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01 Civ. 3102 (LAP)
August 8, 2002
MEMORANDUM AND ORDER
Plaintiff Ulysses I Company, Inc. ("Ulysses") brings this second amended complaint ("Second Amended Complaint") against defendant Gary Feldstein ("Feldstein") for violations of federal law under the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and for common law fraud and unjust enrichment arising from feldstein's alleged unlawful scheme to: (1) misappropriate millions of dollars from Total Physicians Services, Inc. ("TPS"), (2) use the stolen funds to acquire and maintain control over certain oceanfront property in East Hampton, New York, which rightfully belongs to Ulysses, and (3) falsify public documents, obstruct the administration of justice and improperly enlist the police to perpetuate his fraudulent scheme and control of the premises. Peter Morton ("Morton"), formerly a defendant in this action, brings counterclaims against Ulysses, former plaintiff Bridgewater Operating Corporation ("Bridgewater") and additional defendants Sheldon Solow ("Solow"), Marc Dreier ("Dreier") and Stuart Schlesinger ("Schlesinger"), alleging tortious interference, intentional infliction of injury, abuse of process, engagement in serial litigation, violation of New York Judiciary Law § 487(a) and violation of 28 U.S.C. § 1927.
Solow admittedly has a financial interest in Ulysses. (Notice of Motion, Declaration of Kevin L. Smith, sworn to on November 13, 2001 ("Smith Decl."), ¶ 18 Ex. D). Schlesinger is an officer of Ulysses — allegedly its president. (Schlesinger Mem. Opp. Order to Show Cause, at 17). Ulysses is an affiliate of Bridgewater by reason of common ownership and control. (Notice of Motion to Dismiss the Second Amended Complaint and For Injunctive Relief ("Notice of Motion to Dismiss SAC"), Ex. 9, at 4).
In his deposition, Schlesinger disclosed that Ulysses does not appear to operate as a business:
Q: Are there any full-time employees of [Ulysses]?
A: No.
Q: Are there any part-time employees of the company?
A: No.
Q: Does the company have a payroll?
A: No.
Q: Does Mr. Cherniak receive any compensation for acting as vice president?
A: No.
Q: Do you know what he does for a living?
A: He is an officer of Solow Development Corporation. I think he is an officer. He is involved with Solow Development Corporation.
(Reply Declaration of Kevin L. Smith in Further Support of Feldstein's Motion to Dismiss the Second Amended Complaint ("Smith Reply Decl."), Ex. 3, at 10).
Feldstein now moves for an order: (1) dismissing Ulysses' Second Amended Complaint pursuant to Rules 9(b), 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted, and (2) enjoining Ulysses from pursuing any further claims against Feldstein with respect to the Premises at issue in this action. Morton also moves, by order to show cause, to dismiss the complaint and to vacate three notices of pendency filed with the Clerk of Suffolk County, to enjoin Ulysses from initiating any further litigation over the Premises or against the defendants without permission from the Court and for attachment against the assets of Ulysses and any interest of Ulysses in personal property or any debt owed it in New York up to $1,464,242.39. Dreier moves to dismiss the counterclaims asserted against him pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. For the foregoing reasons, Feldstein's motion to dismiss the Second Amended Complaint is granted, Morton's state counterclaims are dismissed without prejudice, and Morton's federal counterclaim is dismissed with prejudice.
BACKGROUND
Rounick-Feldstein Contract
This litigation has a long and sordid history. In or about October 1992, Jack Rounick ("Rounick"), the owner of certain property located at 57 West End Road, in the town of East Hampton, County of Suffolk and State of New York (the "Premises"), entered into a lease agreement (the "1992 Lease") with Feldstein by which Feldstein, as tenant, took possession of the Premises, including Rounick's personal furnishings. (Second Amended Complaint ¶ 5). In May 1993, Rounick and Feldstein entered into a sales contract ("Sales Contract") superceding the 1992 Lease, whereby Feldstein agreed to purchase the Premises (exclusive of Rounick's furnishings) for $7 million: $1.7 million (including the amount already paid under the 1992 Lease) in installments before the scheduled closing, $1.3 million upon closing and $4 million in installments on specified dates after the closing. (Id. ¶ 6 Ex. A). The Sales Contract provided that the closing date would be on or before October 1, 1997. (Id. ¶ 7). The Sales Contract further provided that Feldstein could continue to occupy the Premises until the closing date, provided that he met his periodic payments and other obligations under the Sales Contract. (Id. ¶ 8). If the scheduled closing date passed and Feldstein failed to close, according to the Sales Contract, Feldstein would have to vacate the Premises. (Id.).
On May 30, 1997, Rounick and Feldstein executed a second amendment to the Sales Contract ("Second Amendment"), extending the closing date until October 1, 1998. (Id. ¶ 7 Ex. B). The Second Amendment also provided that Feldstein could accelerate this closing date if he made an advance payment, upon such election, in the amount of $1.1 million. (Id.).
In or about June 1998, Ulysses alleges, Feldstein informed Rounick that he was "having financial difficulties" and likely would be unable to purchase the Premises as scheduled. (Id. ¶ 9). As a result, Rounick sought another purchaser for the Premises. (Id.). According to Ulysses, however, Feldstein "undertook to acquire the Premises with stolen monies, enlisting the aid of various third parties towards that end." (Id. ¶ 10). Feldstein, Ulysses alleges, "devised a plan by which, to the very substantial detriment of TPS's creditors, he would illegally divert funds from TPS to purchase the Premises," which resulted in TPS filing for bankruptcy in August 1998. (Id. ¶ 12). As the Chairman and Chief Executive Officer of TPS — which purported to be a specialist in the treatment of HIV/AIDS patients and funded primarily through Medicare and Medicaid participation — Feldstein acquired a number of other medical practices, beginning in August 1996. (Id. ¶¶ 11, 13, 18, 20, 22, 24). Due to "these fraudulent acquisitions of medical practices, Feldstein illegally converted to his personal use cash or assets of not less than $5 million." (Id. ¶ 26). Ulysses alleges that Feldstein also engaged in a number of additional schemes that "robbed" TPS of "millions of dollars and rendered [it] insolvent." (Id. ¶ 35).
On August 10, 1998, Feldstein entered into an Agreement to Assign and Assume ("Agreement to Assign") with Morton, whom Ulysses describes as "a Las Vegas casino owner with a history of violations of the federal election laws, and related money laundering." (Id. ¶ 36). Pursuant to that agreement, Feldstein agreed to assign to Morton all of Feldstein's rights and obligations under his Sales Contract with Rounick. (Id. ¶ 37). The Agreement to Assign provided that Morton would pay Feldstein $9.7 million, of which $970,000 was deposited in escrow with Stroock Stroock Lavan LLP ("Stroock"). (Id. ¶ 37 Ex. L). Ulysses alleges that, several days after executing the Agreement to Assign, Feldstein requested Rounick's consent to the assignment, but Rounick refused. (Id. ¶ 38). Rounick also allegedly refused Feldstein's offer on a "discounted" purchase price. (Id.).
On August 20, 1998, Stroock wrote to Rounick informing him that Stroock's client, Feldstein, had entered into an assignment to assign his contractual right to purchase the Premises. (Id. ¶ 39 Ex. M). In this letter, Feldstein offered two alternatives to Rounick: (1) amend the existing contract between Rounick and Feldstein "to cause a mutually agreeable amount representing the present discounted value of all future payments to be made to [Rounick] under [the existing contract] to be paid to [Feldstein] at the closing of title to the property"; or (2) Feldstein and Morton would "accelerate the closing of title" to the Premises to August 28, 1998, with Morton assuming all of Feldstein's payment obligations under the existing contract. (Id.).
