Opinion
01 Civ. 8518 (MBM)
October 3, 2003
JACK E. ROBINSON, ESQ., Stamford, for Plaintiff.
ALAN C. THOMAS, ESQ., STUART S. MEYER, ESQ., Fischer, Porter, Caliguire Thomas, P.C., New York, NY, for Defendants
OPINION AND ORDER
This malicious prosecution action is the most recent — and, if past is prologue, likely not the final — chapter in a protracted dispute between the parties. Plaintiff Voluntary Benefit Systems, Inc. ("VBS") has sued defendants Donald M. Israel and Mark R. Taylor, alleging that, in a prior lawsuit before this court, Israel and Taylor named VBS as a defendant without probable cause and with malicious intent, and that their alleged misconduct caused substantial injury to VBS. The parties have submitted competing motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Because, as appears below, VBS filed its complaint after the expiration of the relevant limitations period, I deny plaintiff's motion and grant defendant's motion.
I.
This action arises from what the Second Circuit recently described, with becoming understatement, as a "long and tortuous litigation" involving the parties herein and certain related parties.Israel v. Carpenter, 02-9225, 2003 U.S. App. LEXIS 11775, at *1-2 (2d Cir. June 13, 2003). The following summary of that underlying litigation is set forth in greater detail in numerous opinions issued by the Second Circuit and this court. See, e.g., Israel v. Carpenter, 9 Fed. Appx. 43 (2d Cir. 2001); Israel v. Carpenter, 95 Civ. 2703, 2000 U.S. Dist. LEXIS 13846 (S.D.N.Y. Sept. 25, 2000); Israel v.Carpenter, 95 Civ. 2703, 1999 U.S. Dist. LEXIS 9709 (S.D.N.Y. June 30, 1999); Israel v. Carpenter, 120 F.3d 361 (2d Cir. 1997); Israel v. Carpenter, 95 Civ. 2703, 1996 U.S. Dist. LEXIS 6603 (S.D.N.Y. May 15, 1996); Israel v.Carpenter, 95 Civ. 2703, 1995 U.S. Dist. LEXIS 16007 (S.D.N.Y. Oct. 31, 1995).
A. The Buyout Agreement
Defendants Israel and Taylor were partners with Donald E. Carpenter in Benefit Concepts New York, Inc. ("BCNY"), a business venture involving the sale of life insurance and qualified retirement plans. Over time, defendants' relationship with Carpenter deteriorated, and the parties entered into a separation agreement dated September 3, 1991 (the "Buyout Agreement"). Under the Buyout Agreement, Carpenter acquired full ownership interest of BCNY, but the three partners agreed to divide among themselves certain equity interests acquired in BCNY's name over the course of the partnership.
Approximately one year after the parties entered into the Buyout Agreement, Israel and Taylor asked Carpenter to execute documents to transfer to them equity interests in an entity called "Omega Reinsurance Corporation" ("Omega Re"). Carpenter refused and took the position that neither Israel nor Taylor ever had any interest in Omega Re.
B. The Massachusetts Action and First Southern District Action
In February 1993, Israel and Taylor sued Carpenter and three corporate defendants in Massachusetts Supreme Court, alleging breach of contract (the "Massachusetts Action"). The Massachusetts Action was terminated in August 1993 pursuant to the parties' voluntary stipulation dismissing the claims against Carpenter with prejudice and the claims against the other defendants without prejudice.
In March 1993, Carpenter caused BCNY to bring suit in this court against Israel, Taylor, and two other corporate defendants, alleging various federal trademark claims (the "First Southern District Action"). Israel and Taylor then filed a third-party complaint against Carpenter in the First Southern District Action, alleging essentially the same state-law breach of contract claims they had previously asserted in the Massachusetts Action. The First Southern District Action concluded when the court granted summary judgment dismissing BCNY's federal trademark claims and dismissing the remaining state claims on jurisdictional grounds.
C. The Prior Action
On March 27, 1995, Israel and Taylor (hereinafter, "Israel and Taylor" or the "Prior Action Plaintiff's") filed a lawsuit in New York Supreme Court against Carpenter, BCNY, and VBS (collectively, the "Prior Action Defendants"). In that lawsuit (hereinafter, the "Prior Action"), which the Prior Action Defendants removed to this court, Israel and Taylor asserted essentially the same causes of action they had asserted in the Massachusetts Action. Israel and Taylor contend they named VBS as a defendant in the Prior Action because they believed Carpenter was diverting to VBS proceeds from the sale of Omega Re stock, or the stock itself. (Defs.' Mem. at 4; Israel Aff. ¶ 10) Carpenter was the Chairman of VBS, a third-party administrator of health and welfare benefit plans. (Carpenter Aff. ¶ 2)
After considerable motion practice and several interim rulings, Magistrate Judge Francis issued a memorandum order and opinion, dated May 15, 1996, that, inter alia, dismissed VBS as a defendant "[i]n light of the [Prior Action Plaintiff's'] complete failure to make a showing sufficient to establish the essential elements of its claims against VBS." Israel, 1996 U.S. Dist. LEXIS 6603, at * 19. However, Magistrate Judge Francis declined to dismiss certain claims asserted against Carpenter and BCNY, and they remained defendants in the Prior Action.
