969 F. Supp. 2d 278
E.D.N.Y2013Background
- Plaintiffs JBWV and Theiler sued for RICO, securities fraud, and state-law claims related to advanced-fee fraud.
- Defaults were entered against several defendants and Judge Tomlinson issued R&Rs recommending partial default judgments.
- Plaintiffs sought additional default judgments on fraud, conspiracy, conversion, unjust enrichment, and gross negligence claims.
- Judge Tomlinson’s R&Rs recommended substantial damages and joint/ several liability among many defendants, subject to proof.
- The Court sustained some objections, denied others, and dismissed or declined enforcement of certain settlements; several reinstatement motions were denied.
- The Court ordered dismissal without prejudice for many non-served defendants and dismissal with prejudice for others for failure to prosecute; and declined to enforce a settlement against Gibbins/Meytec due to lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the February 21 R&R improperly relied on extrinsic evidence | Bölükbasi et al. relied on non-pleaded exhibits; defaults do not admit extrinsic material. | Judge’s reliance on attached exhibits was proper to show evidence of liability. | Objections sustained; refuse to adopt Feb. 21 R&R to the extent it relies on extrinsic evidence. |
| Whether the March 8 R&R properly relied on extrinsic evidence to determine liability | Liability should be based only on the Second Amended Complaint; extrinsic evidence improper. | Extrinsic evidence supported liability. | Objections sustained; cannot adopt March 8 R&R on liability; require refiling under proper standards. |
| Whether defaults on fraud/conversion/conspiracy/unjust enrichment can be entered | Default judgment appropriate under well-pleaded facts. | Some claims lack facially valid pleading under Rule 9(b) and NY law. | Denied; plaintiffs may refile within 30 days or dismiss claims; some claims dismissed with prejudice for lack of prosecution. |
| Whether Salzman Defendants’ reinstatement/redemption is timely under Rule 60(b) | Rule 60(b) relief to reinstate claims should be allowed. | Motion untimely and waived; relief not warranted. | Denied as untimely; reinstatement denied. |
Key Cases Cited
- City of New York v. Mickalis Pawn Shop, L.L.C., 645 F.3d 114 (2d Cir. 2011) (default admits well-pleaded allegations only; facial claims required)
- In re Wildlife Ctr., Inc., 102 B.R. 321 (Bankr. E.D. Ky. 1989) (default judgments require reviewing non-conclusory allegations in complaint)
- Ganino v. Citizens Utils. Co., 228 F.3d 154 (2d Cir. 2000) ( Rule 9(b) heightened pleading for fraud claims)
- First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159 (2d Cir. 2004) ( Rule 9(b) pleading applied to securities fraud claims)
- Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382 (N.Y. 1987) (quasi-contract vs contract conflict; essentially, contract governs when valid)