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SIDERPALI, S.P.A. v. JUDAL INDUS.

September 29, 1993

SIDERPALI, S.P.A. and CONIPOST POSTES METALICOS E ACESSORIOS LTDA., Plaintiffs,
v.
JUDAL INDUSTRIES, INC., ALAN SCHREER and NETUMAR LINES, Defendants.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 This action arises out of a contractual relationship between Conipost Postes Metalicos E Acessorios Ltda. ("Conipost") and Judal Industries, Inc. ("Judal"), whereby Conipost agreed to produce and sell to Judal steel shafts for use as light poles. In an order dated September 4, 1992, this Court granted plaintiffs partial summary judgment against Judal for breach of contract and conversion, and held that plaintiffs may recover the sum of $ 80,000.00 pursuant to either (but not both) of these claims. Plaintiffs now move for an order directing entry of partial judgment in their favor in the sum of $ 80,000.00, and for sanctions against Judal. Defendants Judal and Alan Schreer ("Schreer") (collectively, the "Judal Defendants") move to dismiss plaintiffs' causes of action sounding in fraud (the first and fourth counts of the Amended Complaint). Plaintiffs cross-move for sanctions and request that summary judgment be granted in their favor on the fraud claims. Plaintiffs also move for summary judgment dismissing Judal's remaining counterclaims. Defendant Netumar Lines ("Netumar") moves for summary judgment dismissing Judal's cross-claims against it and for sanctions. Finally, Judal cross-moves for partial summary judgment against Netumar and for sanctions.

 BACKGROUND1

 Conipost is a manufacturer of metal products, including steel shafts for use as posts in street and highway lighting. Plaintiff Siderpali, S.P.A. ("Siderpali") is an Italian corporation that owns Conipost and served as Conipost's financier during the relevant time period. Judal is a manufacturer, vendor and distributor of street lighting equipment and accessories. Judal Sales Corp. ("Judal Sales") is a New York corporation that functions as the sales and negotiator of contracts for Judal. Defendant Schreer is president and part owner of Judal. Defendant Netumar is an ocean common carrier that transports cargo between ports in Brazil and the United States.

 In May, 1989, Judal and Conipost entered into a contract whereby Conipost agreed to produce and sell to Judal steel shafts for use as light poles. Judal, in turn, entered into a contract to supply the light poles to the City of New York. Pursuant to the contract between Conipost and Judal, the purchase price of the poles was $ 169,504.00. Of that amount, Judal paid $ 70,000.00 in cash to a New York bank prior to delivery. The balance, $ 99,504.00, was to be paid by letter of credit obtained at Sunkyong Bank by Judal ("Letter of Credit") for the benefit of Conipost. In addition, as security for Judal's cash payment, plaintiff Siderpali agreed to post a standby letter of credit ("Standby Letter"), issued by Banca Commerciale in Bologna, Italy, in the amount of $ 80,000.00. The Standby Letter stated that the sum of $ 80,000.00 would be available to Judal upon presentation of "[a] statement duly signed by an authorized officer of your company . . . certifying that Conipost Ltda . . . has failed to deliver to yourselves within September 15, 1989" the light poles.

 On September 7, 1989, Schreer made a demand on the Standby Letter. In his demand letter, Schreer stated:

 
The terms of the credit call for a statement from an authorized officer of Judal to certify that Conipost . . . has failed to deliver the goods, encompassed within the credit, within the September 15, 1989 final date.
 
I therefore state that the goods . . . have not been delivered.

 In reliance upon Schreer's letter, Banca Commerciale made a payment on the Standby Letter to Judal in the amount of $ 80,000.00.

 On September 13, 1989, Conipost placed the goods in the possession of Netumar in Santos, Brazil. Soon thereafter, Netumar issued a negotiable order bill of lading ("Bill of Lading") to Judal, which on its face entitled Judal to take possession of the six containers of light poles. Conipost was subsequently paid on the Letter of Credit in the amount of $ 99,500.00. The goods arrived at the New York port in and around October 27, 1989.

