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NORRIS v. GROSVENOR MKTG.

April 7, 1986

CRAWFORD S. NORRIS and KATHLEEN NORRIS, Plaintiffs, against GROSVENOR MARKETING LIMITED, and R. TWININGS & CO. LTD. (U.S.A.) and R. TWINING AND COMPANY, LTD. Defendants


The opinion of the court was delivered by: TENNEY

TENNEY, J.

The plaintiffs in this diversity action, Crawford S. Norris ("Norris") and his wife Kathleen Norris ("Mrs. Norris"), are asserting three claims against the defendants. All of the claims are based on a contract that Norris entered into in 1969 with Robert R. Cooper ("Cooper"), who is not a party to this action. The plaintiffs claim that (1) Cooper breached his fiduciary duties, and the defendants participated in that breach, (2) the defendants tortiously interfered with the contract between Norris and Cooper, and (3) the defendants wrongfully deprived the plaintiffs of future payments owed to them under the pertinent contract.

The defendants argue that these claims were fully adjudicated in an arbitration proceeding that was instituted by Norris against Cooper. The defendants contend that the plaintiffs' claims should be dismissed under the doctrines of collateral estoppel and res judicata. The defendants also argue that the plaintiffs' claims are time barred, and they have moved for dismissal of the action pursuant to Fed. R. Civ. P. ("Rule") 12(b) and 56.

 The Court concludes that the doctrine of collateral estoppel bars the action. Accordingly, the defendants' motion for summary judgment is granted.

 BACKGROUND

 The defendant R. Twining and Company, Ltd. ("Twining") prepares and sells tea throughout the world. *fn1" Norris was the United States distributor for Twining's tea for almost forty years. Norris distributed the tea pursuant to a license issued by Twining.

 In 1969, Twining advised Norris that his license would not be renewed when it expired in 1970. Twining also told Norris that Twining intended to license Cooper as its United States distributor.

 Norris subsequently agreed to sell to Cooper the distribution network that Norris had developed, including warehouse inventories and customer lists. Cooper and Norris entered into a contract of sale in 1969 ("1969 Agreement" or "Agreement") which provided that Norris would receive 50% of "the annual after-tax net operating profits" from 1971 to 1975, and 25% of such profits thereafter. The Agreement provided that Norris would receive such profits as long as Cooper was licensed to distribute Twining's tea. The Agreement also established that--in the event that Norris should pre-decease his wife--the agreed on payments would be made to Mrs. Norris.

 In 1979, Twining advised Cooper that his license would not be renewed when it expired in 1981. Cooper sold the distribution network in 1979 to the defendant Grosvenor Marketing Limited ("Grosvenor"), a Delaware corporation, which is an affiliate of Twining. Cooper also stopped making payments to Norris.

 Claiming that Cooper had breached his contract, Norris instituted an arbitration proceeding against Cooper. *fn2" Norris submitted the issue to arbitration rather than to the court because the 1969 Agreement included an arbitration clause requiring that all disputes be settled by arbitration.

 The arbitrator awarded Norris $750,000 for "[d]isposition of assets," which was 25% of the sale price. *fn3" The New York Court of Appeals subsequently confirmed the arbitration award. See 61 N.Y.2d 299, 473 N.Y.S.2d 774 (1984). Cooper paid Norris the full amount owed.

 Norris and his wife then instituted this action. Cooper is not a party. The question before the Court is whether the plaintiffs are barred from litigating their claims against the defendants because of the prior arbitration proceeding. *fn4"

 DISCUSSION

 The defendants contend that the plaintiffs' claims are barred under the doctrines of res judicata and collateral estoppel. Both doctrines deal with the question of whether the adjudication of certain matters is precluded by prior adjudication. See Kremer v. Chemical Constr. Corp., 456 U.S. 461, 466, 72 L. Ed. 2d 262, 102 S. Ct. 1883 n.6 (1982). Under the doctrine of res judicata, parties and their privies are precluded from litigating claims that were or could have been raised in a prior action. See Wilson v. Steinhoff, 718 F.2d 550, 552 (2d Cir. 1983). It is not necessary that the parties be identical in both suits. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 58 L. Ed. 2d 552, 99 S. Ct. 645 Z (19769); Collard v. Village of Flower Hill, 604 F. Supp. 1318, 1322 (E.D.N.Y. 1984), aff'd, 759 F.2d 205, cert. denied, 474 U.S. 827, 106 S. Ct. 88, 88 L. Ed. 2d 72 (1985). Furthermore, collateral estoppel can be invoked where, as here, the prior proceeding was an arbitration proceeding and a final ...


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