MEMORANDUM-DECISION AND ORDER
Nicholas J. Grasso commenced this diversity action seeking compensatory and punitive damages against the estate of Joseph F. Grasso, Sr., Joseph F. Grasso, Jr., Olga Grass, Teresa Grasso, and Michelle Grasso for conversion, fraudulent conveyance, illegal eavesdropping, the imposition of a constructive and/or resultant trust. Am. Compl. (Dkt. No. 14).
Presently before the Court is Defendants' Motion to dismiss. Dkt. No. 15. For the reasons that follow, Defendants' Motion is granted in part and denied in part.
The instant action brought by Plaintiff Nicholas J. Grasso ("Plaintiff") against Defendants Joseph Grasso, Jr., in his individual capacity, and in his capacity as the Limited Administrator of the Estate of Joseph Grasso, Sr.; the Estate of Joseph Grasso, Sr. ("the Estate"); Olga Grasso ("Olga"); Teresa Grasso ("Teresa""); and Michelle Grasso ("Michelle") (collectively, "Defendants") relates to a family dispute that has embroiled Plaintiff and his now-deceased brother, Joseph Grasso, Sr. ("Decedent") in over eight years of litigation. Much of that litigation has concerned property located at 50 Royal Way, Clearwater Beach, Florida upon which a motel operated ("the property").
While the ownership of the property is the subject of an extensive litigation record, in brief, it was previously owned by Plaintiff and Decedent's father, John Grasso, who transferred it upon his death to his wife, Mary, Decedent, and Plaintiff. Upon Mary's death, the property passed in equal shares to Decedent and Plaintiff as joint tenants.*fn1 For years prior to the commencement of litigation, Decedent insisted that he was the sole owner of the property and, on several occasions, demanded that Plaintiff, a licensed attorney in New York, sign over his interest in the property to Decedent.
Pl.'s Aff. (Dkt. No. 21-3) ¶ 10. Decedent allegedly threatened that if Plaintiff failed to convey his interest, Decedent would make accusations against him to the authorities and the Committee on Professional Standards, including that Plaintiff forged Decedent's signature, and the signature of their parents, on various deeds to real property. Id.
Plaintiff alleges that, eventually, he and Decedent agreed that Plaintiff would convey his interest in the property to Decedent, and Decedent would transfer his interest in another parcel located in Saratoga County, New York to Plaintiff; Decedent also agreed to drop all claims and threats against Plaintiff. Id. ¶¶ 11-3. Plaintiff conveyed his interest, but Decedent failed to fulfill any of the obligations to which he allegedly agreed. Id. 13-15. Instead, Decedent allegedly continued to threaten Plaintiff, purportedly to force him to convey more property to Decedent. Id..
The dispute between the brothers largely took place over a long distance, with Plaintiff, in New York, talking by telephone to Decedent, in Florida. Decedent often relayed the content of these conversations to his wife, Olga, also in Florida, and his son, Joseph, Jr. in Oklahoma, who, in turn, would tell his daughters, Michelle and Teresa, also in Oklahoma. Decedent's Aff. (Dkt. No. 14-3, Ex. J) ¶¶ 7-9; Joseph Grasso, Jr. Aff. (Dkt. No. 14-3, Ex. K) ¶¶ 4-9. Prior to one conversation in the summer of 2001, Defendants agreed that Olga would stay on the line during the phone call, and Joseph, Jr., Michelle, and Teresa would listen remotely via an Internet Protocol Communication set-up.*fn2 Unbeknownst to Plaintiff, who believed his conversation with his brother to be private, Olga, Joseph, Jr., Michelle, and Teresa would listen in so they could later act as witnesses to what was said. Decedent's Aff. ¶¶ 9-13; Joseph Grasso, Jr. Aff. ¶¶ 10-14; Pl.'s Aff. ¶¶ 34-35.