 On October 30, 1989, Judal claims that its agent engaged trucks and drivers to pick up the containers, and hired cranes and operators to unload the cargo at its warehouse. Affidavit of Alan Schreer, sworn to on June 27, 1990 ("Schreer Aff."), P 3. Despite Judal's presentation of the Bill of Lading, however, Netumar refused to release the cargo, claiming that it had been notified by Conipost that a fraud had been committed by Judal, and that the cargo should therefore be delivered to Conipost instead. Judal contends that, thereafter, on November 1, 1989, Netumar allowed Judal to pick up only one container. Affidavit of Karen M. Kim, sworn to on June 27, 1990 ("Kim Aff."), P 4.

 This action commenced in and around November 1, 1989, when plaintiffs brought an order to show cause seeking a temporary restraining order preventing Netumar from delivering the containers of cargo to Judal. The Court denied plaintiffs' motion for a temporary restraining order, and thereafter, on November 8 and 9, 1989, Netumar released the remaining containers to Judal.

 In its Amended Complaint, plaintiffs allege four causes of action against the Judal Defendants. *fn2" The first and fourth causes of action allege fraud against Judal and Schreer respectively, in calling upon the Standby Letter. The second and third causes of action allege conversion and breach of contract against Judal. By Order dated September 4, 1992 (the "September Order"), this Court accepted Magistrate Judge Gershon's Reports and Recommendations *fn3" granting summary judgment to plaintiffs on their breach of contract and conversion claims (counts two and three of the Amended Complaint). The Court also adopted that portion of the Magistrate Judge's report (1) dismissing the complaint against Judal Sales Corp.; (2) denying Schreer's motion to dismiss the fourth cause of action on the ground that he was protected by the corporate shield doctrine; and (3) denying Judal's motion to dismiss the fraud claim against it.

 The Judal Defendants answered the amended complaint on January 4, 1990, and Judal asserted three counterclaims against plaintiffs. The first counterclaim alleges that Conipost breached its contract with Judal by (1) failing to pack the steel shafts in accordance with New York City Department of Transportation ("D.O.T.") specifications; (2) failing to place metal manufacturer labels on the light poles; and (3) improperly spacing drill holes. *fn4" The second and third counterclaims allege that Conipost's breach caused Judal loss of business and business reputation, and that Conipost's attempt to have Netumar withhold delivery of the light poles caused Judal damages. The second counterclaim was dismissed by order dated May 17, 1991.

 In its answer, Judal also asserts one cross-claim against defendant Netumar. This cross-claim alleges that Netumar's refusal to release the goods to Judal on October 30, 1989 was improper and illegal, causing Judal damages in the sum of $ 10,324.00 for the payments Judal was required to make for trucks, cranes, operators and demurrage charges.

 Defendants Judal and Schreer now move to dismiss plaintiffs' first and fourth causes of action. In response, plaintiffs: (1) cross-move for sanctions; (2) request summary judgment on the first and fourth causes of action; and (3) cross-move for summary judgment dismissing Judal's remaining counterclaims. Plaintiffs also move for an order directing the entry of partial judgment on their breach of contract and conversion claims in the amount of $ 80,000.00, and for sanctions. Defendant Netumar moves for summary judgment dismissing Judal's cross-claim and for sanctions, and Judal cross-moves for summary judgment and for sanctions against Netumar. The Court will consider each of these motions in turn.

 Discussion

 I. The Fraud Causes of Action

 The Judal Defendants move, pursuant to Federal Rule of Civil Procedure 12(c), to dismiss plaintiffs' first and fourth causes of action on the ground that the fraud alleged in the Amended Complaint arises out of the same facts for which plaintiffs have already obtained judgment for breach of contract. Alternatively, Judal and Schreer argue that plaintiffs have elected their remedies in proceeding to judgment on the third cause of action, thereby barring judgment on the first and fourth causes of action. Plaintiffs oppose this motion and cross-move for sanctions on the ground that this Court, by Order dated September 4, 1992, previously had denied the Judal Defendants' motion to dismiss the fraud claims for the precise reasons reargued by Judal herein. Plaintiffs also request summary judgment on their fraud claims. For the reasons set forth below, the Court denies defendants' motion to dismiss, grants plaintiffs' motion for sanctions, and denies plaintiffs' request for summary judgment.

