Rebecca MONTESA v. Daniel SCHWARTZ (2016)

January 13, 2016

2016 WL 8140048



United States District Court,

S.D. New York.



Rebecca MONTESA, et al., Plaintiffs,

v.

Daniel SCHWARTZ, et al., Defendants.


12-CV-6057 (CS)

Signed 01/13/2016

Attorneys and Law Firms


Arthur Z. Schwartz, Advocates for Justice, New York, New York, Counsel for Plaintiffs.

David J. Butler, Randall M. Levine, Stephanie Schuster, Morgan, Lewis & Bockius LLP, New York, New York, Washington, District of Columbia, Counsel for School District Defendants.

Mark D. Harris, Proskauer Rose LLP, New York, New York, Jessica D. Zietz, Proskauer Rose LLP, Boca Raton, Florida, Counsel for Defendant Nathan Rothschild.







ORDER


CATHY SEIBEL, U.S.D.J


*1 Before me are Defendants’ Motions to permanently enjoin a pending state court proceeding, White v. East Ramapo Central School District Board of Education, N.Y. County Index No. 158035/2015, pursuant to the All Writs Act, 28 U.S.C. § 1651. (Docs. 527, 529.) For the following reasons, Defendants’ Motions are GRANTED IN PART.


I. Background


I assume the parties’ familiarity with the long and vitriolic history of this case and recite herein only those facts necessary to this Order.


Plaintiffs are parents acting on behalf of current students in the East Ramapo Central School District (“ERCSD” or the “District”) and taxpayers residing within the District (collectively, “Plaintiffs”). Plaintiffs allege that Defendants, who are or were “members, employees, or attorneys” of the ERCSD Board of Education (“Board”), “divert[ed] federal, State, and local District education funds to promote religion and private religious schools and institutions,” and “gutt[ed] the District’s funding of the public schools thereby depriving its students of educational opportunities.” (Doc. 554 ¶ 1.)


Plaintiffs filed their initial complaint in this Court on August 8, 2012. (See Doc. 1.) Subsequently, on August 4, 2015, two plaintiffs in this case—Steven White and Betty Carmand—filed the state court proceeding, represented by Advocates for Justice, the same counsel as in this case. On September 4, 2015, after Defendants had asked this Court to stay the state case, the state plaintiffs amended the state complaint, adding three plaintiffs—Robert M. Miller, Yolanda Maya and Ligia Enriquez—who are not plaintiffs in the instant federal case. They brought claims against the Board, certain individual Defendants from this action, and Morgan, Lewis & Bockius LLP (“Morgan Lewis”) and Proskauer Rose LLP (“Proskauer”), counsel to the school district Defendants and Defendant Rothschild, respectively, in this case (collectively, the “Law Firms”). (SeeNY FAC; see also Ds’ Mem. 3.)1 The plaintiffs in the state court proceeding (“state plaintiffs”) allege that Defendants and the Law Firms breached their fiduciary duties to the state plaintiffs by, among other things, charging or paying excessive legal fees for defending this case. (See NY FAC ¶¶ 1-7, 93-106.) The state plaintiffs also allege breach of contract, statutory and “misfeasance of office” claims. (See id. ¶¶ 107-119.) The state plaintiffs seek, among other things, an order: (1) enjoining: (a) payment of any outstanding legal fees to the Law Firms; (b) payment of any attorneys’ fees for the individual defendants until a certification of good faith is issued by the New York State Commissioner of Education under New York Education Law § 3811; and (c) retention of any lawyers by the individual defendants without issuing a request for proposal; (2) requiring the individual defendants to seek a refund from the Law Firms for any overcharges and the Law Firms to refund to the District all excessive fees (as found by an independent third party); (3) disgorging all legal fees paid to the Law Firms over $187,500 (a figure approved by a state judge in litigation between the District and its insurance company) or for the representation of individual defendants without proper certification under § 3811; and (4) ordering the Board and its members to make restitution for excessive legal fees paid on behalf of the individual defendants. (Id. at 31-33.)


