United States District Court, E.D. New York
MANTIS TRANSPORTATION, ALFRED J. MANTI, Plaintiffs,
PATRICIA KENNER, CT LINES d/b/a Campus Coach, GENERAL ELECTRIC, CITI CAPITAL, Defendants
[Copyrighted Material Omitted]
Mantis Transportation, Plaintiff, Pro se, Staten Island, NY.
Alfred J. Manti, Plaintiff, Pro se, Staten Island, NY.
For Patricia Kenner, CT Lines, doing business as Campus Coach, Defendants: Adam Todd Newman, law office of adam t. newman, pc, Merrick, NY.
For General Electric, Defendant: Sarah E. O'Connell, LEAD ATTORNEY, Fulbright & Jaworski LLP, New York, NY; David Barry Schwartz, Fulbright & Jaworski, New York, NY.
For Citi Capital, Defendant: David Barry Schwartz, Fulbright & Jaworski, New York, NY.
Sandra J. Feuerstein, United States District Judge.
On November 26, 2013, plaintiffs Alfred J. Manti (" Manti" ) and Mantis Transportation (a/k/a Manti's Transportation, Inc.) (" MTI" ) commenced the instant action (the " Instant Action" ) against Patricia Kenner (" Kenner" ), CT Lines d/b/a Campus Coach (" CT Lines" ), General Electric and CitiCapital. Now before the Court are the motion
to dismiss filed by CT Lines and Kenner (the " CT Lines/Kenner MTD" ) [Docket Entry No. 14], and the GECC MTD, both of which are brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure (" Rule 12(b)(1)" and " Rule 12(b)(6)," respectively), the motion for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure (" Rule 11" ) filed by CT Lines and Kenner (the " CT Lines/Kenner Sanctions Motion" ) [Docket Entry No. 15], and Deborah Manti's motion to intervene (" Motion to Intervene" ) [Docket Entry No. 33]. For the reasons that follow, the GECC MTD, the CT Lines/Kenner MTD, and the CT Lines/Kenner Sanctions Motion are granted, and the Motion to Intervene is denied as moot.
MTI is a New York corporation which, until June 1998, was engaged in the business of providing commuter bus service in the New York City area. ( Manti II, 2008 WL 977192, at *1 (E.D.N.Y. Apr. 9, 2008)). Manti is the president and sole shareholder of MTI. ( Id.). At the time of the relevant transactions underlying the Instant Action, Associates Commercial Corporation
(" Associates" ) provided commercial financing services to prospective purchasers of buses. ( Id.). CT Lines is a New York corporation in the business of operating and selling buses. (Aff. of Adam N. Newman in Supp. of CT Lines/Kenner MTD (" Newman Aff." ), Ex. B (Compl., Manti State Action) [Docket Entry No. 14-2], ¶ 4). Kenner is an officer of CT Lines. ( Id. ¶ 6).
B. Factual Background
In November 1997, MTI purchased a fleet of buses from a third-party vendor, which was financed by a loan from Associates pursuant to a security agreement dated March 31, 1998. ( Manti II, 2008 WL 977192, at *1). Following the purchase, Manti discovered that the buses were defective and unusable, but his repeated demands that the third-party vendor repair the buses went unheeded. ( Id.). In June 1998, Manti contacted Lawrence Shute (" Shute" ), an Associate's branch manager, to notify him that due to the unusable buses, MTI was unable to make timely payments on the various security agreements between MTI and Associates. ( Id.). MTI returned the fleet of buses to the third-party vendor. ( Id.). Without the buses or a new loan from Associates, MTI ceased operations. ( Id.).
On November 18, 1999, approximately fifteen (15) months after MTI returned the buses to the third-party vendor, Associates agreed to provide MTI with a new loan and to refinance MTI's existing debt, and MTI and Associates executed the following agreements: (i) a modification agreement governing the refinancing of MTI's existing debt (" Modification Agreement" ); (ii) a security agreement governing a new loan to finance the purchase of two (2) buses, serial numbers SI 5322 (the " 1980 Crusa Bus" ) and 1M89CM8A78P036640 (the " 1981 MCI Bus" ), from CT Lines (the " November 18, 1999 Security Agreement" ) (Manti Ex. G); and (iii) a general release (the " Release" ) (Decl. of Sarah E. O'Connell in Supp. of GECC MTD (" O'Connell Decl" ), Ex. 2 (Release) [Docket Entry No. 26-3]). ( Manti I, 2002 WL 369807, at *1 (E.D.N.Y. Mar. 28, 2002)).
