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Fagan v. Republic of Austria

May 19, 2009

EDWARD D. FAGAN; ERI, TOMONARI, NOBUKO AND YOUKO DEGUCHI; HERMANN GEIER; BIRGIT GÖTZ; ERWIN GÖTZ; MANFRED HILTEL; MARCUS HILTEL; MEMORANDUM ETSUKO, YASUAKI AND YUUKA KATONO; AND ORDER THOMAS KRAUS; ELAINE MAYERHOFER; ROLAND MAYERHOFER; MARIA MAYERHOFER-KARG; NANAE, MASATOSHI AND KOSUKE MITSUMOTO; JUNKO AND HITOSHI NARAHARA; ETSUKO, NOBUO AND HIROYASU ONODERA; ASAKO, MINEO AND CHIE OYAMA; SHIZUNO, TOMOYOSHI,: TAKESHI AND KAYO SAKAKIBARA; HIDEKO, SOUJU, MOTOKO AND KEIKO SAZE; JOOP STADMAN; MASAKO, YASUSHI, HIROKAZU, KIYOE AND HIROKO WAKUI; AGNES WOLF; JAMES F. LOWY ESQ. PA AND LOWY ROYER LAW FIRM LLC F/K/A INTERNATIONAL LAW GROUP LLC; PROF. DR. TOICHIRO KIGAWA; AND DR. GERHARD PODOVSOVNIK, :: PLAINTIFFS,
v.
REPUBLIC OF AUSTRIA, INDIVIDUALLY AND AS AGENT FOR ITS VARIOUS MUNICIPALITIES, DIVISIONS, ORGANS, MINISTRIES AND/OR OTHER ENTITIES INCLUDING BUT NOT LIMITED TO AUSTRIAN MINISTRY OF JUSTICE, AUSTRIAN TOURIST OFFICE INC., AUSTRIAN NATIONAL TOURIST OFFICE INC., FACHVERBAND DER SEILBAHNEN, AUSTRIAN MINISTRY OF TRANSPORTATION, STATE OF SALZBURG, MUNICIPALITY OF KAPRUN, EUROPA SPORTREGION GMBH, SALZBURGER LAND TOURISMUS GMBH, OESTERREICH WERBUNG, AUSTRIAN TRADE COMMISSION,: AUSTRIAN MINISTRY OF ECONOMICS AND LABOR, VERMITTLUNGSKOMMISSION BRANDKATASTROPHE KAPRUN A/K/A THE KAPRUN COMMISSION; GLETSCHERBAHNEN KAPRUN AG; ÖSTERREICHISCHE : ELEKTRIZITÄTSWIRTSCHAFTS-AG; GENERALI VERSICHERUNG AG; UNITED STATES DISTRICT COURT FOR SOUTHERN : DISTRICT OF NEW YORK, INDIVIDUALLY AND AS CUSTODIAN OF RECORDS OF : HON. SHIRA A. SCHEINDLIN USDJ, BETON-UND MONIERBAU G.M.B.H. D/B/A : HEITKAMP INC., E. HEITKAMP GMBH, AND HEITKAMP-DEILMANHANIEL GMBH; : BOSCH REXROTH AG; BOSCH REXROTH CORPORATION D/B/A AND/OR ITS/THEIR : ENTITIES INCLUDING REXROTH CORPORATION INDUSTRIAL HYDRAULICS DIVISION, ROBERT BOSCH CORP., THE BOSCH GROUP, ROBERT BOSCH GMBH, ROBERT BOSCH AG, BOSCH REXROTH PNEUMATICS, BOSCH REXROTH MOBILE HYDRAULICS, BOSCH REXROTH CORPORATION HYDRAULICS DIVISION, MANNESMAN REXROTH CORPORATION, AND REXROTH BOSCH GROUP; CYALUME TECHNOLOGIES INC. INDIVIDUALLY AS SUCCESSOR TO OMNIGLOW CORPORATION; : EXXON MOBIL CORPORATION; HYDAC INTERNATIONAL AG D/B/A HYDAC TECHNOLOGY CORP. AND HYDAC CORPORATION; INTERSPORT INTERNATIONAL CORPORATION, D/B/A INTERSPORT AUSTRIA GMBH AND INTERSPORT MARKETING USA INC.; SIEMENS AG OESTERREICH AND SIEMENS AG, D/B/A SIEMENS CORPORATION, SIEMENS PSE (PSC) TECHLABS, SIEMENS: TRANSPORTATION SYSTEMS CORP., SIEMENS TRANSPORTATION SYSTEMS GMBH & CO KG, AND SIEMENS SHARED SYSTEMS; SWOBODA KAROSSERIE AG D/B/A BAUBEDARFS-ZENTRUM STADLBAUER: AG AND SWOBODA KAROSSERIE UN STAHLBAU GMBH; THYSSENKRUPP AG AND THYSSEN SCHACTBAU GMBH; TUV INTERNATIONAL D/B/A RHEINLAND HOLDING AG, TUV RHEINLAND OF NORTH AMERICA INC., TUV INTERNATIONAL GMBH, TUV OSTERREICH, TUV RHEINLAND: GMBH, AND TUV CONSULT OESTERREICH-RHEINLAND GMBH; VA TECH D/B/A VA TECH ELIN EBG, VA TECH HYDRO AG, VA TECHNOLOGIE, VA TECH ELIN USA CORPORATION, VA TECH AMERICAN CORPORATION, AND VOEST-ALPINE SERVICES & TECHNOLOGY CORP.; VERBUND-AUSTRIAN HYDRO POWER AG AND TAUERN TOURISTIK GMBH; WAAGNER-BIRO BINDER AG IN ABWICKLUNG D/B/A WAAGNER-BIRO BINDER BETEILIGUNGS AG AND WB HOLDING AG, AND BINDER CO AG; WESTINGHOUSE ELECTRIC COMPANY; WYETH AS SUCCESS TO AMERICAN CYANAMID CORPORATION; WIKA INSTRUMENTS AG D/B/A WIKA INSTRUMENT CORPORATION AND WIKA ALEXANDER WIEGAND GMBH & CO KG, DEFENDANTS.



