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United States District Court, S.D. New York

February 19, 2004.


The opinion of the court was delivered by: BARBARA JONES, District Judge


Defendants Merrill Lynch and Morgan Guaranty moved for an order dismissing Plaintiff's Second Amended Complaint in this case, and Plaintiff requested leave to amend his complaint. For the reasons below, Defendants' motion to dismiss is GRANTED and Plaintiff's request is DENIED.


  The facts of this case have been extensively detailed both in the prior opinion issued by this Court, see Haughton v. FBI, No. 98 Civ. 3418, 1999 WL 1133346 (S.D.N.Y. Dec. 10, 1999), and in the numerous opinions issued by the New York Supreme and Appellate courts in Plaintiff's parallel state suits. See, e.g. Haughton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., Index No. 122308/93 (N.Y. Sup.Ct. July 12, 1995) ("7/12/99 Op."); Haughton, Index No. 602406/98 (N.Y.Sup.Ct. Feb. 23, 1999)("2/3/99 Op."); Haughton, Index No. 122308/93 (N.Y. Sup. Ct Page 2 Feb. 28, 1999) ("2/28/99 Op."); see also Haughton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 717 N.Y.S.2d 156 (1st Dep't 2000).

  In 1992, Plaintiff Gabriel Haughton, a solicitor in Ireland, began discussions with Jean Ricker over a possible sale of Eurobonds held by Ricker. (Second Amended Federal Complaint ("Compl.") ¶ 19). The Eurobonds, which were non-negotiable inside the United States, had been issued by a subsidiary of Merrill Lynch, MLH, but had never been sold. (Compl. ¶¶ 8-10).

  Haughton alleges that he sought various assurances as to the validity of the bonds from subsidiaries of Merrill Lynch and other sources. (Compl. ¶¶ 22-24). In and around this time, Merrill became aware of the theft of certain unauthenticated Eurobonds from its facility in New York, which would have amounted to approximately $8 million had they been authenticated.*fn1 (Compl. ¶¶ 52-54).

  Next, Haughton contacted two people at Merrill, Fenton and McDonald, and faxed copies of the bonds to McDonal. (Compl. ¶¶ 25-26 31). The serial numbers matched those from some of the stolen bonds. (Compl. ¶ 68(c)). Merrill contacted the FBI, which decided to organize a "sting" operation to catch Haughton. (Compl. ¶¶ 62-65). Thereafter, Merrill informed Haughton that the bonds were legitimate and marketable, and offered to contract Page 3 with Haughton to sell the bonds for him. (Compl. ¶¶ 26-28). Haughton agreed and stated that he would travel to London to deposit the bonds with Merrill's offices there as Merrill had requested. (Compl. ¶¶ 34-35).

  Once in London, Merrill told Haughton to redeem the interest coupons attached to the bonds at Morgan Guaranty Trust. (Compl. ¶¶ 39-40). Haughton proceeded to Morgan's office, where the teller told him that she would have to inspect the bonds in order to redeem the interest coupons (they were detached from the bonds). (Compl. ¶¶ 43-44). When Haughton handed the bonds to the teller, two members of the London Police identified themselves and took him into custody. (Compl. ¶¶ 44, 46-47). Haughton alleges that they were waiting for him as part of the FBI sting operation, and because Merrill and Morgan indicated to the London Police that Haughton possessed $4.8 million in stolen bonds. (Compl. ¶¶ 73-74, 77). Morgan turned the bonds over to the London Police, which in turn gave them to the FBI. (Compl. ¶ 49). Haughton was informed in 1998 that the FBI destroyed the bonds because they were not authenticated and therefore allegedly without value. (Compl. ¶ 91).

  Haughton was interrogated by the London Police, but released after approximately 33 hours (Compl. ¶¶ 48, 50, 79). Charges were never filed against him. (Compl. ¶¶ 50, 90). Page 4


 1. State Cases

  In 1993, Plaintiff brought suit in New York Supreme Court against Merrill Lynch, Pierce, Fenner & Smith Inc. and its affiliates ("Merrill"), as well as other defendants,*fn2 claiming 1) false arrest, 2) malicious prosecution, 3) conspiracy to cause unlawful imprisonment, 4) conversion, and 5) slander. On July 12, 1995, the court dismissed all of the claims except for the defamation claim, in part because it held that Haughton's arrest was legal. See 7/12/95 Op.