 A. The Judal Defendants' Motion To Dismiss

 The Court is free to modify its own pretrial rulings at any time prior to entering final judgment. Wilder v. Bernstein, 645 F. Supp. 1292, 1310 (S.D.N.Y. 1986), aff'd, 848 F.2d 1338 (2d Cir. 1988). However, the "law of the case" doctrine counsels against re-opening issues previously decided absent compelling circumstances, such as an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice. Id. Thus, a judicial determination at one stage of a proceeding becomes the "law of the case" to be followed in successive stages of the same litigation, ensuring "the orderly progress of court proceedings." Crown Zellerbach Corp. v. Goldsmith, 609 F. Supp. 187, 189 (S.D.N.Y. 1985). As the Second Circuit has indicated, "where litigants have once battled for the court's decision, they should neither be required, nor without good reason permitted, to battle for it again." Zdanok v. Glidden Co., Durkee Famous Foods Div., 327 F.2d 944, 953 (2d Cir. 1964), cert. denied, 377 U.S. 934, 12 L. Ed. 2d 298, 84 S. Ct. 1338 (1964).

 
even if Judal Industries, Inc. had no contractual obligation to act in accordance with the parties' agreement, its act in making allegedly false statements to the bank to obtain plaintiffs' money would be actionable in tort. In contrast, in Edwil, upon which defendant relies, there was no obligation of truthfulness absent the contract.

 RRII at 10. The Court sees no reason to disturb the Magistrate Judge's ruling, which was adopted by the Court on September 4, 1992, as Judal and Schreer fail to cite either new grounds or new law in their support. *fn5"

 Moreover, although defendant Schreer did not previously assert a motion to dismiss the fraud count on the grounds raised by Judal, the Court finds that the Magistrate Judge's reason for rejecting Judal's argument applies equally well to Schreer. The Judal Defendants' fraudulent conduct created actionable causes of action separate and apart from plaintiffs' claim against Judal for breach of contract. Accordingly, the Judal Defendants' motion to dismiss the first and fourth causes of action on the ground that the fraud charged relates to a breach of contract is denied.

 Judal and Schreer next move to dismiss the fraud counts on the ground that the plaintiffs have elected their remedies by obtaining judgment for breach of contract and conversion. Magistrate Judge Gershon previously addressed a similar contention, namely, whether plaintiffs could seek recovery for both breach of contract and conversion. See RRII at 7-8. Judge Gershon found that, although plaintiffs had been granted summary judgment on the breach of contract claim, this did not warrant dismissal of their conversion claim. Id. As the Magistrate Judge noted, "that plaintiffs joined different theories of recovery relating to the same injury does not present an election of remedies problem." Id.

 Similarly, plaintiffs are free to pursue their fraud causes of action despite the fact that they have already been granted summary judgment for breach of contract and conversion. However, should plaintiffs successfully prove fraud against the defendants, they will be limited to one recovery, as they may not recover for the same wrong twice. Acorn Structures, Inc. v. Swantz, 846 F.2d 923, 926 (4th Cir. 1988). Nonetheless, if plaintiffs succeed on the fourth cause of action, Schreer will be found jointly and severally liable for the $ 80,000.00 judgment, thus affording plaintiffs an opportunity to obtain recovery from an additional party. Moreover, should defendant Judal be found liable for fraud, plaintiffs may recover an additional $ 240,000.00 in punitive and exemplary damages. Accordingly, the Judal Defendants' motion to dismiss the first and fourth causes of action is denied.

 B. Plaintiffs' Motion For Sanctions

 Plaintiffs move for sanctions, pursuant to Federal Rule of Civil Procedure 11 and 28 U.S.C. ยง 1927, arguing that the Judal Defendants' motion to dismiss the first and fourth causes of action is a mere repetition of their January 20, 1992 motion to dismiss the same counts, which was denied by Magistrate Judge Gershon's RRII and this Court's ...


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