The opinion of the court was delivered by: James C. Francis IV United States Magistrate Judge

This case involves disputes arising from a prior litigation in this court, In re Ski Train Fire in Kaprun Austria on November 11, 2000, 01 MDL 1428. That case (the "Kaprun case") involved claims stemming from a train fire on November 11, 2000 in Kaprun, Austria that killed 155 people. It was eventually dismissed on forum non conveniens grounds, In re Ski Train Fire in Kaprun Austria on November 11, 2000, 499 F. Supp. 2d 437, 439-40, 452 (S.D.N.Y. 2007), and an appeal of the dismissal remains pending. (Notice of Appeal dated Aug. 28, 2008; Second Amended Notice of Appeal dated Oct. 2, 2008; Notice of Appeal and Motion by Japanese Victim Families dated Oct. 15, 2008; Notice of Appeal dated May 6, 2009).

Most of the plaintiffs in the current case include German, Japanese, and Dutch nationals who are either survivors of the train disaster or are relatives of the victims.*fn1 Plaintiffs in the current case also include James F. Lowy and Edward D. Fagan, attorneys who represented plaintiffs in the Kaprun case,*fn2 and Mr. Lowy's law firm, Lowy Royer Law Firm LLC.*fn3 (FAC, ¶ 26). Mr. Fagan is appearing pro se; all other plaintiffs are represented by Mr. Lowy and by Robert J. Pearl.

In the current case, the plaintiffs allege that various forms of misconduct by the defendants and by the district court in the prior action warrant a host of monetary and non-monetary remedies. Many of the defendants (the "moving defendants") now move for a stay of the proceedings in this case "pending resolution of the appeal from the District Court's June 17, 2007 forum non conveniens dismissal order."*fn4 (Notice of Motion to Stay Proceedings dated March 18, 2009 ("Stay Notice") at 1). They also request that the case be stayed until Mr. Fagan pays fines and sanctions that were entered against him in the related litigation, until the plaintiffs other than Mr. Fagan are represented by an attorney admitted to the bar of the Southern District of New York, and until all plaintiffs other than Mr. Fagan have submitted sworn statements that counsel have been authorized to represent them. (Stay Notice at 1-2).*fn5 Mr. Fagan has cross-moved for an order denying any stay, setting a discovery schedule, and granting other relief. (April 8, 2009 Notice of Cross Motion by Plaintiff Edward D. Fagan ("Fagan Notice")). For the reasons stated below, the defendants' motion is granted in part and denied in part, and plaintiff Fagan's cross-motion is denied.

Background

The Kaprun case was originally filed on January 21, 2001. (Am. Compl. at 41). The claims were dismissed on forum non conveniens grounds on June 19, 2007. In re Ski Train Fire, 499 F. Supp. 2d at 439-40, 452. Subsequent to that dismissal, most plaintiffs settled their claims. (Opinion dated Aug. 1, 2008, attached as Exh. 2 to Declaration of Plaintiff Edward D. Fagan dated April 8, 2009 ("Fagan Decl."), at 1). The dismissal is now on appeal before the Second Circuit and the parties are awaiting a decision.

A. History of the Kaprun Case

The Kaprun case was a large and complex litigation that was assigned to the Honorable Shira A. Scheindlin, U.S.D.J. According to the plaintiffs in the current action, the Kaprun case was fraught with numerous instances of misconduct by both the defendants and Judge Scheindlin. They argue that the defendants made misrepresentations to the court on a variety of matters, such as the status of the Austrian proceedings related to the disaster; the jurisdiction of the Austrian courts and the plaintiffs' ability to prosecute their claims in Austria; the purpose, authority, and capabilities of the "Kaprun Commission" that had been set up in Austria; and the contents of the settlement to which some plaintiffs eventually agreed. (See, e.g., FAC, ¶¶ 105-108). The plaintiffs also allege that the defendants destroyed evidence relevant to the case despite specific instructions by the court to the contrary and forced certain plaintiffs into settlement through duress and fraud. (See, e.g., FAC, ¶¶ 109-111, 208-211, 225-227). Moreover, the plaintiffs maintain that the defendants failed to implement the settlement agreement properly and failed to ensure that Mr. Fagan and his associates were paid the attorneys' fees and expenses due to them from that settlement. (See, e.g., FAC, ¶¶ 373-448). Indeed, the plaintiffs generally accuse the defendants of seeking to destroy their claims and interfere with Mr. Fagan's ability to represent them. (See, e.g., FAC, ¶ 118).

