Opinion
96 Civ. 3231 (RPP), Master File No. 96 Civ. 5567 (RPP).
May 8, 2002
OPINION AND ORDER
Petitioner/Claimant Proskauer Rose LLP ("Proskauer") has filed a motion seeking to enjoin Jack Banks ("Banks") from proceeding with an action against Proskauer, the Estate of Edward Brodsky, Sarah Gold, and Karen Clarke in Ontario, Canada. Banks' Canadian suit alleges that Proskauer, during its representation of Banks, Lawrence Weltman ("Weltman"), and Gaming Lottery Corporation, having changed its name to GalaxiWorld.com Ltd. ("GalaxiWorld"), engaged in malpractice and breached its fiduciary duties of loyalty, trust, and confidence to Banks. Proskauer contends that Banks' Canadian action is "based upon the very same issues and arguments that were decided adverse to Banks by this Court and the Court of Appeals" and that Banks' Canadian action "is nothing more than an effort to evade and relitigate the rulings of this Court and the Court of Appeals." (Proskauer's Mem. in Support of Motion at 1.)
Edward Brodsky, Sarah Gold, and Karen Clarke were attorneys at Proskauer involved in the representation of Banks, Lawrence Weltman, and Gaming Lottery Corporation in two actions before this Court.
Gaming Lottery Corporation, whose name had been Laser Friendly Corporation until July 28, 1995, had been a Canadian corporation whose stock was traded publicly in the United States and Canada. In April 1996, Gaming Lottery Corporation announced it would reincorporate itself in Bermuda. In January 1997, Gaming Lottery Corporation reincorporated in the British Virgin Islands. In September 1998, the corporation renamed itself GLC Limited and relocated its corporate offices to Gibraltar. On July 1, 1999, GLC Limited announced that it had changed its name to GalaxiWorld.com Limited. See Opinion and Order dated September 4, 2001.
Background
Proskauer represented GalaxiWorld, Lawrence Weltman, former Chief Financial Officer of GalaxiWorld, and Banks, the President and Chief Executive Officer of GalaxiWorld, as defendants in two related cases before this Court, In re Gaming Lottery Securities Litigation and Silva Run Worldwide Ltd. v. Gaming Lottery Corp.. Banks, individually, and GalaxiWorld had separate retainer agreements and were billed separately. For approximately three years, Banks and Gaming Lottery/Galaxi World routinely paid Proskauer's bills for services performed in accordance with the retainer agreements covering the two litigations. Though Galaxi World and Banks had paid these bills, Galaxi World's Officers and Directors insurance policy had reimbursed them for Proskauer's fees of over three million. See Revised Opinion and Order dated April 24, 2000 at n. 2. Proskauer's motion to withdraw and collect outstanding fees was based on Galaxi World's actions since the fall of 1999, when the proceeds of Galaxi World's insurance policy became exhausted and were no longer available to pay litigation fees and expenses.
In Silva Run, Banks and Galaxi World affirmatively asserted counterclaims against plaintiff and cross-claims against defendant Coutts Co AG.
In the late fall of 1999, Banks, Weltman, and Galaxi World, which was in the process of being taken private by a new owner, told Proskauer to stop all work, ceased paying Proskauer's bills, ceased communicating with Proskauer, and rebuffed Proskauer's requests to talk with the prospective owner of GalaxiWorld, an offshore corporation called Ostel Management Inc.. See Opinion and Order dated September 4, 2001 at 2-3. By letter dated January 7, 2000, Proskauer notified the defendants that it was obliged to move to withdraw as counsel for the defendants and for payment of outstanding fees. On January 10, 2000, Proskauer applied to this Court in the In re Gaming Lottery Securities Litigation case for an order (1) permitting Proskauer to withdraw as counsel to the defendants due to the breakdown of the attorney-client relationship and (2) requiring payment of the outstanding fees and expenses. Proskauer indicated that the matter was of some urgency because the going-private transaction was scheduled to close on January 21, 2000.
Trial in In re Gaming Lottery Securities Litigation, an action filed in 1996, was scheduled to begin in April, 2000.
With notice to Banks, Weltman, and GalaxiWorld, the Court scheduled a hearing on the matter for January 13, 2000. Defendants Banks, Weltman, and GalaxiWorld failed to submit opposition papers or to appear at the January 13, 2000 hearing. On that date, the Court entered an Order and Judgment terminating Proskauer's representation of Banks, Weltman, and Galaxi World in the In re Gaming Lottery Securities Litigation and directing Galaxi World to pay, and Banks, as President of Galaxi World, to cause Galaxi World to pay, the outstanding fees by January 18, 2000. (Clarke Aff. Exh. A.)