Pursuant to the November 18, 1999 Security Agreement, MTI agreed to pay Associates one hundred eighty thousand four hundred sixty dollars and thirty-two cents ($180,460.32) in monthly installments beginning on January 2, 2000, and Associates agreed to disburse one hundred thirty-three thousand sixty-six dollars ($133,066.00) to CT Lines. (Manti Ex. G). The Release provided that it was executed in consideration for, inter alia, the November 18, 1999 Security Agreement and MTI's performance of all of its obligations thereunder. (O'Connell Decl., Ex. 2). The Release states, inter alia :
[MTI] does hereby release and discharge [Associates and its ] . . . successors in interest . . . of and from any and all manners of action, causes of action, suits, debts, obligations, liabilities, claims, and/or demands whatsoever, whether at law or in equity, known or unknown, which [MTI] now has, can have, ever had . . . for or by reason of any cause, matter or thing whatsoever including, without limitation, the execution,
delivery and performance of the Existing Security Agreements.
* * *
In the event legal proceedings are instituted to enforce or sue the breach of this Agreement, the prevailing party therein shall be entitled to recover its reasonable attorney's fees and costs of suit in such proceeding.
* * *
The parties hereto warrant and represent that they have carefully read this Agreement, know the contents hereof, have been advised by counsel, and that the same is being signed of their own free will.
Id. ¶ ¶ 2, 5, 6).
In compliance with the November 18, 1999 Security Agreement, Associates provided the additional financing to MTI, by disbursing one hundred thirty-three thousand sixty-six dollars ($133,066.00) to CT Lines (the " November 1999 Transaction" ), and modified the terms of plaintiff's previous loans as required by the Modification Agreement. ( Manti I, 2002 WL 369807, at *2). On August 21, 2000, MTI and Associates rolled MTI's debt over into two (2) new security agreements (the " August 21, 2000 Security Agreements" ). ( Id.)
C. The Prior Actions
1. Manti I
October 17, 2000, MTI commenced the Manti I action against Associates in the Supreme Court of the State of New York, Kings County, alleging breach of contract, fraud, unjust enrichment, and tortious interference with prospective business advantage. ( Manti I, 2002 WL 369807, at *1). On November 14, 2000, Associates removed the case to this Court pursuant to 28 U.S.C. § § 1441 and 1446 based on diversity jurisdiction. ([WL] at *2; Notice of Removal, Manti I (E.D.N.Y. Nov. 14, 2000), ECF. No. 1). On November 29, 2000, Associates filed its answer, raising the Release as a complete affirmative defense to MTI's claims, and asserting counterclaims for: (i) breach of the August 21, 2000 Security Agreements in the total amount of one million two hundred ninety-six thousand five hundred ninety-one dollars and thirty-one cents ($1,296,591.31), plus interest and consequential damages, and (ii) breach of the Release. ( Manti I, 2002 WL 369807, at *2; Answer, Manti I (E.D.N.Y. Nov. 29, 2000), ECF No. 4). On January 22, 2001, MTI responded to Associate's counterclaims, asserting, inter alia, that " [p]laintiff's signatures on certain of the documents were obtained by fraud, duress, and/or mistake." (Reply to Countercls., Manti I (E.D.N.Y. Jan. 22, 2001), ECF No. 6).
On May 7, 2001, Associates moved for summary judgment. (Summ. J. Mot., Manti I (E.D.N.Y. May 7, 2001), ECF No. 16). On May 25, 2001, Associates moved for sanctions pursuant to Rule 11, (Rule 11 Mot., Manti I (E.D.N.Y. May 22, 2001),
ECF No. 22). On June 4, 2001, MTI opposed Associates' motions, and cross-moved pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure to withdraw the complaint without prejudice on the ground that MTI intended to file a bankruptcy petition. ( Manti I, 2002 WL 369807, at *3). On June 21, 2001, MTI advised the Court by letter that it would not be filing for bankruptcy, but did not withdraw the Rule 41(a)(2) motion. ( Id.)