The plaintiffs also accuse Judge Scheindlin of being biased against them and of violating the rules of judicial conduct in overseeing the case. On August 16, 2007, she disqualified Mr. Fagan from serving as an attorney in the Kaprun case. He had entered personal bankruptcy, and Judge Scheindlin found that his particular situation created an "impermissible conflict of interest" with his clients. In re Ski Train Fire in Kaprun Austria on November 11, 2000, 01 MDL No. 1328, 2007 WL 2398697, at *3-4 (S.D.N.Y. Aug. 16, 2007). She determined that this conflict of interest, along with his failure to file his federal income tax returns for seven years, showed such extreme financial irresponsibility that it "severely undermines this Court's confidence in his ability to adequately represent" his clients.*fn6 Id. at *2, *3-4. At the same time, Judge Scheindlin imposed a $5,000 sanction plus an award of fees and costs against Mr. Fagan for "utter disregard for ethical standards of conduct" and "misrepresent[ing] critical facts" related to two "whistleblower" witnesses --- namely, representing that the witnesses knew certain information when they in fact did not. Id. at *3-5, *6-7 (quotation marks omitted). She found that these claims were made in bad faith and in "utter disregard for the Court." Id. at *7. Judge Scheindlin later determined that the fees and costs for which Mr. Fagan was liable amounted to $44,797.56. (Order in 01 MDL 1428 dated Nov. 26, 2007 at 4). Thereafter, Judge Scheindlin ordered Mr. Fagan's clients to either find new counsel within thirty days or notify the court within sixty days of their intent to proceed pro se. Id. at *8. The parties failed to do either, and all pending motions were dismissed.*fn7 (Order in 01 MDL No. 1428 dated Oct. 18, 2007).

The plaintiffs in the current case allege that Judge Scheindlin's decisions were improper and based in part on her animus against Mr. Fagan. (FAC, ¶¶ 233, 260, 268, 274). The plaintiffs contend that her chambers did extra-judicial research and conducted ex parte communications in an effort to be rid of the case. (FAC, ¶¶ 234, 246, 250, 257, 264-267, 269, 271, 275). The plaintiffs also generally maintain that the court managed the case poorly by failing to file or docket various documents and refusing to rule on many of Mr. Fagan's motions. (FAC, ¶¶ 237, 239, 246, 261-62, 270-271).

After Mr. Fagan was disqualified from and sanctioned in the Kaprun case, he was disbarred for similar conduct in a prior litigation. On December 11, 2008, the New York State Supreme Court, Appellate Division, disbarrred him for making misrepresentations that were "dishonest and prejudicial to the administration of justice" before the Honorable Shirley Wohl Kram while litigating Association of Holocaust Victims for Restitution of Artwork and Masterpieces v. Bank Austria Creditanstalt AG, No. 04 Civ. 3600. In re Edward D. Fagan, 58 A.D.3d 260, 266, 869 N.Y.S.2d 417, 421 (1st Dep't 2008). The Appellate Division also cited Mr. Fagan's "pattern of prior sanctions for unprofessional conduct, his failure to pay sanctions and fees imposed, and lack of contrition or acknowledgment of wrongdoing" as reasons he was "unfit to practice law." Id. (citation omitted)

B. History of the Current Case

Mr. Fagan brought the current case on his own behalf on July 28, 2008. Since then, a First Amended Complaint has been submitted, incorporating all the other plaintiffs and their claims. (Complaint dated July 28, 2008; FAC). Advancing 19 different claims, the FAC requests the following relief: (1) compensatory and punitive damages, (2) an order voiding the forum non conveniens dismissal and reinstating those claims, (3) nullification of the settlement agreement between some of the plaintiffs in the Kaprun case and the defendants, (4) sanctions against the defendants for various conduct, including spoliation, in the Kaprun case, (5) production of documents from the court file in the prior case and a finding that that court acted improperly, (6) reversal of all decisions against Mr. Fagan in the prior case, including the awarding of sanctions and fines and Mr. Fagan's disqualification from the case, (7) recovery of fees and expenses allegedly due to Mr. Fagan, Mr. Lowy, Dr. Kigawa, and Dr. Podovsovnik for work done on behalf of those plaintiffs who settled in the Kaprun case, and (8) any other appropriate relief. T h e defendants Exxon Mobil Corporation, Hydac Technology Corp., Cyalume Technologies Inc., Siemens Corporation, Wika Instruments Corporation, and Bosch Rexroth Corporation now move to stay these proceedings. The plaintiffs oppose this motion, and Mr. Fagan has also cross-moved for discovery and other relief to move the case forward.*fn8

Discussion

A. Stay Pending ...


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