Rounick construed Feldstein's letter as a renunciation of the Sales Contract and a forfeiture of any remaining rights Feldstein may have had thereunder. (Id. ¶ 43). Therefore, on August 25, 1998, Rounick executed a contract for sale for the Premises to Ulysses ("Ulysses Sales Contract") in the amount of $4,925,000, which is approximately the same amount that would have otherwise been due from Feldstein to Rounick under the original Sales Contract. (Id. ¶ 44 Ex. N). On August 28, 1998, the title company submitted the deed for recording in the Office of the County Clerk. (Id. ¶ 68 Ex. V).
Ulysses was incorporated on or about August 17, 1998 — approximately eight days before Rounick sold the premises pursuant to the Ulysses Sales Contract. (Smith Reply Decl., Ex. 2).
On the same day that Rounick executed the contract for sale to Ulysses, Rounick wrote to Feldstein indicating that he had done so. (Id. ¶ 45 Ex. 0). According to Ulysses, however, Feldstein ignored this notice and did not make the monthly payment of $33,500 due under the Sales Contract on September 1, 1998, nor did he pay real estate taxes due the day before. (Id. ¶ 46). Rather, by letter dated September 3, 1998, Stroock informed Rounick and Ulysses that Feldstein intended to accelerate the closing date of the sale of the Premises to September 10, 1998 and that Stroock expected both Rounick and Ulysses to be present "and to be prepared to fulfill [their] obligations pursuant to the Contract." (Id. ¶ 47, Ex. P). On September 10, 1998, Feldstein "held a sham `closing' of the Sales Contract at the offices of his counsel, without Rounick in attendance." (Id. ¶ 48).
Thereafter, Ulysses alleges,
Feldstein had been occupying the Premises pursuant to an interim arrangement under the Sales Contract. He was obligated to vacate the Premises if he failed to close on the purchase as of the scheduled closing date. However, after failing to close, Feldstein refused to surrender the Premises to either Rounick or Ulysses.
Instead, Feldstein transferred possession of the Premises to Morton, again without the consent of either Rounick or Ulysses. Morton paid Feldstein certain "rent" money for the property on which Ulysses, not Feldstein, held title, and Feldstein absconded with this money to California, where he took up residence in the house he acquired with the funds he had stolen from TPS.
(Id. ¶¶ 54-55). Ulysses alleges that, "[i]n furtherance of the unlawful scheme," Morton took possession of the Premises in May 1999 and thereafter resided there along with his sister, Mara Gibbs ("Gibbs"), and his lawyer, Errol Margolin ("Margolin") (Id. ¶ 56-57). Ulysses further alleges that it was forbidden from entering the Premises on numerous occasions, with the unlawful enlistment of several members of the East Hampton Police Department. (Id. ¶¶ 58-66).
Suffolk County Action
On August 31, 1998, Feldstein commenced an action against Ulysses in Supreme Court, Suffolk County, to enforce the Sales Contract ("Suffolk County Action"). (Id. ¶ 69). Feldstein also filed a Notice of Pendency dated the same day. (Id. ¶ 69, Ex. X). Ulysses alleges, however, that the stamp-date on the Notice of Pendency was altered, and that Romaine, as Suffolk County Clerk, was "enlisted by Feldstein to knowingly use his office to unlawfully assist Feldstein in his illegal scheme." (Id. ¶ 67, 69-71). Further, Ulysses alleges, on or about September 9, 1998, Romaine rejected the August 28 submission from Ulysses' title company, which he did not re-execute, re-submit and record until September 21, 1998. (Id. ¶ 68). Ulysses alleges that:
[a]s a result of the foregoing manipulation of recording and filing dates, Feldstein, with Romaine's assistance, created the false impression that his Notice of Pendency preceded the transfer of title in the Premises to Ulysses. In fact, however, Ulysses obtained good title on August 25, 1998 and duly submitted the deed for recording on August 28, 1998.
(Id. ¶ 72).
On January 31, 2000, the Honorable Gerard D'Emilio, Justice of the Supreme Court of the State of New York, County of Suffolk, granted Feldstein's motion for specific performance on his Sales Contract (the "January 31 Decision and Judgment"). (Id. ¶ 74 Ex. Z). Ulysses alleges that, "[a]fter the January 31 Decision and Judgment was issued by Justice D'Emilio, Feldstein's counsel, Kevin Smith (`Smith'), spoke on the phone ex parte with Justice D'Emilio's law clerk, Gary Brunjes, and with Romaine," and that those individuals "agreed among themselves, all without Ulysses' knowledge, that, despite the direction of the Court, Romaine would not file the January 31 Decision and Judgment but rather that a new judgment prepared by Smith would be substituted." (Id. ¶ 77). Ulysses alleges that, "in clear violation of due process (as embodied in CPLR 5016(c))," Romaine entered a new judgment prepared by Feldstein's attorney dated February 7, 2000 (the "Suffolk County Judgment"). (Id. ¶ 78 Ex. 2). On October 10, 2000, that judgment was affirmed on appeal: the Appellate Division found that Feldstein "was ready, willing, and able to perform his obligations under the contract, even though his tender of performance was excused by the defendant seller's anticipatory breach." Feldstein v. Rounick, 714 N.Y.S.2d 689, 690 (App.Div.2d Dept. 2000).
In April 2001, Ulysses moved in state court pursuant to CPLR 5015(a) (2) and (3) to vacate the Suffolk County Judgment on the ground that it was entered in violation of both due process and the mandatory notice procedures set forth in CPLR 5016(c). (Second Amended Complaint ¶ 85). On May 14, 2001, the Honorable John J.J. Jones Jr., Justice of the Supreme Court of the State of New York, County of Suffolk, granted Ulysses' motion, vacated the Suffolk County Judgment pursuant to CPLR 5015(a)(3) and directed Feldstein to submit a new judgment (although the court still concluded that Feldstein was entitled to specific performance of the contract). (Id. ¶ 85, Ex. 6). Feldstein moved for leave to renew and/or reargue the May 14 order. On October 2, 2001, Justice Jones granted Feldstein's motion and reinstated the Suffolk County Judgment. (Id. ¶ 86, Ex. 22). On June 10, 2002, the Appellate Division affirmed the state court's October 2 holding, finding that Ulysses had "failed to establish that the judgment was procured by fraud, misrepresentation, or other misconduct" and had "failed to show that the alleged newly-discovered evidence could not have been discovered with due diligence before entry of the judgment." Feldstein v. Rounick, 743 N.Y.S.2d 735, 736 (App.Div.2d Dept. 2002).
Town of East Hampton Action
On or about April 30, 1999, Ulysses filed against Feldstein and numerous other unnamed defendants a Notice of Petition to Recover Possession of Real Property in the East Hampton Justice Court, Town of East Hampton, County of Suffolk, State of New York. (Order to Show Cause, Exhibits to Motion to Dismiss ("OTSC Exhibits"), Ex. 30 (the "Petition")). The Petition sought final judgment of eviction and the awarding of the Premises to Ulysses. (Id.). After Feldstein served opposition papers, Ulysses apparently withdrew the Petition. (Order to Show Cause ¶ 34).