On March 8, 2002, the Judge Block Manti I Order was issued, granting Associates' motion for summary judgment, denying Associates' Rule 11 motion for sanctions, and denying MTI's Rule 41(a)(2) motion to withdraw the complaint without prejudice. ( Id.). Specifically, Judge Block rejected MTI's contention that it should not be bound by the Release, the terms of which " clearly bar any and all claims [MTI] may have had against [Associates]." ( Id.). Judge Block held that " [i]n light of Manti's admission that he signed the release, the clear and unambiguous language of the release, and [MTI's] failure to put forth cognizable facts to make out a fraud, duress or misrepresentation defense, . . . the [R]elease is effective and bars all of [MTI's] claims." ( Id.). Judge Block concluded that " [w]hile the [R]elease does not include an explicit covenant not to sue, the inclusion of the prospective language regarding the entitlement to attorney's fees and costs creates and implied covenant not to sue," which MTI breached by commencing Manti I. ([WL] at *4). Judge Block held that Associates was entitled to an award of attorney's fees and costs on its counterclaim for MTI's breach of the Release. ([WL] at *5).
With respect to MTI's breach of the August 21, 2000 Security Agreements, Judge Block noted that " Manti admits that he signed [the August 21, 2000] Security Agreements," and that MTI failed to dispute that was in default or challenge the amount that Associates claimed it was due under the August 21, 2000 Security Agreements. ([WL] at *4). Accordingly, Judge Block awarded Associates the total amount sought -- one million two hundred ninety-six thousand five hundred ninety-one dollars and thirty-one cents ($1,296,591.31) -- plus nine percent (.09) per annum from the dates of the default. ([WL] at **4, 5). Judge Block instructed MTI and Associates " to attempt to reach an agreement on the dates of default [of the August 21, 2000 Security Agreements] and the amount of [Associate's] attorney's fees and costs." ([WL] at *5).
On May 31, 2002, MTI stipulated, inter alia, to the date of default of the August 21, 2000 Security Agreements, and the amount of attorney's fees and costs it would pay to Associates for its breach of the Release. (Stipulation, Manti I (E.D.N.Y. June 14, 2002), ECF No. 66; Katz Aff., Ex. J, Manti II (E.D.N.Y. Apr. 11, 2007), ECF No. 47-11). On June 17, 2002, final judgment was entered against MTI (the " Manti I Judgment" ), directing MTI to pay one million two hundred ninety-six thousand five hundred ninety-one dollars and thirty-one cents ($1,296,591.31), plus nine percent (.09) interest per annum from October 1, 2000, for breaching the August 21, 2000 Security Agreements, and one hundred six thousand nine hundred thirty-six dollars and twenty-two cents ($106,936.22) in attorney's fees and costs for breaching the Release. (Judgment,
Monti I (E.D.N.Y. June 17, 2002), ECF No. 67). It is undisputed that the Manti I Judgment remains unsatisfied, and that MTI did not appeal or move for reconsideration of the Judge Block Manti I Order or the Manti I Judgment, or move to vacate the Manti I Judgment within one (1) year of the date of its entry pursuant to subsections one (1) through three (3) of Rule 60(b) of the Federal Rules of Civil Procedure. ( Manti II, 2008 WL 977192, at *3).
2. Manti II
On April 12, 2006, almost four (4) years after the Manti I Judgment was entered, MTI and Manti (" plaintiffs" ), through their counsel, commenced the Manti II action against, inter alia, " CitiCapital Commercial Corporation, f/k/a Associates Commercial Corporation,"  asserting numerous claims for, inter alia, RICO violations, breach of contract, tort, and fraud. (Compl., Manti II (E.D.N.Y. Apr. 12, 2006), ECF No. 1). On November 15, 2006, plaintiffs filed an amended complaint against Citicapital, asserting only one claim pursuant to the " savings clause" of Rule 60(b) of the Federal Rules of Civil Procedure, seeking to vacate the Judge Block Manti I Order and the Manti I Judgment on the ground of fraud upon the court. (Am. Compl., Manti II (E.D.N.Y. Nov. 15, 2006), ECF No. 37). On April 11, 2007, Citicapital moved to dismiss the amended complaint pursuant to Rule 12(b)(6). (Dismiss Mot., Manti II (E.D.N.Y. Apr. 11, 2007), ECF No. 47). On July 13, 2007, Citicapital moved for sanctions pursuant to Rule 11. (Rule 11 Mot., Manti II (E.D.N.Y. July 13, 2007), ECF No. 56).