  On or about May 15, 1998, Plaintiff filed a new suit in state court against Merrill, and later amended that complaint to include claims against Morgan Guaranty Trust Company of New York ("Morgan"). The 1998 complaint claimed: 1) against Merrill for prevention of performance and breach of contract, 2) against Merrill for fraudulent misrepresentation, 3) against Merrill for breach of fiduciary duty, 4) against Merrill for unjust enrichment, 5) against Merrill for promissory estoppel, 6) against Merrill and Morgan for conspiracy to defraud, 7) against Morgan for breach of trust, 8) against Merrill and Morgan for breach contract, and 9) against Merill for inducing and assisting Morgan to breach its obligations to Haughton. See 2/23/99 Op. at 2-3. On February 23, 1999, the court dismissed the claims of Page 5 breach of fiduciary duty, promissory estoppel, conspiracy to defraud, inducing breach of trust obligations, and parts of claims for unjust enrichment and breach of trust. Id. at 6-12. The court also held that Haughton could not receive punitive damages. Id. at 12.

  In 1998, Plaintiff also sought to amend his complaint from the 1993 case to allege, inter alia, claims against Morgan. The state court rejected this request on February 28, 1999, and consolidated the two state cases into one. See 2/28/99 Op.

  Haughton appealed the July 12, 1995 and the February 23 and 28, 1999 decisions, but the Appellate Division unanimously affirmed them. See Haughton, 717 N.Y.S.2d at 156. On March 15, 2001, the Appellate Division denied Haughton's motion for re-argument. See Haughton, M-7427, Index No. 122308/93 (1st Dep't Mar. 15, 2001).

  On October 30, 1999, the New York Supreme Court dismissed all claims against Morgan Guaranty. See Haughton. Merrill, Lynch, Pierce, Fenner & Smith, Inc., Index No. 122308/93 (N.Y.Sup.Ct. Oct. 30, 1999). Specifically, the Court dismissed the conspiracy to defraud, breach of trust, and breach of contract claims, in part because Haughton had not adequately alleged a substantive claim of fraud against Morgan.

  By order entered on or around July 28, 2000, the court Page 6 granted summary judgment in favor of Merrill, thereby ending the action against it. See Ltr. from Richard DeY. Manning to the Hon. Barbara S. Jones, dated Dec. 4, 2003. Haughton appealed the Merrill decision, but on May 13, 2003, the Appellate Division affirmed. Haughton, 761 N.Y.S.2d 13, 14-15 (1st Dep't 2003). Both the lower court's and Appellate Division's opinions turned in part on the finding that Merrill was protected by immunity for any allegedly improper actions it took at the direction of the FBI.

  On November 24, 2003, the Appellate Division denied Haughton's request for reargument. Haughton, 1 N.Y.3d 546 (1st Dep't 2003).

 2. Federal Case

  Plaintiff filed a complaint with this Court on May 13, 1998, against the Federal Bureau of Investigation ("FBI"), and later amended it to include claims against Merrill and Morgan. Thereafter, the defendants moved to dismiss the amended complaint. On December 10, 1999, this Court granted the FBI's motion to dismiss, and stayed the action as to Merrill and Morgan while the state court actions were pending. See generally Haughton, 1999 WL 1133346.

  Plaintiff filed a second amended complaint ("Complaint") on April 24, 2000 alleging Bivens claims against individual FBI Page 7 agents. The Complaint also alleges that Merrill and Morgan aided and abetted the FBI in the various actions that Haughton asserts were illegal or otherwise improper. The Court construes Haughton's allegations against Merrill and Morgan as Bivens claims. However, because Haughton does not clearly state his cause or causes of action, the Court also construes the Complaint alternatively to raise claims that the Defendants engaged in wrongful conduct with the intent to secure, and which did in fact result in, Haughton's wrongful arrest.*fn3 See Compl. ¶ 111.

  The agents moved pursuant to Federal Rules of Civil Procedure Rule 12(b)(6) to dismiss the Complaint as against them, and this Court granted the motion on January 19, 2001.

  On June 20, 2002, the Court lifted the stay on Haughton's action against Merrill and Morgan, and allowed defendants sixty days to bring any motions in light of the state decisions. In August 2002, Morgan brought a motion to dismiss the second amended complaint with prejudice and without leave to re-plead, and Merrill brought a motion to dismiss and in the alternative, a motion for summary judgment. Plaintiff filed his opposition in Page 8 the form of a "Rule 56.1 Statement" on September 12, 2002.*fn4

  Over one year later, and without leave of the Court, Haughton sent a letter brief to this Court, re-arguing some of the points he addressed in his original Opposition, and requesting leave to amend his complaint to include claims for fraudulent misrepresentation against Merrill "and certain of its employees." (Ltr. from Richard DeY. Manning to the Hon. Barbara S. Jones, dated Dec. 4, 2003, at 1). To the extent that this letter is a motion for reargument, it is untimely and denied. The Court, however, will address Haughton's request to amend his Complaint.


