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GREENBERG v. BEAR STEARNS & CO.

January 22, 2000

HOWARD GREENBERG, PLAINTIFF,
V.
BEAR STEARNS & CO., INC., AND BEAR STEARNS SECURITIES CORP., DEFENDANTS. ROBERT LEVITT FOR HIMSELF AND AS CUSTODIAN FOR RICHARD LEVITT AND MONICA LEVITT, ROBERT RICE, STEPHEN G. SIBEN, STEPHEN STROBEHN, STANLEY VELTKAMP, PHILIP C. VITANZA FOR HIMSELF AND ELIZABETH VITANZA AND LUKE VITANZA, JOHN T. WHITE, GUY V. WOOD, CARL ZANDER, JR., AND TED M. AND KATHRYN N. JONES, AS TRUSTEES, PLAINTIFFS, V. BEAR STEARNS & CO., INC., AND BEAR STEARNS SECURITIES CORP., DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

On January 19, 1999, Howard Greenberg filed a class action on behalf of purchasers of ML Direct stock against Bear Stearns in the United States District Court, Southern District of New York, Greenberg v. Bear Stearns (No. 99 CIV 359[JSM]). On February 9, 1999, additional plaintiffs, in an action entitled Robert Levitt, et al. v. Bear Stearns (No. 99 CIV 1115[JSM]), filed a second action for the same class in the United States District Court, Southern District of New York. The Greenberg and Levitt plaintiffs are both represented by the Morley & Trager law firm. On March 1, 1999, the Greenberg and Levitt plaintiffs moved in the Southern District to be appointed lead plaintiffs for the class of all persons who purchased ML Direct stock or warrants through Sterling Foster during the period of September 4, 1996 through December 31, 1996 (the "Class Period").

Prior to a decision being rendered by the Honorable John S. Martin, Jr., the plaintiffs in the In Re Sterling Foster multi district litigation (97 CV 189[ADS]), moved to transfer the Greenberg and Levitt cases to this Court. The Judicial Panel for Multi District Litigation entered an order effective April 6, 1999 granting the motion to transfer the actions entitled Greenberg v. Bear Stearns (No. 99 CIV 359[JSM]) and Robert Levitt, et al. v. Bear Stearns (No. 99 CIV 1115[JSM]) to this Court. In addition, the cases were given new civil action numbers as reflected in the caption above. Due to the transfer, Greenberg and Levitt's motion for lead plaintiffs was never decided and is now pending before this Court. Also pending before the Court are the motions filed by defendant Bear Stearns to dismiss the Greenberg and Levitt complaints.

I. DISCUSSION

A. The Motion to Dismiss the Greenberg Complaint

On May 13, 1997, prior to Greenberg filing his class action complaint in the United States District Court, Southern District of New York, a Statement of Claim was filed by Greenberg against Bear Stearns in a National Association of Securities Dealers ("NASD") Arbitration alleging the same fraudulent scheme involving ML Direct and Bear Stearns. On March 9, 1999, the NASD arbitration panel dismissed Greenberg's Claim against Bear Stearns.

In Greenberg's opposition to Bear Stearns' motion to dismiss it is stated:

Defendant Bear Stearns has made a motion in the Greenberg case to dismiss the class action brought by Greenberg on the ground that Greenberg cannot be a class representative until the arbitration award dismissing his claim is vacated. Plaintiff agrees and asks that this Court defer consideration of the motion with respect to the Greenberg class action until a determination has been made with respect to the motion to vacate. The motion to vacate has been fully briefed and has been submitted to the Honorable John S. Martin in April, 1999. . . . Thus, once the arbitration award is vacated, Greenberg will then be entitled to pursue his class action remedies.

On August 23, 1999, Judge Martin denied Greenberg's motion to vacate the arbitral award and affirmed the decision of the arbitration panel dismissing the complaint. See Greenberg v. Bear Stearns & Co., Inc., 99 CV 359(JSM), 1999 WL 642859 (S.D.N.Y. Aug. 23, 1999). Judge Martin found that the arbitral panel's decision did not "reflect a manifest disregard of the evidence or the law." Id. at * 2.

It is well settled that the doctrine of res judicata precludes a party from re-litigating issues that have been previously decided. Maharaj v. Bankamerica Corp., 128 F.3d 94, 97 (2d Cir. 1997) (citing Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 101 S.Ct. 2424 [1981]) (other citations omitted). A decision by an arbitrator is "as binding and conclusive under the doctrine of res judicata and estoppel as the judgment of a court." Katz v. Financial Clearing & Servs. Corp., 794 F. Supp. 88, 94 (S.D.N.Y. 1992); American Renaissance Lines, Inc. v. Saxis S.S. Co., 502 F.2d 674, 679 (2d Cir. 1974).

The unsuccessful claims presented by Greenberg to the arbitration panel do not differ in any respect to the claims presently before this Court. Accordingly Bear Stearns' motion to dismiss the Greenberg complaint must be granted on the ground of res judicata.

B. The Motion to Dismiss the Levitt Complaint

One of the principal arguments in Bear Stearns' motion to dismiss the Levitt complaint is that it is barred by the applicable statute of limitations. As a similar argument was made in a motion filed on December 20, 1999 on behalf of Bear Steams in the Rogers v. Sterling Foster & Co., Inc. et al., 97 CV 189(ADS) multi district litigation, the Court will hear oral argument on the motion to dismiss the Levitt complaint simultaneously with the numerous motions to dismiss already filed and to be filed in the near future with respect to the multi district litigation. Accordingly, the motion to dismiss the Levitt complaint is denied with leave to renew after the Court ...


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