United States v. Butler

12-5120
United States v. Butler
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 TO 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
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
22nd day of November, two thousand thirteen.
PRESENT:
ROSEMARY S. POOLER,
REENA RAGGI,
RICHARD C. WESLEY,
Circuit Judges.
_____________________________________
United States of America,
Appellee,
v. 12-5120
Elizabeth Butler,
Third Party-Appellant,
Julian Tzolov, Eric Butler,
Defendants.
_____________________________________
FOR THIRD PARTY-APPELLANT: Elizabeth Butler, pro se, New York, NY.
FOR APPELLEE: Varuni Nelson, Beth P. Schwartz, Mary M.
Dickman, Assistant United States Attorneys, of
counsel, for Loretta E. Lynch, United States
Attorney, Eastern District of New York, Brooklyn,
NY.
Appeal from an order of the United States District Court for the Eastern District of New
York (Weinstein, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order is AFFIRMED.
Third Party-Appellant Elizabeth Butler’s husband, Eric Butler, was convicted of
securities and wire fraud. His sentence included a $5 million fine and $250,000 forfeiture. The
judgment provided that assets in certain accounts, held in Mr. Butler’s name only, be applied to
his fine and forfeiture. Contending that she had an interest in those accounts pursuant to both her
marital relationship with Mr. Butler and a constructive trust theory, Mrs. Butler moved for a
preliminary injunction prohibiting the Government from accessing the funds. The district court
denied Mrs. Butler all injunctive relief because she did not have a legal or equitable interest in
the assets. Mrs. Butler, pro se, appeals from that order. We assume the parties’ familiarity with
the underlying facts, the procedural history of the case, and the issues on appeal.
We review for abuse of discretion the denial of a motion for a preliminary injunction.
Louis Vuitton Malletier v. Burlington Coat Factory Warehouse Corp., 426 F.3d 532, 537 (2d
Cir. 2005). “A party seeking a preliminary injunction must show (a) irreparable harm and (b)
either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the
merits to make them fair ground for litigation and a balance of hardships tipping decidedly
toward the party requesting preliminary relief.” Cacchillo v. Insmed, Inc., 638 F.3d 401, 405-06
(2d Cir. 2011) (internal quotation marks omitted).
The district court did not abuse its discretion in denying Mrs. Butler’s motion for a
preliminary injunction. On appeal, Mrs. Butler first argues that she is entitled to half the funds in
the restrained accounts because she and her husband operated the accounts as an “economic
2
partnership,” as recognized by New York state law. New York law “requires that a trial court
equitably distribute marital property between the parties upon the dissolution of the marriage.”
See Commodity Futures Trading Comm’n v. Walsh, 17 N.Y. 3d 162, 170-71 (2011). The state’s
equitable distribution law was enacted “[i]n recognition that marriage represents an economic
partnership to which both parties contribute as spouse, parent, wage earner or homemaker.” Id.
at 171 (citation and internal quotation marks omitted). Mrs. Butler’s reliance on the New York
state courts’ use of this “economic partnership” language does not eclipse the basic principle that
New York state law does not create any interest in marital property prior to a judgment
dissolving the marriage. See, e.g., Musso v. Ostashko, 468 F.3d 99, 105-06 (2d Cir. 2006)
(quoting Leibowits v. Leibowits, 462 N.Y.S.2d 469, 473 (2d Dep’t 1983)) (“A spouse without
legal title has no interest in marital property prior to obtaining a judgment creating such an
interest, for the concept of marital property only exists ‘as an ancillary remedy to the dissolution
of a marriage.’”). Mrs. Butler does not challenge the principle that interest in marital property
does not vest prior to a judgment of divorce; rather, she argues that the Government’s “cynical
view” that “a spouse of any person being investigated for criminal activity [should] divorce that
person as quickly as possible to protect assets” is “not sound policy for obvious reasons.” Her
argument that the current state of the law is bad public policy, however, does not alter the
conclusion that she has no legal right to assets held in her husband’s name only.
Mrs. Butler’s argument that the funds she deposited into the accounts should be deemed
held in a constructive trust similarly fails. Mrs. Butler relies heavily on Torres v. $36,256.80
U.S. Currency, 25 F.3d 1154, 1158 (2d Cir. 1994). There, the spouse of a criminal defendant
claimed an ownership interest in a certificate of deposit (“CD”) held in the name of her husband.
Id. at 1156. In support of this claim, the defendant provided an affidavit stating that the money
3
belonged to his wife, that she had transferred the money to him to help him establish credit, and
that he had agreed to repay her in full once the CD matured. Id. Torres is readily
distinguishable from the instant case. During the evidentiary hearing below, both Butlers
testified that the funds deposited into the accounts–even the funds deposited from Mrs. Butler’s
earnings–were used to pay their family’s expenses. Mrs. Butler’s argument that the funds she
deposited into the account were essentially held for her in a constructive trust, with the
expectation that they would be returned to her, is contradicted by this testimony, as well as by
her continued argument that she and her husband operated as an “economic partnership.”
Finally, on appeal, Mrs. Butler repeatedly cites statements by the magistrate judge who
held the evidentiary hearing below, indicating that he incorrectly assumed all of the funds in the
restrained accounts to be the proceeds of Mr. Butler’s criminal activities. Mrs. Butler argues that
the magistrate judge therefore conducted the evidentiary hearing and issued his report and
recommendation under a “fundamental misconception.” This line of argument is unavailing.
Whether the magistrate judge incorrectly attributed all of the funds in the restrained accounts to
Mr. Butler’s criminal activities had no bearing on the magistrate judge and district court’s
correct conclusion that Mrs. Butler failed to demonstrate a legal right to the assets in the
accounts, regardless of their origin.
We have considered all of Mrs. Butler’s remaining arguments and find them to be
without merit. Accordingly, we AFFIRM the order of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
4