 A. Bivens Claims

  In a Bivens action, damages may be obtained for injuries inflicted by a federal official as a result of a violation of a constitutionally protected right. See Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 (1971). A Bivens action is intended to be one in which federal agents, as individuals, are liable for damages resulting from their actions taken under color of law. Id. at 395-96. Bivens claims cannot be asserted against federal entities, because "the purpose of Bivens Page 9 is to deter the officer, not the agency." See FDIC v. Meyer, 510 U.S. 471, 480 (1994)(quotations omitted).

  Likewise, as the Supreme Court recently held in Correctional Servs. Corp. v. Malesko, 122 S.Ct. 515, 519 (2001), Bivens does not allow a private right of action against a private corporation for alleged constitutional deprivations. In Malesko, the defendant corporation operated a halfway house under contract with the Bureau of Prisons. The Court held that the plaintiff could not bring a Bivens claim against the corporation for two reasons. First, the deterrent effect of Bivens would not be advanced in allowing this action to proceed against the private corporation: "if a corporate defendant is available for suit, claimants will focus their collection efforts on it, and not the individual directly responsible for the alleged injury." Id. at 521. Second, Bivens provided a remedy where previously there was no avenue of recourse. The Malesko plaintiff, however, had other remedies available to him and therefore, there was no need to extend the Bivens doctrine to allow for this claim. Id. at 520, 522 (stating that the plaintiff did not "lack [other] effective remedies").

  Applying the Malesko holding to the case at bar, it is clear that Haughton cannot bring a Bivens action against either Merrill or Morgan, both of which are private corporations. It is likewise clear that he has pursued numerous alternative causes of action, Page 10 such that here is little need to allow Haughton to assert a Bivens claim against Merrill and Morgan.

  Therefore, Defendants' motion to dismiss Plaintiff's Second Amended Complaint is GRANTED, with prejudice.*fn5

 B. Non-Bivens Claims

  All of Haughton's claims arise out of his 1992 arrest and the surrounding circumstances. Haughton had a full and fair opportunity to raise these claims in the state court cases he filed against the same Defendants, which concerned the same circumstances. Accordingly, he is barred by res judicata from raising them before this Court.

  Haughton is likewise barred by collateral estoppel from asserting the specific claims he alleges here, because the state courts addressed them at length and dismissed them on their merits.

  Haughton's Complaint is therefore dismissed.

  1. Res Judicata and Collateral Estoppel

  "Federal courts must give the same preclusive effect to a prior state court judgment as would that state's own courts." Caserta v. Selsky, No. 01 Civ. 2644, 2002 WL 1359727, at *2 (S.D.N.Y. June 20, 2002); see also Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75 (1984). Accordingly, Page 11 district courts lack subject matter jurisdiction over an action if the exercise of jurisdiction would result in the reversal or modification of a state court judgment. See Rooker v. Fidelity Trust Co., 263 U.S, 413, 414-16 (1923) (holding that only the Supreme Court can entertain a direct appeal from a state court judgment); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 n.16 (1983) (stating that federal courts do not have jurisdiction over claims which are "inextricably intertwined" with prior state court determinations).

  a. Res Judicata

  "The doctrine of res judicata, or claim preclusion, holds that a final judgment on the merits of an action precludes the parties from relitigating issues that were or could have been raised in that action.'" See Monahan v. New York City Dep't of Corr., 214 F.3d 275, 278 (2d Cir.), cert. denied, 531 U.S. 1035 (2000), (quoting Alien v. McCurry, 449 U.S. 90, 94 (1980). The doctrine is founded on the "generally recognized public policy that there must be some end to litigation and that when one appears in court to present his case, is fully heard, and the contested issue is decided against him, he may not later renew the litigation in another court." Heiser v. Woodruff, 327 U.S. 726, 733 (1946).

