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I.L.G.W.U. NATIONAL RETIREMENT FUND v. CUDDLECOAT

March 10, 2004.

I.L.G.W.U. NATIONAL RETIREMENT FUND; EDGAR ROMNEY and ARNOLD HARRIS and their successors as trustees of the I.L.G.W.U. NATIONAL RETIREMENT FUND, Plaintiffs,
v.
CUDDLECOAT, INC.; WARREN CORPORATION; WARREN LEASING CORPORATION and LORO PIANA & C., INC., Defendants; WARREN CORPORATION; WARREN LEASING CORPORATION and LORO PIANA & C., INC., Third-Party Plaintiffs, v. NEW YORK COAT, SUIT, DRESS, RAINWEAR & ALLIED WORKERS UNION, LOCAL 89-22-1, UNITE, AFL-CIO and LEWIS, GREENWALD, CLIFTON & NIKOLAIDIS, P.C., Third-Party Defendants



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

Opinion

Before the Court are Third-Party Defendants' motion to dismiss Third-Party Plaintiff's Complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and Plaintiffs' motion for reconsideration of this Court's Order vacating the previously entered default judgment against Defendant Cuddlecoat, Inc. Page 2 ("Cuddlecoat"). For the reasons set forth below, Third-'Party Defendants' motion to dismiss is GRANTED in part and DENIED-in part and Plaintiffs' motion for reconsideration is DENIED.

BACKGROUND

  Defendant Warren Corporation ("Warren") is a private company engaged principally in the manufacture of fabrics and clothing. Defendant Cuddlecoat, until 1996, was engaged in the business of finishing fabrics and manufacturing clothing. Certain of Cuddlecoat's employees were members of the International Ladies' Garment Workers' Union, and Cuddlecoat was required to make payments to Plaintiff I.L.G.W.U. National Retirement Fund ("the Fund") pursuant to the Employee Retirement and Income Security Act ("ERISA").

  Cuddlecoat was a customer of Warren and entered into a series of security and other agreements with Warren. In 1995, Warren commenced suit against Cuddlecoat, seeking to foreclose on its security. In January 1996, while the suit between Warren and Cuddlecoat was still pending, an involuntary Chapter 11 bankruptcy petition was filed against Cuddlecoat. The Fund and the New York Coat, Suit Dress, Rainwear & Allied Workers Union, Local 89-221-1, UNITE, AFL-CIO ("the Union") each filed separate claims in the bankruptcy proceeding.

  After the bankruptcy petition was filed, Warren and Cuddlecoat settled their individual litigation in an agreement Page 3 under which Warren became the sole shareholder of Cuddlecoat. The timing and operation of that agreement remain in dispute between the parties to this action. The committee of unsecured creditors brought an adversary proceeding in the bankruptcy action seeking to hold Warren responsible for various creditors' claims against Cuddlecoat. Warren negotiated a settlement of the creditors committee's claims, and exchanged mutual releases with the Union. Warren did not obtain a release from the Fund, and the Union's release did not name the Fund as an entity included in the release.

  Warren alleges that it did not obtain a specific release from the Fund because David Greenwald, an associate with Defendant Lewis, Greenwald, Clifton & Nikolaidis, P.C. ("Lewis Greenwald"), stated that the Union's release would bind the Fund. Lewis Greenwald represented the Union in the settlement negotiations. Cuddlecoat was formally dissolved on September 23, 1998 and the bankruptcy proceeding was dismissed eleven months later.

  In 2001, the Fund filed this action seeking to recover money owed to the Fund pursuant to ERISA.*fn1 In response, Warren asserted a counter-claim against the Fund and filed a third-party action against the Union and Lewis Greenwald. Defendant Page 4 Cuddlecoat failed to answer Plaintiff's Complaint and failed to appear or otherwise move with respect to the Complaint. Plaintiffs moved for default judgment against Cuddlecoat on or about October 17, 2p01. The Court granted the motion for default judgment on October 25, 2001.

  On October 26, 2001, the Court received a letter from Defendant Warren, asking that the Court either deny Plaintiff's motion for default judgment against Cuddlecoat or, in the alternative, grant Warren an extension of time to answer on Cuddlecoat's behalf. Upon learning that the Court had granted Plaintiffs' motion for default judgment, Warren moved, pursuant to Local Rule 6.3, for reconsideration of the default judgment entered against Cuddlecoat. In a telephone conference on January 25, 2002, the Court granted Warren's motion and vacated the default judgment. Plaintiffs now move for reconsideration of that decision.

  In or about March 2002, Warren moved pursuant to Fed.R.Civ.P. 15 and 21 to file and serve an amended answer, counterclaim, and third-party complaint. Plaintiffs opposed this motion. In a Memorandum and Order, dated June 3, 2002, Magistrate Judge Eaton granted the motion. Third-Party Plaintiffs now move to dismiss Warren's Third-Party Complaint. Page 5

  DISCUSSION

 I. MOTION TO DISMISS

  Warren's Third-Party Complaint ("Warren Complaint") brings claims against the Union and Lewis Greenwald for fraud, negligent misrepresentation, and civil conspiracy. Essentially, Warren claims that the Third-Party Defendants — the Union and their counsel Lewis Greenwald — purposely misrepresented that the Settlement Agreement and releases resolved all claims by the Fund. The Warren Complaint also claims that the Union breached the 1997 Settlement Agreement with ...


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