The opinion of the court was delivered by: SOTOMAYOR
SONIA SOTOMAYOR, U.S.D.J.
Defendants Hans Homburger ("Homburger"), Myna Homburger, Robin Nelson Wolfe ("Wolfe"), and the law firm of Kantor, Davidoff, Wolfe, Rabbino & Kass ("Kantor") (collectively, "the Homburger Defendants") move to dismiss the claims brought against them by plaintiff Lazar Levitin ("Levitin") pursuant to Fed. R. Civ. P. 8, 9, 12(b) and 19. Defendant Joseph Castellano ("Castellano") has filed a separate motion to dismiss, and moves in the alternative for summary judgment pursuant to Fed. R. Civ. P. 56.
Also before me are plaintiff's motions to amend his complaint and to disqualify the Homburger Defendants' counsel, and a motion by the Homburger Defendants to impose Rule 11 sanctions against plaintiff.
For the reasons discussed below, the Homburger Defendants' motion to dismiss is GRANTED, Castellano's motion for summary judgment is GRANTED, plaintiff's motions to amend his Complaint and to disqualify defendants' counsel are DENIED, and the Homburger Defendants' motion for Rule 11 sanctions is DENIED.
I begin with a recitation of events in state court, where this litigation began twelve years ago. The following summary is drawn largely from the record in the state court, of which I take judicial notice.
At issue is a partnership gone disastrously sour. In 1980, Levitin and Homburger formed a limited partnership, Ocean Parkway Medical Building ("OPMB"), under a written partnership agreement in which Levitin became the sole general partner and Homburger the sole limited partner. Levitin owned 79% of the partnership and Homburger the remaining 21%. OPMB's principal asset was a long-term lease on a medical office building in Brooklyn.
In May 1984, Homburger filed a lawsuit in New York Supreme Court against Levitin and OPMB, alleging that Levitin had breached the partnership agreement by, inter alia, converting partnership assets. Homburger sought an accounting and damages.
Levitin, who was represented by an attorney during this part of the litigation, failed for two years to comply with court orders to produce certain documents. In an Order entered on September 11, 1986, the court granted Homburger's third request for a default judgment against Levitin and ordered that Levitin's answer be stricken. In addition to adjudicating Homburger's legal claims, the Order reorganized the partnership. It removed Levitin as general partner and permanently enjoined him from playing any role in the management of OPMB. It installed Homburger as general partner of OPMB and stated that he was entitled to an accounting, damages and costs. It appointed Salvatore DeMatteo, a retired Justice of New York's Appellate Division, as Referee to conduct the accounting and to quantify the damages owed to Homburger. It also provided that when the accounting was complete, Homburger could move for a money judgment against Levitin. Finally, the Order permitted either partner to dissolve the partnership upon application to the court.
Levitin, represented by new counsel, appealed the Order to the Appellate Division, Second Department. On May 26, 1987, the Appellate Division unanimously affirmed the judgment and denied the appeal, observing that Levitin's conduct had been "deliberately dilatory, evasive and obstructive" as well as "willful and contumacious," and that the trial court had properly exercised its discretion.
While the appeal was pending, Homburger filed an application in state court seeking an inquest on damages and a substitution of counsel for the partnership. OPMB had been represented by Levitin's attorneys, and Homburger wanted to replace them with his own counsel, Kantor (the defendant law firm in this case). In an Affidavit filed with his motion to substitute counsel, Homburger anticipated that Levitin would oppose the motion on the ground of conflict of interest. Although Homburger conceded that he, represented by Kantor, had sued both Levitin and OPMB, he maintained that OPMB was merely a nominal defendant and that he was seeking relief only against Levitin; therefore his attorneys, if substituted, would not be representing adverse parties. Levitin opposed Homburger's motion to substitute Kantor as counsel for OPMB but the court permitted the substitution on January 28, 1987, and postponed scheduling an inquest pending Justice DeMatteo's completion of the accounting.
In the ensuing months, Levitin provided enough financial information to render the accounting unnecessary. By Order entered on July 14, 1987, the court vacated its appointment of Justice DeMatteo as Referee and scheduled an inquest for October 13, 1987.
The inquest, at which Levitin was represented by new counsel, lasted 12 days and featured testimony from both parties about their financial transactions with the partnership. Ruling from the bench on November 5, 1987, Justice Gerald Held described Levitin's testimony as "rampant with contrivance and connivance," stated that Levitin was "totally unworthy of belief," found that Levitin had "used the monies of the partnership as his own personal account and created his own private fiefdom," and concluded that he had converted $ 314,500 in partnership assets. The judge determined that Homburger was entitled to receive 21% of the converted funds, proportional to his partnership interest, and an additional $ 20,000 which Homburger had been fraudulently induced to invest in the partnership plus interest, for a total sum of $ 112,651. Judge Held further ordered that if OPMB's assets were ever sold, Homburger was entitled to recover an additional $ 65,000 he had loaned to the partnership.