Eastern District Actions
On June 4, 1999, Ulysses commenced a diversity action by order to show cause against Morton in the United States District Court for the Eastern District of New York, alleging, inter alia, slander of title with respect to the Premises, conspiracy to interfere tortiously with Ulysses' contractual relations with Rounick and conspiracy to interfere tortiously with Ulysses' quiet possession and enjoyment of its real property. (OTSC Exhibits, Ex. 31). On November 5, 1999, the Honorable Michael L. Orenstein, United States Magistrate Judge, issued a Report and Recommendation to dismiss the action without prejudice pursuant to Rule 12(b)(7) of the Federal Rules of Civil Procedure for failure to join a necessary party: Feldstein. (Id. at 14). On January 6, 2000, the Honorable Dennis J. Hurley adopted Judge Orenstein's Report and Recommendation. (OTSC Exhibits, Ex. 32).
On or about April 6, 2000, Ulysses filed an amended complaint against Morton, Feldstein, Romaine and various entities in the District Court for the Eastern District of New York (the "Eastern District Action"). (Notice of Motion to Dismiss SAC, Ex. 5). The complaint alleged, inter alia, violations of 42 U.S.C. § 1983, intentional interference with the quiet possession and enjoyment of real property, intentional interference with contractual relations and conversion. The complaint focused on the defendants' alleged "unlawful conspiracy" to take from Ulysses the Premises to which Ulysses allegedly acquired title in August 1998 from Rounick. The complaint alleged that, since that date, while Ulysses has paid all property taxes and utility charges on the property, the defendants have excluded Ulysses from the Premises and falsely held themselves out as its owners and/or occupants. (Id. ¶ 13). The complaint further alleged that Justice D'Emilio entered judgment awarding the Premises to Feldstein in violation of the CPLR and the Due Process clause to the United States Constitution. (Id. ¶ 14).
On August 1, 2000, Judge Hurley orally dismissed the Eastern District Action. (OTSC Exhibits, Ex. 12). Judge Hurley stated that "the gravamen of plaintiff's complaint . . . is quite clearly that Justice D'Emilio was wrong," (id. at 31), and concluded that the Court lacked subject matter jurisdiction under the Rooker-Feldman doctrine because "there is an available mechanism obviously to review the work product of Justice D'Emilio, and that's via an appeal to the Second Department," (id. at 32). Judge Hurley also held that "[t]he doctrine of collateral estoppel is clearly applicable here." (Id. at 39). The judgment was entered on September 11, 2000. On April 18, 2001, the Court of Appeals affirmed the judgment, and on October 29, 2001, the Supreme Court denied certiorari. Ulysses I Co. v. Morton, 11 Fed. Appx. 14 (2d Cir.), cert. denied, 122 S.Ct. 458 (2001).
With respect to Ulysses' argument that "the judgment departs from Justice D'Emilio's decision," (id. at 34), Judge Hurley found that "[t]o the extent there's an irregularity in the judgment, that should have been addressed in the State, presumably to Justice D'Emilio," (id. at 35).
Southern District of Florida Bankruptcy Action
On August 18, 1998, TPS and TPS of Florida, Inc. filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, which were later converted to Chapter 7 liquidation proceedings. (Notice of Motion to Dismiss SAC, Ex. 9, at 2). The Trustee commenced several adversary proceedings on behalf of the estate, including one against Feldstein for fraudulent transfers. (Id. at 3). On April 11, 2001, the Trustee filed a motion to approve a settlement agreement between itself and Feldstein. (Id. at 7). On April 30, 2001, a visiting judge, Thomas A. Ulschig, held a hearing on the motion. (Id.) Bridgewater — which is an affiliate of Ulysses by reason of common ownership and control and had purchased the claims of Sprout Capital VII, L.P. in this bankruptcy — objected to approval of the settlement agreement. (Id. at 7-8). Judge Ulschig also heard arguments "regarding Ulysses' pattern of litigiousness and how Bridgewater's request is really a dispute over the Hampton's [sic] property." (Id. at 8). Judge Ulschig then ruled from the bench that the settlement should be approved. (Id. at 9). Bridgewater appealed that decision to the United States District Court for the Southern District of Florida, which held, in November 2001, that Bridgewater's appeal should be dismissed as moot because "[b]oth the TPS and Feldstein have acted in reliance on the settlement agreement, and Bridgewater has done nothing to prevent its consummation," so "effective judicial relief no longer can be granted." (Id. at 17). In so ruling, the court observed:
From the history of the suits, it appears that this appeal and Bridgewater's motions underlying the orders from which Bridgewater appeals are yet another attempt by Ulysses to gain possession of the Hamptons property. As Bridgewater's counsel acknowledged to the bankruptcy court, "We have a claim against Dr. Feldstein and we don't like the guy, and we think that the sale in New York should not go forward. We concede that."
(Id. at 5 (citation omitted)). On June 24, 2002, the Court of Appeals for the Eleventh Circuit affirmed the district court's dismissal of Bridgewater's appeal. (Letter from Errol F. Margolin to the Court, dated July 9, 2002, Ex. 1).
The Instant Action (Southern District of New York)
On or about April 12, 2001, plaintiffs Bridgewater and Ulysses filed a complaint in the Southern District of New York (the "Original Complaint") against defendants Feldstein, Stroock, Smith, Joan Taverni, Decten Fund, L.P., Andrea Benko, Morton, Gibbs, Margolin, Romaine, Patrick Aube, Richard Schneider, Kenneth Brown and Gerard Larsen (collectively the "Original Defendants"). The Original Complaint alleges violations of federal RICO law, civil rights violations under 42 U.S.C. § 1983 and violations of the common law "arising from defendants' unlawful conspiracy to misappropriate and share for their own wrongful benefit millions of dollars diverted from [TPS], ostensibly a healthcare provider for HIV/AIDS patients supported by Medicaid/Medicare funding but in fact a sham company ultimately driven into bankruptcy by this massive fraud to the detriment of TPS's creditors." (Original Complaint at 2).
On or about October 10, 2001, plaintiffs Bridgewater and Ulysses filed an amended complaint (the "Amended Complaint") against most of the Original Defendants but did not include Stroock, Smith or Margolin. As in the Original Complaint filed on April 12, the Amended Complaint asserted claims for violations of federal law under RICO, civil rights violations under 42 U.S.C. § 1983 and for violations of the common law "arising from defendants' unlawful conspiracy to misappropriate and share for their own wrongful benefit millions of dollars diverted from [TPS], ostensibly a healthcare provider for HIV/AIDS patients supported by Medicaid/Medicare funding but in fact a sham company ultimately driven into bankruptcy by this massive fraud to the detriment of TPS's creditors." (Amended Complaint at 1-2).
The so-called "Amended Complaint" is not technically an amendment to the Original Complaint, but rather an entirely new complaint with a different docket number (01 CV 9026). The civil cover sheet for the Amended Complaint indicates that a similar case assigned to Judge Owen — i.e., the Original Complaint — had been voluntarily dismissed on October 10, 2001. (OTSC, Ex. 15). The Original Complaint, however, was never actually discontinued. On the same day that the Amended Complaint was filed, it was referred to Judge Owen as possibly related to the Original Complaint (01 CV 3102). On October 18, 2001, Judge Owen accepted reference of the Amended Complaint.