*2 Thereafter, Defendants requested a temporary stay of the state-court proceeding in order to preserve the status quo pending their contemplated motion for a permanent injunction. (See Docs. 483, 489.) In an Order dated September 22, 2015, I stayed the state proceeding with respect to the issues of (1) the Law Firms’ fiduciary duty to the state plaintiffs and (2) the state plaintiffs’ claims for restitution or refund. (Doc. 516.) Defendants now move to permanently enjoin the state proceeding in its entirety. (See Docs. 527, 529.)


II. Discussion


The All Writs Act empowers federal courts to “issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. § 1651(a). The Anti-Injunction Act precludes a federal court from enjoining state proceedings “except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. “The authority of a United States court to issue an injunction ‘to protect … its judgments’ from further litigation in state courts is known as the ‘relitigation exception’ to the broad prohibition of the Anti-Injunction Act.” Smith v. Woosley, 399 F.3d 428, 431 (2d Cir. 2005) (quoting 28 U.S.C. § 2283) (alteration in original). “The relitigation exception, which was designed to implement well-recognized concepts of claim and issue preclusion, authorizes a federal court to enjoin state litigation of a claim or issue that previously was presented to and decided by the federal court.” Wyly v. Weiss, 697 F.3d 131, 139 (2d Cir. 2012) (internal quotation marks omitted).2 The doctrine of collateral estoppel, or issue preclusion, precludes relitigation of an issue where: “(1) the identical issue was raised in a previous proceeding; (2) the issue was actually litigated and decided in the previous proceeding; (3) the part[ies] had a full and fair opportunity to litigate the issue; and (4) the resolution of the issue was necessary to support a valid and final judgment on the merits.” Id. at 141 (internal quotation marks omitted) (alteration in original).


“In applying [the relitigation] exception, the Supreme Court has taken special care to keep it strict and narrow, because issuing an injunction under the relitigation exception is resorting to heavy artillery…. Thus, the fact that an injunction may issue under the Anti-Injunction Act does not mean that it must issue.” Id. at 140 (citations omitted). Accordingly, “[a]ny doubts as to the propriety of a federal injunction against state court proceedings should be resolved in favor of permitting the state courts to proceed.” Smith v. Bayer Corp., 131 S. Ct. 2368, 2375 (2011) (internal quotation marks omitted) (alteration in original). “[E]very benefit of the doubt goes toward the state court; an injunction can issue only if preclusion is clear beyond peradventure.” Id. at 2376 (citation omitted).


Although issue preclusion and its requirements articulated above typically operate to bar future adjudication of discrete issues, issue preclusion may also bar entire claims where the issue precluded is an essential element of that claim. See id.; see also Jeffreys v. Teamsters Union Local 1150, 28 Fed.Appx. 92, 93-94 (2d Cir. 2002) (affirming preclusion of an entire claim where an earlier ruling precluded an essential element of that claim); Thomas v. Powell, 247 F.3d 260, 263 (D.C. Cir. 2001) (“If the plaintiff still could not prevail because an essential element of his state cause of action had already been determined against him in the federal suit, the relitigation exception would permit an injunction against the state proceedings.”).


*3 Thus, it is appropriate to compare the complaint in the state proceeding to the record in this case in order to determine whether the New York Supreme Court would have to rule on an issue or claim that I have already decided. See Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 148 (1988); Thomas, 247 F.3d at 263. I address the parties and claims in the state proceeding in turn below.


A. Parties in the State Proceeding


Collateral estoppel presents more sensitive constitutional issues where the parties in the separate actions are not identical. This is because “[a] person who was not a party to a suit generally has not had a ‘full and fair opportunity to litigate’ the claims and issues settled in that suit.” Taylor v. Sturgell, 553 U.S. 880, 892 (2008). There are, however, several limited exceptions to the general rule that nonparties may not be bound by a prior ruling. See id. at 893-95. One is that “a party bound by a judgment may not avoid its preclusive force by relitigating through a proxy. Preclusion is thus in order when a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication.” Id. at 895; see Chicago, R.I. & P. Ry. Co. v. Schendel, 270 U.S. 611, 620, 623 (1923).