Banks and Galaxi World did not comply with the Court's Order. On January 19, 2000, Banks submitted a letter on Galaxi World letterhead asking the Court to vacate the January 13, 2000 Order and alleging that Proskauer had "committed malpractice of the worst kind by elevating its interest in collecting substantial legal fees over protecting the interests of its clients." (Clarke Aff. Exh. B at 2.) Banks also stated that "[i]n particular, Proskauer failed to properly present the Company in all substantive aspects of settlement discussions." (Id.) In response to Banks' letter, the Court temporarily vacated the Judgment and held it in abeyance pending a further hearing. (Clarke Aff. Exh. E at 1.) The parties were "to appear at a further hearing on January 25, 2000 at 9:30 a.m. to address the issues raised in Galaxi World's January 19 letter . . . ." (Id.)
On January 20, 2000, at the request of Proskauer, the Court ordered Banks to appear in person, and Weltman to appear by telephone, at the hearing on January 25, 2000. Neither GalaxiWorld nor Banks appeared at the January 25, 2000 hearing. At the hearing, the Court proceeded to take Weltman's testimony, as well as that of Edward Brodsky and Sarah Gold of Proskauer, and Robert Finkel, one of plaintiffs' counsel, on the subjects raised in Galaxi World's letters, including the amount of fees outstanding and the alleged malpractice claims set forth in Banks' letter of January 19, 2000. On January 26, 2000, after taking into consideration the testimony and "all the materials submitted by the parties, including the affirmations of Edward Brodsky dated January 10 and 24, 2000, which set forth Proskauer's position, and the letters dated January 18, 19, and 24, 2000 to the Court from Jack Banks, the President of GalaxiWorld, which set forth Galaxi World's position and defenses to Proskauer's request for payment," the Court entered an Order and Judgment ordering "that GalaxiWorld shall pay Proskauer the sum of $569,536.48 forthwith, and Jack Banks, as President of Galaxi World, shall cause GalaxiWorld to pay that sum to Proskauer forthwith." (Id. at 3.) Banks and GalaxiWorld did not comply with this Order and Judgment.
Weltman was allowed to appear by telephone because his wife was expecting to deliver their child at the time.
On February 10, 2000, in the Silva Run case, Proskauer made a parallel motion for an order permitting withdrawal as counsel and directing payment of outstanding fees, based upon the existing record in the In re Gaming Lottery Securities Litigation case. The Court held a hearing on Proskauer's motion in Silva Run on February 17, 2000. On that date, Sheldon Eisenberger, Esq. appeared before this Court representing Banks, individually, and GalaxiWorld. From the bench, the Court granted Proskauer's motion to withdraw. (Clarke Aff. Exh. L at 1.) Mr. Eisenberger then
requested the files in Proskauer's possession pertaining to this case, and Proskauer asserted its retaining lien against all the files pertaining to Galaxi World and Banks in its possession, pending payment of the total outstanding legal fees for all matters Proskauer handled for them; and Proskauer requested that the Court consider entering an order imposing certain consequences if Galaxi World and Banks failed to comply with the order to pay the outstanding legal fees, including the possibility that they would be barred from proceeding on their affirmative claims against Coutts Co AG and Silva Run Worldwide Ltd. in this case if they failed to pay the outstanding legal fees.
(Clarke Aff. Exh. L at 1-2.) The parties submitted briefs and letters addressing these issues on February 22, 23, 24, and 25, 2000. In his brief of February 22, 2000, Mr. Eisenberger argued that Banks, individually, should not be subject to the retaining lien because Banks, who was billed separately from Galaxi World, owed no fees to Proskauer. (Clarke Aff. Exh. G.) Mr. Eisenberger also argued that Proskauer was not entitled to an order precluding the defendants from prosecuting their cross-claims and counterclaims. (Id.) On February 29, 2000, the Court held further oral argument on these issues, jointly in Silva Run and In re Gaming Lottery Securities Litigation.
