State v. Gold Fever, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
STATE OF DELAWARE,
Plaintiff,
v. C. A. No. Nl7C-09-OOl DCS
GOLD FEVER, LLC, GOLD
FEVER FINANCE, LLC SHAUN S.
REILLY, KISHA A. REILLY, and
DENISE TOY
\/\/\./\./\./\./\./\./V\_/\/
Defendants.
REPORT AND RECOMMENDATION THAT
SHAUN S. REILLY’S MOTION TO DISMISS SHOULD BE DENIED
AND ORDER THAT THE STATE OF DELAWARE’S MOTION TO
AMEND COMPLAINT IS DENIEDl
Through this civil action, the State of DelaWare seeks forfeiture of assets, and
civil penalties, arising from an alleged criminal enterprise operated ``by Gold Fever,
LLC, Gold Fever Finance, LLC, Shaun S. Reilly (“Reilly”), Kisha A. Reilly,2 and
Denise C. Toy (“Toy”) (collectively the “Defendants”) in violation of the DelaWare
Organized Crime and Racketeering Act, Chapter 15 of Title l l of the DelaWare Code
' A Report and Recommendation is issued for the Motion to Dismiss pursuant to
Super. Ct. Civ. R. l32(a)(4) and an Order is entered on the Motion to Arnend
pursuant to Super. Ct. Civ. R. 132 (a)(3).
2 The Court Was notified that Ms. Reilly passed away on August 3, 2016. An
order Was then issued staying this matter until the end of Septernber.
(the “RICO Statute”). Presently before the Court is Reilly’s Motion to Dismiss
(“MTD”) and the State’s Motion to Amend the Complaint (“MTA”). A hearing Was
held on July 20, 2018,3 and this is my Report and Recommendation and Order after
considering the arguments presented by the parties.
BACKGROUND
The relevant timeline of events is as folloWs:
» August 2, 2016 _ DelaWare State Police (“DSP”) execute a search and seizure
of Defendants’ business and personal properties. Defendants Were each
arrested and charged With various criminal offenses.
0 March 3, 2017 - the State filed a Notice of Racketeering Lien (the “First
Lien”) including reference to (a) 970 Cox Neck Road (the “Real Property”);
(b) the Gold Fever entities; (c) three Trumark financial accounts; (d) a TD
Bank account; (e) three Wells Fargo accounts; (f) an Amazon customer ID;
(g) a 2008 Hyundai Elantra; (h) a 2012 Chevy Travese; (i) a 2015 HMST
Utility Trailer; and (j) an All-Terrain Vehicle.
¢ April 10, 2017 _ Reilly pleads guilty to Criminal Racketeering, Conspiracy to
Commit Racketeering and Possession of a Firearm during the Commission of
a Felony in violation of DelaWare’s RICO Act. Neither the Plea Agreement,
nor the Truth-in-Sentencing Form reference any agreement for forfeiture of
property or return of property.
0 April 10, 2017 - The Court conducts a plea colloquy With Reilly and the issue
of forfeiture is discussed Defense counsel states “[t]here’s been other items,
$60,000 in cash, bank accounts and cars. He’s not contesting any of that
property, simply the home so his children have someplace to live.”4
The State’s counsel responds that “there has been a civil racketeering lien filed
3 Ms. Toy appeared at the hearing With counsel but notified the Court that She took
no position on the motions and Was present to observe and demand a jury trial in the
event the MTA Was granted.
4 Plea Trans. at p. 15.
for all the property, which includes the house, cash, motor vehicles, other
property seized.”5 The sentencing order reflected Defendant’s position that
he would contest forfeiture of the family home.6
¢ September 1, 2017 - Civil Complaint filed pursuant to 11 Qe_l. g §§1501 et.
seq. (the “Civil Action”). ln paragraphs 54-60, the State describes the funds
of the criminal enterprise as including (a) funds deposited into certain bank
accounts and a trust account; (b) auto loan payments for personal vehicles, a
storage trailer and firearms; (c) funds used to purchase registered pit-bull
puppies and for an addition/home remodel; (d) payments for Gold Fever
expenses; (e) payments applied to personal taxes; (f) payments for credit card
bills, personal cell phones, oil and utility payments, auto insurance premiums,
little league memberships, medical insurance, rent, concert and event tickets,
airfare, a cruise vacation and home renovations.