As discussed above, the state plaintiffs amended their complaint to add three plaintiffs who are not plaintiffs in the instant federal case. Defendants argue that these additional state plaintiffs are merely proxies who were added solely for tactical purposes—in other words, to avoid preclusion by arguing that state plaintiffs did not have a full and fair opportunity to litigate—and that Plaintiffs’ counsel essentially admitted as much at an earlier pre-motion conference on August 20, 2015. (See Ds’ Reply 5.)3 According to Defendants, the additional state plaintiffs are therefore bound by my prior rulings in this case. Plaintiffs respond that the record in this case is simply too underdeveloped to determine whether Miller, Maya and Enriquez are proxies, and they therefore should not be bound. (See Ps’ Mem. 32.)


While my Order of September 22, 2015 did state that the additional plaintiffs “appear to be” proxies, (see Doc. 516 at 7) (emphasis added), further review of oral argument at the August 20 pre-motion conference reveals that Plaintiffs’ counsel only alluded to the tactical advantages of adding plaintiffs to the state case and did not go so far as to concede that these parties are proxies. (Doc. 526 at 45-46.) While he said that he wanted plaintiffs in the White case who were not plaintiffs in this case, that he thought two were lined up, and that he did not think this Court could enjoin plaintiffs who were not before this Court, (id. at 46),4 and while those statements suggest that he had in fact been shopping for proxies, he did not make a clear statement to that effect. Plaintiffs’ counsel is correct that there is not enough on the current record to make a final determination that Miller, Maya and Enriquez are proxies. (Ps’ Mem. 32).


*4 I will, however, require Plaintiffs’ counsel to submit, within seven days of the date of this Order, an affirmation stating that state plaintiffs Robert M. Miller, Yolanda Maya and Ligia Enriquez were not added as plaintiffs in the state action for merely tactical reasons and are not proxies for state plaintiffs White and Carmand. It should go without saying that this affirmation should be submitted only if Plaintiffs’ counsel can so affirm in good faith. If counsel cannot represent that Miller, Maya and Enriquez are not proxies, my findings below will be binding on all parties in the state proceeding. If counsel does submit the affirmation, then Defendants will be entitled to take limited discovery, (see Ds’ Reply 5), directed at how these additional parties became plaintiffs in the state action.5


Accordingly, my rulings on Defendants’ Motion currently do not apply to state plaintiffs Miller, Maya and Enriquez. Those rulings are set forth in turn below.


B. Breach of Fiduciary Duties of Care and Loyalty; Misfeasance of Office (Claims 1, 2 and 8)


The state plaintiffs’ first, second and eighth claims in the state proceeding allege that the Board and individual defendants breached duties of care and loyalty owed to students and taxpayers and failed to carry out the responsibilities of their office when they hired Morgan Lewis and Proskauer, agreed to pay them allegedly excessive fees, failed to address improper billing practices and continued to employ them in the instant litigation. (NY FAC ¶¶ 93-104, 119.) Defendants argue that these claims are precluded for several reasons. First, Defendants assert that these claims are “owned by the District” under New York law and are therefore derivative even when styled as direct claims (as they are in the state proceeding), and that I have “already ruled that the plaintiffs cannot pursue the District’s claims.” (Ds’ Mem. 7-8.) Defendants also argue that in my September 30, 2013 ruling, I found that “neither students, parents, nor taxpayers have a ‘direct right to sue’ or a ‘derivative right to sue’ Board members and District administrators for breach of fiduciary duty.” (Id. at 14.) Plaintiffs counter by claiming that the state “claims are different and based on distinct sets of facts” and involve different time periods, defendants, and duties allegedly breached. (Ps’ Mem. 20.) More specifically, Plaintiffs contend that the taxpayer relief sought in the state case for overspending on legal fees is “not the claim that was litigated in the 2013 Motion to Dismiss” and that, consequently, this issue has not been fully and fairly litigated. (Id. at 30-32.)


