Three Executive Life of New York (ELNY) structured settlement shortfall payees (objector respondents) and their legal counsel have filed a Notice of Appeal dated February 14, 2013 challenging "each and every part" of a Contempt Order issued January 25, 2013 by New York Supreme Court Judge John Galasso "on questions of both fact and law".
Judge Galasso's Contempt Order:
- Responded to a federal class action lawsuit filed November 8, 2012 by the three ELNY structured settlement shortfall payees, as plaintiffs, against Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, in his non-regulatory capacity as ELNY's Receiver, including predecessor ELNY Receivers (Superintendent), Metropolitan Life Insurance Company and Credit Suisse Group, AG, as defendants.
- Determined the federal class action lawsuit violated three ELNY injunctions: injunctions contained in the ELNY Rehabilitation Order (1991) and the ELNY Rehabilitation Plan Approval (1992) as well as an injunction in Judge Galasso's April 16, 2012 ELNY Liquidation Order which states: "All persons are enjoined and restrained from commencing or further prosecuting any actions at law or other proceedings against ELNY or its assets, the Receiver or the New York Liquidation Bureau, or their present or former employees, attorneys, or agents, with respect to this proceeding or the discharge of their duties under Insurance Law Article 74."
- Imposed a fine, payable by the ELNY shortfall payees’ legal counsel to the Superintendent for costs, disbursements and reasonable attorney’s fees the Superintendent had incurred defending the federal class action and for pursuing the contempt application plus potential additional legal expenses assuming the Superintendent achieved a favorable result in the concurrent appeal of the ELNY Liquidation Order which was denied February 6, 2013 by the Appellate Division of the Supreme Court of the State of New York, Second Department.
- Acknowledged: "This Court is not empowered to dismiss the federal complaint outright."
Following Judge Galasso's Contempt Order and the denial of their Liquidation Order appeal, attorneys representing the structured settlement shortfall payees voluntarily dismissed their ELNY class action lawsuit without prejudice preserving their right to refile claims and tolling the statute of limitations.
Attorney Edward Stone characterized the voluntary dismissal as a "strategic decision" attributable to the Contempt Order which left open the possibility of additional fines for continued legal efforts to protect ELNY shortfall payees.
The objector respondents and their legal counsel, attorneys Stone, Roger Christensen and Karra Porter, have six months to perfect their appeal of Judge Galasso's Contempt Order with the same appellate court that denied their earlier appeal of the ELNY Liquidation Order. Based upon previous court filings and out-of-court statements, they are expected to argue, in part, that Judge Galasso's Contempt Order violates the United States Constitution.
In a letter written to United States District Judge Jesse M. Furman prior to the voluntary dismissal of the ELNY class action lawsuit, attorney Christensen quoted from the 1964 decision of the United States Supreme Court in Donovan v. City of Dallas: "Early in the history of our country, a general rule was established that state and federal courts would not interfere with or try to restrain each others proceedings. That rule has continued substantially unchanged to this time."
Christensen's letter continued: "It could not be more clear that a state court cannot enjoin a federal action or use contempt proceedings to preclude citizens' attempts to have their claims heard in federal court."