The opinion of the court was delivered by: Sweet, District Judge.
In Cresswell v. Sullivan & Cromwell, 87 Civ. 2685 (RWS)
("Cresswell II"), defendant Sullivan & Cromwell ("S & C") has
moved on remand for summary judgment dismissing the complaint
of plaintiff Edward Cresswell ("Cresswell"). In Meadows v.
Sullivan & Cromwell, 88 Civ. 2221 ("Meadows"), plaintiff Percy
Herbert Meadows ("Meadows") has moved to stay all proceedings,
and in Cresswell v. Sullivan & Cromwell, 91 Civ. 0333
("Cresswell III"), and Noble v. Sullivan & Cromwell, 91 Civ.
0676 ("Noble") plaintiffs Cresswell and Elizabeth E. Noble
("Noble") have moved to remand their cases to the New York
State Supreme Court. Cresswell has also moved to stay or
dismiss Cresswell II. For the following reasons, S & C's motion
is granted, the other motions are denied, and summary judgment
is entered in S & C's favor on all of the complaints.*fn1
The parties, underlying facts, and prior proceedings are
fully described in the prior opinions of this Court and the
Court of Appeals, familiarity with which is assumed.
Cresswell v. Sullivan & Cromwell, 922 F.2d 60 (2d Cir. 1990),
rev'g 704 F. Supp. 392 (S.D.N.Y. 1989).
In December 1990, the Second Circuit opinion reversed on
jurisdictional grounds the grant of summary judgment in S & C's
favor on the Cresswell II fraud claim and remanded it to this
Court for consideration in light of the proper jurisdictional
basis. Shortly thereafter, Cresswell and Noble instituted the
Cresswell III and Noble actions in New York State Supreme
Court, essentially repeating the allegations and claims for
relief made in Cresswell II and in Meadows.
On January 15, 1991, S & C removed both of the new actions to
this Court and at the same time moved for summary judgment
dismissing Cresswell II. On February 19, Cresswell responded
with his motion to remand Cresswell III and to stay or dismiss
Cresswell II, and on February 20 Meadows and Noble filed moved
to remand Noble and to stay Meadows. All of the motions were
argued and fully submitted on March 29.
1. There Is Jurisdiction Over the Cresswell II Fraud
In seeking to differentiate the claim in Cresswell II from
those in the New Actions, Plaintiffs assert that the Second
Circuit impliedly dismissed their common law fraud claim
against S & C and upheld federal jurisdiction only over their
equitable claims. Arguing that they never intended to assert
such claims and that as "masters of their complaints" they have
the right to determine which claims they will press and which
law will govern those claims, they seek dismissal of Cresswell
II and permission to prosecute their common law claims in the
only court which they believe has subject matter jurisdiction
those claims, namely the New York State court.
However, analysis of the Circuit Court's opinion indicates
that it did not dismiss any of the Plaintiffs' claims and
instead explicitly upheld this Court's jurisdiction to
At the outset of its jurisdiction discussion, the Court of
Appeals summarized its decision, stating
[W]e conclude that there is neither diversity
jurisdiction nor federal question jurisdiction
under the provisions relied on by plaintiffs. We
are persuaded, however, that the district court
had ancillary equitable jurisdiction to entertain
922 F.2d at 68. The court proceeded to clarify that
"plaintiffs' claim is that S & C committed common-law fraud."
Id. at 69.
After dismissing diversity and federal question as the basis
for jurisdiction, the court again stated
Notwithstanding the absence of federal question
jurisdiction and the apparent absence of
diversity, however, we concluded for the reasons
below that the court had ancillary equitable
jurisdiction to entertain an attack on the
Cresswell I judgment.
Following an explanation of the origins of this type of
jurisdiction, the court, finding that "[a]ncillary jurisdiction
is sufficiently flexible that the action may be maintained
against a person who was not a party to the original action,"
id., concluded that "the district court had ancillary equitable
jurisdiction over the present claims against S & C." Id.
Thus, the Circuit Court held that this Court "had . . .
jurisdiction to entertain the action," an action in which
"plaintiffs' claim is that S & C committed common-law fraud,"
which represented "an attack on the Cresswell I judgment." Far
from dismissing any of the Plaintiffs' claims, the Court of
Appeals explicitly held that there was jurisdiction over the
Plaintiffs' "present claims." There is simply no support in the
opinion for the Plaintiffs' contention that in speaking of the
"present claims against S & C" the Court of Appeals meant to
refer to anything but the claims pled in the Cresswell II
complaint. Therefore there is federal jurisdiction over the
Cresswell II claims.
2. In Holding That Equitable Standards Would Govern the
Plaintiffs' Fraud Claim, the Court of Appeals Implied
that the Claim Was Federal in Nature.
Significantly, the Circuit Court did not merely hold that
this Court would have had equitable ancillary jurisdiction if
the Plaintiffs' had chosen to frame their fraud claim in
equity, but rather determined that there was jurisdiction over
the claim as it had been pled. Moreover, after expressly
acknowledging that the claim was for common-law fraud, the
Circuit Court stated that
Considering this issue solely as a matter of law,
we would concluded that the district court did not
err in [finding no reliance as a matter of law.]
As indicated . . . above, however, the present
action is not an action at law, but is one