As I explained in my September 22, 2015 Order addressing Defendants’ request for a preliminary injunction, (see Doc. 516, at 4), Defendants’ argument mischaracterizes my September 30, 2013 ruling. In that ruling I dismissed Plaintiffs’ breach of fiduciary duty claim against the Board and the individual Defendants because I found that Plaintiffs could not sue derivatively on behalf of the District. While I noted that I had not found a New York case providing that members of a School Board owe a fiduciary duty to District taxpayers, parents or students, I held that even if there were such a duty, Plaintiffs had only alleged breach of a duty owed to the District. In the state court proceeding, in contrast, the state plaintiffs allege that the defendants owe a fiduciary duty to them directly. (NY FAC ¶ 94.) Whether the Board and individual defendants owe a duty to Plaintiffs directly was not decided in the September 2013 order.6


*5 Defendants’ alternative argument essentially proceeds as follows: (1) regardless of how they label their claims in the state proceeding, state plaintiffs may only pursue them under New York’s General Municipal Law (“GML”) § 51; (2) I have already found that a school board cannot be sued under GML § 51; (3) therefore, state plaintiffs cannot possibly bring their claims; and (4) as a result, my ruling should preclude the state plaintiffs’ claims in that proceeding. (See Ds’ Mem. 7-10.) Defendants may be correct on the first point, and the New York Supreme Court may ultimately agree. But I have not so ruled. Nor do I find that the case law cited by Defendants so clearly holds that state plaintiffs can only pursue their claims under GML § 51 that it necessarily rules out any other possibility.7 While I did indeed find in my March 12, 2014 ruling that taxpayers may not sue a school district or its officers under GML § 51 because the school district is not a municipal corporation for purposes of that statute, that may not preclude the state plaintiffs’ claims if there are other avenues for those claims. And it would not preclude claims against non-Board defendants. Accordingly, because “every benefit of the doubt goes toward the state court” and “an injunction can issue only if preclusion is clear beyond peradventure,” Smith, 131 S. Ct. at 2376, I decline to enjoin state plaintiffs’ first, second, and eighth claims. To the extent these claims seek disgorgement from the District or restitution of fees from Morgan Lewis and Proskauer, however, they are enjoined for the reasons discussed below.


C. Breach of Fiduciary Duty—Unjust Enrichment (Claim 3)


The state plaintiffs’ third cause of action alleges that Morgan Lewis and Proskauer have a “fiduciary and ethical responsibility” to them to ensure that District funds are not wasted or spent unnecessarily. (See NY FAC ¶¶ 105-06.)


In my September 2013 ruling, I dismissed Plaintiffs’ breach of fiduciary duty claim against the District’s former attorney, stating that an attorney for the District owes no fiduciary duty to taxpayers, parents or students, and citing Ahmed v. Trupin, 809 F. Supp. 1100, 1106 (S.D.N.Y. 1993) (“A lawyer employed or retained by a corporation or similar entity owes his allegiance to that entity, not to every person connected with that entity.”). (See Doc. 151 Ex. B, at 92.) My September 2013 ruling also addressed state plaintiffs’ efforts to seek disgorgement or restitution from that lawyer as a result of allegedly excessive legal fees. (See id. at 98-99.) In that ruling, I also dismissed Plaintiffs’ restitution claim, holding that they did not have standing to seek restitution on behalf of the District. (Id.)