On March 6, 2000, the Court issued a written order that relieved Proskauer as counsel for Galaxi World and Banks in the Silva Run action as of February 17, 2000; entered judgment in favor of Proskauer and against Galaxi World in the amount of $10,731.72 for services in Silva Run and $654,412.58 for services rendered in In re Gaming Lottery Securities Litigation approved Proskauer's retaining lien against Banks and GalaxiWorld until all outstanding fees and expenses incurred in all matters in which Proskauer provided services to them were paid; prohibited Galaxi World and Banks from proceeding on their cross-claims and counterclaims in Silva Run until they purged their failures to follow orders of this Court; and ordered Galaxi World to pay, and Banks to cause Galaxi World to pay, the $422,113.43 outstanding to Proskauer. (Clarke Aff. Exh. L.) The Court also ordered that if the outstanding fees were not paid by March 13, 2000, Banks was to appear before the Court "to be deposed as to all matters relevant to the satisfaction of the judgments in favor of Proskauer . . . ." (Id. at 2-3.) The Court gave notice to Banks and Galaxi World that if they "fail fully to comply with any of the foregoing, their cross-claims and counterclaims asserted in this case will be subject to dismissal with prejudice . . . ." (Id. at 3.)
Although Galaxi World and Banks had not paid Proskauer any portion of the amounts previously ordered to be obtained, Proskauer had obtained, through judgment enforcement proceedings, partial payment in the amount of $243,030.87. (Clarke Aff. Exh. L at 3.)
On March 9, 2000, Banks and GalaxiWorld filed a motion to alter or amend the Court's March 6, 2000 Order. Among other things, the defendants contended that the Court should not have ordered Banks to cause GalaxiWorld to pay Proskauer's judgment and that Banks' and Galaxi World's affirmative claims in Silva Run could not be dismissed for non-payment of fees. (Clarke Aff. Exh. M.) In its Revised Opinion and Order dated April 24, 2000, the Court rejected defendants' arguments. With respect to defendants' argument that the Court should not have ordered Banks to cause Galaxi World to pay Proskauer's judgment, the Court stated:
This argument is without merit. Jack Banks was the Chief Executive Officer and the controlling shareholder with his wife of Galaxi World. He was a named defendant in this action and it was his actions that gave rise to plaintiffs' claims of liability. Banks signed a retainer agreement with Proskauer as an individual, and Banks and GalaxiWorld were billed separately. Although GalaxiWorld and Banks paid those bills, Galaxi World's Officers and Directors insurance policy reimbursed them for Proskauer's fees of over 3 million dollars.
(Clarke Aff. Exh. O at n. 2.)
On the same date, the Court issued an order in In re Gaming Lottery Securities Litigation, stating that, for the same reasons as those set forth in the Court's Revised Opinion and Order in Silva Run of April 24, 2000, "the Court finds that Proskauer's claim giving rise to the Amended Judgment is a plenary claim, and finding no just reason for delay, pursuant to Rule 54(b), orders entry of judgment." On May 3, 2000, the Court entered a second amended judgment in the amount of $654,412.58.
Banks, individually, and Galaxi World appealed in In re Gaming Lottery Securities Litigation from the January 26, 2000 order and judgment for $569,536.48, the March 6, 2000 amended judgment for $654,412.58, the April 24, 2000 order identifying Proskauer's claim as plenary and severable, and the May 3, 2000 second amended judgment for $654,412.58. (Clarke Aff. Exh. R.) On January 10, 2001, the Court of Appeals issued an opinion affirming this Court's rulings. (Clarke Aff. Exh. R.) With respect to Banks' and Galaxi World's arguments that the Court erred by entering a money judgment in favor of Proskauer Rose and by ordering Banks, president of Galaxi World, to "cause" GalaxiWorld to pay its debts, the Court of Appeals affirmed "for substantially the same reasons as stated in the district court's revised opinion and order of April 27, 2000." (Clarke Aff. Exh. R at * 1.) With respect to Banks' and GalaxiWorld's argument that the Court erred when it conditioned Banks' and GalaxiWorld's ability to move forward with its cross-claims and counterclaims in Silva Run on payment of the outstanding judgment from In re Gaming Lottery Securities Litigation, the Court of Appeals affirmed, stating "Judge Patterson's decision to halt Galaxi World's ability to progress in an effort to make sure that Proskauer was paid is consistent with the law of this Court as explained in National Equipment Rental and Itar-Tass Russian News Agency." (Id.)
In addition, Galaxi World, but not Banks, appealed from the March 6, 2000 judgment for $10,731.72 and the April 24, 2000 Revised Opinion and Order denying its motion to vacate paragraph (4) of the March 6, 2000 order.
