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HAUGHTON v. BURROUGHS

February 19, 2004.

GABRIEL F. HAUGHTON, Plaintiff,
v.
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

Opinion

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.

BACKROUND

  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

  PROCEEDURAL HISTORY

 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 ...


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