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WEIZMANN INSTITUTE OF SCIENCE v. NESCHIS
October 3, 2002
WEIZMANN INSTITUTE OF SCIENCE, PLAINTIFF,
JANET C. NESCHIS, INDIVIDUALLY AND IN HER CAPACITIES AS TRUSTEE OF THE JACQUES AND NATASHA GELMAN TRUST DATED NOVEMBER 18, 1997, AND AS TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, ROBERT R. LITTMAN, INDIVIDUALLY AND IN HIS CAPACITY AS SUCCESSOR TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, AND MARILYN G. DIAMOND, IN HER CAPACITY AS TRUSTEE OF THE JACQUES AND NATASHA GELMAN TRUST DATED NOVEMBER 18, 1997, AND AS TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, DEFENDANTS. ALICE ANN JUNG ON HER OWN BEHALF, AS EXECUTRIX OF THE ESTATE OF MIROSLAV JUNG, DECEASED, JOSEF JUNG, MICHELLE JUNG, AND JAROSLAV JUNG A/K/A JERRY JUNG, PLAINTIFFS, V. JANET C. NESCHIS, INDIVIDUALLY AND IN HER CAPACITIES AS TRUSTEE OF THE JACQUES AND NATASHA GELMAN TRUST DATED NOVEMBER 18, 1997, AND AS TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, ROBERT R. LITTMAN, INDIVIDUALLY AND IN HIS CAPACITY AS SUCCESSOR TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, AND MARILYN G. DIAMOND, IN HER CAPACITY AS TRUSTEE OF THE JACQUES AND NATASHA GELMAN TRUST DATED NOVEMBER 18, 1997, AND AS TRUSTEE OF THE TRUST CREATED UNDER THE LAST WILL AND TESTAMENT OF NATASHA GELMAN DATED APRIL 23, 1993, DEFENDANTS.
The opinion of the court was delivered by: Berman, District Judge.
Plaintiff Weizmann Institute of Science ("Weizmann") commenced
an action against defendants Janet C. Neschis ("Neschis"),
Robert R. Littman ("Littman"), and Marilyn G. Diamond
("Diamond") (collectively, "Defendants") on or about October 16,
2000. Weizmann's complaint ("Weizmann Complaint") alleges six
causes of action: (i) declaratory judgment that Weizmann is
entitled to 37% of the assets of the Anturia Foundation, a
nonparty; (ii) conversion; (iii) tortious interference with
contractual relations; (iv) tortious interference with
expectancy of inheritance; (v) violation of 18 U.S.C. § 1962(c);
and (vi) violation of 18 U.S.C. § 1962(d).*fn1 Weizmann
alleges that the Court has jurisdiction over its claims pursuant
to 18 U.S.C. § 1965(a) (RICO), 28 U.S.C. § 1331 (federal
question), 28 U.S.C. § 1332(a)(2) (diversity), and
28 U.S.C. § 1367 (supplemental jurisdiction). (Weizmann Complaint ("WC") ¶
Plaintiffs Alice Ann Jung, Josef Jung, Michelle Jung, and
Jaroslav Jung, a/k/a Jerry Jung (collectively, "Jungs")
commenced an action against Defendants on or about July 30,
2001.*fn2 The Jungs' complaint ("Jung Complaint") alleges
nine causes of action: (i) declaratory judgment that the Jungs
are entitled to 20% of the assets of the Anturia Foundation, a
nonparty; (ii) conversion; (iii) tortious interference with
contractual relations; (iv) tortious interference with
expectancy of inheritance; (v) violation of 18 U.S.C. § 1962(c);
(vi) violation of 18 U.S.C. § 1962(d); (vii) injunctive relief;
and (viii) two counts seeking a constructive trust. The Jungs
allege that the Court has jurisdiction over their claims
pursuant to 18 U.S.C. § 1965(a) (RICO), 28 U.S.C. § 1331
(federal question), and 28 U.S.C. § 1367 (supplemental
jurisdiction); they appear not to have plead diversity
jurisdiction. (Jung Complaint ("JC") ¶ 13).