Based on these rulings, and after an examination of the parties’ arguments and U.S. Supreme Court and Second Circuit collateral estoppel jurisprudence, I subsequently found that a temporary stay of the state plaintiffs’ third claim—which seeks both to enjoin the District from paying the Law Firms and to direct the Law Firms to disgorge excessive fees through restitution—was appropriate. (See Doc. 516, at 5-7.) Moreover, to the extent that state plaintiffs’ first two claims for breach of fiduciary duties sought the same remedies, I also stayed those two claims for the same reasons. My review of the record once again indicates that, for the reasons stated in my September 22, 2015 Order: these issues were raised in previous proceedings; the issues were actually and fairly litigated and decided; and the resolution of these issues was necessary to support valid and final judgments on the merits. See Wyly, 697 F.3d at 141. Plaintiffs are precluded from relitigating the fiduciary duty issue in an action against different defendants when they previously unsuccessfully litigated that issue here. See United States v. Mendoza, 464 U.S. 154, 158-59 (1984); Chevron Corp. v. Donziger, 886 F. Supp. 2d 235, 272 (S.D.N.Y. 2012). White and Carmand are therefore precluded from litigating these issues.


D. Breach of Contract (Claim 4)


*6 The state plaintiffs’ fourth cause of action alleges that the state plaintiffs are third-party beneficiaries of a contract between the Law Firms the District, which the Law Firms breached by charging excessive legal fees and billing for unnecessary services. (See id. ¶¶ 107-09.) Defendants argue that this claim should be enjoined for two reasons. First, Defendants assert that my September 2013 ruling precludes state plaintiffs’ breach of contract claim because “there is no legal distinction between the contractual and fiduciary obligations that arise out of the attorney-client relationship.” (Ds’ Mem. 12.) Second, Defendant Rothschild asserts that the breach of contract claim is frivolous and that it is inconceivable that Morgan Lewis and Proskauer would form a contract for legal services such that they would owe a duty to their clients’ adversaries or under which those adversaries could be third-party beneficiaries. (See D Rothschild’s Mem. 14-15.)8 Plaintiffs apparently concede these points, as they do not address them in their opposition.9


Under New York law, breach of contract, breach of fiduciary duty and malpractice claims against lawyers are generally duplicative, see, e.g., Bernard v. Proskauer Rose, LLP, 927 N.Y.S.2d 655, 658 (App. Div. 2011); Nevelson v. Carro, Spanbock, Kaster & Cuiffo, 736 N.Y.S.2d 668, 670 (App. Div. 2002), at least where they arise from the same set of facts and request the same relief, see Ullmann-Schneider v. Lacher & Lovell-Taylor, P.C., 994 N.Y.S.2d 72, 73 (App. Div. 2014); Chowaiki & Co. Fine Art Ltd. v. Lacher, 982 N.Y.S.2d 474, 475 (App. Div. 2014). That is the case here. The state plaintiffs’ breach of contract claim arises from the same facts and requests the same relief as the state plaintiffs’ fiduciary duty claim—that is, disgorgement or restitution from the District’s lawyers as a consequence of allegedly excessive legal fees and unnecessary work. Moreover, contrary to Plaintiffs’ assertion, an essential element of this claim was fully and fairly litigated and the resolution was necessary to support my September 2013 ruling. See Wyly, 697 F.3d at 141. As discussed above, in that ruling, I found that attorneys for the District owe no fiduciary duty to any of the Plaintiffs. See Ahmed, 809 F. Supp. at 1106. This ruling was explicitly based on law and was not fact- or defendant-specific. Thus, New York law dictates that because state plaintiffs cannot show that they were owed a fiduciary duty, neither can state plaintiffs bring claims for breach of contract. The state plaintiffs are therefore (as they apparently concede) precluded from pursuing their breach of contract claim in the state proceeding.


