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United States District Court, S.D. New York

July 30, 2004.

MARY FACELLA, Plaintiff,

The opinion of the court was delivered by: DEBORAH BATTS, District Judge


Plaintiff Mary Facella brought this action against Defendants Federation of Jewish Philanthropies of New York, Inc. ("FOJP"), Montefiore Medical Center ("Montefiore"), and First Colony Life Insurance Company ("First Colony") for claims arising from alleged violations of a state court settlement, which resolved a medical malpractice case between Plaintiff and Defendants FOJP and Montefiore (collectively "FOJP Defendants"). Plaintiff, FOJP Defendants, and Third-Party Defendant Lewis E. Alperin ("Alperin") have moved for summary judgment. Defendant First Colony Life Insurance Company ("First Colony") has also moved to have the FOJP Defendants' cross-claims dismissed.


  In 1978, Meredith Facella was born to Mary Facella and her then-husband Stephen Facella. (Joint Rule 56.1 Statement ("56.1 Stmt.") ¶ 1.)*fn1 Meredith Facella lived her entire life in a vegetative state, and her parents, alleging medical malpractice, filed suit against Defendant Montefiore (and other individual defendants not named in the instant case) in Supreme Court, Bronx County in 1980. (Id. ¶¶ 1, 2; Compl. ¶¶ 8, 9.)

  The parties to the state court case settled the matter in a Stipulation of Settlement ("Stipulation"), executed on September 17, 1982 by Stephen Facella. (56.1 Stmt. ¶ 3; Compl. ¶ 11.)*fn2 This Stipulation was later incorporated into an Infant's Compromise Order, dated October 8, 1982 ("Compromise Order") and approved by Justice Louis Fusco, Jr. of the Supreme Court, Bronx County as required by New York state law. (56.1 Stmt. ¶ 4; Compl. ¶ 12; Compromise Order at 1 ("Comp. Order").) The parties subsequently appeared before Justice Fusco at a November 17, 1982 Hearing ("Hearing") in which both attorneys indicated on the record that they were effectuating a settlement agreement, (11/17/82 Trans at 1-3), and in which a Release ("Release"), signed by both Mary and Stephen Facella on November 15, 1982, was given to opposing counsel. This Release specifically stated that:

STEPHEN FACELLA and MARY FACELLA, as parents and natural guardians of MEREDITH FACELLA, . . . as RELEASOR, in consideration of the amounts of money to be paid pursuant to the Order of Judge Louis Fusco entered on the 8th day of October, 1982. . . . releases and discharges Montefiore Hospital . . . from all actions, causes of action . . . claims, and demands whatsoever, in law, admiralty or equity which the . . . RELEASOR . . . ever had, now have, or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this RELEASE. . . .
/s/ Stephen Facella, /s/ Mary Facella.
(Release, Nov. 15, 1982.)
  The Compromise Order established and detailed a payment scheme whereby Montefiore would purchase an annuity contract (the "Annuity") to make monthly payments of approximately $4,166, totaling $50,000 per annum, to Stephen Facella within 30 days of the date of the Compromise Order. (56.1 Stmt. ¶ 8; Comp. Order at 3.) This payment was to last the longer of ten years or Meredith's life. (56.1 Stmt. ¶ 8; Comp. Order at 4.)

  The Annuity was also to provide for five lump-sum payments of $150,000, paid to Stephen Facella and beginning five years after the first monthly payment to Stephen Facella and then every five years after that until 2007. (56.1 Stmt. ¶¶ 4-8; Comp. Order at 5-7.) These payments were guaranteed even if Meredith Facella died before the payout dates. (56.1 Stmt. ¶ 6; Comp. Order at 6.) According to the Compromise Order, each lump-sum payment:

shall be paid to STEPHEN FACELLA as parent and natural guardian of MEREDITH FACELLA, jointly with an officer of the [eight] respectively designated bank as herein specified with payment to be distributed in the following amounts:
$18,750.00 to be deposited in Dollar Savings Bank located at 2530 Grand Concourse, Bronx, NY.
$18,750.00 to be deposited in Eastern Savings Bank located at 888 Grand Concourse, Bronx, NY.
. . . [listing four other banks]
$18,750.00 to be deposited in Greenwich Savings Bank located at 950 Third Avenue NY, NY.
(Comp. Order at 8.)
Justice Fusco further stipulated that "[a]ll payments are to be deposited in the highest interest-bearing account to the credit of the infant plaintiff, subject to the further Order of the Court." (Id.) The Compromise Order stipulated that Meredith Facella was to be named the beneficiary of the Annuity. In the case of her death, the named beneficiaries would be both her parents. (Comp. Order at 4-5, 7.) The Order also required Montefiore to guarantee all the payments under the Annuity in the event of default by the insurance company. (56.1 Stmt. ¶ 10; Comp. Order at 8.) Finally, Stephen Facella was to apply to be appointed Conservator of Meredith Facella's estate pursuant to Article 77 of the Mental Hygiene Law. (56.1 Stmt. ¶ 11; Comp. Order at 9.)

  In accordance with the Compromise Order, FOJP, Montefiore's fiduciary, purchased an annuity from First Colony to make the monthly and lump-sum payments as mandated by Judge Fusco. (56.1 Stmt. ¶ 9.) It appears that the monthly payments were disbursed in a timely manner. (Kearney Decl., Exh. B. (indicating that monthly "payments . . . commenced on December 20, 1982, which was 30 days after the receipt of the [C]ompromise [O]rder").) By the time of the first lump-sum payment in 1987, all the banks listed in the Compromise Order no longer existed. (Saretsky Aff., Exh. G, Exh. 2 at 2.) FOJP made the payments solely to Stephen and by 1993, the first two lump-sum payments were made. (56.1 Stmt. ¶¶ 13, 14, 17.)

  Plaintiff, Stephen Facella, and their three other minor children moved to Florida sometime in 1986 or 1987 (Pl. Depos. at 19.); however, Meredith Facella stayed in New York in the care of St. Margaret's Children's Hospital in Albany New York. (56.1 Stmt. ¶ 16.) Her care was apparently paid for first by the family's medical insurance and then by the state.*fn3

  Lewis Alperin ("Alperin") was appointed as a referee pursuant to the state's Mental Hygiene Law by court order. (56.1 Stmt. ¶ 30.) Meredith Facella died on March 24, 1993 in New York. (56.1 Stmt. ¶ 15.) Several days after her death, Stephen Facella brought Alperin the death certificate. (56.1 Stmt. ¶ 34.) From 1993 to 1996, Stephen Facella continued to receive the monthly payments, which totaled $183,348 over the period. (56.1 Stmt. ¶ 23.) At no time before 1996 did Stephen or Mary Facella, or Alperin inform FOJP Defendants of Meredith Facella's death. (56.1 Stmt. ¶ 22.)

  Stephen and Mary Facella entered into divorce proceedings in Florida sometime in 1996. (56.1 Stmt. ¶¶ 19, 22.) At this time, FOJP Defendants became aware for the first time that the monthly payments should not have been made. They accordingly offset the total amount of those monthly payments ("post-death monthly payments") from the lump-sum payment due in 1997; the entire payment was offset. (FOJP Def. Memo. of Law at 8; Ellmer Depos. at 52-56.)

  In 1998, Plaintiff's divorce from her husband became final. (56.1 Stmt. ¶ 19.) In their divorce settlement, Stephen Facella gave Plaintiff his share of the remaining two payments in 2002 and 2007. (Id. ¶ 20.) Neither of those payments, to the Court's knowledge, have been made.