The Revised Opinion and Order cited is the Revised Opinion and Order dated April 24, 2000.
On October 19, 2000, the Court entered an Order dated October 18, 2000 compelling Banks and representatives of Galaxi World to appear and give testimony under oath at a hearing scheduled for November 2, 2000 regarding
(i) the location of GalaxiWorld's assets, (ii) GalaxiWorld's compliance with the Court's orders dated January 13, 2000, January 19, 2000, January 26, 2000, February 16, 2000, and May 11, 2000 restraining Galaxi World from "disbursing or transferring any funds or other assets out of any of its accounts," and (iii) the representations made to the Court by Galaxiworld's counsel in the letter dated October 5, 2000 that assets were transferred by Ostel Management to a trust account for the benefit of Galaxiworld's shareholders.
(Order dated October 18, 2000.) The Court further ordered Galaxi World to produce to counsel for plaintiffs and Proskauer on or before October 25, 2000 all business records concerning the disposition of its funds or other assets during the period that they were subject to restraint. (Order dated October 18, 2000.) Banks and Galaxi World failed to appear at the November 2, 2000 hearing and failed to produce the documents as had been ordered by the Court on October 19, 2000.
Based on the failure of Galaxi World and Banks to comply, the Court entered an order dated November 6, 2000(1) holding Galaxi World in contempt of Court and fining Galaxi World $5,000 for each day from the date of entry of the order that it failed to comply with the Court's order of August 18, 2000 and (2) ordering Banks and representatives of Galaxi World to personally appear and show cause on November 14, 2000 why they should not be held in contempt of court for violation of the Court's October 19, 2000 order. The Court reiterated that, on that date, Banks and representatives of Galaxi World would be required to give testimony on subject matter contained in the October 19, 2000 order and on the location of any books and accounts of Galaxi World and all documents relating to the assets of GalaxiWorld at any time from May 24, 1996. (Order dated November 6, 2000.)
On November 14, 2000, defendants Banks, Weltman, and Galaxi World moved by order to show cause for plaintiffs to show why at a hearing to be held November 16, 2000, an order should not be entered: (1) staying the order of contempt; (2) reconsidering the Court's October 18, 2000 and November 6, 2000 orders; (3) granting defendants a protective order requiring all depositions of defendants to be conducted in the place they reside; and (4) entering a Martindell protective order in the form previously submitted to the Court. On November 14, 2000, the hearing scheduled for that date was reset to November 21, 2000.
On November 21, 2000, neither Banks nor representatives of Galaxi World appeared at the hearing. The Court granted, sua sponte, Banks an extension of time until November 27, 2000 to inform the Court that he intended to comply with the Court's October 18, 2000 order and ordered that Galaxi World be held in contempt with sanctions to be levied against it in the amount of $5,000 per day until it complied with the Court's orders of August 18, 2000, October 18, 2000, and November 6, 2000.
Banks failed to inform the Court that he intended to comply with the Court's October 19, 2000 order by November 27, 2000. The Court entered an order dated November 29, 2000, holding Banks in contempt of the Court's October 18, 2000 order with sanctions to be levied against him in the amount of $1,000 per day against Banks until he complied with the October 19, 2000 order. Banks again did not comply with the Court's orders.
On February 9, 2001, the Court held Banks and Galaxi World in contempt for their year-long noncompliance with the payment orders and noncompliance with the discovery orders in the post-judgment proceedings, during which they were represented by Mr. Eisenberger. (Clarke Aff. Exh. S.) The order explicitly gave GalaxiWorld and Banks the chance to purge their contempt by complying with the prior payment orders by February 19, 2001, but provided that if they failed to do so, their cross-claims and counterclaims in Silva Run would be dismissed with prejudice. (Id.) Based on Banks' and Galaxi World's failure to comply with the prior payment orders by February 19, 2001, the Court dismissed their affirmative claims in Silva Run. (Clarke Aff. Exh. T.) Neither Banks nor Galaxi World appealed from that order.
In January 2002, Banks filed an action in Ontario, Canada alleging that Proskauer breached its fiduciary duties to Banks by (a) representing to the Court on January 13, 2000 that Banks and Galaxi World had likely received motion materials, when Proskauer knew or ought to have known that Banks was not aware of those materials; (b) urging upon this Court the granting of relief which would preclude Banks from prosecuting his affirmative claims against third parties in a proceeding in which Proskauer was not owed fees by Banks; (c) preventing Banks from making full answer or defense in the Silva Run litigation; and (d) preferring Proskauer's financial interests over Banks' financial interests.