0 December 19, 2017 - Reilly files a Motion for Return of Property (the
“MRP”) arguing an agreement was made for the return of the seized items
listed on Exhibit A to the MRP. Reilly argues the State did not timely pursue
a Motion for Forfeiture as required under Superior Court Criminal Rule 40
and that neither the First Lien, nor any negotiations between the parties or the
Civil Complaint, put Defendant on notice that the State was seeking forfeiture
of the items in his MRP. In response to the MRP, the State did not then seek
to amend the Complaint, nor did it mention jewelry and coins that had been
seized.
0 April 4, 2018 - The State files a Notice of State of Delaware Racketeering
Lien (the “Second Lien”)7 providing notice of the State’s intent to seek
forfeiture of no less than 149 seized items.
¢ May 2, 2018 - The Court issues a Trial Scheduling Order for the Civil Action.
5 Plea Trans. at pp. 15-16.
6 Plea Trans. at p. 18.
7 During the hearing on Reilly’s MRP, State’s counsel provided the case number for
the Civil Action. After the hearing concluded, l reviewed the docket in the Civil
Action and learned of the filing of the Second Lien.
3
0 May 22, 2018 - An Order is issued on the MRP staying any decision pending
the outcome of the Civil Action.
0 June 4, 2018 - The State files the MTA and in support suggests that “the Court
prefers the asset forfeiture matter to proceed through a formally amended
complaint rather than by a separate motion.”
¢ June 8, 2018 - Reilly files the MTD for failure to state a claim and asserts the
State has “unclean hands” because certain personal property has gone
“missing” or disappeared
¢ July 18, 2018 - The State files a Notice of State of Delaware Racketeering
Lien (the “Third Lien”) identifying the Real Property and property listed on
an Appendix “A”. The Third Lien included an “Amended Racketeering Lien”
as an attachment with 149 numerical paragraphs of property, “Amended
items” of an additional 20 numerical paragraphs, and an “Appendix A” of
approximately 181 groupings of property including coins, cash, jewelry,
stones and other valuables.
The State notified the Court by way of a July 18, 2018 cover letter, that the
Third Lien was filed to assure the Court that the “missing property” was in the
custody of DSP but had been inadvertently excluded from the inventory list provided
to the State to prepare the lien for the Civil Action. After receiving Reilly’s MTD
the State contacted DSP who performed a supplemental inventory and prepared a
report dated June 25, 2018 identifying the missing property.
The supplemental report includes an Investigative Narrative explaining that
on June 21, 2018, the DSP conferred with the State in response to Reilly’s MTD.
According to the report, DSP reviewed the photos from the seizure and identified
two black zipper bank bags and a purse style bag that were never accounted for in
the inventory. DSP then reviewed all evidence collected, and in particular the
evidence seized from “Room 11” and eventually located the items contained now in
evidence box labeled II-l. The list included approximately 18 items plus cash and
jewelry. Evidence box 11-8 was also found to include some jewelry and a large
quantity of coins. ln addition to the large quantity of coins, they located $9,434 in
cash that was referenced in Reilly’s MTD, as well as $1,886. The report states “[i]n
considering how this evidence was overlooked in the completion of the itemized
inventory, writer noted the sheer volume of evidence collected in this case and the
number of investigators used to collect the evidence.” The State remarked at the
hearing that it may seek further amendments, or file an updated lien, and that a full
itemization of all property seized is not yet available.