On or about November 5, 2001, in response to the Amended Complaint, Morton brought counterclaims against Ulysses, Bridgewater, Solow, Dreier and Schlesinger ("Morton's Counterclaims") alleging tortious interference, intentional infliction of injury, abuse of process, engagement in serial litigation, violation of New York Judiciary Law § 487(a) and violation of 28 U.S.C. § 1927.
On or about November 9, 2001, defendants Morton, Gibbs, Aube and Margolin (collectively the "Morton Defendants") moved by order to show cause: (1) to dismiss the complaint pursuant to Rules 12(b)(1) and 12 (b)(6) of the Federal Rules of Civil Procedure; (2) to vacate the three notices of pendency filed with the Clerk of Suffolk County by either Bridgewater or Ulysses based upon (i) the Amended Complaint, (ii) an unfiled action in the Southern District of New York ostensibly brought on behalf of the United States, and (iii) the Eastern District Action, (OTSC Exhibits, Exs. 18-20); (3) to enjoin Ulysses from initiating any further litigation over the Premises or against the defendants without permission from the Court; and (4) for attachment pursuant to FRCP 64 and CPLR Article 62 against Ulysses on Morton's counterclaims against it and the other counterclaim defendants (Bridgewater, Solow, Schlesinger and Dreier). The Morton Defendants argued, inter alia, that this Court lacks jurisdiction under the Rooker-Feldman doctrine applicable to the Suffolk County Judgment, Ulysses' claims are barred by res judicata and collateral estoppel and Ulysses has not alleged a RICO claim.
On October 11, 2001, Smith wrote to Schlesinger at Ulysses advising that Schlesinger could pick up a check for Ulysses in the amount of $2,136,833.33 representing the balance of the purchase price due under the relevant contract after adjustment for the relevant transfer tax. (OTSC Exhibits, Ex. 24). Smith indicated, however, that he would only hand over the check "upon signing a receipt for them and deliverying [sic] cancellations of the three Notices of Pendency which Ulysses and Bridgewater Operating Corp. filed against the Premises." (Id. at 1). Apparently neither Ulysses nor any of its representatives have done so.
The status of these Notices of Pendency is not entirely clear. (See Schlesinger Mem. Opp. Order to Show Cause, at 15 ("[C]ertain intervening factors have caused the Notices of Pendency to become ineffective since their filing. . . .").
On the same day that the Morton Defendants moved by Order to Show Cause, the case was reassigned from the Honorable Richard Owen to the Honorable Lewis A. Kaplan. Also that day, an order to show case was issued upon the Morton Defendants' application, which, inter alia, (1) temporarily restrained Ulysses and all other persons or garnishees from transferring or paying to any third party any of its assets in New York up to $1,464,242.39, and (2) set forth a briefing schedule.
On November 13, 2001, defendants Feldstein, Joan Taverni and Decten Fund L.P. moved for an order: (1) pursuant to Rules 9 and 12(b)(1) and (6) of the Federal Rules of Civil Procedure dismissing the amended complaint; (2) enjoining plaintiffs Bridgewater and Ulysses, their officers, directors, agents and employees from pursuing any further claims against those defendants; and (3) such other and further relief as the Court deemed just and proper. These defendants explicitly adopted the arguments made by the Morton Defendants with respect to Rooker-Feldman, res judicata and collateral estoppel, but argued separately that, inter alia, the complaint failed to state a claim under RICO.
On November 21, 2001, Ulysses filed the Second Amended Complaint against Feldstein. Ulysses is the sole plaintiff in this action, and Feldstein is the sole defendant; the remaining parties were dropped. As with both the Original Complaint and the Amended Complaint, the Second Amended Complaint alleges violations of RICO and common law fraud, but does not allege any violations of 42 U.S.C. § 1983.
By letter to Judge Kaplan dated November 23, 2001, Ulysses indicated that, because Morton was no longer a defendant, "the emergency proffered as a basis for the Order to Show Cause no longer exists." (Letter from Dreier to Judge Kaplan, dated November 23, 2001).
On November 30, 2001, the case was reassigned again from Judge Kaplan to me.
On December 27, 2001, Feldstein moved to dismiss the Second Amended Complaint, pursuant to Rules 9, 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, and for injunctive relief. Feldstein filed a supplemental memorandum of law in support of his motion, once again adopting the arguments made by the Morton Defendants with respect to Rooker-Feldman, res judicata and collateral estoppel, and arguing separately that, inter alia, the complaint failed to state a claim under RICO and that Ulysses' fraud claim should be dismissed.
On or about January 16, 2002, Counterclaim Defendants Solow and Schlesinger filed answers to Morton's Counterclaims. Dreier, however, filed a motion to dismiss Morton's Counterclaims. Dreier argued that the claims seeking to hold him accountable for the acts of his clients, Ulysses and Bridgewater, should be dismissed because "an attorney representing his clients in good faith can not be held legally accountable to third parties for the acts of his clients." (Mem. at 3). Dreier further asserts that he had no "collateral objective" in using the legal process on behalf of his clients. (Id. at 5). Dreier argues that Morton's Section 487(a) claim fails because he fails to demonstrate that Dreier intended to deceive the court or any party. (Id.). Finally, Dreier states that the Section 1927 claim fails because that statute does not create an independent cause of action. (Id. at 6).
DISCUSSION
I. Applicable Legal Standards
A. Rule 12(b)(1)
In considering a motion to dismiss under Rule 12(b)(1), I must view the complaint in the light most favorable to the plaintiff. See Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 562 (2d Cir. 1985). A court considering a Rule 12(b)(1) motion to dismiss must "accept as true all material factual allegations in the complaint." Atlantic Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). "However, argumentative inferences favorable to the party asserting jurisdiction should not be drawn." Id. at 198 (citing Norton v. Larney, 266 U.S. 511, 515 (1925)). Further, a "court may resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits." Antares Aircraft, L.P. v. Fed. Republic of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991), vacated for reconsideration on other grounds, 505 U.S. 1215 (1992), reaff'd on remand, 999 F.2d 33 (2d Cir. 1993).
B. Rule 12(b)(6)
When deciding a motion to dismiss under Rule 12(b)(6), I must accept as true all well-pleaded factual allegations of the complaint and draw all inferences in favor of the pleader. See City of Los Angeles v. Preferred Communications, Inc., 476 U.S. 488, 493 (1986); Miree v. DeKalb County, 433 U.S. 25, 27 n. 2 (1977) (referring to "well-pleaded allegations"); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). "[T]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Int'l Audiotext Network, Inc. v. Am. Tel. Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)). In order to avoid dismissal, plaintiffs must do more than plead mere "[c]onclusory allegations or legal conclusions masquerading as factual conclusions." Gebhardt v. Allspect, Inc., 96 F. Supp.2d 331, 333 (S.D.N.Y. 2000) (quoting 2 James Wm. Moore, Moore's Federal Practice ¶ 12.34[a] [b] (3d ed. 1997)). Dismissal is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); accord Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994).
II. Ulysses' Second Amended Complaint
A. Rooker-Feldman
Feldstein first argues, in part through his adoption of the brief of the Morton Defendants, that Ulysses' claims are barred by the Rooker-Feldman doctrine. (Supplemental Mem. Law Supp. Mot. Dismiss Second Am. Compl. at 2).
