The opinion of the court was delivered by: Joseph F. Bianco, District Judge
Plaintiff Neil J. Giannone brings the instant action against his former employer, York Tape & Label, Inc., seeking damages for the employer's enforcement of a noncompetition agreement that was later declared void by the New York State Supreme Court. After removing the action to this Court, defendant filed a pre-answer motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) based on the doctrine of res judicata. The instant motion addresses a very discrete issue - that is, whether, under New York law, the declaratory judgment exception to the doctrine of res judicata applies where the prior state action sought both declaratory and injunctive relief. As set forth below, the Court concludes that the exception does not apply because injunctive relief was sought (and in fact obtained) in the prior state court action and, thus, this lawsuit is barred by the doctrine of res judicata.
Plaintiff commenced an action in the Supreme Court of the State of New York, Suffolk County against defendant, his former employer, seeking a declaration of his rights under a restrictive covenant not to compete and an order permanently enjoining defendant from enforcing the restrictive employment covenants against him. By order dated September 21, 2005, the Supreme Court granted summary judgment on plaintiff's complaint, declaring the restrictive covenant void for lack of consideration and enjoining the enforcement of the restrictive covenant.
On September 25, 2006, plaintiff commenced the instant action against defendant, seeking damages for its commission of a commercial tort under New York law in enforcing the restrictive covenant that had been declared void by the September 21, 2005 order. Defendant removed the action to this Court on the basis of diversity of the parties on December 11, 2006.
In reviewing a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, the court must accept the factual allegations set forth in the complaint as true, and draw all reasonable inferences in favor of the plaintiff.*fn1 See Cleveland v. Caplaw Enterp., 448 F.3d 518, 521 (2d Cir. 2006); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005). A complaint should be dismissed under Rule 12(b)(6) "`only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Overton v. Todman & Co., CPAs, P.C., 478 F.3d 479, 483 (2d Cir. 2007) (quoting Rombach v. Chang, 355 F.3d 164, 169 (2d Cir. 2004) (internal quotation marks omitted)). The appropriate inquiry is "not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Twombly v. Bell Atl. Corp., 425 F.3d 99, 106 (2d Cir. 2005).
Here, defendant argues that the complaint is barred by the doctrine of res judicata. Under the doctrine of res judicata, otherwise known as claim preclusion, "`a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.'" Flaherty v. Lang, 199 F.3d 607, 612 (2d Cir. 1999) (quoting Rivet v. Regions Bank of La., 522 U.S. 470, 476 (1998) (internal quotation marks omitted) (emphasis added)); accord Allen v. McCurry, 449 U.S. 90, 94 (1980). The doctrine applies only if "(1) the previous action involved an adjudication on the merits; (2) the previous action involved the [parties] 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. N. Y. City Dep't of Corr., 214 F.3d 275, 285 (2d Cir. 2000) (citations omitted). "In determining whether a second suit is barred by this doctrine, the fact that the first and second suits involved the same parties, similar legal issues, similar facts, or essentially the same type of wrongful conduct is not dispositive." Maharaj v. Bankamerica Corp., 128 F.3d 94, 97 (2d Cir. 1997). "Rather, the first judgment will preclude a second suit only when it involves the same `transaction' or connected series of transactions as the earlier suit." Id. Therefore, as the Second Circuit has noted, "the obvious starting point in a preclusion analysis is a determination of the issues that were litigated in the first action." Flaherty, 199 F.3d at 613. Furthermore, in evaluating the res judicata effect of a prior action, "courts routinely take judicial notice of documents filed in other courts, again not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings." Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991).
Plaintiff does not dispute that the prior action involved an adjudication on the merits, that the prior action involved the same parties, and that the claims asserted in the instant action could have been raised in the prior action. However, plaintiff argues that an exception to the doctrine of collateral estoppel allows this case to proceed - namely, the declaratory judgment exception.
It is well established that "both federal and New York State law recognize the declaratory judgment exception articulated in the Restatement." Harborside Refrig. Servs., Inc. v. Vogel, 959 F.2d 368, 373 (2d Cir. 1992). The Restatement provides in relevant part:
When a plaintiff seeks solely declaratory relief, the weight of authority does not view him as seeking to enforce a claim against the defendant. Instead, he is seen as merely requesting a judicial declaration as to the existence and nature of a relation between himself and the defendant. The effect of such a declaration, under this approach, is not to merge a claim in the judgment or to bar it. Accordingly, regardless of outcome, the plaintiff or defendant may pursue further declaratory or coercive relief in a subsequent action.
Restatement (Second) of Judgments § 33, comment c (1982). However, as noted above, this narrow exception in the Restatement is limited to cases where "a plaintiff seeks solely declaratory relief." Id. (emphasis added).
Thus, courts that "recognize an exception to ordinary res judicata principles" do so only where "the prior action involved only a request for declaratory relief." Harborside Refrig. Servs., 959 F.2d at 372 (emphasis added); see also Minneapolis Auto Parts Co. v. City of Minneapolis, 739 F.2d 408, 410 (8th Cir. 1984) (applying Restatement (Second) § 33 and holding "we agree with the district court that claim preclusion applies when coercive relief is sought and granted in the first suit"); accord Mandarino v. Pollard, 718 F.2d 845, 848-49 (7th Cir. 1983) ("[P]ermitting [plaintiff] to proceed with his federal lawsuit would not further the purpose of declaratory actions, since his state court action did not seek `solely' declaratory relief. Instead, his request for a judicial declaration was coupled with a request for a preliminary injunction . . . We conclude that even if the rule stated in Restatement (Second) of Judgments governed resolution of this appeal, [plaintiff's] pursuit of injunctive relief in his state court action would remove him from the protections of the rule."); MTS, Inc. v. 200 E. 87th St. Assoc., 899 F. Supp. 1180, 1185-86 (S.D.N.Y. 1995) ("An action that seeks only declaratory relief may be subject to a restrictive application of claim preclusion principles. However, a prior action . . . that sought both declaratory and coercive relief is subject to the claim preclusion rules that apply to actions for coercive relief alone.") (citations and quotations omitted); Univ. of N.H. v. April, 347 A.2d 446, 450 (N.H. 1975) ("While the res judicata effect of a declaratory judgment as to matters which could have been litigated but were not has been held more restrictive than that of a full judgment on the merits, the basis for such differential treatment is lacking in the present action, where coercive relief was sought and granted in the prior one.").
The Second Circuit made clear in Harborside that New York law is consistent with the declaratory judgment exception articulated in the Restatement. See Harborside Refrig. Servs., 959 F.2d at 373 (concluding that the court need not decide whether federal or New York law applies to res judicata issue because "both federal and New York State law recognize the declaratory judgment exception articulated in the Restatement"). In other words, if a plaintiff seeks coercive relief (such as injunctive relief) in connection with a declaratory judgment ...