On April 4, 2002, Proskauer filed the instant motion, and the Court entered an Order to Show Cause requiring Banks to respond by April 8, 2002 and appear before the Court on April 10, 2002. On April 5, 2002, Mr. Eisenberger requested an extension of time to submit papers until April 24, 2002 and for the hearing to be conducted thereafter. On April 8, 2002, Proskauer submitted a letter to this Court objecting to Banks' request. Proskauer reported that they had communicated to Mr. Eisenberger that they would agree to the request for adjournment if Banks would agree to adjourn Proskauer's time to take any action in Canada until after this Court rules on Proskauer's motion. Banks did not agree to this request. In light of the possible prejudice to Proskauer stemming from a lengthy delay of this motion while the Canadian action moved ahead, the Court ordered Banks to respond by April 10, 2002, Proskauer to reply by April 11, 2002, and for a hearing to be held on April 12, 2002.
On April 12, 2002, Mr. Eisenberger, representing Banks, and Proskauer appeared before this Court. Based upon Mr. Eisenberger's insistence that he had not had time to properly brief the issues before the Court, the Court agreed that Banks' time to respond to the order to show cause be extended to April 16, 2002, that Proskauer file reply papers by April 19, 2002, and that a hearing be held on April 24, 2002. On April 18, 2002, Banks' Canadian counsel amended the complaint in the Canadian action to add additional allegations to his malpractice action against Proskauer. Specifically, Banks now alleged, in addition to his initial complaint, that Proskauer, the Estate of Edward Brodsky, Sarah Gold, and Karen Clarke breached their fiduciary duties to Banks by (e) having Brodsky state in an affidavit filed with the Court on or about January 24, 2000, that "based on the discovery we thought the Defendants would likely lose at trial"; (f) having permitted the class action plaintiffs to turn over the New York District Attorney's office documents produced in the proceedings in this Court which were subject to a confidentiality order of the Court; (g) having failed to advise Banks of his options concerning the provision of documents to the New York District Attorney's office; (h) having failed to bring a motion before the Court for an order pursuant to Martindell v. International Tel. and Tel. Corp. and (i) having failed to notify Banks of settlement offers received from the class action plaintiffs.
On April 24, 2002, the Court heard oral argument on Proskauer's motion for injunctive relief.
Discussion
A. The Power to Enjoin Foreign Suits
"The power of federal courts to enjoin foreign suits by persons subject to their jurisdiction is well-established." China Trade and Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 35 (2d. Cir. 1987). Out of due regard for the principles of international comity, "[w]hen two sovereigns have concurrent in personam jurisdiction one court will ordinarily not interfere with or try to restrain proceedings before the other." Id. at 36. However,
When the injunction is requested after a previous judgment on the merits, there is little interference with the rule favoring parallel proceedings in matters subject to concurrent jurisdiction. Thus, a court may freely protect the integrity of its judgments by preventing their evasion through vexatious or oppressive relitigation.Farrell Lines, Inc. v. Columbus Cello-Poly Corp., 32 F. Supp.2d 118, 131 (S.D.N.Y. 1997) (quoting Laker Airways, Ltd. v. Sabena Belgian World Airlines, 731 F.2d 909, 928 (D.C. Cir. 1984) (footnotes omitted)), aff'd sub nom. Farrell Lines, Inc. v. Ceres Terminals, 161 F.3d 115 (2d Cir. 1998). "[A]fter judgment in the domestic litigation, some showing of harassment, bad faith, or other equitable circumstance is sufficient to support enjoining the foreign litigation." Id.
B. Previous Judgment on the Merits: Res Judicata
"The doctrine of res judicata, or claim preclusion, holds that "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Monahan v. New York City Dept. of Corrections, 214 F.3d 275, 284 (2d Cir. 2000) (quoting Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980)). Res judicata is an important public policy of our judicial system.