A challenge pursuant to Rooker-Feldman is for lack of subject matter jurisdiction. Moccio v. New York State Office of Court Admin., 95 F.3d 195, 198 (2d Cir. 1996). "Under the Rooker-Feldman doctrine, lower federal courts lack subject matter jurisdiction over claims that effectively challenge state court judgments." Kropelnicki v. Siegel, 290 F.3d 118, 128 (2d Cir. 2002). Further, in addition to claims that were actually litigated in state courts, Rooker-Feldman forbids lower federal courts "from exercising jurisdiction over claims that are `inextricably intertwined' with state court determinations." Id. (quoting D.C. Court of Appeals v. Feldman, 460 U.S. 462, 482-83 n. 16 (1983)). A "federal claim is inextricably intertwined with the state-court judgment if the federal claim succeeds only to the extent that the state court wrongly decided the issues before it." Pennzoil Co. v. Texaco, 481 U.S. 1, 25 (1987) (Marshall, J., concurring). The Court of Appeals has interpreted the phrase "inextricably intertwined" to mean "at a minimum, that where a federal plaintiff had an opportunity to litigate a claim in a state proceeding . . ., subsequent litigation of the claim will be barred under the Rooker-Feldman doctrine if it would be barred under the principles of preclusion." Moccio, 95 F.3d at 199-200.
Feldstein asserts that the Suffolk County Judgment entered by Justice D'Emilio on February 7 precludes Ulysses' instant federal suit. Feldstein cites to the Court of Appeals' decision in Ulysses I Co. v. Morton, 11 Fed. Appx. 14 (2d Cir.), cert. denied, 122 S.Ct. 458 (2001), which affirmed Judge Hurley's decision in the Eastern District Action discussed above:
We affirm the district court's conclusion that Ulysses' claims against the individual defendants are barred under the Rooker-Feldman doctrine, because these claims all require, at least in part, a determination that Ulysses has property rights in the premises at issue. As such, an adjudication of these claims would necessitate review of Justice D'Emilio's decision, which is plainly prohibited by Rooker-Feldman.
Id. at 15-16. In response, Ulysses argues that, while the Suffolk County Action addressed property ownership, the instant action involves "a pattern of mail fraud and wire fraud designed to steal money and harm Ulysses." (Pl.'s Mem. Opp. at 9). Therefore, Ulysses suggests, "[t]his Court is not being asked to determine and need not determine that the state court wrongly decided any issues before it in order for Ulysses to prevail on these RICO claims." (Id.).
Ulysses' federal claims are barred by Rooker-Feldman because they are "inextricably intertwined" with the Suffolk County Judgment. It is true that, unlike in the Suffolk County Action, Ulysses is not seeking possession of the Premises here. The claims raised in Ulysses' Second Amended Complaint, however, in essence seek damages for losing the Premises to Feldstein, which claims directly implicate the propriety of the Suffolk County Judgment. Indeed, the Second Amended Complaint focuses almost exclusively on the Sales Contract between Rounick and Feldstein, along with the subsequent disputes among the parties about whom the Premises actually belongs to. Ulysses' RICO claims can only succeed to the extent that Justice D'Emilio wrongly decided the issues before him with respect to the Suffolk County Action. Accordingly, jurisdiction is lacking in this court to hear those claims. See, e.g., Goldberg v. Roth, No. 99 Civ. 11591, 2001 WL 1622201, at *5 (S.D.N.Y. Dec. 17, 2001) ("Here, Plaintiff seeks to have me review and `cure' determinations made by New York state courts. Indeed, many of the constitutional, RICO, conspiracy and other claims asserted by Plaintiff seemingly arise from the alleged injustices of the state court decisions. Plaintiff cannot make an end run around the Rooker-Feldman doctrine and into federal court, however, through the mere assertion of new and baseless claims to supplement the old."); Rene v. Citibank NA, 32 F. Supp.2d 539, 543 (E.D.N.Y. 1999) (concluding that the Court lacks subject matter jurisdiction under Rooker-Feldman to hear plaintiffs' RICO and Section 1983 claims because "plaintiffs ask this Court to review the state court's judgment of foreclosure and eviction, by seeking damages for the loss of their property"); Zipper v. Todd, No. 96 Civ. 5198 (WK), 1997 WL 181044, at *3 (S.D.N.Y. Apr. 14, 1997) ("While it is true that plaintiffs never actually raised the federal claims of Section 1983, RICO and SLAPP violations before the state court, Rooker-Feldman precludes district court review of claims `inextricably intertwined' with state court determinations. The fact that plaintiffs raise new claims under federal statutes does not preclude a finding that they are barred by the Rooker-Feldman doctrine."); see also, e.g., Harris v. New York State Dep't of Health, 202 F. Supp.2d 143, 166-67 (S.D.N.Y. 2002) (barring plaintiff's ADA and Rehabilitation Act claims because they were "integrally connected with the matters decided in the state administrative proceedings" and "implicate[d] the essence of the issue adjudicated by the state court"); In Re Goetzman, 91 F.3d 1173, 1177 (8th Cir. 1996) (plaintiff barred under Rooker-Feldman from seeking a federal judgment that would alter a state court judgment when "the heart of the state court proceedings" involved a determination of the plaintiff's mortgage payment).
Even if Rooker-Feldman were otherwise applicable to the Suffolk County Judgment, Ulysses argues, the doctrine would still not apply because "Ulysses alleges that the state court judgment was obtained through fraud." (Pl.'s Mem. Opp. at 10). The Court of Appeals has held, however, that it has "never recognized a blanket fraud exception to Rooker-Feldman." Johnson v. Smithsonian Institution, 189 F.3d 180, 186 (2d Cir. 1999); see also Kropelnicki, 290 F.3d at 128 (finding that plaintiff's misrepresentation claim was barred by Rooker-Feldman "even accepting as true her claim that she was kept out of the state court action in the first instance by the defendants' misrepresentation"); Azumendi v. Roth, No. 99 Civ. 3663 (WK) (DF), 2002 WL 441283, at *10 (S.D.N.Y. Mar. 20, 2002) (plaintiff's allegations of fraud against defendants, i.e., that "defendants falsely created appearance that decedent lived in New York" and that the Surrogate's Court "fraudulently acquired jurisdiction over decedent's estate," did not preclude dismissal under Rooker-Feldman); Bell v. State, No. 99 Civ. 5809 (AGS), 2000 WL 1273637, at *4 (S.D.N.Y. Sept. 7, 2000) ("[T]he fact that the plaintiff alleges [in federal court] that the State court judgment was procured fraudulently does not remove his claims from the ambit of Rooker-Feldman." (quoting Dockery v. Culley Dykman, 90 F. Supp.2d 233, 236 (E.D.N.Y. 2000))); Simpson v. Putnam County Nat'l Bank, 20 F. Supp.2d 630, 633 (S.D.N.Y. 1998) ("Under Rooker-Feldman . . . this Court has no authority to review the State Court's judgment. Nor does the fact that plaintiff alleges that the State Court foreclosure judgment was procured by fraud and conspiracy change that result.").
B. Res Judicata
Feldstein also asserts, again in part through his adoption of the brief of the Morton Defendants, that all of Ulysses' claims are barred by res judicata. (Supplemental Mem. Law Supp. Not. Dismiss Second Am. Compl. at 3).