On April 9, 2008, this Court issued the Manti II Order, granting Citicapital's motion to dismiss and denying Citicapital's Rule 11 motion for sanctions. ( Manti II, 2008 WL 977192, at *1). The Court explained that " [a]s plaintiffs filed this action almost four (4) years after the date that judgment was entered in Manti I, legal relief under Rule 60(b) by way of motion in that case is time barred" by the " one (1) year limitation period from the date of entry of judgment to move for relief under subsections one (1) through three (3)," but not for " independent actions seeking to vacate a final order or judgment under the savings clause of Rule 60."  ( Manti II, 2008 WL
977192, at *5).
However, the Court found that, " at the most, plaintiffs allege fraud committed by defendant on them, not the court, which can only be brought pursuant to Rule 60(b)(3) and which is, thus, time-barred." ([WL] at *8). Furthermore, the Court noted that " 'allegations of nondisclosure during pretrial discovery do not constitute grounds for an independent action under Fed.R.Civ.P. 60(b).'" ( Id. (quoting Gleason v. Jandrucko, 860 F.2d 556, 559-60 (2d Cir. 1988))). Thus, the Court held that " plaintiffs' allegations that defendant failed to disclose its purported conduct committed after commencement of Manti I, i.e., (1) that it filed lien applications and applications for post-repossession titles in other states, (2) that it held the titles to the buses, and (3) that it disposed of the repossessed buses, are insufficient to justify relief under the 'savings clause' of Rule 60(b)." ( Id.).
The Court concluded that plaintiffs had failed to satisfy the onerous burden of proof to succeed on a Rule 60 claim, Specifically, the Court held that plaintiffs failed to show " that their own carelessness did not create the situation for which they now seek equitable relief," given that " plaintiffs were aware of the possibility of fraud committed by [Associates] prior to the entry of final judgment in [ Manti I ]" and " plaintiffs admittedly knew during the course of the proceedings in Manti I that they did not have certificates of title for the buses purchased at issue." ([WL] at *6). Furthermore, the Court determined that " the evidence upon which plaintiffs rely to purportedly establish their claim that [Associates] concealed the titles from the court in Manti I is not 'new' for purposes of Rule 60(b)" because it " could have been discovered earlier with due diligence." ( Id.). Had plaintiffs " investigated their claims for fraud, which they admittedly suspected during the course of Manti I," plaintiffs would have been able to file a " timely motion to vacate the final judgment in Manti I pursuant to Rule 60(b)(3) within one (1) year from the date the judgment was entered." ([WL] at *7). In denying plaintiffs' motion to vacate the Judge Block Manti I Order and the Manti I Judgment, the Court also considered that plaintiffs had failed to " explain why they did not seek discovery for the approximate six (6) month period between the filing of Manti I and [Associate's] motion for summary judgment." ([WL] at *8).
With respect to Citicapital's Rule 11 motion for sanctions, the Court " decline[d] to impose monetary sanctions" because " it cannot be said that the amended complaint was entirely frivolous or made for a completely improper purpose." ([WL] at *10). However, the Court warned " plaintiffs and their counsel . . . that any further attempts to litigate in this Court the matters of which they complain in this action, and of which they complained in Manti I, may result in the imposition of sanctions, including monetary sanctions and an injunction from filing future lawsuits relating to the same transactions and occurrences." ( Id.).
3. Manti State Action
On May 16, 2006, MTI and Manti commenced the Manti State Action in the Supreme Court of the State of New York, County of Richmond, against CT Lines, Bertram J, Askwith a/k/a Mike Long (" Askwith" ), and Kenner, asserting, inter alia, claims for fraud, tortious interference with business relations, and tortious interference with contract. (Newman Aff., Ex. B
(Compl., Manti State Action). On February 28, 2008, Judge Joseph L. Maltese issued a decision (the " February 2008 Judge Maltese Decision" ) denying CT Lines', Askwith's, and Kenner's motion for summary judgment. (Manti Ex. L (Order, Manti State Action (N.Y. Sup. Richmond Cnty. Feb. 18, 2008)). On November 10, 2008, Judge Maltese denied CT Lines' Askwith's, and Kenner's motion for leave to renew the branches of their prior motion for summary judgment that were denied in the February 2008 Judge Maltese Decision. ( Manti's Transp., Inc. v. C.T. ...