On September 26, 2001, the Court consolidated these two cases
for pre-trial purposes, including motion practice. On or about
October 19, 2001, Defendants moved jointly, pursuant to Federal
Rules of Civil Procedure ("Fed.R. Civ.P.") 12(b)(6) and
12(b)(7), to dismiss Plaintiffs' claims for, inter alia,
failure to state a claim upon which relief can be granted and
failure to join a necessary party, i.e., the Anturia
Foundation. See Defendants' Joint Memorandum of Law in Support
of Their Motion to Dismiss the Complaints, dated October 19,
2001 ("Def.Mem."). On November 15, 2001, Plaintiffs filed their
Joint Brief in Opposition to Motion to Dismiss ("Pl. Opp." or
"Opposition Brief"). Defendants filed a reply brief, dated
November 20, 2001 ("Def.Reply"). On December 17, 2001,
Plaintiffs moved jointly for a preliminary injunction "pending
the Court's decision on [D]efendants' currently pending motions
to dismiss. . . ." Notice of Motion for a Preliminary
Injunction, dated December 17, 2001, at 2.
For the reasons set forth below, Defendants' motion to
dismiss is granted in part and denied in part and Plaintiffs'
motion for a preliminary injunction is denied.*fn3
The following allegations from the Weizmann Complaint and the
Jung Complaint are taken as true for the purposes of this
motion. Jacques and Natasha Gelman, a married couple with no
children, amassed a great personal fortune as a result of Mr.
Gelman's successful career as an entertainment agent and film
producer. (WC ¶ 10; JC ¶¶ 29-30). In 1985, the Gelmans deposited
a substantial portion of their assets into a Liechtenstein
"stiftung" called the Anturia Foundation ("Anturia" or
"Foundation").*fn4 (WC ¶ 11; JC ¶ 31). The Foundation's Board
of Trustees ("Board") enacted various sets of by-laws over time,
all of which provide for the distribution of the Foundation's
assets upon the death of the surviving Gelman spouse.*fn5 (WC
¶ 13; JC ¶ 34).
After Mr. Gelman's death on July 23, 1986, Mrs. Gelman
instructed the Board to make two sets of changes to the
Foundation's by-laws.*fn6 (WC ¶¶ 15, 20; JC ¶¶ 37-38). Pursuant
to her instructions, the Board adopted by-laws, dated August 10,
1989 ("August 10, 1989 By-Laws") which provided that, in the
event of Mrs. Gelman's death, the Foundation's assets would be
divided as follows: (1) 20% to Weizmann; (2) 34% (collectively)
to the Jungs; and (3) 46% (collectively) to other named
charities and beneficiaries.*fn7 In 1991, pursuant to Mrs.
Gelman's instructions, the Board adopted by-laws dated August
13, 1991 ("August 13, 1991 By-Laws"). The August 13, 1991
By-Laws provided for the following distribution of the
Foundation's assets upon Mrs. Gelman's death: (1) 20% to
Weizmann; (2) 37% (collectively) to the Jungs; (3) 1% to
Littman; and (4) 42% (collectively) to other named charities and
beneficiaries. (WC ¶ 18; JC ¶ 41).
Mrs. Gelman possessed other assets which were not part of the
Foundation and which were to be disposed of by will to be
probated in New York ("New York assets"). (WC ¶ 17; JC ¶ 40).
Until 1989, Sidney Cohn, Esq. ("Cohn") prepared the Gelmans'
wills and codicils. (WC ¶ 22; JC ¶ 49). Thereafter, Mrs. Gelman
was represented by Diamond until Diamond became a Justice of the
New York State Supreme Court, New York County, in 1991. (WC ¶¶ 9,
22; JC ¶¶ 26, 50). Neschis, Cohn's daughter and Diamond's former
partner, became Mrs. Gelman's attorney in 1991. Id. Plaintiffs
allege that beginning in late 1991, after Neschis became Mrs.
Gelman's legal representative and continuing until Mrs. Gelman's
death on May 2, 1998, Neschis and Littman took (unfair)
advantage of Mrs. Gelman's mental condition by, among other
things, "cementing themselves as the sole custodians of her
substantial estate and charitable trust, unlawfully taking
millions of dollars from Anturia Foundation and Mrs. Gelman's
personal assets, and increasing the bequests, commissions and/or
fees to be received by these defendants." (WC ¶ 23; JC ¶ 51).
