United States District Court, S.D. New York
February 19, 2004.
GABRIEL F. HAUGHTON, Plaintiff,
DAVID BURROUGHS and other UNNAMED AGENTS of the FEDERAL BUREAU OF INVESTIGATION; MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.; and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Defendants
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
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
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
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).
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
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
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
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
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
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
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,
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).
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
New York courts have adopted a transactional approach to res
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
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
(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.
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).
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
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
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
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 
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
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
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
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
The Clerk of the Court is directed to close this case.