On December 1, 1987, the court entered a judgment in favor of Homburger in the amount of $ 112,651. Levitin appealed the judgment to New York's Appellate Division, Second Department. This appeal, too, was denied by a unanimous court on June 3, 1988.
Levitin, proceeding pro se, filed an answer and an amended answer to Homburger's petition in which he asserted many of the claims he now raises before me. In his amended answer, Levitin claimed that (1) Homburger had violated the partnership agreement by failing to provide him with an accounting of OPMB's cash flow, (2) Justice Held had been improperly assigned to the case because of "illegal fabrications" on the part of Homburger's attorneys, (3) OPMB had ample cash flow to satisfy the judgment against Levitin, (4) OPMB's cash flow was less than it should have been because Homburger had allowed some office space to remain vacant, and (5) Homburger had converted partnership assets. Homburger replied, inter alia, that he had been unable to prepare an accounting for the partnership because Levitin had refused to provide him with needed financial documents, despite court orders to do so.
Justice Barry Hurowitz entered judgment in favor of Homburger on March 4, 1988. The judge ordered that Levitin's partnership interest be sold in compliance with CPLR § 5233
and appointed Justice DeMatteo as Receiver for the purpose of conducting the sale.
Levitin received actual notice of Justice Hurowitz's Order by service of process on two separate occasions, June 2 and June 21, 1988. Consistent with CPLR § 5233(b), Homburger published notice of the sale in The New York Times on June 21 and June 23, 1988. The advertisement stated that Levitin's partnership interest would be sold on June 29, 1988, at 11 a.m., on the front steps of the Supreme Court, Kings County. Thus, Levitin received constructive notice of the date and time of sale.
The following account of the sale is taken from a declaration provided by Wolfe, Homburger's attorney, as part of defendants' motion to dismiss. Levitin does not dispute that the following events occurred as described, although he challenges the motives of the parties. At 11 a.m. on June 29, 1988, on the front steps of the Supreme Court, Kings County, Justice DeMatteo opened the bidding on Levitin's interest in OPMB. The sale was attended only by Homburger, his wife, Myna Homburger, and Wolfe. Myna Homburger bid $ 500. There were no other bids. (Decl. of Robin Nelson Wolfe P 24.) Myna Homburger "paid the $ 500.00 then and there in cash to Justice DeMatteo, who delivered the sum to Hans [Homburger]." (Id.) Homburger then executed a receipt for the sum and agreed to pay Justice DeMatteo a fee of $ 500. (Id.) "That fee was paid by Hans to Justice DeMatteo there and then by check." (Id.)
On the same day, Justice DeMatteo executed a Receiver's Bill of Sale and Certification, which was filed with the Kings County Clerk on July 7, 1988, thus providing Levitin with constructive notice that his interest in OPMB had been sold. (Id. P 25.)
Defendant Castellano was an officer of Dependable Hearing Aid Services Corporation ("Dependable"), a longtime tenant in the OPMB building. In September 1988, Dependable rented additional space in the building and, according to Castellano, agreed to spend $ 220,000 to $ 250,000 to renovate the space in exchange for a reduced rent.
Levitin alleges that Castellano's $ 250,000 expenditure was actually a bribe paid to Homburger "under the table" to obtain additional space for a "fraction of its market value." (Cmpl. P 38.) Levitin contends that this deal between Homburger and Castellano defrauded the partnership and cost Levitin $ 1.5 million. (Id. at 41-42.)
Plaintiff's Causes of Action
Levitin filed the instant Complaint on April 15, 1994. At the time, he had not satisfied the state judgment. The Complaint is premised on Levitin's contention that the sale should never have taken place because by the time it occurred, Levitin owed nothing to Homburger. (Cmpl. PP 79, 91; Pl.'s Decl. in Opp. to Motions to Dismiss P 26 [hereinafter, Pl.'s Decl.]) Various acts of fraud and conspiracy allegedly surrounded the sale. Levitin claims that he did not know of the sale until 1993 (Cmpl. P 69), that the price paid at auction was grossly inadequate, (Cmpl. P 70), and that the sale was tainted by procedural irregularities. (Cmpl. PP 86, 87; Pl.'s Decl. PP 7-32.)
Specifically, the Complaint asserts six causes of action:
1) Constructive fraud and conspiracy by Homburger and Castellano in executing their sublease agreement, which deprived Levitin of the fair value of his partnership interest. Levitin requests $ 1.5 million plus punitive damages.
2) Constructive fraud and conspiracy by the Homburger Defendants in arranging a secret sale of Levitin's partnership interest at public auction for $ 500. Levitin, who places the value of his partnership interest at $ 2 million, requests $ 2 million in actual damages and $ 10 million in lost opportunities damages, plus ...