Amusement Indus., Inc. v. Stern, 17-339-cv

Background

Amusement Industry, Inc. and Practical Finance Co. (collectively, Amusement) sued Moses Stern over a real-estate transaction by which Stern obtained $13 million, asserting fraud, conversion, unjust enrichment, and conspiracy.
The district court granted summary judgment for Amusement; Stern appealed. The magistrate judge’s report and recommendation was adopted by the district court.
Stern and third-party defendant Stephen Friedman invoked the Fifth Amendment in depositions; the district court drew adverse inferences but also relied on other evidentiary proof of fraud and reliance.
Stern pointed to a prior 2009 bankruptcy ruling and an unrelated 2007 California decision to challenge Amusement’s credibility and assert ratification; he also noted a confidential settlement allegedly showing Amusement recovered other damages.
Stern had pleaded guilty to perjury in the bankruptcy proceedings. He did not produce admissible evidence creating a triable issue on the merits or causation.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Fifth Amendment invocations justified adverse inferences at summary judgment	Amusement relied on admissible evidence of fraud; any inferences were ancillary	Stern argued adverse inferences were improperly used against him and Friedman	Court affirmed: even if inferences were drawn, plaintiffs had overwhelming admissible evidence so inferences were unnecessary to support judgment
Whether Amusement established elements of fraud (including reasonable reliance)	Amusement presented evidence that Stern made misrepresentations intended to be relayed to and relied on by Amusement	Stern argued reliance was unreasonable because statements were made to third parties and Friedman was Amusement’s attorney	Court held plaintiffs proved fraud and reasonable reliance; indirect communications are actionable where intended to be relayed (Pasternack distinguished)
Whether prior bankruptcy findings or other prior rulings create genuine issues of fact or preclusion	Amusement: prior rulings irrelevant to current record; Stern’s perjury plea undermines his reliance on bankruptcy findings	Stern: earlier bankruptcy decision and other opinions paint a different picture and show ratification or lack of credibility	Court rejected Stern’s reliance on earlier rulings; no issue preclusion, and perjury plea and lack of record support defeat credibility arguments
Whether alleged confidential settlement or prior recoveries defeat causation or damages	Amusement: no record evidence that settlements eliminate Stern’s liability here	Stern: plaintiffs already recovered $26 million from others, negating causation/relief	Court held Stern presented no admissible evidence of such recovery; conclusory assertions insufficient to create triable issue

Key Cases Cited

Townsend v. Benjamin Enters., Inc., 679 F.3d 41 (2d Cir.) (summary judgment review standard)
Bruh v. Bessemer Venture Partners III L.P., 464 F.3d 202 (2d Cir.) (appellate affirmance may rest on any supported basis)
In re 650 Fifth Ave. & Related Props., 830 F.3d 66 (2d Cir.) (limitations on drawing adverse inferences from Fifth Amendment at summary judgment)
United States v. Certain Real Prop. & Premises Known as 4003-4005 5th Ave., Brooklyn, N.Y., 55 F.3d 78 (2d Cir.) (Fifth Amendment invocation does not relieve party of burden to produce evidence)
Cephas v. Nash, 328 F.3d 98 (2d Cir.) (waiver rule for failure to object to magistrate judge report)
Proctor v. LeClaire, 715 F.3d 402 (2d Cir.) (elements of issue preclusion)
Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257 (2d Cir.) (conclusory attacks on witness credibility insufficient at summary judgment)
Pasternack v. Lab. Corp. of Am. Holdings, 27 N.Y.3d 817 (N.Y.) (reliance cannot be proved solely by false statements to a third party unless intended as conduit)
Davis v. New York, 316 F.3d 93 (2d Cir.) (conclusory allegations insufficient to defeat summary judgment)