allegation of the required egregious tortious conduct. See Rocanova v.
Equitable Life Assurance Society of the United States, 83 N.Y.2d 603,
613, 612 N.Y.S.2d 339, 342-43, 634 N.E.2d 940 (1994). Although the court
granted the motion to dismiss, it denied a motion for summary judgment on
Plaintiffs first cause of action without prejudice to renewal upon the
completion of discovery.
IV. The Complaint
Plaintiffs complaint in this court alleges seven causes of action
against Allstate. The first cause of action states that the DJ Action was
"not authorized in accordance with New York law" and is "void ab initio."
Plaintiff supports his argument as to the invalidity of the DJ Action
with the allegation that the action was commenced by a "renegade Allstate
outside lawyer and aided and abetted by Allstate employees." Plaintiff
concludes that the DJ Action was commenced at the behest of "low level
corporate employees" who could not commence a lawsuit on behalf of a
Plaintiffs second cause of action in this court alleges that Allstate
breached its obligations under the Policies by failing to defend
Plaintiff in the action commenced by the Buyers. The third cause of
action alleges a breach of Allstate's duties of good faith and fair
dealing and the company's failure to assist its policyholder. Plaintiffs
fourth cause of action alleges Allstate's failure to supervise its
employees and states that institution of the DJ Action constitutes a
"public harm and a burden on the judicial system generally."
Plaintiffs fifth, sixth and seventh causes of action allege that
Allstate is guilty of spoliation of evidence, has failed to maintain
proper records and improperly covered up its early decision to deny
Plaintiff coverage in the action commenced by the Buyers. Finally,
Plaintiff alleges a New York State Law deceptive business practices
action pursuant to section 349 of the New York State General Business Law
V. The Motion to Dismiss
Defendant moves to dismiss the complaint in its entirety. Dismissal is
sought on the grounds of res judicata, collateral estoppel and the
Rooker-Feldman doctrine, see Rooker v. Fidelity Trust Co., 263 U.S. 413,
44 S.Ct. 149, 68 L.Ed. 362 (1923); District of Columbia Court of Appeals
v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).
Defendant also seeks to have this court abstain from exercising
jurisdiction over the issue of the parties' rights under the Policies in
favor of the pending state court proceedings. Finally, Defendant argues
that Plaintiffs complaint fails to state a claim pursuant to Section
I. Legal Principles
A. Motions To Dismiss
Defendants' motions are made in the context of a motion to dismiss
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. A
motion to dismiss is properly granted only if "it appears beyond doubt
that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief." Conley v. Gibson, 355 U.S. 41,
45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Harsco Corp. v. Segui,
91 F.3d 337, 341 (2d Cir. 1996); Berneim v. Litt, 79 F.3d 318, 321 (2d
When considering a motion to dismiss for failure to state a claim, the
court can consider the facts as set forth in the complaint, documents
attached thereto and those incorporated in the complaint by reference.
Stuto v. Fleishman, 164 F.3d 820, 826 n. 1 (2d Cir. 1999); Kramer v.
Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991). Such consideration
includes documents of which plaintiff had notice "and which were integral
to their claim . . . even though those documents were not incorporated
into the complaint by reference." Brass v. American Film Technologies,
Inc., 987 F.2d 142, 150 (2d Cir. 1993); Cortec Indus. v. Sum Holding
L.P., 949 F.2d 42, 48 (2d Cir. 1991).
B. Res Judicata and Collateral Estoppel: General Principles
Under the Full Faith and Credit Clause of the Constitution, a federal
court is required to give the same preclusive effect to a state court
judgment as would be given under the law of the State in which the
judgment was rendered. Migra v. Warren City School Dist., 465 U.S. 75,
81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); Johnson v. Watkins, 101 F.3d 792,