"Res judicata challenges may properly be raised via a motion to dismiss for failure to state a claim under Rule 12(b)(6)." Thompson v. County of Franklin, 15 F.3d 245, 253 (2d Cir. 1994) (citations omitted). Under the doctrine of res judicata, "once a final judgment has been entered on the merits of a case, that judgment will bar any subsequent litigation by the same parties or those in privity with them concerning the `transaction, or series of connected transactions, out of which the [first] action arose.'" Maharaj v. BankAmerica Corp., 128 F.3d 94, 97 (2d Cir. 1997) (citation omitted). Further, res judicata "prevents a plaintiff from relitigating claims that were or could have been raised in a prior action against the same defendant where that action has reached a final judgment on the merits." L-Tec Elecs. Corp. v. Cougar Elec. Org., Inc., 198 F.3d 85, 87-88 (2d Cir. 1999); see also Greenberg v. Board of Governors of the Fed. Reserve Sys., 968 F.2d 164, 168 (2d Cir. 1992) (res judicata bars both "issues actually decided in determining the claim in the first action and . . . issues that could have been raised in the adjudication of that claim" (citation omitted)). "Even claims based upon different legal theories are barred provided they arise from the same transaction or occurrence." L-Tec, 198 F.3d at 88; see also Singh v. Parnes, 199 F. Supp.2d 152, 158 (S.D.N.Y. 2002) ("[I]t is the facts surrounding the transaction or occurrence which operate to constitute the cause of action, not the legal theory upon which a litigant relies."). "To prove that a claim is precluded under this doctrine, `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.'" Pike v. Freeman, 266 F.3d 78, 91 (2d Cir. 2001) (quoting Monahan v. New York City Dep't of Corr., 214 F.3d 275, 284-85 (2d Cir. 2000)).
Res judicata and Rooker-Feldman are distinct doctrines:
[T]he precise demarcations of the Rooker-Feldman doctrine on the one hand, and the preclusive effect of common law res judicata and collateral estoppel on the other, remain obscure. Some courts hold them effectively synonymous, interchangeable or at least co-extensive. Other courts have conflated the doctrines altogether, citing Rooker-Feldman as support for application of what they held to be dismissal based on res judicata. A leading treatise characterizes Rooker-Feldman as a "transmutation of res judicata doctrine into jurisdictional dogma." And one circuit court has described the principle as "a combination of the abstention and res judicata doctrines. . . ."
And yet the doctrines differ in fundamental ways that may materially affect how a case may be decided. The Supreme Court has instructed that the Rooker-Feldman principle addresses the subject matter jurisdiction of federal district courts. . . . By contrast, res judicata and collateral estoppel, resting on common law principles, are affirmative defenses which, if not pleaded, may be waived.
Harris, 202 F. Supp.2d at 158-60 (citations omitted).
Res judicata mandates dismissal of all of Ulysses' claims. Ulysses asserts that "[w]hether these acts were illegal," "whether these acts injured Ulysses" and "whether [Feldstein's alleged wrongdoing] may give rise to RICO liability" has "never been addressed," (Pl.'s Mem. Opp. at 13), and that Ulysses' RICO action "seeks a different remedy" from the Eastern District Action, which alleges, inter alia, civil rights violations, (id. at 15). These assertions, however, miss the point. Feldstein's alleged wrongdoing could have been addressed in the Eastern District Action: both Ulysses and Feldstein were parties to that action and the "facts surrounding the transaction or occurrence" supporting Ulysses' RICO claim and state law claims were substantially the same at the time Ulysses filed its Eastern District Action. (See Notice of Motion to Dismiss SAC, Supplemental Declaration of Kevin L. Smith, sworn to on December 27, 2001, Ex. 11 (comparing factual allegations in the Eastern District Action with factual allegation in Ulysses' instant RICO complaint)). Further, the Eastern District Action was adjudicated on the merits. See Ulysses, 11 Fed. Appx. 14; see also, e.g., Kalka v. Kucher Kraus Bruh, LLP, No. 99 Civ. 4999 (MBM), 2000 WL 557266, at *9 (S.D.N.Y. May 8, 2000) ("[Plaintiff] claimed in the state courts that she had a contract to buy the apartment at issue, that certain of her payments were mischaracterized as down payments rather than rent payments, and that she should not have been evicted. Again, her assertions and defenses were rejected. Further, she sued Yuri Chuu in this court for conduct arising out of the dispute over the Chuu apartment, and agreed to dismiss that case, with prejudice, on January 5, 1999. Whether or not she asserted RICO claims in that case, she could have.").
Further, Feldstein asserts that Ulysses' claims are barred by collateral estoppel. Because I find, however, that Ulysses' claims are barred by Rooker-Feldman and res judicata, I need not address Feldstein's collateral estoppel arguments.
Ulysses asserts that res judicata should not bar the RICO action because certain of the predicate acts forming these claims "were not discovered and, in part did not occur," until after Justice D'Emilio's decision in the Suffolk County Action and the decision in the Eastern District Action "predicated on Justice D'Emilio's decision." (Pl.'s Mem. Opp. at 13). I reject this argument. "As a general rule, newly discovered evidence does not preclude the application of res judicata." Saud v. Bank of New York, 929 F.2d 916, 920 (2d Cir. 1991). "Exceptions to this rule exist when the evidence was either fraudulently concealed or when it could not have been discovered with due diligence." Id. But Ulysses has not identified which predicate acts "in part did not occur" that could arguably form the basis to invoke either exception. In any event, the transaction, or series of connected transactions, out of which the Eastern District Action — and, it appears, the Suffolk County Action — arose had already occurred by the time the Original Complaint, let alone the Second Amended Complaint, was filed. Permitting Ulysses to continue its action at this stage "would elevate form over substance and undermine the fundamental purposes behind the doctrine of res judicata." Saud v. Bank of New York, 734 F. Supp. 628, 636 (S.D.N.Y. 1990), aff'd, 929 F.2d 916; see also, e.g., Waldman v. Village of Kiryas Joel, 39 F. Supp.2d 370, 379 (S.D.N.Y. 1999) (concluding that res judicata barred resident's Establishment Clause claims even though complaint relied on facts that post-dated prior judgments), aff'd, 207 F.3d 105 (2d Cir. 2000).
C. Failure to state a RICO claim
Because Ulysses' Second Amended Complaint is dismissed pursuant to Rooker-Feldman and res judicata, I need not address Feldstein's assertion that Ulysses has failed to state a RICO claim.
D. Injunctive Relief
Finally, Feldstein moves to enjoin Ulysses and their officers, directors, agents and employees from pursuing any further claims against Feldstein.
1. Standard
Federal courts may enjoin a party from initiating future vexatious litigation. See Malley v. New York City Bd. of Educ., 112 F.3d 69 (2d Cir. 1997); Pentagen Technologies Int'l Ltd. v. United States, 172 F. Supp.2d 464 (S.D.N.Y. 2001). "The federal courts have an institutional concern and obligation to `protect their jurisdiction from conduct which impairs their ability to carry out Article III functions.'" Carlin v. Gold Hawk Joint Venture, 778 F. Supp. 686, 694 (S.D.N.Y. 1991) (citation omitted).
"In determining whether or not to restrict a litigant's future access to the courts, courts in this Circuit consider the following factors:
(1) the litigant's history of litigation and in particular whether it entailed vexatious, harassing or duplicative lawsuits; (2) the litigant's motive in pursuing the litigation, e.g., does the litigant have an objective good faith expectation of prevailing?; (3) whether the litigant is represented by counsel; (4) whether the litigant has caused needless expense to other parties or has posed an unnecessary burden on the courts and their personnel; and (5) whether other sanctions would be adequate to protect the courts and other parties."