Plaintiffs allege that Neschis and Littman "fraudulently
assum[ed] fiscal authority over Mrs. Gelman's assets," by, among
other things, securing the following documents after Mrs. Gelman
no longer possessed mental or testamentary capacity: (1) general
powers of attorney in favor of Neschis and Littman and (several)
powers of attorney which gave Neschis the authority to conduct
transactions at Mrs. Gelman's New York banks; (2) a last will
and testament, executed on April 23, 1993 ("1993 Will"),
appointing Neschis as executor and appointing Diamond and
Littman as alternate executors; and (3) an affidavit by Mrs.
Gelman, signed on October 28, 1994, stating that, at the time of
the 1993 Will, she intended that Neschis receive a commission
for her services as executor and that Neschis' law firm receive
legal fees for administering her estate.*fn9 (WC ¶¶ 23-29; JC
¶¶ 51-53, 75-88).
Plaintiffs further allege that Neschis "fraudulently obtained"
an amendment to the Foundation's by-laws which eliminated
Weizmann as a beneficiary and drastically reduced the amount of
the bequests to the Jungs. (WC ¶ 33; JC ¶ 60). "In or about
April 1992, Neschis traveled to Zurich with Mrs. Gelman to meet
with representatives of Credit Suisse and/or Fides, the asset
management company responsible for administering the . . .
Foundation." (WC ¶ 30; JC ¶ 54). During this trip, Dr.
Madeline-Claire Levis ("Levis"), a Fides employee, came to
believe that Mrs. Gelman was not of sound mind. (WC ¶ 30; JC ¶
55). Plaintiffs allege that Neschis fraudulently obtained Mrs.
Gelman's signature on a letter dated June 5, 1992 to the Board
("June 5, 1992 Letter"), instructing that certain changes be
made to the bylaws, and transmitted the letter to Levis.*fn10
(WC 133; JC ¶¶ 60-62). Although Levis initially "refused to make
the requested changes without a satisfactory explanation of the
unusual circumstances," she was allegedly compelled to do so
after Neschis threatened to withdraw the Foundation's assets
from Credit Suisse Bank and persuaded one of the Board members
to intervene. (WC ¶¶ 34-35; JC ¶¶ 64-66).
In or about October 1992, Neschis presented a letter to the
Board from Mrs. Gelman and dated September 29, 1992 ("September
29, 1992 Letter") purporting to contain Mrs. Gelman's
instructions for amending the Foundation's by-laws. (WC ¶ 37; JC
¶ 68). In accordance with the September 29, 1992 Letter, the
Board adopted new by-laws on or about October 19, 1992 ("October
19, 1992 By-Laws") which, inter alia, eliminated Weizmann as a
beneficiary, reduced the Jungs' allocation to 5% of the
Foundation's assets, increased Littman's share from 1% to 31% of
the assets, added Diamond as a beneficiary of 3% of the assets,
and added the Testamentary Trust as a beneficiary of 57% of the
assets.*fn11 (WC ¶¶ 37-38; JC ¶¶ 69-70).
Plaintiffs further allege that "[i]n April 1992 and continuing
through 1998, Neschis caused substantial distributions to be
made from the assets of the . . . Foundation to herself or for
her personal benefit." (WC ¶ 41; JC ¶ 89). Neschis presented a
handwritten note, dated April 30, 1992 and purportedly signed by
Mrs. Gelman, directing Credit Suisse to "`arrange for the
immediate transfer to my Credit Suisse, New York account of
$150,000 (U.S.)' from the accounts of the . . . Foundation
and/or from accounts held for the Gelmans." (WC ¶ 42; JC ¶ 91).
In addition, the April 1992 note instructed the bank to send all
future interest payments directly to the same New York account.
(WC ¶ 42; JC ¶ 92). Credit Suisse complied with these
instructions and transferred approximately $2.5 million from the
Credit Suisse Zurich account to the Credit Suisse New York
account between November 30, 1992 and February 28, 1995. (WC ¶
43; JC ¶ 94). Plaintiffs also allege that Credit Suisse Zurich
periodically sent other distributions to the Credit Suisse New
York account "in excess of $10 million." (WC 43; JC ¶ 95).
