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Rubin v. Valicenti Advisory Services

January 26, 2007

GEOFFREY S. RUBIN, AS TRUSTEE OF THE SOUTHERN TIER NEWS COMPANY PENSION PLAN, PLAINTIFF,
v.
VALICENTI ADVISORY SERVICES, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

This action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1101 et seq., is before the Court on the objections by defendants/third-party plaintiffs Valicenti Advisory Services, Inc. ("VAS") and its president, Vincent R. Valicenti (collectively "defendants") to the June 16, 2006 Decision and Order of United States Magistrate Judge Marian W. Payson, 236 F.R.D. 149, which granted the motion by plaintiff/third-party defendant Geoffrey S. Rubin for leave to amend his answer to defendants' third-party complaint.*fn1 For the reasons that follow, the Court rejects defendants' objections and affirms and adopts the Magistrate Judge's Decision and Order in its entirety.

FACTUAL BACKGROUND

Rubin brought this action in April 2003 in his capacity as trustee of the Southern Tier News Company Pension Plan ("Plan"), seeking to recover losses suffered by the Plan, allegedly as a result of imprudent investment decisions by VAS, which served as the investment manager of the Plan from February 2000 to October 2002. On July 19, 2004, I issued a Decision and Order, 326 F.Supp.2d 427, granting defendants' motion for leave to amend the answer to assert third-party claims against Rubin individually, seeking contribution and indemnity based on defendants' allegation that the Plan's losses were caused by Rubin's own breach of his fiduciary duties.

Rubin answered the third-party complaint on September 10, 2004. (Dkt. #35). On February 17, 2006, Rubin moved before Magistrate Judge Payson for leave to amend his answer to assert counterclaims relating to defendants' alleged mismanagement of his personal account, which he opened with defendants at about the same time as the Plan account.

In her Decision and Order granting Rubin's motion, Magistrate Judge Payson first found that Rubin's proposed counterclaims concerning defendants' management of his personal account arise out of the same transactions or occurrences on which defendants' third-party claims for indemnity and contribution are based, and, accordingly, that they are compulsory counterclaims. 236 F.R.D. at 156. Magistrate Judge Payson also found that the counterclaims relate back to the filing of the third-party complaint on July 28, 2004, and that they are therefore not barred by the relevant statutes of limitations of three years for Rubin's claims for professional malpractice and breach of contract, see N.Y. C.P.L.R. § 214(6), and six years on his fraud claim, see N.Y. C.P.L.R. § 213(8).*fn2 Magistrate Judge Payson concluded that Rubin's proposed counterclaims were timely, and that his motion to amend his answer to include those counterclaims was therefore not futile. 236 F.R.D. at 157.

In their objections, defendants contend that Magistrate Judge Payson erred in a number of respects. They first assert that she erred in concluding that Rubin's counterclaims relate back simply because they are compulsory. Defendants contend that Magistrate Judge Payson should have also made a finding concerning whether Rubin's original answer put defendants on notice of the subject matter of his counterclaims. Defendants further assert that, in any event, Rubin's counterclaims are not compulsory, and that they do not meet the test for relation back of amendments under Fed. R. Civ. P. 15(c)(2).

DISCUSSION

I. Standard of Review

This action was referred to Magistrate Judge Payson pursuant to 28 U.S.C. § 636, which generally provides, in part, that a judge may designate a magistrate judge to hear and determine any nondispositive pretrial matter, and to issue proposed findings of fact and recommendations (commonly referred to as a "report and recommendation") for the disposition of dispositive matters. 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72. A party may object to a magistrate judge's decision on either type of matter within ten days after being served with the order. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72.

"The primary distinction between objections made pursuant [to] Rule 72(a) [governing nondispositive matters] and Rule 72(b) [governing dispositive motions] lies in the standard of review applied by the district court. Under Rule 72(a), a magistrate judge's decision can be vacated only if it is 'clearly erroneous or contrary to law,' whereas Rule 72(b) applies a de novo review standard to objections to a magistrate judge's report and recommendation." In re Comverse Tech., Inc. Derivative Litigation, No. 06-CV-1849, 2006 WL 3511375, at *2 n. 1 (E.D.N.Y. Dec. 5, 2006). Under the "clearly erroneous" standard of review of Rule 72(a), the magistrate judge's findings should not be rejected merely because the court would have decided the matter differently. Rather, the district court must affirm the decision of the magistrate judge unless "the district court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948); accord Anderson v. City of Bessemer, 470 U.S. 564, 573 (1985); In re Health Management, Inc., No. CV 96-0889, 1999 WL 33594132, at *4 (E.D.N.Y. Sept. 25, 1999). Under de novo review, the magistrate judge's findings and rulings are entitled to no deference. See Zervos v. Verizon New York, Inc., 252 F.3d 163, 168 (2d Cir. 2001) ("De novo review is review without deference").

The standard of review that this Court employs in considering objections to a magistrate judge's decision, then, depends on whether the underlying motion is considered dispositive or nondispositive. Although the Court of Appeals for the Second Circuit has not ruled on whether a motion to amend a pleading is properly classified as dispositive or nondispositive, "the weight of authority within this Circuit classifies a motion to amend a [pleading] as a non-dispositive pre-trial motion, and holds that a magistrate's order should be reviewed under the 'clearly erroneous standard.'" Palmer v. Monroe County Sheriff, 378 F.Supp.2d 284, 289 (W.D.N.Y. 2005) (collecting cases). See also Pagano v. Frank, 983 F.2d 343, 346 (1st Cir. 1993) ("Under ordinary circumstances a motion to amend a complaint is 'a pretrial matter not dispositive of a claim or defense of a party' within the purview of Fed. R. Civ. P. 72(a)"); Micale ex rel. Charles A. Micale Irrevocable Insurance Trusts v. Bank One N.A. (Chicago), No. 04-cv-00288, 2006 WL 1222330, at *2 (D.Colo. May 5, 2006) ("As a general matter, courts view a magistrate judge's decision to grant leave to amend a complaint as non-dispositive"); Stetz v. ReeherEnters., Inc., 70 F.Supp.2d 119, 120 (N.D.N.Y. 1999) ("Orders granting leave to amend are nondispositive, as they do not remove claims or defenses of a party") (quotation omitted). Accordingly, I review Magistrate Judge Payson's decision granting Rubin's motion for leave to amend his answer to the third-party complaint under the clearly-erroneous standard.

To the extent that Magistrate Judge Payson's decision is based upon her finding that the proposed counterclaims relate back under Rule 15(c)(2), however, the Second Circuit has recently clarified that review of that finding is de novo. See Salyton v. American Exp. Co., 460 F.3d 215, 228 (2d Cir. 2006) ("The proper standard of review of Rule 15(c)(2) decisions is ... de novo ..."). As the court explained in Salyton, "[a] court reviewing a Rule 15(c)(2) decision performs a function analogous to that performed by an appellate court reviewing a dismissal for failure to state a claim under Rule 12(b)(6)," since the relevant question in either situation focuses on facts provable under the allegations of the complaint, an ...


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