Lipin v. Nat'l Union Ins. Fire Co., 202 F. Supp.2d 126, 142 (S.D.N.Y. 2002) (quoting Safir v. United States Lines, Inc., 792 F.2d 19, 24 (2d Cir. 1986)). "Ultimately, the question the court must answer is whether a litigant who has a history of vexatious litigation is likely to continue to abuse the judicial process and harass other parties." Safir, 792 F.2d at 24. A court may deny injunctive relief based on the defense of unclean hands "where the party applying for such relief is guilty of conduct involving fraud, deceit, unconscionability, or bad faith related to the matter at issue to the detriment of the other party." Estate of John Lennon v. Screen Creations, Ltd., 939 F. Supp. 287, 293 (S.D.N.Y. 1996) (citation omitted). But "[m]isconduct . . . unrelated to the claim to which it is asserted as a defense, does not constitute unclean hands." Dunlap-McCullen v. Local 1-S. AFL-CIO-CLC, 149 F.3d 85, 90 (2d Cir. 1998) (quoting A.H. Emery Co. v. Marcan Prods. Corp., 389 F.2d 11, 18 (2d Cir. 1968)). Further, "[t]he unclean hands defense is not an automatic or absolute bar to relief; it is only one of the factors the court must consider when deciding whether to exercise its discretion and grant an injunction." Id. (quoting 11A Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 2946, at 111 (1995)).
2. Permanent Injunction Against Ulysses
An injunction here is proper. First, as other judges and justices have observed, Ulysses has a history of duplicative litigation with respect to ownership of the Premises — although, admittedly, Ulysses seeks monetary damages in this case rather than ownership. See, e.g., Ulysses, 11 Fed. Appx. at 15 (finding that the claims in the Eastern District Action "all require, at least in part, a determination that Ulysses has property rights in the premises at issue"); Notice of Motion to Dismiss SAC, Ex. 9, at 5 ("From the history of the suits, it appears that this appeal and Bridgewater's motions underlying the orders from which Bridgewater appeals [to the Southern District of Florida] are yet another attempt by Ulysses to gain possession of the Hamptons property."). Second, Ulysses cannot have had an objective good faith expectation of prevailing in this case. It knew or should have known that there was a substantial likelihood that its RICO complaint would be dismissed pursuant to Rooker-Feldman and res judicata — especially considering that the Court of Appeals just last year dismissed the Eastern District Action expressly based on, inter alia, Rooker-Feldman. Third, Ulysses is represented by counsel, which weighs in favor of an injunction. See Iwachiw v. New York City Bd. of Educ., 194 F. Supp.2d 194, 208 (E.D.N.Y. 2002) (fact that plaintiff is proceeding pro se weighs against an injunction). Fourth, Ulysses has caused needless expense to Feldstein and continues to burden unnecessarily numerous courts and their personnel across the nation, as the facts in the instant complaint essentially arise out of the same facts in a number of previous actions. Fifth, it does not appear that any other sanction short of an injunction will be adequate to protect the courts and other parties from Ulysses' insatiable appetite for litigating about the Premises.
Courts within this Circuit have found that, "when a litigant has shown a pattern of abusing different district courts around the country, an injunction which applies to all federal district courts is warranted." Sassower v. Abrams, 833 F. Supp. 253, 270 (S.D.N.Y. 1993); see Iwachiw, 194 F. Supp.2d at 208 (requiring plaintiff to seek leave from the court before filing any additional actions against certain parties arising out of or relating to alleged conspiracy to fix bid prices and elimination of the plaintiff as a potential bidder for the sale of equipment and services); Fitzgerald v. Field, No. 99 Civ. 3406 (RWS), 1999 WL 1021568, at *6 (S.D.N.Y. Nov. 9, 1999) ("The least restrictive, yet effective, means of preventing further vexatious litigation by Fitzgerald is to enjoin him from filing any civil lawsuit in this Circuit without first obtaining leave of court."); Jones v. Newman, No. 98 Civ. 7460 (MBM), 1999 WL 493429, at *14 (S.D.N.Y. June 30, 1999) (enjoining plaintiff from filing "any civil lawsuit related to the underlying subject matter of this suit, other than a petition for habeas corpus, in any court of the United States" without first obtaining leave of such court); In re NASDAQ Market-Makers Antitrust Litigation, 187 F.R.D. 124, 132 (S.D.N.Y. 1999) ("It appears that the least restrictive, but effective, means of protecting plaintiffs and the Court from further vexatious litigation by Genins is to enjoin him from filing any further papers in this court that relate in any way to In re NASDAQ without first obtaining prior leave of court.").
Injunctive relief directed towards state courts is, if properly framed, also appropriate. In Schlesinger's opposition brief to imposition of a permanent injunction against Ulysses, he asserts that "the courts of this Circuit have consistently refused to tell state courts who can and cannot seek redress before them." (Schlensinger Mem. Law Opp. to Order to Show Cause, at 14). For support, Schlesinger cites In re Martin-Trigona, 737 F.2d 1254 (2d Cir. 1984). That case does not support Schlesinger's position. In Martin-Trigona, the district court had enjoined Anthony Martin-Trigona ("Martin-Trigona") from, inter alia: (1) "making further filings in any pending case brought by him or on his behalf within the District of Connecticut without first obtaining leave of the court"; and (2) "filing any action in any state or federal court in the United States" arising out of the bankruptcy proceedings at issue in that case. Id. at 1258-59 (emphasis added). The district court provided that, to obtain leave of the court, Martin-Trigona was required to append certain informational materials to his pleadings, including a "Motion Pursuant to Court Order Seeking Leave to File." Id. at 1258 n. 3.
On appeal, the Court of Appeals found that the restrictions placed upon Martin-Trigona from bringing "new actions in all federal district courts" was "necessary and proper," id. at 1262, but that "extension of the terms of the injunction to state courts" was improper, id. at 1263. The Court of Appeals further recognized, however, that it was entirely appropriate to warn state courts about vexatious litigators:
[T]he protection of federal jurisdiction does not necessarily require extension of each provision of the injunction to actions brought in state courts. It is our independence from other branches of government which is the source of our power to enjoin Martin-Trigona, but that very independence militates against extension of the terms of the injunction to state courts. Abuse of state judicial processes is not per se a threat to the jurisdiction of Article III courts and does not per se implicate other federal interests. We therefore believe that the district court erred in its blanket extension of the injunction to state courts.
It does not follow, however, that some qualifications relating to the protection of federal interests may not be placed upon Martin-Trigona's resort to state courts. First, while comity usually requires us to abstain from intrusion into state proceedings, a spirit of cooperative federalism calls upon us to alert state courts to Martin-Trigona's past activities so they may take judicial notice of matters relevant to new litigation brought by him. Upon remand, therefore, the district court should continue the provisions of the injunction requiring Martin-Trigona to append pertinent informational materials to pleadings in state courts.
Second, protection of our jurisdiction requires that we shield federal litigants, their counsel, court personnel, their families and professional associates from Martin-Trigona's vexatious litigation in all courts, state or federal.
