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Salomon v. Burr Manor Estates

July 11, 2009

JOSEPH SALOMON, INDIVIDUALLY AND DOING BUSINESS AS SALOMON REALTY COMPANY, PLAINTIFF,
v.
BURR MANOR ESTATES, INC., JEFFERSON WOODS ESTATES, INC., AND SAL MALGUARNERA, DEFENDANTS.
SAL MALGUARNERA, THIRD-PARTY PLAINTIFF,
v.
JEFFREY FELDMAN AND BARRY FELDMAN, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Arthur D. Spatt United States District Judge

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On December 4, 2007, Joseph Salomon ("Salomon" or "the Plaintiff") filed this suit against Sal Malguarnera("Malguarnera")and Catherine Castellano as well as Burr Manor Estates, Inc. ("Burr Manor") and Jefferson Woods Estates, Inc. ("Jefferson Woods") (collectively "the Corporate Defendants"), seeking to recover monies allegedly due on certain promissory notes. In turn, Malguarnera filed a third-party action against Jeffrey Feldman and Barry Feldman ("the Feldmans" or "the Third-Party Defendants"), seeking contribution in the event that there is a determination that Malguarnera is liable to Salomon under the promissory notes. Presently before the Court is the Feldmans' motion to vacate the order granting Malguarnera leave to file the third-party complaint. In the alternative, the Feldmans contend that the Court should abstain from exercising jurisdiction over Malguarnera's third-party action because these same parties have a pending case in New York State Supreme Court, Suffolk County.

I. BACKGROUND

The Feldmans are accountants, and the owners of the accounting firm Feldman & Company. Malguarnera has been involved in the real estate development and construction industries for thirty years. In 2005, the Feldmans approached Malguarnera and Catherine Castellano with a proposal to form two corporations for the purpose of purchasing and developing fourteen residential lots in Suffolk County. In the fall of 2005, the parties formed the Corporate Defendants for the purpose of acquiring the land and obtaining the construction financing. The Feldmans and both Malguarnera and Castellano each owned a 25% share in the Corporate Defendants and the Feldmans served as corporate officers.

In December of 2005, at the urging of his accountants, namely the Feldmans, the Plaintiff agreed to loan money to the Corporate Defendants in order to facilitate the purchase of the lots. The Plaintiff alleges that, in consideration for the loans, the Corporate Defendants agreed to be held jointly and severally liable for their repayment and Malguarnera and Castellano agreed to guarantee the loans. The Plaintiff further alleges that he and the Feldmans agreed that all of the loan proceeds would be deposited in the bank account of Feldman & Company ("the Feldman Account").

On November 30, 2005, the Plaintiff made his first loan of $500,000 and on December 22, 2005, Barry Feldman executed a promissory note on behalf of Burr Manor for repayment of the full amount. Over the course of the next nineteen months, the Plaintiff wired five loans totaling $1.3 million into the Feldman Account. In each instance, Barry Feldman executed a promissory note in the respective amounts on behalf of the Corporate Defendants. The Plaintiff alleges that Malguarnera and the Corporate Defendants have failed to repay any of these loans. In November of 2007, Jeffrey Feldman executed and delivered Confessions of Judgment on behalf of the Corporate Defendants in favor of the Plaintiff in New York State Supreme Court, Suffolk County.

On December 4, 2007, the Plaintiff commenced this lawsuit against Malguarnera, Castellano, and the Corporate Defendants seeking to recover money allegedly owed under the promissory notes. On October 21, 2008, the Court denied the Defendants' Fed. R. Civ. P. 12(b)(7) motion to dismiss, finding that the Defendants failed to show that the Feldmans were necessary parties within the meaning of Fed. R. Civ. P. 19. Subsequently, the parties filed a stipulation dismissing the Plaintiff's claims as against Castellano.

In a scheduling Order dated February 5, 2009, United States Magistrate Judge A. Kathleen Tomlinson directed the parties to a file a stipulation permitting Malguarnera to file a third-party complaint against the Feldmans by February 20, 2009. Malguarnera and the Plaintiff filed the stipulation on February 26, 2009 and Judge Tomlinson endorsed the stipulation on March 3, 2009. Malguarnera filed a third-party complaintagainst the Feldmans on March 11, 2009 and subsequently filed an amended third-party complaint on March 25, 2009.By his third-party claim, Malguarnera seeks contribution from the Feldmans in the event that there is a determination that Malguarnera is liable to Salomon under the promissory notes Malguarnera alleges that the Feldmans never transferred the loan proceeds to the Corporate Defendants and instead used the proceeds for their own benefit. Malguarnera also alleges that when the Feldmans approached him and Castellano about this venture, the Feldmans represented that they would use their personal funds to finance the purchase and development of the lots. Malguarnera maintains that he had no knowledge that the financing was actuallybeing obtained from the Plaintiff and alleges that Barry Feldman had no authority to execute the promissory notes on behalf of him and the Corporate Defendants. Malguarnera also alleges that Jeffrey Feldman improperly signed and executed the Confessions of Judgment on behalf of the Corporate Defendants.

The Feldmans have moved to "dismiss" the amended third-party complaint pursuant to Fed. R. Civ. P. 14(a). In the event that the Court declines to dismiss the amended third-party complaint, the Feldmans urge the Court to stay the third-party claim in light of a pending action in New York State Supreme Court, Suffolk County: Malguarnera, et al. v. Salomon, et al., Index No: 08-10483.

II. DISCUSSION

A. Standard - Fed. R. Civ. P. 14

Fed. R. Civ. P. 14(a) governs third-party practice in the federal courts. The Rule provides, in relevant part, that "[a] defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it." Fed. R. Civ. P. 14(a). "Leave of the court must be obtained to file a third-party complaint more than ten days after service of the original answer." Id. Even where leave to file a third-party action has been granted, Rule 14 permits the impleaded party to challenge the third-party complaint. Id.; see also 6 Wright, Miller & Kane, Federal Practice & Procedure § 1460, at 459-60 (2d ed.1990) (explaining that a third-party defendant can move to vacate an order granting leave to file a third-party complaint).

Although the Feldmans frame their application as a motion to dismiss the third-party complaint, it is more appropriately viewed as a motion to vacate the order granting Malguarnera leave to file the third-party complaint. See Id. (noting that courts have viewed a motion to vacate under Rule 14 as the appropriate mechanism where a third-party defendant is not attacking the merits of the third-party claim but the propriety of the impleader). In deciding whether to vacate an order granting leave to a file a third-party complaint under Fed. R. Civ. P. 14(a), courts generally consider: "(1) whether the movant deliberately delayed or was derelict in filing the motion; (2) whether impleading would delay or unduly complicate the trial; (3) whether impleading would prejudice the third-party defendant; and (4) whether the proposed third-party complaint states a claim upon which relief can be granted." Dipute Resolution Mgmt, Inc. v. Greenberg Traurig, LLP, No. 03-3501, 2004 WL ...


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