Plaintiffs allege that on or about November 18, 1997, Neschis
fraudulently induced Mrs. Gelman to execute an instrument
creating a second trust, also named the Jacques and Natasha
("Inter Vivos Trust"), which designated Neschis and Diamond as
its co-trustees.*fn12 (WC ¶ 46; JC ¶¶ 98-99). The Inter Vivos
Trust instrument provides that: (i) "[i]n addition to
commissions, the [t]rustees are authorized to perform
professional services for the Inter Vivos Trust at their regular
rates;" (ii) "[t]he [t]rustees are also expressly authorized to
arbitrate and settle claims on behalf of the Inter Vivos Trust;"
and (iii) "[t]he trustees are expressly excused from filing
inventories and periodic accountings in any court."*fn13 (WC
¶ 46; JC ¶ 99). That same day, Mrs. Gelman allegedly signed a
letter to the Foundation requesting, inter alia, that the
Inter Vivos Trust be substituted for the Testamentary Trust as
the beneficiary of 58% of the Foundation's assets. (WC ¶ 49; JC
¶¶ 106-07). The Foundation's by-laws were amended again on
January 27, 1998 ("January 27, 1998 By-Laws") to reflect this
change in beneficiaries. (WC ¶ 49; JC ¶ 107).
Mrs. Gelman died on May 2, 1998. (WC ¶ 53; JC ¶ 110). On or
about September 21, 1999, the Court of Arbitration in
Liechtenstein began arbitration proceedings ("Liechtenstein
Arbitration") between Neschis and Diamond, as trustees for the
Jacques and Natasha Gelman Trust, and the Foundation.*fn14
See Decision of the Court of Arbitration ("Arbitration
Order"), dated September 21, 1999, at 1. The Arbitration Order,
among other things, lists the names of the arbitrators
("Arbitration Panel"), states that "the Court of Arbitration is
duly formed pursuant to Article 13 of the bylaws of the Anturia
Foundation, dated May 29, 1985," and outlines the procedures
governing the Liechtenstein Arbitration. See id. at 1-4. On or
about January 12, 2000, the Foundation filed its arbitration
Answer to the Complaint/Interlocutory Motion for a Determination
("Answer"). On or about March 20, 2000, Weizmann filed its
arbitration Joinder as Intervener/Answer to the
Complaint/Preliminary Pleading ("Joinder"). The Joinder states,
in pertinent part: "we have a legal interest in seeing the
[Foundation] prevail, and we therefore join [the Foundation] as
an intervening third party." Joinder at 1. On or about June 8,
2001, the Arbitration Panel issued its Award in Arbitration
("Arbitration Award"), finding, among other things, "that the
1992 and 1998 [foundation] by-laws are legally valid."
Arbitration Award at 51. Pursuant to the January 27, 1998
By-Laws, 57% of the Foundation's assets will be distributed to
the Inter Vivos Trust. (WC ¶ 49; JC ¶ 107).
After Mrs. Gelman's death, Neschis offered the 1993 Will for
probate in the Surrogate's Court, New York County ("Surrogate's
Proceeding"). (WC ¶ 54; JC ¶ 111). On May 4, 1999, Alice Jung
and Jaroslav Jung filed their Amended Objections to Probate and
Jury Demand ("Am. Obj.") stating, among other things that the
1993 Will "was not freely or voluntarily made by [Mrs.] Gelman
. . . but that the said paper writing purporting to be her Last
Will and Testament . . . was procured by duress and undue
influence . . . Janet Neschis and Robert Littman. . . ."*fn15
Am. Obj. ¶ 4. By stipulation dated as recently as April 26,
2001 ("4/26/01 Stip."), the Jungs agreed to withdraw their
objections to probate of the 1993 Will if the Liechtenstein
Arbitration "determine[d], for any reason, that the 1992 By-Laws
are valid." 4/26/01 Stip. at 1. On June 19, 2001 — after the
decision was rendered in the Liechtenstein Arbitration — Alice
Jung and Jaroslav Jung (each) withdrew their objections to
probate. See Withdrawal of All Objections of Alice Jung,
("Alice Jung . . . hereby withdraws her Objections to Probate
. . ."); Withdrawal of All Objections of Jaroslav Jung,
("Jaroslav Jung hereby withdraws his Objections to Probate
. . ."). On October 16, 2001, the Surrogate admitted the 1993
Will to probate. See Decree Granting Probate ("Probate
Decree"). The Probate Decree states, in pertinent part, that (1)
"the  Will was duly executed;" (2) "the Testatrix, at the
time of executing it, was in all respects competent to make a
Will, and not under restraint;" and (3) "the Court [is]
satisfied of the genuineness of the  Will and the validity
of its execution." Probate Decree at 2.
