The opinion of the court was delivered by: JOHN CURTIN, Senior District Judge
Defendant Eastman Kodak Company ("Kodak") moves pursuant to
Rule 56 of the Federal Rules of Civil Procedure for summary
judgment dismissing this action on the ground that the claims
asserted in the complaint are barred by principles of res
judicata as the result of final judgment entered in New York
State Supreme Court, Monroe County, in Eastman Kodak Company v.
LSW Industries, Inc., Index No. 99-9863 (October 23, 2002),
aff'd, 6 A.D.3d 1123, 775 N.Y.S.2d 684 (4th Dep't April 30,
2004). For the reasons that follow, defendant's motion is granted.
The following facts are set forth in the pleadings, including
defendant's "Statement of Material Facts Not In Dispute" (Item
68) filed in accordance with Rule 56.1 of the Local Rules of
Civil Procedure for the Western District of New York.*fn1 Plaintiff Eddie Ashley, an African-American, is a shareholder
in Ashley Technologies Corp. ("ATC") and a principal of ATC's
wholly owned subsidiary, LSW Industries, Inc. ("LSW"). On
December 14, 1995, plaintiff signed an agreement with Kodak,
whereby LSW agreed to supply Kodak with wooden pallets and pallet
services for a period of seven years beginning in 1995. The
agreement provided that Kodak would purchase "not less than 18%
of the total annual pallet and pallet services requirements at
Kodak's Rochester, New York facilities . . ." from LSW, and LSW
would be compensated at "market competitive rates" (Item 68, Ex.
3, p. 2).
On September 22, 1999, Kodak commenced the above-referenced
state court action (Index No. 99-9863) against LSW and ATC
seeking judgment declaring that LSW had breached its obligations
under the agreement, and that Kodak was therefore entitled to
terminate the contract. The complaint set forth causes of action
for breach of contract, unjust enrichment, conversion, and
fraudulent misrepresentation based on allegations that LSW had
failed to maintain the agreed-upon inventory and had failed to
reimburse Kodak for raw materials purchased for LSW's benefit
(see Item 68, Ex. 2). On November 19, 1999, LSW and ATC
answered the complaint and asserted affirmative defenses and
counterclaims alleging that Kodak had failed to substantially
perform its obligations under the contract and had fraudulently
induced LSW to enter into the agreement (Item 68, Ex. 4). Then,
on December 28, 1999, plaintiffs Ashley, LSW, and ATC filed a
separate state court action against Kodak (Index No. 99-3518),
seeking an order compelling Kodak to continue to honor the December 14, 1995 agreement (Item 68,
Ex. 5). Both cases were assigned to Hon. Thomas A. Stander,
J.S.C., in Commercial Term.
Meanwhile, on December 10, 1999, plaintiffs filed this federal
court action seeking relief under 42 U.S.C. § 1981, alleging that
Kodak's breach of its obligations under the December 14, 1995
agreement was based upon race (Item 1). The complaint was amended
as of right on December 22, 1999 (Item 3). Kodak answered and
asserted counterclaims identical to the causes of action it had
previously raised in the initial state court action (Item 10).
Plaintiffs subsequently filed a motion for leave to amend the
complaint a second time in order to assert antitrust and RICO
(Racketeer and Corrupt Organizations Act) causes of action (see
Item 11). Kodak responded to the motion to amend, and filed a
motion to stay the federal court action pending final judgment in
the state court cases, pursuant to the abstention doctrine of
Colorado River Water Conservation District v. United States,
424 U.S. 800 (1976)*fn2 (see Item 19). When this court
denied both the motion for abstention (see Item 37) and the
motion to amend the pleadings (see Item 50), the parties
ultimately agreed to stay the federal proceedings pending the
outcome of the state court dispute (see Item 55).
In an order delivered from the bench on September 13, 2003,
Justice Stander granted Kodak's motion for summary judgment in
No. 99-9863, dismissing the action in its entirety (Item 68, Ex.
14). Justice Stander found that the December 14, 1995 agreement was unambiguous, and that Kodak had performed its contractual
obligation to pay LSW market competitive prices for pallets and
pallet services. He also found that LSW breached the agreement by
failing to maintain required inventory in the amount of
$36,197.00, and by failing to deliver $46,448.64 worth of
finished pallets. Justice Stander also dismissed LSW's
counterclaims for fraudulent inducement and misrepresentation
(id.). By written order dated October 18, 2002, Justice Stander
entered judgment in favor of Kodak in the amount of $86,646.00
(Item 68, Ex. 15). On April 30, 2004, the Appellate Division,
Fourth Department, unanimously affirmed. Eastman Kodak Company
v. LSW Industries, Inc., 6 A.D.3d 1123, 775 N.Y.S.2d 684
(4th Dep't 2004).
Kodak now moves for summary judgment dismissing this action on
the ground that it is barred by principles of res judicata. For
the reasons that follow, Kodak's motion is granted.