  New York courts have adopted a transactional approach to res Page 12 judicata, such that a final decision in one action bars all subsequent claims arising out of the same transaction or series of transactions. Brooks v. Guiliani, 84 F.3d 1454, 1463 (2d Cir. 1996); Tonken v. Loving & Weintraub, Inc., 22 F. Supp.2d 86, 90 (S.D.N.Y. 1998).

  b. Collateral Estoppel

  Under the doctrine of collateral estoppel, "once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case. Alien, 449 U.S. at 94. Under this rule of "issue preclusion," relitigation of the issues identical to those raised and necessarily decided in a prior proceeding on a different claim is precluded. Mendoza v. SSC & B Lintas, 799 F. Supp. 1502, 1509 (S.D.N.Y. 1992).

  The requirements of collateral estoppel are "that the issue be identical and necessarily determined in the prior proceeding, and that the party against whom preclusion is sought was accorded a full and fair opportunity to contest the issue in the prior proceeding." Long Island Lighting Co. v. IMP Indus. Inc., 6 F.3d 876, 885 (2d Cir. 1993). In addition, "it is well-settled that the failure to state a proper cause of action calls for a judgment on the merits. . . ." People v. Casey, 717 N.Y.S.2d 88, 95 (2000); see also Meltzer v. G.B.G., Inc., 575 N.Y.S.2d 485, 488 Page 13 (1st Dep't 1991) (holding that dismissal of causes of action as legally deficient have res judicata effect).

  In this case, Haughton alleges claims that are part of the same transaction or transactions that formed the basis of his state suits. It is clear that Haughton had full and fair opportunity to raise the claims in state court that he now raises before this Court. Therefore, Haughton is barred on res judicata grounds from relitigating issues that were or could have been raised in his state court action. Cf. Alien, 449 U.S. at 94. In addition, to the extent that the identical issues were raised and necessarily decided by the state courts, Haughton is precluded by collateral estoppel from re-litigating them here.

  c. Haughton's Second Amended Complaint

  1. Haughton's Parallel Claims in State Court

  In his state court proceedings, Haughton asserted claims of false arrest and imprisonment against Merrill for allegedly providing false information to the law enforcement agencies. Regarding the false imprisonment claim, the court stated that "[n]o cause of action for false imprisonment arises where the confinement was by arrest under a valid process issued by a court having jurisdiction." 7/12/95 Op. at 5. The Court found that the imprisonment in Haughton's case was lawful because it was pursuant to valid process.*fn6 See 7/12/95 at 4-5. Page 14

  With respect to the act of giving allegedly false information to the authorities, the court also found that Merrill was not liable because "information to the police about the commission of a crime does not give rise to a cause of action against [Merrill] for false imprisonment so long as the police made the decision to arrest."*fn7 Id.

  The Appellate Division agreed with the lower court's rulings, stating that "[i]t is clear that plaintiff's detention by Scotland Yard in 1992 was pursuant to valid legal process, and that defendants' act of informing the authorities that someone had been attempting to sell stolen bonds does not constitute a ground for a claim of false arrest or conspiracy to cause false arrest." Haughton, 278 A.D.2d 29, 29 (1st Dep't 2000); see also 2/28/99 Op. (denying Haughton's motion to amend his complaint to include a claim for conspiracy to defraud because this claim was similarly alleged and dismissed in the July 12, 1995 Opinion). Page 15 Of equal importance, on Merrill's motion for summary judgment in the 1998 action, the state court rejected several of Haughton's claims regarding Merrill's allegedly improper conduct engaged in while Merrill was acting at the direction of the FBI. 5/14/01 Op. at 16. The Court stated that, "[p]rivate persons acting under the direction of Federal officials are sometimes treated as subordinate officials, and are entitled to that same immunity." Id. (citations omitted). This ruling was also upheld by the Appellate Division, which stated that "[t]he complained-of communications by Merrill with law enforcement authorities are cloaked with qualified immunity both because of the firm's interest in the recovery of bonds issued by its subsidiaries and stolen from its custody . . . and because of its `duty to report criminal activity to the proper authorities.'" Haughton 305 N.Y.S.2d 13, 14 (1st Dep't 2003). The court continued that, "because plaintiff failed to raise any triable issue as to whether the challenged communications were consistent only with a desire to injure Plaintiff, his claims premised upon those communications were properly dismissed." Id. (quotations and citations omitted).

  2. Haughton's Federal Claims

  Haughton now pursues claims, although clothed under somewhat different theories of law, that are based on the same 1992 arrest Page 16 and the surrounding circumstances that the state courts previously adjudicated after a full and fair hearing. The state courts specifically held that the arrest, which is at the heart of all of Haughton's current claims, was valid. Moreover, with respect to Merrill, the court dismissed all of the claims regarding its allegedly improper behavior, on both substantive grounds and because Merrill was protected by immunity for all of the actions it took at the direction of the FBI. Therefore, res judicata bars further prosecution of such claims with respect to Merrill.

