Bank, N.A., 2001 U.S. Dist. LEXIS 15861 *1 (E.D.Pa. Sept. 21, 2001) (denying as moot defendant's motion for summary judgment filed prior to plaintiff's amended complaint). Even if plaintiff's pending cross-motion is still valid, my entering judgment on it in favor of the VIBIR would not be a final judgment ending the litigation; the VIBIR's claim for fraudulent conveyance would still be pending. See Catlin v. United States, 324 U.S. 229, 233 (1945) (stating that a final judgment "ends the litigation on the merits and leaves nothing for the Court to do but execute the judgment"); see also Ortiz v. Dodge, 37 V.I. 567, 571-72, 126 F.3d 545, 547 (3d Cir. 1997) (quoting Catlin, 324 U.S. at 233). Accordingly, I will deny plaintiff's motion for entry of final judgment.

B. Defendants' Rule 56(f) motion

Assertions of inadequate time for discovery come within the purview of Rule 56(f) of the Federal Rules of Civil Procedure. This rule "affords a party opposing summary judgment, who has not had the time or means to discover facts necessary to defeat the motion, the ability to ask the court to grant a continuance or deny the motion altogether." Annulli v. Panikkar, 200 F.3d 189, 201 (3d Cir. 1999); see also Radich v. Goode, 886 F.2d 1391, 1393 (3d Cir. 1989) ("The court must give a party opposing summary judgment an adequate opportunity to obtain discovery.").

Rule 56(f) provides:

Should it appear from the affidavits of a party opposing the motion [for summary judgment] that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or make such other order as is just.

FED. R. CIV. P. 56(F). The Third Circuit Court of Appeals has interpreted Rule 56(f) motions as imposing certain requirements on the movant. In particular, when seeking additional discovery, the movant needs to "submit an affidavit specifying . . . what particular information is sought; how, if uncovered, it would preclude summary judgment; and why it has not been obtained previously. See Dowling v. City of Philadelphia, 855 F.2d 136, 140 (3d Cir. 1988); see also Pastore v. Bell, 24 F.3d 508, 511 (3d Cir. 1994) (citing Dowling, 855 F.2d at 140).

In their Rule 56(f) affidavit, the defendants specify five areas that require discovery, only one of which could possibly affect the conversion vel non of my ruling piercing the corporate veils of the defendant corporations to find personal jurisdiction over the Lansdales to a ruling piercing the corporate veils to impose personal liability on William and Marianthi Lansdale. Hence, I will only address the third discovery area raised in defendants' motion: "The authenticity of and factual foundation for the hearsay statements contained in the hundreds of pages of exhibits attached to the Declaration of Richard Prendergast." Based on documents submitted by the VIBIR via its counsel's declaration, on July 30, 2001, I pierced the veils of the Lansdales' defendant corporations to find personal jurisdiction over the individual defendants and denied their motion to dismiss or for summary judgment for lack of jurisdiction. The Lansdales argue that these documents have not been authenticated and, until properly established as authentic documents, they cannot be relied on by this Court in deciding the VIBIR's motion to enter judgment against the Lansdales for the income tax liability of their defendant corporations. (Defs.' Opp. to Pl.'s Mot. for Entry of Final J. at 3.)

It does indeed appear that some of these challenged records may not have been properly authenticated. It is also obvious to me that it will be the rare record that cannot be readily authenticated, since virtually all of the challenged documents are interoffice bank memoranda, bank statements, and letters to and from the Lansdales or to and from their corporations. Once authenticated, the relevant and legally dispositive records will likely be admissible as business records or admission of party-opponents under hearsay exceptions Rule 803(6) or Rule 801(d)(2) of the Federal Rules of Evidence. Unless there are challenged documents that cannot be authenticated and would vitiate my jurisdictional ruling that the Lansdales are the alter-egos of the defendant corporations, their Rule 56(f) motion will have no bearing on the pending motion for summary judgment. See Dowling, 855 F.2d at 140 (stating that movant must show how additional discovery would preclude summary judgment). The individual defendants and their defendant corporations have already litigated the question of whether the Lansdales were the alter-egos of the corporate defendants and whether any transfers between the Lansdales, or either of them, and the corporate defendants were for adequate consideration. Only if my July 30th ruling on personal jurisdiction was based on facts in records that cannot be authenticated will further discovery and additional proceedings on these issues be necessary.

Accordingly, and to the extent the individual defendants have a good faith basis reasonably to challenge the authenticity of any documents submitted through Attorney Prendergast's declaration, the Lansdales shall identify each record and give the basis of their challenge to its authenticity. The magistrate judge shall then review each challenged document with the parties and report to the Court whether further proceedings are necessary to determine the authenticity vel non of those records that may affect the legal issues raised by the VIBIR's pending motions.

The VIBIR's motion for entry of final judgment is denied as premature. The defendants' Rule 56(f) motion will be granted in part as limited by the above discussion, and the balance of the motion will be denied. Further proceedings will await receipt of the report from the magistrate judge in accordance with this memorandum. The defendants shall have thirty days to submit their list of documents whose authenticity they have a good faith basis to challenge together with the basis of their challenge. The magistrate judge shall review each document with the parties within thirty days thereafter and submit a report of his finding within the following thirty days.

For the reasons set forth in the foregoing Memorandum of even date, it is hereby

ORDERED that plaintiff's motion for entry of final judgment (Docket No. 64) is DENIED; it is further

ORDERED that plaintiff's motion to strike defendants' opposition to plaintiff's motion for entry of final judgment (Docket No. 78) is DENIED; and it is further

ORDERED that defendants' Rule 56(f) motion (Docket No. 37) is GRANTED in part and DENIED in part. The defendants shall have thirty (30) days from the date of this Order to submit their list of documents whose authenticity they have a good faith basis to challenge together with the basis of their challenge to the magistrate judge. The magistrate judge shall then review each document with the parties within thirty (30) days thereafter and submit a report of his finding within the following thirty (30) days.

(Defs.' Mot. to Stay Response to Cross-Mot. for Summ. J. at 4.)