  Plaintiff then brought this diversity action pursuant to 28 U.S.C. § 1332, alleging four causes of action against the FOJP Defendants. Specifically, she seeks monetary damages from Defendants based on: 1) purported violations of the Compromise Order, 2) breach of fiduciary duty, 3) breach of contract, and 4) negligence. (Compl. ¶¶ 30-48.) On December 16, 1999, Plaintiff dismissed her claims against First Colony with prejudice; however, First Colony remains a defendant in the case because the FOJP Defendants brought counterclaims against it. (Stip. of Withdrawal, Dec. 16, 1999; FOJP Def. Ans. ¶¶ 78-81.) They also served a Third-Party Complaint against Stephen and Alperin, alleging a violation of the Appointment Order and a claim of contribution or indemnity. (3d Party Compl. ¶¶ 48-58.) Finally, the FOJP Defendants obtained a default judgment against Stephen Facella on April 30, 1999.

  Pursuant to the Court's Scheduling Order, Plaintiff and FOJP Defendants cross moved for Summary Judgment on all four claims contained in the Complaint; Third Party Defendant Alperin moved for Summary Judgment on Third Party Plaintiffs FOJP and Montefiore's claims. (Sch. Order, Mar. 28, 2002.). Defendant First Colony also moved for summary judgment on FOJP Defendants' counterclaims. For the reasons that follow, Plaintiff's Motion is DENIED; FOJP's Motion is GRANTED. Because FOJP Defendants' Motion has been granted, the Court does not reach the merits of Alperin or First Colony's Motions.


  I. Summary Judgment Standard

  A district court should grant summary judgment when there is "no genuine issue as to any material fact," and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000). Genuine issues of fact cannot be created by mere conclusory allegations; summary judgment is appropriate only when, "after drawing all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor of that party." See Heublein v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993) (citing Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986)).

  In assessing when summary judgment should be granted, "there must be more than a `scintilla of evidence' in the non-movant's favor; there must be evidence upon which a fact-finder could reasonably find for the non-movant." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). A court must always "resolv[e] ambiguities and draw[] reasonable inferences against the moving party," Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986); however, the non-movant may not rely upon "mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Id. at 12. Instead, when the moving party has documented particular facts in the record, "the opposing party must, `set forth specific facts showing that there is a genuine issue for trial.'" Williams v. Smith, 781 F.2d 319, 323 (2d Cir. 1986) (quoting Fed.R.Civ.P. 56(e)). Establishing such facts requires going beyond the allegations of the pleadings, as the moment has arrived "`to put up or shut up.'" Weinstock v. Columbia University, 224 F.3d 33, 41 (2d Cir. 2000) (citation omitted). Accordingly, unsupported allegations in the pleadings cannot create a material issue of fact. Id.

  For cases in which both sides move for summary judgment, a district court need not grant judgment as a matter of law for one side or the other. Schwabenbauer v. Bd. of Educ. of Olean, 667 F.2d 305, 313 (2d Cir. 1981). Instead, it must evaluate "each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Id. at 314.

  A. Violation of a Court Order

  The first claim contained in the Complaint seeks monetary damages for alleged violations of the Compromise Order. It is not clear, however, whether such a violation is actionable here. Plaintiff relies on Siroty v. Nelson, 75 N.Y.2d 957 (1990), in which the New York Court of Appeals determined that a bank's failure to comply with a court order in an interpleader action involving competing claims over deposited funds rendered it liable for the misappropriation of funds that purportedly resulted from its noncompliance. Id. at 958-59. The lower court had, pursuant to Civil Practice Law and Rules ("CPLR") § 1006, issued a discharge order, which as the law explicitly states "shall not discharge the stakeholder from liability to any claimant until" such order "is complied with." CPLR § 1006(f). The Court of Appeals concluded that the bank remained liable since it had failed to obey the directives of the lower court and the statute explicitly did not release it from liability. Id. at 959.

  Plaintiff contends that a violation of a state court order similar to the one in Siroty has occurred. It was, after all, the failure of the FOJP Defendants to follow the Compromise Order that allowed Stephen Facella to dissipate the funds. While they "may have claims against Stephen Facella, they cannot avoid liability to Mary Facella due to his conduct." (Pl. Memo. of Law in Oppos. at 3.)

