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LEONE INDUS. v. ASSOCIATED PACKAGING

May 18, 1992

Leone Industries, Plaintiff,
v.
Associated Packaging, Inc.; Michael Sarbello; Clifford L. Stafford, Jr.; Joseph John Centurione; Maria Cusano, General Administratrix of the Estate of Harry Cusano; and Maria Cusano, Defendants.



The opinion of the court was delivered by: WILLIAM G. BASSLER

 BASSLER, District Judge:

 Leone Industries, Inc. ("Leone"), a glassware manufacturer, filed this civil racketeering complaint to recover losses stemming from a bribery scheme involving its controller. Leone moved for appointment pendente lite of a receiver or special master to manage the assets of defendant Michael Sarbello ("Sarbello"), a central figure in the bribery scheme. Instead of appointing a receiver, the Court by its order of April 6, 1992 appointed a special fiscal agent. This opinion explains the reasons for that order.

 Introduction

 I. The Criminal and Civil RICO Proceedings

 Defendant Sarbello, formerly the president of defendant Associated Packaging, Inc., was convicted on December 26, 1990, of several criminal violations of 18 U.S.C. § 1861, et seq. ("RICO"). Plaintiff Leone was the victim of the RICO offenses, suffering financially because of a conspiracy in which Leone's controller accepted bribes from Sarbello and others in return for purchasing glassware packaging at inflated rates from Associated Packaging, Inc.

 On April 15, 1991 U.S. District Court Judge John C. Lifland sentenced Sarbello to seven years in prison, fined him $ 250,000 and ordered him to pay restitution to Leone in an amount to be determined. See Judgment of Conviction, United States v. Sarbello, No. 90-00190-001 (D.N.J. 1991). *fn1"

 Shortly before the entry of judgment in the criminal matter Leone filed this civil action against Sarbello and other defendants, alleging, among other things, civil violations of the RICO statute. Count one of Leone's civil RICO complaint alleges the essential facts underlying the criminal RICO convictions. This court granted summary judgment as to liability in favor of Leone and against Sarbello on that count. *fn2"

 In this civil action against Sarbello and other defendants, Leone seeks treble damages and attorney's fees, or an estimated $ 1.5 million. The amount of damages due from Sarbello, however, was not an issue at summary judgment, and remains to be determined at trial.

 II. Procedural History

 In January 1992 Leone sought an injunction to prevent Sarbello from transferring or otherwise dissipating his assets, alleging that Sarbello's financial transactions jeopardized Leone's ability to collect its anticipated judgment.

 The Court signed a temporary restraining order and order to show cause. Shortly before the return date, Leone provided additional information documenting that Sarbello had submitted to the Court a fraudulent affidavit. On the return date, Leone requested appointment of a receiver or master to oversee Sarbello's assets.

 Because the request was late and inadequately briefed, the request for appointment of a receiver or special master was denied. The injunction, however, was granted.

 Shortly afterward, Sarbello moved to modify the injunction, and Leone filed a cross-motion renewing its request for appointment of a receiver or special master. After oral argument, the Court in its order of April 6, 1992 modified the injunction to permit Sarbello to meet his reasonable, daily expenses and appointed a special fiscal agent to monitor Sarbello's financial transactions. *fn3"

 Discussion

 The special fiscal agent was appointed in large measure to oversee compliance with the injunction. A brief summary of the injunction, therefore, is in order, to be followed by the reasons for appointment of a special fiscal agent.

 I. The Injunction

 The issuance or denial of a preliminary injunction is a matter committed to the sound discretion of the trial court. Penn Galvanizing Co. v. Lukens Steel Co., 468 F.2d 1021, 1023 (3d Cir. 1972). An injunction may issue to protect a potential future damages remedy of the type Leone seeks here. Hoxworth v. Blinder, Robinson & Co., Inc., 903 F.2d 186 (3d Cir. 1990). The Hoxworth criteria for issuance of preliminary injunction were satisfied by the following discoveries:

 1) Sarbello used assets owned jointly by him and his wife to capitalize a new company, Atlantic Packaging, Inc., owned entirely by Sarbello's wife. This transfer violated Sarbello's voluntary agreement with Judge Lifland in the criminal matter not to transfer or ...


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