The doctrine of res judicata, or "claim preclusion,"*fn3
makes a final, valid judgment on the merits of a case
"`conclusive on the parties, and those in privity with them, as
to all matters, fact and law, [that] were or should have been
adjudicated in the proceeding.'" Waldman v. Village of Kiryas
Joel, 207 F.3d 105, 108 (2d Cir. 2000) (quoting Wm. James Moore,
Moore's Federal Practice ¶ 0.405, at III-7 (2d ed. 1996)).
The judgment "is a finality as to the claim or demand in
controversy, concluding parties and those in privity
with them, not only as to every matter which was
offered and received to sustain or defeat the claim
or demand, but as to any other admissible matter
which might have been offered for that purpose."
Securities and Exch. Comm'n v. First Jersey Secs., Inc.,
101 F.3d 1450, 1463 (2d Cir. 1996) (quoting Nevada v. United
States, 463 U.S. 110, 129-30 (1983)), cert. denied,
522 U.S. 812 (1997).
The party seeking to establish the preclusive effect of a prior
judgment must show that (1) the previous action involved an
adjudication on the merits, (2) the previous action involved the
plaintiffs or those in privity with them, and (3) the claims
asserted in the subsequent action were, or could have been,
raised in the prior action. Monahan v. New York City Dept. of
Corrections, 214 F.3d 275, 285 (2d Cir.), cert. denied,
531 U.S. 1035 (2000). It is beyond dispute in this case that the
judgment entered in state court involved an adjudication on the
merits of the contractual dispute between the parties.
Accordingly, the only question for this court is whether
plaintiffs' Section 1981 "discriminatory breach of contract"
claim was, or could have been, raised in state court.
The focus of this inquiry is whether the second suit involves
the same claim, or "nucleus of operative fact," as the first
suit. Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86,
90 (2d Cir. 1997) (quoting Apparel Art International, Inc. v.
Amertex Enterprises Ltd., 48 F.3d 576, 583 (1st Cir. 1995)).
This determination depends on whether "`the transaction or
connected series of transactions at issue in both suits is the
same, that is, where the same evidence is needed to support both
claims, and where the facts essential to the second were present
in the first.'" Id. at 91, quoting Securities and Exch. Comm'n
v. First Jersey Secs., Inc., 101 F.3d at 1464; see National
Labor Relations Bd. v. United Techs. Corp., 706 F.2d 1254, 1260 (2d Cir. 1983). The Second
Circuit has identified the following factors for courts to
consider when conducting this inquiry: (1) whether the facts are
related in time, space, origin, or motivation, (2) whether the
facts form a convenient trial unit, and (3) whether treating the
facts as a unit conforms to the parties' expectations. Waldman,
207 F.3d at 108. "[Second Circuit] cases consistently hold that
the facts essential to the barred second suit need not be the
same as the facts that were necessary to the first suit. It is
instead enough that `the facts essential to the second were
[already] present in the first.'" Id. at 110-11 (quoting
Computer Associates International, Inc. v. Altai, Inc.,
126 F.3d 365, 369 (2d Cir. 1997), cert. denied, 523 U.S. 1106
(1998)); see also Interoceanica, 107 F.3d at 91.
There can be no question in this case that the facts underlying
the matters adjudicated by Justice Stander and the matters set
forth in the plaintiffs' federal complaint are rooted in the same
nucleus of operative facts. The entire federal cause of action is
centered on Kodak's alleged failure to perform its obligations
under the December 14, 1995 agreement (see Item 3, ¶¶ 21-30),
and that the failure to perform was "based solely on the fact
that the plaintiff Eddie Ashley is of the African-American race"
(id., ¶ 32). These allegations are substantially related in
time, space, origin, and motivation to the facts ruled upon by
Justice Stander and the Fourth Department. Specifically, Justice
Stander found as follows:
The intent of the parties as expressed in the Letter
Agreement is that Ashley would provide pallets and/or
pallet services at market competitive rates, with
pricing to be bench marked by formal quotation
processes and other analytical means. The parties
agreed to work together to determine the fair selling
price/profit margin for Ashley. . . . The evidence presented on this motion for summary
judgment shows that Kodak performed formal quotation
processes and other analytical means to assess and
determine pricing that it would accept for pallets.
The defendants [LSW and ATC] have failed to show a
question of fact that the prices paid by Kodak were
not at market competitive prices. The facts establish
that the prices paid to LSW for pallets and pallet
services was at or above market rates paid to other
suppliers for the same goods and services.
(Item 68, Ex. 14, pp. 3-4). As already discussed, Justice Stander
not only found that Kodak had performed its contractual
obligations, but he also found that LSW breached the agreement by
failing to maintain required inventory and failing to deliver
finished product (see id. at pp. 5-6).
Clearly, the transactions at issue in both suits are the same,
and the facts necessary to support plaintiffs' "discriminatory
breach of contract" claim in this case were "already present" in
the state court action. Waldman, 207 F.3d at 111. Both actions
are centered around the parties' performance of their contractual
obligations under the December 14, 1995 agreement, and the
reasons for Kodak's termination of the agreement. There is
nothing in the record now before the court to suggest that
further discovery would yield any additional support for
plaintiffs' claim that the agreement was terminated by Kodak
because of Mr. Ashley's race, and not as Justice Stander found
as the result of LSW's breach. Under these circumstances, ...