794 (2d Cir. 1996). Accordingly, the court must consider the law of the
State of New York when determining the preclusive effect of the prior
Under New York law, application of the principle of res judicata bars
relitigation of a claim actually raised as well as a claim that might
have been raised in a prior proceeding. New York courts hold that where
claims arise from the same "`factual grouping' they are deemed to be part
of the same cause of action and a later claim will be barred without
regard to whether it is based upon different legal theories or seeks
different or additional relief." Davidson v. Capuano, 792 F.2d 275, 278
(2d Cir. 1986), citing, Smith v. Russell Sage College, 54 N.Y.2d 185,
192-93, 445 N.Y.S.2d 68, 429 N.E.2d 746 (1981). Thus, res judicata bars
re-litigation of claims actually raised in a prior proceeding as well as
those that could have been litigated. Quartararo v. Catterson,
917 F. Supp. 919, 944 (E.D.N.Y. 1996).
Under New York law, collateral estoppel, also known as issue
preclusion, will preclude re-litigation of an issue, if the issue sought
to be precluded is identical to the issue in the first proceeding and is
one which has necessarily been decided in the earlier proceeding in the
context of a full and fair opportunity to litigate. Colon v. Coughlin,
58 F.3d 865, 869 (2d Cir. 1995); see Capital Telephone Co. v.
Pattersonville Telephone Co., 56 N.Y.2d 11, 17-18, 451 N.Y.S.2d 11,
436 N.E.2d 461 (1982); Schwartz v. Public Administrator 24 N.Y.2d 65,
71, 298 N.Y.S.2d 955, 246 N.E.2d 725 (1969). The party seeking preclusion
bears the burden of showing the identity of issues while the party
against whom collateral estoppel is asserted bears the burden of showing
the absence of a full and fair opportunity to litigate. Colon, 58 F.3d at
869; Quartararo, 917 F. Supp. at 944; Capital Tel., 56 N.Y.2d at 18,
451 N.Y.S.2d 11, 436 N.E.2d 461.
Collateral estoppel is applied to protect litigants from multiple
lawsuits and to conserve judicial resources. The doctrine "fosters
reliance on judicial action by minimizing the possibility of inconsistent
decisions." Remington Rand Corp. v. Amsterdam-Rotterdam Bank, NV.,
68 F.3d 1478, 1485 (2d Cir. 1995) (quoting Montana v. United States,
440 U.S. 147, 153-54, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979)).
C. The Rooker-Feldman Doctrine
The Rooker-Feldman doctrine holds that federal courts lack jurisdiction
over cases that seek, essentially, review of state court judgments.
Rooker-Feldman precludes the federal courts from exercising jurisdiction
over cases that are "inextricably intertwined" with a state court
judgment. Feldman, 460 U.S. at 483 n. 16, 103 S.Ct. 1303. A federal case
intertwined with a state case if the federal claim "succeeds only to the
extent that the state court wrongly decided the issues before it." Marden
v. Dinin, 22 F. Supp.2d 180, 185 (S.D.N.Y. 1998), quoting, Pennzoil Co.
v. Texaco, 481 U.S. 1, 25, 107 S.Ct. 1519, 95 L.Ed.2d 1 (1987)
(Marshall, J., concurring).
Defendants characterize this action as a "quasi-declaratory judgment"
action and seek abstention normally exercised when a litigant seeks to
avoid federal litigation of an action commenced pursuant to the Federal
Declaratory Judgment Act. 28 U.S.C. § 2201-02. In such cases, the
decision to abstain is one of discretion. See Wilton v. Seven Falls,
Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); National
Union Fire Ins. Co. of Pittsburgh, Pa. v. Karp, 108 F.3d 17, 21 (2d Cir.
While the discretionary factors set forth by the Supreme Court in
Wilton arose in the context of a case brought pursuant to the Declaratory
Judgment Act, the Second Circuit has held clearly that such discretion is
appropriately exercised with reference to any claim for declaratory relief
that is brought within the jurisdiction of the federal courts. Karp, 108
F.3d at 21.
Exercise of the court's discretion to abstain requires consideration of
the following factors:
• the scope of the pending state proceeding and
the nature of the defenses available there;
• whether the claims of all parties in interest
can satisfactorily be adjudicated in that proceeding;
• whether the necessary parties have been
• whether such parties are amendable to process
in that proceeding;
• avoiding duplicative proceedings and