United States District Court, S.D. New York
September 22, 2004.
DANIEL TEPPER, Plaintiff,
BRUCE BENDELL, DORON COHEN, RICHARD L. FEINSTEIN, GEOFFREY ALEXANDER, MITCHELL C. LITTMAN, ESQ., LITTMAN KROOKS & ROTH P.C., ROBERT L. RIMBERG, ESQ., AND RIMBERG & ASSOCIATES, P.C. Defendants.
The opinion of the court was delivered by: SHIRLEY KRAM, Senior District Judge
OPINION AND ORDER
Daniel Tepper ("Plaintiff") filed suit in Nevada District Court
against Fidelity Holdings, Inc. ("Fidelity") based on a dispute
over securities transactions (the "Nevada Action"). See Tepper
v. Fidelity Holdings, Inc., No. 99-1119 (D. Nev. filed Jul. 27,
2001). Judge Quackenbush decided the matter through binding
mediation and found Fidelity liable for damages totaling
$522,000. Thereafter, Fidelity paid the sum in its entirety to
satisfy the judgment. (Rimberg Decl. Ex. B at 1-2).
Plaintiff now sues Bruce Bendell, Doron Cohen, Richard L.
Feinstein, Mitchell C. Littman, Esq., Littman Krooks & Roth P.C.,
Robert L. Rimberg, Esq., and Rimberg & Associates ("Defendants")
in their individual capacities as the officers and attorneys of Fidelity for the same losses at issue in the
Defendants move pursuant to Fed.R. Civ. P. 12(b) (6) to
dismiss Plaintiff's cause of action for failure to state a claim
upon which relief may be granted. In the alternative, Defendants
move for summary judgment pursuant to Fed.R. Civ. P. 56(c),
citing the preclusive effect of the binding mediation on
Plaintiff's current claims for damages. Defendants also move to
levy sanctions under Fed.R. Civ. P. 11(b), alleging that
Plaintiff and his attorney have pursued a frivolous lawsuit.
For the reasons set forth below, Defendant's motions are
granted in part and denied in part.
Both the facts and procedural history of the transactions at
issue have been described previously by this Court. See Tepper
v. Bendell, 2002 U.S. Dist. LEXIS 23303, at 2-7 (S.D.N.Y. Dec 5,
2002). Since 2002, however, there have been significant
developments affecting the viability of Plaintiff's three
On March 27, 2003, Plaintiff received a complete satisfaction
of the judgment in the Nevada Action. (Rimberg Decl. Ex B at
1-2). This is clearly evinced by a signed document labeled
"Satisfaction of Judgment," which states that the "judgment, with
interests and costs, has been fully paid." See id. Fidelity therefore fulfilled its obligations under
the stipulated mediation, paying Plaintiff $522,000 for his
losses on the securities transactions in question. Nonetheless,
Plaintiff continues to assert three causes of action against
Defendants in their individual capacities as the officers and
attorneys of Fidelity. In return, Defendants move to dismiss
these claims and move for summary judgment in the alternative.
A. Applicable Legal Standards
1. Motion to Dismiss
To prevail on a Rule 12(b) (6) motion to dismiss, the Court
accepts as true the factual allegations in the complaint and
draws all reasonable inferences in favor of the plaintiff. See
Harris v. City of New York, 186 F.3d 243, 247 (2d Cir. 1999).
However, the Rules require that when "matters outside the
pleadings are presented to and not excluded by the court, the
motion shall be treated as one for summary judgment and disposed
of as provided in Rule 56." Fed.R. Civ. P. 12(b) (6). Such
actions are mandatory when a party wishes to introduce an
extraneous document with information not set forth in the
complaint. See Carter v. Stanton, 405 U.S. 669, 671 (1972).
Defendant relies on a document labeled "Satisfaction of
Judgment" that was signed by Plaintiff as the primary piece of
evidentiary support for his 12(b) (6) motion. (See Rimberg Decl. Ex. B at 1-2). Because the document was not included in
Plaintiff's amended complaint, the Court will convert Defendants'
motion to dismiss to a Rule 56(c) motion for summary judgment.
2. Motion for Summary Judgment
According to Fed.R. Civ. P. 56(c), summary judgment is
appropriate where "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law." Fed.R. Civ. P. 56(c). The moving party
bears the initial responsibility of demonstrating the basis for
its motion by identifying those portions of the pleadings,
depositions, answers to interrogatories, or affidavits on file
which it believes demonstrates the absence of a genuine issue of
material fact. See Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). The nonmoving party must then come forward with
"specific facts showing that there is a genuine issue for trial,"
Fed.R. Civ. P. 56(e), by "a showing sufficient to establish the
existence of [every] element essential to that party's case, and
on which that party will bear the burden of proof at trial."
Celotex, 477 U.S. at 322.