MOTION TO DISMISS
The State first asserts that the MTD was filed out of time (247 days from
service of the Complaint).8 The State argues Reilly has not demonstrated excusable
neglect because Reilly “had access to the available information throughout this
litigation and neglected to avail himself of a timely opportunity to file a Motion to
Dismiss.” Reilly explained that he has never received the discovery from the
criminal trial and has needed time to identify what property was seized and may be
unaccounted for. Reilly is incarcerated and acting pro se. l find that Reilly acted
8 Ironically, the State’s MTA was filed 276 days after the Complaint was filed.
5
within a reasonable timeframe considering the unique obstacles involved in this case,
and therefore Reilly has demonstrated excusable neglect. ln light of the moving
target set by the State with the filing of three liens over time as well as the fact that
a complete list of the seized property is not yet available, l find that Reilly has not
had “access to the available information” nor could he have reasonably acted sooner.
The late filing is justified under the circumstances presented
Turning to the merits of the MTD, I find the arguments do not warrant
dismissal of the Complaint. Reilly first argues that the State of Delaware does not
have standing to pursue the claims. However, the State clearly has standing pursuant
to ll D_el. Q. §§1505(b) and 1506(a) which provide the Attorney General with
authority to institute proceedings under the RICO Statute and to seek forfeiture of
real and personal property to the State.
Next, Reilly argues that the Complaint is not well pled because evidence has
been overlooked, mistakes have been made, and the State has unclean hands because
it knowingly withheld evidence stored in an unprotected location for approximately
two years. If true, these accusations are disturbing, but even granting Mr. Reilly
some leeway due to his pro se status, do not rise to the level necessary to justify
dismissal.
A motion to dismiss will be denied if a party can recover under any reasonably
conceivable set of circumstances.9 The facts alleged in the complaint will be taken
as true and interpreted in a light most favorable to the non-moving party.lo
The Complaint outlines the relationship between the Defendants and how
they allegedly used the corporate entities to engage in a criminal enterprise (See
Paragraphs 16-26). The Complaint also sets forth claims of possession of firearms
by persons prohibited, tax evasion, wire fraud, and mail fraud The Complaint
further states that the Defendants used the funds obtained from the criminal
enterprise to make certain investments and to pay for personal expenses. The
Complaint includes ten counts and 151 paragraphs in support. Accepting the facts
as alleged as true, and interpreting the claims in a light most favorable to the State,
l find that the Complaint sufficiently sets forth facts in support of a claim that Reilly
engaged in a pattern of racketeering activity under the RICO Statute.
Finally, Reilly argues that the State has unclean hands because neither the
First Lien nor the Second Lien disclosed the actual and true scope of items seized
By way of example, Reilly points the Court to the August 16, 2016 Supplemental
9 Spence v. Funk, 396 A.2d 967, 968 (Del. 1978), citing Klez``n v. Sunbeam Corp., 94
A.2d 385 (Del. 1952).
10 Morrgage Elec. Registration Sys., lnc. v. Haase and F lanagan, 2006 WL 1454807,
at *1 (Del. Super. 2006), citing Vanderbilt Income & Growth Assoc., LLC v.
Arvida/JMB Managers, Inc. 691 A.2d 609, 612 (Del. 1996).
Report of DSP. Despite the fact that the report references $144.00 in cash and
“several stacks of USC inside a brown Michael Khors bag,” neither of these items
were listed on the First Lien or Second Lien.
“The doctrine of unclean hands is a rule of public policy designed to “‘protect
the public and the Court against misuse by persons who, because of their conduct,
have forfeited the right to have their claims considered”"' l do not find that the
State’s conduct has so offended the integrity of the court that the claims should be
denied, regardless of merit.12 In this case, as the State’s Complaint seeks only legal
remedies and monetary damages, relief based on the equitable doctrine of unclean
hands would not be appropriate13 As such, l decline to dismiss the Complaint on
this basis.14
ll Mor!gage Elec. Registration Sys., Inc. at *1, quoting Furnarl`` v. Wallpang, Inc.,
2014 WL 1678419, at *9 n.26 (Del. Super. Ct. Apr. 16, 2014) (quoting Gallagher,
1991 WL 158969, at *4), cyj”d sub nom New Castle Ins., Lta’. v. Gallagher, 692
A.2d 414 (Del. 1997)).