  Siroty, however, is clearly inapposite to the facts of this case. That case involved an interpleader action, which was resolved by the Court rather than settled by the agreement of the parties. It was also the same court in Siroty, rather than different ones, that both issued the discharge order and refused to relieve the bank's liability for non-compliance with the initial order. More importantly, the defendant bank in Siroty was liable for the violation of a court order only because § 1006's very text discharged liability only with direct compliance with the court order.

  Plaintiff's claim seeks to have this Court determine that the state court's Compromise Order has been violated and to force compliance with it. This is tantamount to a civil contempt claim, which is a court's attempt to vindicate "its legal authority to enter the initial order" and "to give effect to the law's purpose of modifying the contemnor's behavior to conform to the terms required in the order." International Union, UMWA v. Bagwell, 512 U.S. 824, 828, 114 S.Ct. 2252, 129 L.Ed.2d 642 (1994) (citing Hicks v. Feiock, 485 U.S. 624, 632, 109 S.Ct. 1423, 1431, 99 L.Ed.2d 721 (1988)).

  Federal courts have long recognized that such claims may only be decided by the court that issued them not only because of concerns for inherent judicial power, see Fed.R.Civ.P. 4.1 Advisory Committee Notes ("Contempt proceedings, whether civil or criminal, must be brought in the court that was allegedly defied by a contumacious act."); Bagwell, 512 U.S. at 831 ("[C]ivil contempt proceedings leave the offended judge solely responsible for identifying, prosecuting, and sanctioning contumacious conduct."), but also for issues of comity. See Juidice v. Vail, 430 U.S. 327, 335-36, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977) ("A State's interest in the contempt process, through which it vindicates the regular operation of its judicial system . . . is an important interest. . . . [F]ederal-court interference with the State's contempt process is `an offense to the State's interest. . . .'"). Courts faced with such situations have refused to decide the claim. See Hodge ex Rel. Skiff v. Hodge, 66 F. Supp.2d 342, 345 (N.D.N.Y. 1999) (refusing to rule on the contempt claim and remanding it to the state court that issued it); Rhulen Agency, Inc. v. Ins. Co. of North America, 87 Civ. 7682 (RJW), 1992 WL 58932 at *1 (S.D.N.Y. Mar. 19, 1992) (finding that the court was "not a proper forum to determine whether the orders of the bankruptcy were willfully violated" and dismissing the claim).

  Because Plaintiff's claim requires the Court to adjudicate a contempt claim that stems from an order not its own, the Court as a matter of law cannot hear the claim. The Court accordingly DISMISSES the claim without prejudice.

  B. Breach of Fiduciary Duty

  The elements of a claim of breach of duty are that "there is (1) a fiduciary relationship between the parties" and "(2) the fiduciary duty has been breached." Cramer v. Devon Group, Inc., 774 F. Supp. 176, 184 (S.D.N.Y. 1991) (citations omitted).

  In determining when a fiduciary relationship exists, New York courts conduct a fact-specific inquiry into whether a party reposed confidence in another and reasonably relied on the other's superior expertise or knowledge. United States v. Chestman, 947 F.2d 551, 568 (2d Cir. 1991) (finding a fiduciary relationship "exists when confidence is reposed on one side and there is resulting superiority and influence on the other") (citation omitted); Wiener v. Lazard Freres & Co., 672 N.Y.S.2d 8, 14 (1st Dep't 1998) (citing New York cases). From this, a distinct legal duty arises because "[i]n relying on a fiduciary to act for his benefit, the beneficiary of the relation may entrust the fiduciary with custody over property of one sort or another . . . and [the fiduciary] becomes duty-bound not to appropriate the property for his own use." Chestman, 947 F.2d at 569. Finally, "[a] cause of action for breach of fiduciary duty which is merely duplicative of a breach of contract claim cannot stand" William Kaufman Organization, Ltd. v. Graham & James LLP, 703 N.Y.S.2d 439, 442 (1st Dep't 2000) (citations omitted).