E. Violation of Public Officers Law Section 18(3)(b) and New York Education Law Section 3811 (Claims 5, 6 and 7)


The state plaintiffs also allege that payment of the individual defendants’ legal fees violates New York Public Officers Law § 18 and Education Law § 3811, (NY FAC ¶¶ 110-18), two provisions invoked in the Amended Complaint that were subjects of the September 2013 order. In the Amended Complaint, Plaintiffs asserted that Defendants should not be allowed to use New York Public Officers Law § 18 or Education Law § 3811 as justification for paying for the individual Defendants’ legal fees. I rejected that argument in the September 2013 ruling for lack of standing, finding it was not ripe because Defendants had not justified their actions under those statutes. But as I explained in my September 22, 2015 Order, the state plaintiffs, by contrast, allege affirmatively that those statutes have now been invoked. (See Doc. 516, at 4-5.) The issues are therefore not identical, and there is no preclusion. And while I noted in the September 2013 ruling that even if the Public Officers Law § 18 claim were ripe, Plaintiffs would lack standing to assert it, that analysis was not “necessary” to the final outcome, Wyly, 697 F.3d at 141, and thus does not have preclusive effect, see Bobby v. Bies, 556 U.S. 825, 835 (2009) (“A determination ranks as necessary or essential only when the final outcome hinges on it.”).10 As with my September 22, 2015 Order, however, to the extent these three claims seek disgorgement from the District or restitution from Morgan Lewis and Proskauer, they are enjoined for the reasons discussed above.


F. Disqualification of Counsel


*7 Defendants also request, in the event that I do not enjoin the entire state proceeding, that I disqualify Advocates for Justice as Plaintiffs’ counsel. (See Ds’ Mem. 18; Ds’ Reply 9-10.) Defendants allege that Advocates for Justice have violated New York Rules of Professional Conduct by suing opposing counsel and by communicating with Morgan Lewis and Proskauer during the pendency of the litigation. (See Ds’ Mem. 15-18.)


The disqualification of an attorney to remedy or forestall a violation of ethical principles is a matter committed to the sound discretion of the district court. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir. 1990); Scantek Med., Inc. v. Sabella, 693 F. Supp. 2d 235, 238 (S.D.N.Y. 2008). District courts review motions to disqualify with disfavor because they are particularly subject to abuse as tactical devices, infringe on parties’ rights to employ counsel of their choice, and inevitably result in delay and added expense. Scantek Med., 693 F. Supp. 2d at 238-39(collecting cases).


As the cases Defendants cite explain, suing opposing counsel in a pending proceeding and contacting an opposing party are both certainly disfavored, (see Ds’ Mem. 15-18), and Plaintiffs’ counsel would do well to reconsider whether it is appropriate for them to do so. But violations of ethics rules (if there be any) do not always necessitate disqualification. See Papanicolau v. Chase Manhattan Bank, N.A., 720 F. Supp. 1080, 1083-84 (S.D.N.Y. 1989). Rather, a trial judge’s primary inquiry in determining whether disqualification is appropriate is “the possibility of prejudice at trial that might result from the attorney’s unethical act.” Id. at 1083. As discussed above, I have enjoined claims seeking relief from Morgan Lewis and Proskauer, which all but moots the Law Firms’ concerns about vigorously defending their clients in this suit. And by representing themselves in the state proceeding, the Law Firms have essentially mooted the Rule 4.2 no-contact issue as well. In short, I find that Advocates For Justice’s continued representation of Plaintiffs in this suit is not likely to prejudice Defendants should the case go to trial. Whether the same can be said for prejudice to Defendants in the state proceeding is another question, but I will leave that for the state judge to decide. Disqualification here would instead only serve to delay and complicate what has already been a long and complex case. For these reasons, I decline to disqualify Advocates for Justice as Plaintiffs’ counsel.


III. Conclusion


For the reasons set forth above and in my September 22, 2015 Order, (Doc. 516), plaintiffs White and Carmand in the case White v. East Ramapo Central School District Board of Education, N.Y. County Index No. 158035/2015, are hereby precluded from pursuing Claims 3 and 4 in their entirety, and the remaining claims to the extent those claims seek disgorgement or restitution from Morgan Lewis and Proskauer. Plaintiffs’ counsel is directed to submit, within seven days of this Order, the affirmation described above (if they can do so in good faith). The Clerk of Court is respectfully directed to terminate the pending Motions, (Docs. 527, 529).


