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WEINSTOCK v. CLEARY

March 8, 1993

ISRAEL WEINSTOCK, et al., Plaintiffs,
v.
CLEARY, GOTTLIEB, STEEN & HAMILTON, et al., Defendants.



The opinion of the court was delivered by: LORETTA A. PRESKA

 Loretta A. Preska, U.S.D.J.

 Defendant Cleary, Gottlieb, Steen & Hamilton ("Cleary") moves to dismiss the amended complaint on three grounds: (1) the order of another court bars plaintiffs from proceeding on their claims in this action; (2) for reasons of judicial administration, this Court should decline to exercise its jurisdiction in deference to concurrent state proceedings; and (3) plaintiffs fail to state a federal claim, and the Court should not exercise jurisdiction over the pendent state law claims. For the reasons stated below, Cleary's motion is granted and the amended complaint is dismissed.

 BACKGROUND

 This action concerns the relationships among several parties involved in numerous transactions and lawsuits, some of which predate this action by over a decade. Apparent from the eighty-page amended complaint and the fervor with which the parties argue their positions, many of the parties share great enmity for each other; as might be expected, a tale of some interest lies behind this dispute.

 The central figure in this action is plaintiff, Israel Weinstock ("Weinstock"). *fn1" In the early 1980's, Weinstock, an attorney, represented Realty Corp. in an action, 4200 Ave. K Realty Corp. v. 4200 Realty Corp., No. 7604/80 (N.Y. Sup. Ct. Kings County) (the "specific performance action"), seeking specific performance of a contract involving the purchase of two Brooklyn properties (the "Brooklyn properties"). In December 1984, Jack Walker ("Walker"), a defendant herein and allegedly the sole owner of Realty Corp. at the time, *fn2" allegedly transferred 20% of the stock of Realty Corp. to Weinstock in exchange for Weinstock's continued representation of Realty Corp. in the specific performance action.

 Walker allegedly transferred the other 80% of the stock of Realty Corp. to Weinstock and JB Trading in February 1985. Walker allegedly made this transfer in connection with the settlement of an action brought by Walker against Weinstock, Walker v. Weinstock, No. 15210/84 (N.Y. Sup. Ct. Nassau County) (the "Nassau County action"). The Nassau County action concerned allegations by Walker that Weinstock had acted improperly while representing Walker in connection with the purchase of property in Nassau County. In consideration for 80% of the stock of Realty Corp. and Walker's stipulation to the dismissal of the Nassau County action with prejudice, *fn3" Weinstock allegedly waived any claims he held against Walker for defamation and the like arising out of the Nassau County action.

 In September 1986, Walker, Handler, and the Yeshiva instituted suit against Weinstock and JB Trading, Walker v. Weinstock, No. 27600/86 (N.Y. Sup. Ct. Kings County) (the "Kings County action"), in which they sought, inter alia, a declaration that they owned 100% of Realty Corp. Cleary represented Handler and the Yeshiva in the Kings County action, *fn4" and Schlam Stone & Dolan, a defendant herein, represented Walker.

 Also in September 1986, Realty Corp. received an appellate ruling in its favor in the specific performance action. 4200 Ave. K Realty Corp. v. 4200 Realty Co., 506 N.Y.S.2d 723 (2d Dep't 1986). By this time, however, Weinstock, who remained counsel for Realty Corp. in the specific performance action, had become seriously ill and was unable to conduct his affairs. As a consequence of Weinstock's illness, Cleary was substituted as counsel for Realty Corp. in the specific performance action. *fn5"

 Weinstock's claims against Cleary in the instant action arise in large part out of a letter dated October 21, 1986 from George Weisz ("Weisz") a partner at Cleary, to Toby Stone, an associate of Weinstock, setting out a four-point agreement between Cleary and Weinstock (the "substitution agreement"). *fn6" As described below, Weinstock alleges in this action that Cleary has failed to comply with the terms of the substitution agreement.

 Following the substitution of Cleary as counsel for Realty Corp., Realty Corp. allegedly refinanced the Brooklyn properties in November 1987 on the basis of a falsified loan application to First Nationwide Bank, a defendant herein. The loan application allegedly was false because, inter alia, defendants Samuel Roth and Rita Handler stated that they owned 100% of the stock of Realty Corp. Handler allegedly appropriated a portion of the loan proceeds thus acquired to pay fees owed Cleary. In addition, Realty Corp. allegedly transferred title to the Brooklyn properties in December 1987 to 4200 Avenue K Associates ("Associates"), a limited partnership also a defendant herein.

 Weinstock appears only to have recovered sufficiently from his illness to protect his interests in or around February 1988 when he wrote to Cleary inquiring as to the Brooklyn properties. Weinstock and Cleary then embarked upon an exchange of correspondence concerning the Brooklyn properties and Weinstock's contention that Cleary owed him a fiduciary obligation in regard to the Brooklyn properties arising out of the substitution agreement. Put mildly, the correspondence reflects diametrically opposed views as to whether Cleary met its obligations under the substitution agreement; unsurprisingly, the conflict between Weinstock and Cleary as represented in the correspondence appears to take root in the Kings County action and the question of who owns Realty Corp.

 The Kings County action in fact appears to have become revitalized with Weinstock's return to his affairs. In January 1988, Weinstock answered the complaint and asserted six counterclaims, three relating directly to Weinstock's alleged interest in Realty Corp. and the Brooklyn properties. *fn7" In May 1988, approximately two months after Weinstock warned Cleary that he might take legal action in connection with the content of their correspondence described above, Weinstock and JB Trading sought a temporary restraining order in the Kings County action seeking, inter alia, to enjoin Walker, Handler, and the Yeshiva from taking any action affecting Realty Corp. or the Brooklyn properties and to enjoin Cleary from representing Realty Corp. The motion was denied in all respects with prejudice in October 1988.

 In February 1990, an order issued in the Kings county action denying with prejudice a motion by Weinstock and JB Trading seeking an accounting but referring to a referee the issue of whether Weinstock owns 20% of Realty Corp. In June 1990, a motion by Weinstock and JB Trading seeking reargument of their motion for an accounting was denied. At about this time, Weinstock and JB Trading amended their answer in the Kings County action. The amended ...


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