'2 Korotki v. Hiller & Arban, 2017 WL 2303522, at *11 (Del. Super. May 23, 2017),
quoting Gallagher v. Holcomb & Salter, 1991 WL 158969, at *4 (Del. Ch. Aug. 16,
1991 (citing Skoglund v. Ormand lndus., Inc., 372 A.2d 204, 213 (Del. Ch. 1976)).
See also Deutsche Bank National Trust Co. v. Hl``nes, 2016 WL 7437860, at *3 (Del.
Ch. Dec. 21, 2016) (recognizing doctrine applies to litigant who engages in
reprehensible conduct in the matter).
13 Id. at *12.
'4 The doctrine of unclean hands is also a defense thought to be outside the scope of
a motion to dismiss. Deutsche BankNational T rust C0. v. Hines, 2016 WL 743 7860,
at *3 (Del. Ch. Dec. 21, 2016).
MOTION T 0 AMEND
The MTA seeks to add a new paragraph 66 to the Complaint which identifies
an “Exhibit A” that would purportedly be the Third Lien (it was not attached to the
MTA or proposed Amended Complaint). In addition, the amendment would now
add Count ll entitled “Asset Forfeiture” that would lead to forfeiture of the Real
Property as well as all property of the Defendants. This count does not specifically
reference Exhibit A, but rather, states “[t]he State seeks forfeiture of all property
currently held in custody by law enforcement.”
On August 2, 2016, the State of Delaware executed a search and seizure of
the business location as well as Reilly’s personal residence. Numerous items were
seized On June 25, 2018 ~ almost two years later _ the State has submitted a
supplement to the original police report identifying seized items that had previously
been misplaced The Second Lien does not include items that were in the original
Police Report which means the State was aware that these items had been seized,
but did not include them in the lien notice. According to counsel’s representation at
the hearing, each police investigator was assigned to a room for the search. They
would collect, inventory and record any items relevant to the seizure parameters
The items not included in the First Lien (or Second Lien) came from one part of one
room searched by a member of the DSP. To prepare the First Lien, the State’s
counsel requested a consolidated list of what was being held and where. They later
came to learn that there was a large tow behind that had UPS boxes commingled
with boxes containing the “missing property.”
The State argues its Second Lien encompassed all “personal property,
business goods and chattels and/or assets of Gold Fever, LLC and Gold Fever
Finance, LLC” and therefore it was not necessary to identify the missing property
specifically in any filings. Reilly argues that he should not be deprived of his right
to retain property without fair notice and a hearing. Reilly claims he timely filed the
MRP and to the extent any items are missing from the lien notices, this should be
deemed a waiver of the State’s right to seek forfeiture and the MRP granted He
believes the State is using the amendment process to circumvent his rights. Reilly
further argues that the State should not be permitted to amend the Complaint to allow
the State to withhold property illegally, but rather as a tool to address any newly
discovered evidence.
Superior Court Civil Procedure Rule 15 allows the liberal granting of
amendments when justice so requires. However, “justice may not require that leave
to amend be freely given if the party seeking to amend has been inexcusably careless,
or if the amendment would unfairly prejudice an opposing party.”15 In the absence
15 Parker v. State, 2003 WL 24011961, at *7 (Del. Super. Apr. 30, 2004), citing Hess
v. Carmine, 396 A.2d 173, 176 (Del. Super. 1978).