On March 27, 2002, Decedent brought suit against Plaintiff in New York State Supreme Court for fraud, accounting, breach of fiduciary duty, negligence, impression of a trust, conversion, partition, conspiracy, filing a false 1099 form, intentional infliction of emotional distress, setting aside a deeds of conveyance, and breach of a executory contract. Dkt. No. 14-1, Ex. A. On May 30, 2002, Plaintiff, defendant in the state action, answered Decedent's complaint and counterclaimed that Decedent falsely represented the value of the property and that he would release any and all claims against Plaintiff in return for Plaintiff's transferring the property to him; Plaintiff alleged that Decedent made such misrepresentations with the "intent to defraud and deprive [Plaintiff] of valuable property" and ultimately "took control of the said property to the exclusion of [Plaintiff]." State Court Answer (Dkt. No. 14-2, Ex. F) ¶¶ 105-122. As a result of Plaintiff's reliance on these misrepresentations, Decedent "controlled said property to the exclusion of [Plaintiff] in violation of [his] interest" and "exercised exclusive control of the property and the income therefrom." Id. ¶¶ 134-35. Plaintiff identified the income interest as including rental income, insurance loss recovery, proceeds of a mortgage loan, and income generated by a motel company of which Plaintiff was, allegedly a stock-holder. Id. ¶¶ 123-26. Plaintiff requested as relief that the "deed to [Decedent] be set aside and conveyed to [Plaintiff]." Id. ¶ 140.
On June 16, 2004, while the state litigation was ongoing, Decedent, allegedly with the assistance of Joseph Grasso, Jr., sold the property to a third party, Ardent International, LLC ("Ardent"). Am. Compl. ¶22. Pursuant to that sale, a Warranty Deed granting Decedent and Olga's interest in the property to Ardent was prepared and filed. Under the terms of the sale, Decedent entered into a series of agreements with Ardent, consisting of a purchase money mortgage granting Decedent a security interest in the property, a promissory note indebting Ardent to Decedent in the amount of $1,038,606.60, and a Collateral Assignment of Leases, Rental Agreement, Rents and profits securing Decedent's interests. Am. Compl. ¶ 24.
Following the sale, Plaintiff moved for a preliminary injunction to prevent Decedent from dissipating, assigning, alienating, disbursing, commingling or spending the proceeds from that sale. The New York State Supreme Court denied Plaintiff injunctive relief, finding that he had not made the requisite showing to obtain an injunction and, because he was seeking only damages, had an adequate remedy at law for recovery of those funds. Dkt. No. 14-3, Ex. H.
In April 2008, the parties agreed to suspend their state court litigation and send all pending issues to binding arbitration before the Honorable Leonard A. Weiss ("the arbitrator"). Included in Decedent's submissions to the arbitrator were affidavits, signed May 10, 2008 by Decedent and Joseph Grasso, Jr. while they were in New York, attesting, inter alia, to the content of the summer 2001 phone conversation. Olga, Joseph Grasso, Jr., Michelle, and Teresa then appeared in New York with the intention of testifying to that conversation. Pl.'s Aff. ¶37. Plaintiff moved that the arbitrator preclude any statements made by him during the conversation for reasons including that such statements were made in violation of N.Y. C.P.L.R. § 3042 and Florida statute § 934.04; Decedent opposed the motion, claiming that the strict Rules of Law and Evidence do not apply in arbitration proceedings, that Florida law did not apply, or that if it did, was not violated. See Dkt. No. 14-4, Exs. L, M. In ruling on Plaintiff's motion, the arbitrator stated that "in the context of this litigation, of this arbitration . . . . [Decedent] can testify to anything that [Plaintiff] said to him . . . . but I am not going to let his granddaughters and his son come in to authenticate and support what he says . . . . I am going to use my relaxed rule and say no way." Dkt. No. 14-4, Ex. N.
In his arbitration decision, the arbitrator found, inter alia, that Plaintiff was not guilty of any forgery or other misconduct and that the property was owned jointly in equal shares by the brothers as tenants in common. Dkt. No. 14, Ex O at 29. The arbitrator found that Decedent owed Plaintiff one-half of the proceeds of the sale of the property, which was valued at approximately $1.5 million. Dkt. No. 14-5, Ex. O. The arbitrator ruled that Decedent should not make a cash payment to Plaintiff; rather, Decedent was required to cause Trans-American, a privately held corporation of which Decedent and Plaintiff's families each owned 50% of the shares, to provide an accounting and issue payment to Plaintiff. Id. at 28. If Decedent failed to do so, the arbitrator would hold a hearing to determine the net value of Trans-American and award half that value to Plaintiff. Id. This decision was vacated by the New York State Supreme Court insofar as it required any direct or indirect issuance of Trans-American stock or that an accounting be made. The Appellate Division also found that parts of this arrangement exceeded the arbitrator's authority, but vacated the arbitrator's decision only insofar as it directly ordered Trans-American to issue stock of produce an accounting. In re Grasso, 899 N.Y.S.2d 458 (3d Dep't 2010).