Id. at 1262-63 (emphasis added). The Court of Appeals concluded that the district court had "erred in its blanket extension of the injunction to state courts" and remanded the case back to the district court to modify the injunction. Id. at 1263. On remand, the district court entered a new injunction that, inter alia: (1) permanently enjoined Martin-Trigona from initiating any action without leave of the court against certain individuals in the United States Bankruptcy Court for the District of Connecticut, the United States District Court for the District of Connecticut or in the Court of Appeals for the Second Circuit; and (2) required Martin-Trigona to append to any document that either commences a new lawsuit or intervenes in a then-existing lawsuit certain documents, including a statement entitled "Informational Statement Concerning Litigation History of Anthony R. Martin-Trigona, Pursuant to Court Orders." In re Anthony R. Martin-Trigona, 592 F. Supp. 1566, 1573 (D. Conn. 1984). The Court of Appeals affirmed the form of this new injunction, as it "complie[d] faithfully with out prior decision." In re Anthony R. Martin-Trigona, 763 F.2d 140, 141 (2d Cir. 1985). Therefore, the injunction requested to be issued in this case is, in fact, consistent with the Court of Appeals' Martin-Trigona decision.
Finally, I reject Schlesinger's allegation that Feldstein is barred from obtaining injunctive relief because of Feldstein's own unclean hands. (Schlensinger Mem. Law Opp. to Order to Show Cause, at 11-12). Feldstein's alleged misconduct is unrelated to Ulysses' status as a serial litigator with respect to the Premises. In any event, even if it were related, the other factors weigh heavily in favor of granting an injunction.
III. Morton's Counterclaims
Dreier moves to dismiss Morton's Counterclaims. All of Morton's Counterclaims are state law claims except one: a claim pursuant to 28 U.S.C. § 1927 for reasonably incurred excess costs, expenses and attorneys' fees.
A. Section 1927
28 U.S.C. § 1927, entitled "Counsel's liability for excessive costs", provides:
Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.
An award of sanctions under Section 1927 requires a showing that an attorney undertook or continued a litigation in bad faith, or for some improper purpose such as harassment or delay. Oliveri v. Thompson, 803 F.2d 1265, 1272-73 (2d Cir. 1986).
As the Court of Appeals has noted, however, Section 1927 does not create an independent cause of action:
[F]ederal question jurisdiction [may not] be premised on § 1927, for that section does not appear to authorize an independent lawsuit. It provides that an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." The power thereby described is the power of the courts to punish an attorney who conducts frivolous or dilatory litigation by awarding the other side compensation "as part of the costs in the litigation." Though under the present § 1927 "attorneys' fees were intended to be among the costs which a party could request after litigation was completed," the request for such an award is nonetheless made in the case in which the attorney's unreasonable conduct is alleged to have occurred. We have seen no basis for concluding that § 1927 was intended to permit a litigant to institute a new lawsuit to collect excess costs and fees incurred in a prior litigation. . . . As a statute with a punitive thrust, § 1927 is to be strictly construed, and we cannot conclude that it provides a basis for the present suit.
Cresswell v. Sullivan Cromwell, 922 F.2d 60, 69-70 (2d Cir. 1990) (emphasis added) (citations omitted). Therefore, this purported claim is dismissed.
B. State Law Claims
With respect to Morton's state law claims, I must determine whether it is proper for me to exercise supplemental jurisdiction over these claims.
Federal courts have power to decide state law claims that "derive from a common nucleus of operative fact" with claims arising under federal law. United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966). Pursuant to 28 U.S.C. § 1367 (c)(3), however, a district court may nonetheless decline to exercise supplemental jurisdiction over a claim if "the district court has dismissed all claims over which it has original jurisdiction." Here, all of the claims over which this Court had original jurisdiction have been dismissed. Further, Morton is not any longer even a party to the action over which the Court had original jurisdiction. Accordingly, I decline to exercise supplemental jurisdiction over the Morton Counterclaims, and those claims are dismissed without prejudice.
IV. Notices of Pendency
While still a defendant in the Amended Complaint, Morton moved by order to show cause to vacate the three notices of pendency filed with the Clerk of Suffolk County by either Bridgewater or Ulysses based upon (1) the Amended Complaint, (2) an unfiled action in the Southern District of New York ostensibly brought on behalf of the United States, and (3) the Eastern District Action.
A. Cancellation
Pursuant to Rule 64 of the Federal Rules of Civil Procedure, I must look to state law to govern the matter of lis pendens. See Fed.R.Civ.P. 64; State Street Bank Trust Co. v. Trafalgar Power Inc., No. 95-CV-493 (FJS), 1997 WL 369384, at *2 (N.D.N.Y. June 23, 1997). Section 6514 of the Civil Practice Law and Rules ("CPLR"), entitled "Motion for cancellation of notice of pendency," provides in pertinent part:
The terms "notice of pendency" and "lis pendens" are essentially interchangeable. See In re American Motor Club, Inc., 109 B.R. 595, 596 n. 1 (Bankr. E.D.N.Y. 1990) ("Although technically there are differences between the doctrine of lis pendens at common law and the statutory provisional remedy of notice of pendency, since the CPLR uses the phrase `notice of pendency' and the bench and bar more often use the term `lis pendens,' this Court will use them interchangeably." (citation omitted)).
(a) Mandatory cancellation. The court, upon motion of any person aggrieved and upon such notice as it may require, shall direct any county clerk to cancel a notice of pendency, if service of a summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated. . . .
N.Y. Civ. Prac. L. R. § 6514(a) (McKinney's 1980). Here, all three actions underlying the notices of pendency filed by Ulysses on the Premises have been "settled, discontinued or abated." Id. Therefore, the three notices of pendency filed by Ulysses and Bridgewater shall be cancelled.
This Court has the power to cancel Notices of Pendency. See, e.g., Peddie v. 2436 Marion Ave. Ass'n, No. 01 Civ. 1239 (LTS) (HBP), 2001 WL 995337, at *2 (S.D.N.Y. Aug. 30, 2001).
B. Costs
Morton also seeks to recover costs against Ulysses in connection with the three notices of pendency. Section 6514(c) of the CPLR provides:
Costs and expenses. The court, in an order cancelling a notice of pendency under this section, may direct the plaintiff to pay any costs and expenses occasioned by the filing and cancellation, in addition to any costs of the action.
I find that an award of costs against Ulysses pursuant to CPLR 6514(c) is not warranted under the circumstances of this case. See, e.g., Rabinowitz v. Larkfield Building Corp., 647 N.Y.S.2d 820, 821-22 (App. Div.2d Dept. 1996) (finding that award of costs and expenses was not warranted even though notice of pendency was canceled).
CONCLUSION
Ulysses has had so many bites at the apple, it has swallowed the core. Ulysses and its principals have repeatedly used their substantial resources to impose upon the scarce resources of the state and federal courts of several districts and states. They shall not be permitted to continue to do so. Accordingly, Feldstein's motion to dismiss the Second Amended Complaint is granted, Morton's state counterclaims are dismissed without prejudice, and Morton's federal counterclaim is dismissed with prejudice. The Clerk of the Court, Supreme Court, County of Suffolk, is directed to cancel the three notices of pendency filed by Ulysses and Bridgewater.
Counsel shall confer and deliver a proposed form of judgment no later than August 12, 2002, at 4 p.m. If they are not in agreement, counsel shall appear at a conference to discuss the proposed order on August 14, 2002, at 12:00 p.m., Courtroom 12A, United States District Court, Southern District of New York, 500 Pearl Street, New York, New York.
SO ORDERED.