The Court "must resolve all ambiguities and draw all reasonable
inferences in favor of the party defending against the motion." Eastway Constr. Corp. v. City of New York,
762 F.2d 243, 249 (2d Cir. 1985). But the Court is to inquire whether
"there is sufficient evidence favoring the nonmoving party for a
jury to return a verdict for that party," Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 249 (1986), and to grant summary
judgment where the nonmovant's evidence is merely colorable,
conclusory, speculative or not significantly probative. Id. at
249-50; see also Argus Inc. v. Eastman Kodak Co.,
801 F.2d 38, 45 (2d Cir. 1986), cert. denied, 479 U.S. 1088 (1987). In
sum, if the court determines that "the record taken as a whole
could not lead a rational trier of fact to find for the nonmoving
party, there is no `genuine issue for trial.'" Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(quoting First Nat'l Bank of Arizona v. Cities Serv. Co.,
391 U.S. 253, 289 (1969)).
B. Defendants' Motion For Summary Judgment Is Granted
Despite receiving full payment for the judgment in the Nevada
Action, Plaintiff continues to assert claims for (1) conversion;
(2) breach of fiduciary duty; and (3) negligence. Individual
analysis of each of these claims is not necessary because they
can be addressed uniformly. Since Fidelity has previously
compensated Plaintiff for losses on the securities transactions now at issue, Defendant's motion for summary
judgment must be granted.
Plaintiff entered into a binding mediation with District Court
Judge Quackenbush on October 15, 2001 to resolve his dispute with
Fidelity. The stipulated agreement described the process as "a
final and binding judgment" and included a provision waiving any
right to appeal. (Tepper Dec. Ex. 2 at 2). Plaintiff knowingly
and intelligently entered into this mediation procedure and
therefore cannot escape the final determinations entered into the
record by Judge Quackenbush.
There is no dispute that Plaintiff is suing Defendants on the
exact same financial losses for which he was compensated in the
Nevada Action. (See Am. Compl. ¶¶ 17-34). However, payment in
full by a judgment debtor bars further action by the plaintiff in
question against another who is liable for the same damages.
Restatement (Second) of Torts § 886 comment b; see also,
Nagle v. Franzese, 1991 U.S. Dist. LEXIS 519 (S.D.N.Y. Jan. 17,
1991). More specifically, "[w]here the legal relationship between
two parties establishes vicarious liability for one party based
on the acts of the other, a suit brought against either of the
parties will foreclose subsequent action against the other."
Murray v. Dominick Corp. of Canada, Ltd., 631 F.Supp. 534, 537
(S.D.N.Y. Apr. 4, 1986). This Court already delineated the aforementioned doctrine in an
earlier opinion when addressing Defendants' first motion to
dismiss, assuring that "double recovery is foreclosed." Tepper
v. Bendell, 2002 U.S. Dist. LEXIS 23303, at 19 (S.D.N.Y. Dec. 5,
2002); see also Restatement (Second) of Torts § 885(3)
comment e (stating that "if the payment is made as full
satisfaction for a specified item of damage, the claim against
the others is terminated with respect to that item"); Restatement
(Second) of Judgments § 49 cmt. a (1982). The full payment of
damages by Fidelity in the Nevada Action discharged Defendants'
liability in their individual capacities. Accordingly,
Plaintiff's continued prosecution of this matter contravenes
clearly established law.
Principles of collateral estoppel further undermine Plaintiff's
case. Collateral estoppel bars the relitigation of claims against
an agent of a corporation whose liability has previously been
adjudicated. See Ritchie v. Landau, 475 F.2d 151 (2d Cir.
1973). In situations where successive defendants share vicarious
liability or their relationship can be characterized as
principal/agent, a suit brought against either of the Defendants
will foreclose a subsequent action against the other. See
Murray, 631 F.Supp. at 537.
The Ritchie decision and its progeny require that there be a
"full and fair opportunity" to litigate the claim in question in a prior adjudication. See id., at 155; see also
Schwartz v. Public Adm. Of County of Bronx, 24 N.Y.2d 65, 298
(1969). Plaintiff certainly had a full and fair opportunity to
present his claims in their entirety at trial, but strategically
elected to submit them to binding mediation. He now attempts to
pursue a duplicate lawsuit in lieu of the fact that Defendants'
actions were coextensive with Fidelity's and imputed vicarious
liability to the corporation in the first place. Consequently,
Defendant had ample opportunity to fully pursue the matter
earlier and his claims are collaterally estopped.
C. Rule 11 Sanctions Denied
Defendants move for sanctions under Fed.R. Civ. P. 11(b),
asserting that Plaintiff's claims against Defendants are
frivolous and have been filed for the purposes of harassment.
Claims are considered frivolous for purposes of Rule 11 sanctions
if "under an `objective standard of reasonableness' it is clear
. . . that there is no chance of success and no reasonable
argument to modify or reverse the law as it stands." Morley v.
Ciba-Geigy Corp., 66 F.3d 21, 25 (2d Cir. 1995) (quoting Caisse
Nationale de Credit Agricole-CNCA v. Valcorp, Inc., 28 F.3d 259,
264 (2d Cir. 1994)).
Sanctions, however, should be imposed with caution, Oliveri v.
Thompson, 803 F.2d 1265, 1272 (2d Cir. 1986), and deployed with
restraint. Veliz v. Crown Lift Trucks, 714 F. Supp. 49, 59 (E.D.N.Y. 1989). Here, Plaintiff's claims do not rise to the
level of objective frivolity required to sustain Defendants'
motion for sanctions.
Defendants' 12(b) (6) motion to dismiss for failure to state a
claim is converted to a motion for summary judgment, which is
hereby granted. Additionally, Defendant's request for sanctions
pursuant to Rule 11 is denied.
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