In resolving a Fed.R.Civ.P. 12(b)(6) motion to dismiss, the
Court must accept the factual allegations set forth in the
complaint as true and draw all reasonable inferences in favor of
the plaintiff. See Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.
1996). A complaint should not be dismissed for failure to state
a claim "unless 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). This standard applies equally
to RICO claims. See NOW v. Scheidler, 510 U.S. 249, 256, 114
S.Ct. 798, 127 L.Ed.2d 99 (1994).
At the same time, while "the well-pleaded material allegations
of the complaint are taken as admitted . . . conclusions of law
or unwarranted deductions of fact are not admitted." First
Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d
Cir. 1994) (citation omitted). Where, as here, a complaint
alleges fraud, the pleading requirements of Fed.R.Civ.P. 9(b)
apply. Id. Because the mere assertion of a civil RICO claim
"has an almost inevitable stigmatizing effect on those named as
defendants . . . courts should strive to flush out frivolous
RICO allegations at an early stage of the litigation." Figueroa
Ruiz v. Alegria, 896 F.2d 645, 650 (1st Cir. 1990).*fn16
A. Materials and Matters Outside the Pleadings
In resolving a motion to dismiss, "a court may consider
`documents attached to the complaint as an exhibit or
incorporated in it by reference, . . . matters of which judicial
notice may be taken, or . . . documents either in plaintiffs'
possession or of which plaintiffs had knowledge and relied on in
bringing suit.'" Chambers v. Time Warner, Inc., 282 F.3d 147,
153 (2d Cir. 2002) (quoting Brass v. American Film
Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993)).*fn17
"Despite the submission of extra-pleading documents, [the
Court does] not convert this motion into a motion for summary
judgment under Rule 56(c)."*fn18 Scherer v. Equitable Life
Assurance Soc'y, 190 F. Supp.2d 629, 636 n. 2 (S.D.N.Y. 2002).
Both Plaintiffs and Defendants have submitted extra-pleading
documents in connection with the instant motion, only some of
which, as herein noted, have been considered by the Court.
"A court may consider documents attached to the complaint as
exhibits, or incorporated by reference, as well as any documents
that are integral to, or explicitly referenced in, the
pleading."*fn19 Preston v. State of New York, 223 F. Supp.2d 452,
461-62 (S.D.N.Y. 2002). "[C]ourts routinely take judicial
notice of documents filed in other courts . . . not for the
truth of the matters asserted in the other litigation, but
rather to establish the fact of such litigation and related
filings."*fn20 Kramer, 937 F.2d at 774. "However, [some of]
the evidence [the parties have] offered goes beyond these
limited parameters and will not be considered."*fn21 Jordan
(Bermuda) Investment Co., Ltd., 154 F. Supp.2d at 689.
Collateral estoppel bars a party from relitigating "an issue
which has previously been decided against him in a proceeding in
which he had a fair opportunity to fully litigate the point."
Khandhar v. Elfenbein, 943 F.2d 244, 247 (2d Cir. 1991); see
also Conte v. Justice, 996 F.2d 1398, 1400 (2d Cir. 1993)
(citations and internal quotation marks omitted). Collateral
estoppel, also referred to as "issue preclusion," applies "when
an issue was necessarily and conclusively determined in a prior
proceeding and the party to be bound had a full and fair
opportunity to litigate the issue." Sassower v. Abrams,
833 F. Supp. 253, 264-65 (S.D.N.Y. 1993). It is well-settled that