  FOJP Defendants argue that there is no evidence that any fiduciary relationship existed here. They argue that there was no confidential relationship between the parties and that at no time did Plaintiff entrust FOJP Defendants with any property, trust, or confidence.

  Plaintiff remains silent in her papers on this claim. She makes no arguments nor cites any case law that would demonstrate the presence of an additional factor distinguishing this claim from being merely duplicative of her breach of contract action. Moreover, she cites no evidence that would support the existence of a fiduciary relationship. Indeed, the Compromise Order arose from a lawsuit in which Plaintiff and FOJP Defendants were adversaries — hardly a situation demonstrating a relationship of trust or confidence. The Order by its terms, furthermore, does not create a relationship of confidence between the parties. The Court finds that no evidence of such a relationship ever existed.

  Accordingly, the Plaintiff's Motion is DENIED and the FOJP Defendant's Motion is GRANTED.

  C. Breach of Contract

  Plaintiff brings a breach of contract claim here under the theory that the Compromise Order is a valid contract at New York common law. Such a claim under New York state law requires "proof of (1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages." First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2d Cir. 1998) (citation omitted); Ledain v. Town of Ontario, 746 N.Y.S.2d 760, 763 (N.Y.Sup.Ct. 2002).

  To form a contract under New York law, "there must be an offer, acceptance, consideration, mutual assent and intent to be bound." Register.Com, Inc. v. Verio, Inc., 356 F.3d 393, 427 (2d Cir. 2004) (citations omitted). Traditionally, settlements have been treated as contracts for purposes of interpretation and enforcement, Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994) ("A settlement agreement is to be construed according to general principles of contract law."); c.f. CPLR § 2104 Practice Commentaries C2104:3 ("Nevertheless, a stipulation is a contract. . . ."), even in cases when an agreement has not been fully executed by both sides. Ciaramella v. Reader's Digest Ass'n, Inc., 131 F.3d 320, 323 (2d Cir. 1997).

  FOJP Defendants argue that the Compromise Order does not meet the requirements of an enforceable contract since it was not executed by any of the parties and fails to establish the required elements of offer, acceptance, and consideration. Furthermore, the "Compromise Order contains provisions specifically ordered by the Court and not negotiated by the parties." (FOJP Def. Memo. of Law at 14.)

  Plaintiff contends that the Compromise Order represents a court-approved settlement in which the Facellas agreed with FOJP Defendants to give up their legal claims in return for structured monetary payments over a period of years. Such agreement, Plaintiff argues, clearly demonstrates the necessary prerequisites of an enforceable contract.

  It is clear to the Court that the Compromise Order is signed by the state court judge alone; no parties have signed the Compromise Order. While stipulations of settlement are often treated as contracts at New York law, the Compromise Order is not such a stipulation merely so ordered by Justice Fusco but is a judicial order. (Comp. Order at 9 (ordering various actions to be undertaken by the parties).)

  Plaintiff does not cite to a single case in which a court has determined that a court-drafted order constituted a contract. The cases which the Court has found involve situations where the parties themselves drafted a stipulation of settlement and one party seeks to enforce that agreement as though it were a contract. See, e.g., Collins v. Harrison-Bode, 303 F.3d 429, 431-32 (2002) (involving a disagreement over a settlement agreement drafted by parties); Ciaramella 131 F.3d at 321 (seeking enforcement of a settlement agreement, which was drafted by parties but unsigned by one party); Rexnord Holdings, 21 F.3d at 524 (involving the alleged violation of a stipulation drafted and executed by the parties themselves).