10
of prejudice to the other party, trial courts typically exercise discretion in favor of
granting leave to amend.16 Although delay alone is an insufficient basis to deny
relief, inexcusable delay and repeated attempts at amendment may justify denial.17
Likewise, evidence of bad faith or dilatory motive, repeated failures to cure
deficiencies, prejudice, futility or the like may be grounds to deny a request to
amend.18 Courts have looked at whether the facts and averments forming the basis
of the claims were consistent throughout the litigation such that the defendant was
on notice of the specific conduct for which they may be liable.19 As a notice pleading
jurisdiction, the complaint is only required to provide the defendant with notice of
the nature of the claim asserted20
l find that there has been prejudice to the Defendants because of the delays
with recovery and confusion over forfeiture. Reilly argued in his MRP that the
16 Mullen v. Alarmguard of Delmarva lnc., 625 A.2d 258, 263 (Del. 1993), citing
Ikea'a v. Molock, 603 A.2d 785 (Del. 1991).
17 Ia’. citing Chrysler Corp. v. New Castle Coum‘y, 464 A.2d 75 (Del. Super. 1983),
Laira' v. Buckley, 539 A.2d 1076 (Del. 1988), H&HPOultrjy C0., Inc. v. Whaley, 408
A.2d 289 (Del. 1979).
18 Parker v. State, 2003 WL 24011961, at *3 (Del. Super. Apr. 30, 2004), citing Hess
v. Carmine, 396 A.2d 173, 177 (Del. Super. 1978), Forman v. Davis, 371 U.S. 178
(1962).
19 Parker v. State, 2003 WL 24011961, at *6, citing Hess v. Carml``ne, 396 A.2d at
177.
20 Parker v. State, at *9, (internal citations omitted).
11
Complaint and lien notices did not put him sufficiently on notice of what was to be
forfeited ln a separate order, l stayed the outcome of the MRP pending resolution
of this matter. However, more than two months passed before the State moved to
amend the Complaint and filed a Third Lien adding an additional 20 numerical
paragraphs of “Amended items” plus an “Appendix A” with approximately 181
groupings of valuables for forfeiture. There are questions about the safekeeping of
the seized property and when asked at the hearing, the State responded that it did not
know when, or if, the amendments will stop. In the meantime, Reilly has
legitimately questioned where his property is and made attempts to recover property
not included in the First Lien or Second Lien,
Of significance is that the State, through its agent - DSP _ did know of the
facts on which the proposed amendment is based, but omitted the necessary
allegations from the original Complaint, First Lien, and Second Lien, In looking
back to the time of the seizure, 1 year and 350 days have passed, and between the
time of the filing of the First Lien and Third Lien, 1 year and 137 days have passed
which is excessive, careless and inexcusable. The delay by the State in moving to
amend was unnecessary. The seized items have been in the possession of the State
since the inception of the criminal matter (and Civil Action) and were not newly
discovered The State knew of, or could have known, the facts on which the
proposed amendment is based when the original Complaint was filed Despite this,
12
the “missing items” were not included in the First Lien, Second Lien, Response to
MRP, Complaint, or until the Third Lien was filed - almost two years after the
property was seized The State argued that Reilly lacked excusable neglect because
he “had access to the available information throughout this litigation and neglected
to avail himself of a timely opportunity.” That reasoning is wholly applicable to the
State’s conduct. New factual obligations or claims, or additional theories of liability
should not be introduced at this late date of the case.21 ln light of the above, the
MTA is denied
IT IS hereby recommended that the Motion to Dismiss be DENIED and IT IS
HEREBY ORDERED that the Motion to Amend is DENIED.
IT IS SO ORDERED this 27th day of September, 2018.
The a anne L.Mayer n
cc: Prothonotary
Oliver J. Cleary, Deputy Attorney General
Angeline M. Kogut, Deputy Attorney General
Jonathan Layton, Esquire
Mr. Shaun S. Reilly (SBI# 003 86187)
Ms. Kisha A. Reilly22
21 See Wilson v. Consumers Life Ins. Co., 2000 WL 1211169, at *3 (Del. Super.,
Aug. 1, 2000).
22 Service should be made to Ms. Reilly’s representative
13