Four years later, after further motion practice and several more interim rulings, Magistrate Judge Francis bench tried the case, and then issued a memorandum opinion and order, dated September 25, 2000, in favor of Israel and Taylor, ordering Carpenter to pay substantial damages. However, Magistrate Judge Francis noted that Israel and Taylor Mid not present evidence that defendants BCNY or Voluntary Benefit Systems, Inc. breached any obligations under the Buyout Agreement." Israel, 2000 U.S. Dist. LEXIS 13846, at * 22 n. 3. Judgment was entered on September 26, 2000 in accordance with Magistrate Judge Francis's opinion. (Dkt. No. 108)
Since the entry of judgment, the Second Circuit and this court have issued numerous post-judgment rulings. See Israel v.Carpenter, 9 Fed. Appx. 43 (2d Cir. 2001) (affirming judgment as to Carpenter's liability but remanding the case for recalculation of damages and pre-judgment interest); Israel v.Carpenter, 95 Civ. 2703, 2001 U.S. Dist. LEXIS 13506 (S.D.N.Y. Sept. 5, 2001) (recalculating damages and pre-judgment interest in accordance with the Second Circuit's ruling); Israel v.Carpenter, 95 Civ. 2703, 2001 U.S. Dist. LEXIS 15571 (S.D.N.Y. Oct. 1, 2001) (denying Carpenter's Rule 60(b)(1) motion for relief from entry of September 7, 2001 judgment); Israel v.Carpenter, 95 Civ. 2703, 2002 U.S. Dist. LEXIS 11792 (S.D.N. Y. Jun. 28 2002) (denying Carpenter's Rule 26 motion seeking a protective order relieving non-parties of the obligation to comply with subpoenas issued by Israel and Taylor, denying cross-motion by Israel and Taylor for an order of contempt and related relief against Carpenter, and denying non-parties' motion to quash subpoenas); Israel v.Carpenter. 95 Civ. 2703, 2003 U.S. App. LEXIS 11775 (2d Cir. June 13, 2003) (affirming trial court's denial of Carpenter's Rule 60(b)(1) motion); Israel v. Carpenter, 95 Civ. 2703, 2003 U.S. Dist. LEXIS 11356 (S.D.N.Y. July 7, 2003) (denying motion by Israel and Taylor for contempt order and for injunctive relief). None of these rulings present issues relevant to the instant action.
II.
I begin with defendants' statute of limitations affirmative defense because a favorable ruling for defendants on this issue would obviate an inquiry into the parties' competing merits-based arguments for summary judgment.New York law provides the applicable statute of limitations for plaintiff's malicious prosecution claim, because the parties have relied upon New York law throughout their submissions. See Texaco A/S (Denmark) v. Commercial Ins. Co. of Newark, NJ, 160 F.3d 124, 128 (2d Cir. 1998) (parties' consent to application of forum law completes choice-of-law inquiry). Under New York law, a claim for malicious prosecution must be brought within one year after that prosecution terminates favorably to the plaintiff. N.Y. C.P.L.R. § 215 [3] (McKinney 2001); see Lancaster v. Kindor, 65 N.Y.2d 804, 805, 493 N.Y.S.2d 127, 127 (1985) (affirming dismissal of malicious prosecution claim as time-barred by one-year limitations period).
Defendants argue that VBS's claim is time-barred because VBS filed its complaint on September 18, 2001 — more than five years after Magistrate Judge Francis's May 15, 1996 order dismissing VBS from the Prior Action. (Defs.' Mem. at 8-10) However, plaintiff contends that its complaint is timely because it was filed within one year of Magistrate Judge Francis's September 25, 2000 ruling. (Pl.'s Reply Mem. at 6-7) In furtherance of its argument, plaintiff refers to Magistrate Judge Francis's statement in his September 25, 2000 order that Israel and Taylor Mid not present evidence that defenadants BCNY or [VBS] breached any obligations under the Buyout Agreement." (Id.) VBS interprets this statement as "an adjudication on the merits" as to VBS's liability in the Prior Action — the date from which the limitations period should commence. (Id.)