SO ORDERED.


All Citations

Slip Copy, 2016 WL 8140048


Footnotes


1



“NY FAC” refers to the First Amended Verified Class Action Complaint and Petition filed in the state proceeding, (Doc. 527 Ex. A). “Ds’ Mem.” refers to Defendants’ Memorandum of Law in Support of Defendants’ Motion to Permanently Enjoin the Collateral State Court Proceeding, (Doc. 528).


2



Plaintiffs persist in arguing that Wyly has been overruled by United States v. Schurkman, 728 F.3d 129 (2d Cir. 2013). (See Plaintiffs’ Memorandum in Opposition to Motion to Stay State Court Action, (“Ps’ Mem.”), (Doc. 555), 29.) Schurkman, however, expressly limited its holding to the “in aid of jurisdiction” exception, 728 F.3d at 135, so the Court does not understand why Plaintiffs suggest that it undermines Wyly‘s observations regarding the relitigation exception.


3



“Ds’ Reply” refers to the District Defendants’ Reply Memorandum in Further Support of Defendants’ Motion to Permanently Enjoin the Collateral State Court Proceeding, (Doc. 564).


4



Plaintiffs’ counsel also admitted that at least one purpose of the White case was to “slow down the massive expenditure of money in opposition to us in this case” and that a favorable ruling in White “would be to the advantage of our clients in getting this case resolved as opposed to … continuing to litigate.” (Doc. 526 at 4.)


5



Magistrate Judge McCarthy will supervise the limited discovery, but it seems to this Court that it should not take more than thirty or forty-five days.


6



Plaintiffs argue that my ruling in this regard was “off the cuff” and that they did not actually litigate it because they argued direct breach only in their brief but not in their complaint. (Ps’ Mem. 25.) There is some irony in Plaintiffs’ argument that their failure to properly articulate or successfully defend their theory allows them to avoid preclusion, but the fact remains that I have not ruled that no such direct duty exists.


7



Defendants’ summary of case law on this point is wishful. For instance, Defendants claim that Murtha v. Incorporated Village of Island Park, 609 N.Y.S.2d 315 (App. Div. 1994), stands for the proposition that the “right to challenge [a] municipality’s payment of legal fees exists, if at all, pursuant to GML § 51.” (Ds’ Mem. 9.) While that case was indeed brought pursuant to GML § 51, nothing in the opinion so much as hints at the idea that a challenge to a municipality’s legal fees may only be brought under GML § 51 or that such an action may not exist. See Murtha, 609 N.Y.S.2d at 315-16.


8



“D Rothschild’s Mem.” refers to Defendant Nathan Rothschild’s Memorandum of Law in Support of Motion to Enjoin State-Court Proceeding Pursuant to 28 U.S.C. § 1651, (Doc. 530). Rothschild’s argument might well persuade a state judge but it is not one on which I have already ruled.


9



Indeed, Plaintiffs fail to respond to several of Defendants’ arguments despite the fact that their brief is thirty-three pages long—well over my twenty-five page limit. Perhaps they ran out of space after deciding to copy and paste nineteen pages (fifteen of which are in the form of a single-spaced block quote), all but verbatim, from the state court complaint. I am unsure why Plaintiffs thought this would be helpful in any way. I have previously admonished Plaintiffs’ counsel for their inadequate submissions, and I feel compelled to do so once again, as their approach results in a failure to advocate for their clients or assist the Court.


10



Although it is true that multiple grounds for the same decision can be “a good estoppel,” Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 45 (2d Cir. 1986); (see Ds’ Mem. 14), that does not make all analysis in an opinion grounds for preclusion. My ruling makes clear that the claims were dismissed for prematurity. That said, the state judge may well agree that Plaintiffs lack standing under § 18.

Recent Posts

See All

Copyright © 2012 Advocates for Justice Chartered Attorneys