  Moreover, to permit the Plaintiff in this case to bring a cause of action under a breach of contract theory would essentially allow her to make an end run around the Court's previous determination that it could not adjudicate a claim for a violation of a state court order. If the Court cannot determine whether part of the Order has been violated by FOJP Defendants' compliance or noncompliance, the Court shall not do so under the guise of contract law. Because the Compromise Order is not a contract, Plaintiff cannot recover under a breach of contract claim. Accordingly, the Plaintiff's Motion for Summary Judgment is DENIED and the FOJP Defendants' Motion is GRANTED.*fn4

  D. Negligence

  Under New York law, a plaintiff must establish three elements to prevail on a negligence claim: "(1) the existence of a duty on defendant's part as to plaintiff; (2) a breach of this duty; and (3) injury to the plaintiff as a result thereof." Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111, 114 (2d Cir. 2000); Stagl v. Delta Airlines, Inc., 52 F.3d 463 (2d Cir. 1995). It is well-established, nevertheless, that "a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, 389 (1987); North Shore Bottling Co. v. C. Schmidt & Sons, Inc., 22 N.Y.2d 171, 179 (1968) (holding a contracting party may not assert a tort claim in addition to a breach of contract one unless the party alleged additional factors that resulted in "a breach of a duty distinct from, or in addition to, the breach of contract"); see also In re Mid-Island Hosp., Inc., 276 F.3d 123 (2d Cir. 2002) (holding that a party cannot sustain a claim against another based "on negligence unless public policy imposed an additional duty on Empire beyond those imposed by the contract and regulation"); U.S. for Use and Benefit of Evergreen Pipeline Const. Co., Inc. v. Merritt Meridian Const. Corp., 95 F.3d 153, 162 (2d Cir. 1996) (dismissing a tort claim where no legal duty independent of the contract existed). Such an independent legal duty "must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract." Clark Fitzpatrick, 70 N.Y.2d at 389. Finally, in making such a determination, New York courts have required that personal injury or loss result; otherwise, "where the injury alleged is solely economic and where there was no cataclysmic occurrence, New York courts have rejected negligence claims." TD Waterhouse Investor Services, Inc. v. Integrated Fund Services, Inc., 01 Civ. 8986 (HB), 2003 WL 42013 at *12 (S.D.N.Y. Jan. 6, 2003) (citation omitted).

  FOJP Defendants claim that they owe no common law duty to Plaintiff. Because of this, Mary Facella may not assert a negligence claim. As with her fiduciary claim, Plaintiff cites no case law or evidence in support of this claim. The Court agrees that Plaintiff has demonstrated no evidence in the record nor any case law that would support a finding of any common law duty here owed to Plaintiff by FOJP Defendants. Furthermore, Plaintiff cannot proceed on a negligence theory in reference to the Compromise Order as New York case law makes explicitly clear that the absence of a legal duty independent of the contract precludes the assertion of negligence. Indeed, there is no enforceable contract even at issue here. Moreover, the Court notes that Plaintiff seeks only economic damages, which do not give rise to a tort claim in these circumstances. Plaintiff's negligence claim, therefore, "is essentially seeking enforcement of the bargain," and "the action should proceed under a contract theory." Sommer v. Federal Signal Corp., 29 N.Y.2d 540, 552 (1992) (citations omitted).

  Accordingly, Plaintiff's Motion for Summary Judgment is DENIED on the negligence claim, and Defendant's Motion is GRANTED.*fn5 E. Alperin's and First Colony's Motions for Summary Judgment

  Alperin and First Colony both move the Court to grant them summary judgment on the respective claims asserted against them by FOJP Defendants. However, since Plaintiff's claims have been dismissed as determined by the Court above, both Alperin's and First Colony's Motions are essentially moot. Accordingly, the Court declines to reach the merits of either Motion.


  As discussed in this Opinion, the Court DENIES Plaintiff's Motion for Summary Judgment and GRANTS FOJP Defendants' Motion for Summary Judgment except as to Plaintiff's claim of a violation of a court order, which is DISMISSED without prejudice. Given this, the Court DISMISSES the case and DIRECTS the Clerk of Court to close the docket in this case.

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