However, the statement VBS cites does not show that VBS remained a defendant in the Prior Action until the September 25, 2000 order. Rather, that statement shows only that, in the course of the bench trial, Israel and Taylor did not offer any evidence of VBS's liability. That meaning is entirely consistent with Magistrate Judge Francis's May 15, 1996 ruling dismissing VBS as a defendant in the Prior Action, and in no way signifies that the claims against VBS were extant until the September 25, 2000 ruling. As defendants here correctly argue, VBS's proposed interpretation of the September 25, 2000 ruling is implausible because it would mean Magistrate Judge Francis dismissed VBS as a defendant in an action from which VBS had already been dismissed. (Defs.' Mem. at 9-10)
VBS attempts to explain away Magistrate Judge Francis's May 15, 1996 order by arguing that the Second Circuit reinstated the claims against VBS in a subsequent ruling. (Pl's Reply Mem. at 6-7) However, the Second Circuit ruling that VBS cites, Israel v. Carpenter, 120 F.3d 361 (2d Cir. 1997), simply (i) reversed Magistrate Judge Francis's interim order of October 3, 1996, which granted Carpenter's Rule 60(b) motion for "summary judgment based on res judicata, and (ii) reinstated the claims against Carpenter. See Israel, 120 F.3d at 367 (" We therefore conclude that the district court erred in granting Rule 60(b) relief and summary judgment to Carpenter, and dismissing Israel's complaint on the ground of res judicata.") (emphasis added). The claims that Israel and Taylor had originally asserted against VBS, which Magistrate Judge Francis dismissed in his May 15, 1996 order, were simply not at issue before the Second Circuit. This explains why the Second Circuit's opinion does not make a single reference to VBS, let alone to reinstating the claims against VBS in the Prior Action.
Equally unavailing is VBS's contention that it "could not assert a claim for malicious prosecution in the face of the pending appeal, or ultimately, the Second Circuit's decision." (Pl.'s Reply Mem. at 7) First, the record nowhere indicates, and VBS does not allege, that Israel and Taylor ever sought to appeal VBS's dismissal from the Prior Action. As discussed above, the only issue on appeal to the Second Circuit was Magistrate Judge Francis's order granting Carpenter's Rule 60(b) motion for summary judgment on the ground of res Judicata.
Moreover, even assuming Israel and Taylor appealed VBS's dismissal from the Prior Action, VBS was free to file its malicious prosecution claim at any time during the pendency of that appeal. See Marks v.Townsend, 97 N.Y. 590, 595 (1885) (holding that an appeal from the decision in the underlying action does not render malicious prosecution claim premature); Lander v. Gilman. 278 N.Y.S.2d 149, 151 (Sup.Ct. Queens County 1967) (dismissing malicious prosecution claim on ground that claimants could have instituted action during pendency of the appeal of the underlying action). Under New York law, the pendency of an appeal does not suspend the limitations period for a malicious prosecution claim. See Spinale v. Guest, 270 A.D.2d 39, 40, 704 N.Y.S.2d 46, 47 (1st Dept. 2000) (affirming dismissal of malicious prosecution not filed within one-year limitations period "notwithstanding that an appeal was taken"). For these reasons, even assuming Israel and Taylor appealed VBS's dismissal from the Prior Action — a proposition with no support in the trial record — VBS was required in any event to file its malicious prosecution claim within one year of the May 15, 1996 ruling.
Finally, VBS argues that Israel and Taylor are "precluded altogether" from disputing that the September 25, 2000 ruling triggered the one-year limitations period because defendants had already conceded in their response to VBS's Rule 56.1 Statement that "judgment was entered in the Prior Action [in September 2000] in favor of VBS and such judgment was not appealed". (Pl's Reply Mem. at 7) Here, VBS conflates the date Magistrate Judge Francis ordered VBS dismissed from the Prior Action with the date the court formally entered judgment to that effect. Under New York law, the limitations period for a malicious prosecution claim begins with termination of the underlying charges in the claimant's favor,see supra discussion at 6; the court's formal entry of judgment is immaterial for limitations purposes. Defendants' admission that the court entered judgment in VBS's favor in September 2000 in no way precludes them from arguing that the May 15, 1996 order initiated the one-year limitations period.
* * *
Because VBS's complaint is barred by the one-year limitations period governing malicious prosecution claims, I need not consider the parties' remaining arguments. Plaintiff's motion for summary judgment is denied, defendant's motion for summary judgment is granted, and the complaint is dismissed with prejudice. Settle judgment on ten days' notice.
SO ORDERED.