Plaintiff brought the instant action on December 17, 2009. Compl. (Dkt. No. 1). While related to the same overarching dispute, Plaintiff's current allegations concern the transfer and distribution of the proceeds from the sale of the property, first by Decedent to his son, Joseph Grasso, Jr., and subsequently by Joseph Grasso, Jr. into trust, allegedly for the benefit of Teresa and Michelle. Plaintiff asserts that these transfers occurred subsequent to January 16, 2006, when a "balloon payment" was made on the sale. Am. Compl.
Plaintiff's Amended Complaint asserts four causes of action against each of the Defendants:
1) conversion of that portion of the proceeds of the sale of the property plus interest thereon that properly belong to Plaintiff; 2) fraudulent conveyance and concealment of those proceeds; 3) illegal wiretapping in violation of Florida Statute § 934.03 et seq. and 18 U.S.C. §§ 2510, 2511, and 2520 et seq.; and 4) imposition of a constructive and/or resultant trust. Defendants seek to dismiss the Amended Complaint, alleging that it names parties over which the Court lacks personal jurisdiction; is barred under the doctrines of res judicata and/or collateral estoppel; and fails to state a claim for which relief may be granted. Mot. to dismiss (Dkt. No. 14).
II. PERSONAL JURISDICTION
The Court must first determine whether the exercise of jurisdiction over each Defendant is proper. A federal court sitting in diversity must look first to the laws of the forum state, in this case New York, for the rules governing personal jurisdiction. Bensusan Rest. Corp. v. King, 126 F3d 25, 28 (2d Cir. 1997) (citing PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.1997)). "First, personal jurisdiction over a defendant must be established under the law of the state where the federal court sits . . . . Second, if jurisdiction is established under the governing statute, courts must determine whether the exercise of jurisdiction under the relevant state law would violate the defendant's due process rights." Harris v. Ware, No. 04 CV 1120, 2005 WL 503935, at *1--2 (E.D.N.Y. Mar. 4, 2005) (citing Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)).
In considering a motion to dismiss for want of personal jurisdiction, "'plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (internal quotations and citations omitted). Prior to discovery, a plaintiff may defeat such a motion by making aprima facie showing of jurisdiction by way of the allegations in the complaint, affidavits, and other supporting evidence. Stein Fibers, Ltd. v. Bondex Telas Sin Tejar, No. 1:08-CV-210, 2009 WL 385412, at *2 (N.D.N.Y. Feb. 10, 2009) (Kahn, J.). A court is to consider these materials in the light most favorable to the plaintiff and resolve all reasonable doubts in the plaintiff's favor. Id.; Whitaker, 261 F.3d at 208. Conclusory allegations, however, cannot support a prima facie showing of personal jurisdiction. See Jazini v. Nissan Motor Co., 148 F.3d 181, 185 (2d Cir. 1998).
"Personal jurisdiction in New York State may be established under either § 301 or § 302 of New York's Civil Practice Law and Rules." Daou v. Early Advantage, LLC, 410 F. Supp. 2d 82, 90 (N.D.N.Y. 2006).
With respect to in personam jurisdiction, New York recognizes five potential bases: presence, consent, domicile, doing business and "long-arm jurisdiction." The first four of these bases were imbedded in the state's jurisdictional law prior to the adoption of CPLR 301 and are preserved by that section . . . . Long-arm jurisdiction is the topic of CPLR 302.
N.Y. C.P.L.R. 301 cmt. C301:1 (McKinney 2005).
New York's long-arm statute, codified at NY C.P.L.R. § 302, does not reach as far as constitutional due process permits. Research Found. of State Univ. of New York v. Bruker Corp., No. 1:09-CV-0071, 2010 WL 981304, at 3 (N.D.N.Y. Mar. 15, 2010) (citations omitted). Section 302(a) allows for the exercise of personal jurisdiction over a foreign defendant if the defendant:
(1) transacts any business within the state . . . ; or
(2) commits a tortious act within the state . . . ; or
(3) commits a tortious act without the state causing injury. . . within the state . . . if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, . . . in the state; or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from ...