  Moreover, even though the state courts did not directly consider Morgan's actions in the holdings just referenced, Haughton's instant Complaint claims joint liability of Merrill and Morgan for taking the same allegedly improper actions that resulted in Haughton's arrest, which, again, the state court found to be valid. The Complaint does not add in any way to the state court allegations formerly adjudicated against Merrill, and therefore those adjudications have collateral estoppel effect against Haughton. Likewise, this Court would apply the same immunity to Haughton's claims that the state courts applied to Merrill, because Morgan also acted at the direction of the FBI and the rationale asserted by the state court for according immunity to Merrill are equally applicable to Morgan.

  Moreover, even if Haughton's claims were not fairly Page 17 precluded by the collateral estoppel effect of the Merrill decisions, they would nonetheless be precluded by res judicata. It is beyond dispute that Haughton brought an action against Morgan alleging claims that arose out of the same transaction or series of transactions involved in the instant dispute — specifically, those surrounding Haughton's 1992 arrest. Cf. Brooks, 84 F.3d at 1463. Because there was a final judgment on the merits in the state court action against Morgan, Haughton is precluded from re-litigating issues that were or could have been raised in that action. Cf. Monahan, 214 F.3d at 284-85.

 C. Haughton's Request for Leave to Amend the Second Amended Complaint

  In his December 4, 2003 letter to the Court, Haughton requests permission to file his third amended complaint,*fn8


to assert causes of action which he was not permitted to assert by his proposed amendment to the [1993] complaint in the State Court Case for fraudulent misrepresentation against Merrill Lynch and certain of its employees, which was denied by the State Court on the ground that the defendants and the proposed defendants were entitled to immunity as they were acting under the instruction of [the FBI].
See Ltr. from Richard DeY. Manning to the Hon. Barbara S. Jones, dated Dec. 4, 2003.

  Federal Rules of Civil Procedure Rule 15(a) provides that leave to amend a complaint "shall be freely given when justice so Page 18 requires." Fed.R.Civ.P. 15(a). Leave to amend should not be granted, however, when there has been "[u]ndue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment . . .[and] futility of amendment." Foman v. Davis, 371 U.S. 178, 182 (1962).

  The Court denies Haughton's request to amend. First, it is abundantly clear that Haughton's proposed amendments are unduly delayed, as this case has been in this Court for over 4 years, and these claims were litigated in the state court for six years prior to that. Second, the amendments are futile because they are barred by res judicata and collateral estoppel. Specifically, the claims are barred by res judicata because they are part and parcel of the same transactions that were finally adjudicated by the state court. Cf. Meltzer, 575 N.Y.S.2d at 488 (finding that res judicata barred plaintiff from amending his complaint to allege claims analogous to those previously dismissed). Moreover, his claim of misrepresentation is barred by collateral estoppel because the state courts squarely addressed this claim and found not only, as Haughton asserts, that Merrill was immune to such claims, but also that the Defendants would not be liable for any information it gave to the police because they were required by law to give information to the authorities when they suspected Page 19 criminal activity and because Haughton never demonstrated that the Defendants gave "false" information to the authorities.

  Third, Haughton has amended his complaint twice in this action, and now seeks leave to amend it again to assert claims based on behavior and events that he was aware of at the time he filed his original complaint. Cf. Official Comm. of the Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, LLP, 322 F.3d 147, 168 (2d Cir. 2003)(holding that the district court did not abuse its discretion in denying plaintiff's motion for leave to file a Third Amended Complaint where plaintiff repeatedly failed to cure defects in the two prior complaints); In re Am. Express S'holder Litig., 39 F.3d 395, 402 (2d Cir. 1994)(ruling that it was not an abuse of discretion to deny leave to plaintiff's to amend where they had amended twice before); Salinger v. Projectavision, Inc., 972 F. Supp. 222, 236 (S.D.N.Y. 1997) ("Three bites at the apple is enough.").

  Accordingly, Haughton's request to file a third proposed amended complaint is DENIED.


  Haughton may not bring Bivens claims against private corporations, and may not bring claims arising out of the 1992 arrest in London because he is barred by res judicata and collateral estoppel. Therefore, Haughton's Complaint is dismissed as to both Defendants, with prejudice and without leave to Page 20 replead.

  The Clerk of the Court is directed to close this case.


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