The Supreme Court `has long recognized that public policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled between the parties. . . [T]he doctrine of res judicata is not a mere matter of practice or procedure inherited from a more technical time than ours. It is a rule of fundamental and substantial justice, of public policy and of private peace, which should be cordially regarded and enforced by the courts.'Younis Bros Co. v. CIGNA Worldwide Ins. Co., 167 F. Supp.2d 743, 747 (E.D.Pa. 2001) (quoting Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 401, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981) (internal quotations and citations omitted)). The doctrine of res judicata bestows authority on the determinations of courts by making those determinations binding in subsequent actions and promotes judicial economy and fairness by avoiding protracted, piecemeal litigation and saving the courts and parties time and money.
To prove that a claim is barred by res judicata, a party must show that (1) the previous action involved an adjudication on the merits; (2) the previous action involved the parties or those in privity with them; and (3) the claims asserted in the subsequent action were, or could have been raised in the prior action. Monahan, 214 F.3d at 285.
C. The Proceedings Before this Court Involved An Adjudication on the Merits
Proskauer's motion against Banks and Galaxi World to withdraw as counsel and collect its outstanding fees involved an adjudication on the merits, as previously recognized by the Court of Appeals in Banks' and Galaxi World's appeal of the Court's orders of January 13, 2000, March 6, 2000, and April 24, 2000. See Silva Run Worldwide Ltd. v. GalaxiWorld.com Ltd., 2001 WL 40902 at * 1 (2d Cir. 2001) ("These six related judgments and orders included the adjudication of legal fees owed to Proskauer Rose LLP . . . ."). The Court's adjudication was affirmed by the Court of Appeals and is a final judgment. Id. at *2.
D. Banks Was a Party to the Proceedings Before this Court
The previous action before this Court did involve the same parties now involved in the Canadian action. Banks, individually, was represented by Proskauer as a defendant in the underlying litigation and became a defendant in the proceedings at issue upon Proskauer's motion to withdraw from representing Banks, Weltman, and GalaxiWorld. Banks, individually, and Galaxi World were represented jointly in the proceedings by Sheldon Eisenberger, Esq. from February 17, 2000 onwards. Banks, individually, opposed Proskauer's motion to withdraw as counsel, Proskauer's retaining lien on files held with respect to Banks as an individual, and Proskauer's efforts to preclude Banks, as an individual, from pursuing his cross-claims and counterclaims in Silva Run until Banks caused Galaxi World to pay its outstanding fees to Proskauer. (Clarke Aff. Exhs. G, J, M.) Among his claims were claims that Proskauer had committed malpractice. Banks, individually, appealed the Court's orders of January 26, 2000, March 6, 2000, and April 24, 2000 on the grounds that (1) the Court erred in entering a judgment against all of GLC's assets, (2) the Court erred in ordering Banks to cause GLC to pay Proskauer's judgment, and (3) the Court erred in prohibiting GLC and Banks from proceeding on their cross-claims and counterclaims in Silva Run until Proskauer's judgment in In re Gaming Lottery Corporation Securities Litigation was satisfied. (Clarke Aff. Exh. P.)
E. Banks Was in Privity With GalaxiWorld During the Proceedings
In addition to having been a party in the proceedings, Banks was also a party in privity with GalaxiWorld. Banks effectively controlled Galaxi World's case in opposition to Proskauer's motion to withdraw and collect outstanding legal fees. Banks was the President, Chief Executive Officer and, as far as the Court was aware, the controlling shareholder along with his wife of Galaxi World. It was Banks, writing as President of Galaxi World, who contested the legal fees claim of Proskauer and who asserted that Proskauer had committed malpractice. (Clarke Aff. Exh. B.) It was Banks, writing as President of GalaxiWorld, who stated that "the Company wishes to represent itself through its President, Jack Banks" until counsel could be found to replace Proskauer. (Letter of January 18, 2000.) It was Banks who retained Proskauer as counsel in 1996 on behalf of GalaxiWorld as well as himself. (Clarke Aff. Exh. I.) It was Banks, writing as President of Galaxi World, who ordered Proskauer to do "no further on work on this case." (Brodsky Aff. dated 1/10/00 at Exhs. B, D.) Accordingly, Banks would be subject to res judicata not merely as a party to the proceedings, but as a party in privity with GalaxiWorld. See In re Teltronics Services, Inc., 762 F.2d 185, 191 (2d Cir. 1985) ("A judgment against a corporation bars later litigation on the same cause of action by an officer, director, or shareholder of the corporation if the individual participated in and effectively controlled the earlier case.")
This request was denied because in this jurisdiction a corporation may not be represented by anyone other than its counsel.
Banks' letters of November 23, 1999 and December 22, 1999 ordering Proskauer to cease work on the case, though written as President of Galaxi World, applied to Proskauer's representation of Banks, individually, and Weltman, individually, in addition to Galaxi World. (Brodsky Aff. dated 1/10/00 at Exhs. B, D.)
Banks' interests and Galaxi World's interests were virtually identical in this matter. Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 345 (2d Cir. 1995) ("Res judicata may bar non-parties to earlier litigation not only when there was a formal arrangement for representation in, or actual control of, the earlier action but also when the interests involved in the prior litigation are virtually identical to those in later litigation.") Both GalaxiWorld and Banks had an interest in defending against Proskauer's motion to withdraw and collect outstanding fees. GalaxiWorld had a financial interest in not having judgment awarded against it, in not being held in contempt, and in not having its cross-claims and counterclaims dismissed in Silva Run. Banks had an interest in not being ordered to cause Galaxi World to pay the outstanding fees, in not being held in contempt, and in not having his individual cross-claims and counterclaims dismissed in Silva Run.
F. Banks' Claims Were, or Could Have Been, Raised in the Prior Action
The claims now asserted in Banks' Canadian action were, or could have been, raised in the previous action before this Court. Banks' claims, in his Canadian action, that Proskauer breached their fiduciary duties to Banks by (a) representing to this Court on January 13, 2000, that Banks had likely received motion materials when they knew or ought to have known that Banks was not aware of those motion materials, (b) urging this Court to preclude Banks from prosecuting his affirmative claims in Silva Run when Banks, individually, did not owe any fees, (c) having prevented Banks from making full answer and defense in Silva Run, (d) preferring their financial interests over the interests of Banks, and (i) failing to notify Banks of settlement offers received from the class action plaintiffs were all raised and adjudicated before this Court. Banks' claims that Proskauer breached their fiduciary duties to Banks by (e) stating in an affidavit to the Court that "based on the discovery we thought the Defendants would likely lose at trial," (f) permitting the class action plaintiffs to turn over to the New York District Attorney's office documents produced in the proceeding before this Court which were subject to a confidentiality order, (g) failing to advise Banks of his options concerning the provision of documents to the New York District Attorney's office, and (h) failing to bring a motion before the Court for an order pursuant to Martindell v. International Tel and Tel Corp. are claims that could have and should have been brought before this Court. Banks' claims of malpractice were a defense to Proskauer's suit for attorney's fees. Accordingly, these claims should have been raised during the previous litigation before the Court and could have been raised under Rule 60 of the Federal Rules of Civil Procedure in a motion to vacate the judgment. Fed.R.Civ.P. 60(b) ("On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: . . . (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party . . .). Motions to vacate a judgment based on newly discovered evidence or on fraud must be brought within one year after the judgment becomes final. More than one year has elapsed since the Court of Appeals affirmed this Court's opinion.
G. Banks' Claims Are Barred By Res Judicata
Having found that Banks was a party to Proskauer's motion to withdraw as counsel and obtain payment of its outstanding fees and the ancillary proceedings, and that Banks raised or could have raised in that action all of the claims he now seeks to raise in the Canadian action, the Court finds that Banks' claims are barred by res judicata. In light of this determination, and out of the need to protect the integrity of the Court's judgment, the Court may enjoin Banks' foreign suit upon "some showing of harassment, bad faith, or other equitable circumstance."Farrell Lines, 32 F. Supp.2d at 131.
H. Banks' Canadian Suit is Brought in Bad Faith
Banks' Canadian suit is clearly brought in bad faith. Not only does Banks seek to relitigate claims already adjudicated in this Court, his amending of the Canadian proceedings following this Court's adjournment of proceedings to afford Banks greater time to respond to Proskauer's motion is consistent with the bad faith gamesmanship Banks has repeatedly demonstrated to this Court. Banks has repeatedly refused to produce documents or testify as required by this Court in proceedings attempting to locate assets of GalaxiWorld. Consequently, he was held in civil contempt by the Court's orders of November 29, 2000 and February 9, 2000. Banks has done nothing to show a good faith attempt to comply with the orders of the Court and he remains in contempt of Court to this date.
Having found that Banks' Canadian action is barred by res judicata and brought in bad faith, and seeking to preserve the integrity of the Court's judgment by preventing vexatious relitigation, the Court enjoins Banks from proceeding any further with his breach of fiduciary duty and malpractice action in Canada and orders that he dismiss that proceeding.