Miller v. Miller
152 A.D.3d 662
| N.Y. App. Div. | 2017Background
- Plaintiffs (Scott Miller’s children) own interests in several South Carolina-formed LLCs (Four Boys I, II, III, IV, VII) that did business in New York; defendants include Wolfe Miller and Richard Kolsch (managing member/manager).
- Plaintiffs sued in New York for accounting and damages for breach of fiduciary duty, fraud, civil conspiracy, and unjust enrichment, alleging denial of access to LLC records and self-dealing by Kolsch and Miller.
- A prior South Carolina action (filed by Four Boys III and Kolsch) sought judicial dissolution of Four Boys III, later amended to include Four Boys I, II, IV, and VII, on the ground that each LLC’s corporate purpose was frustrated by diminished property value.
- The South Carolina court issued a final order dissolving the LLCs and appointed Kolsch to wind up affairs, permitting preservation of business to prosecute/defend actions as part of winding up.
- Defendants moved in New York to dismiss many causes of action (first–sixteenth, twenty-fifth, twenty-sixth) on full faith and credit / res judicata grounds; Supreme Court granted those branches. Plaintiffs appealed.
- Appellate Division reversed as to the appealed portions, holding South Carolina res judicata would not bar the New York claims because the subject matter and required proof differed from the dissolution action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Full Faith and Credit requires New York to apply South Carolina preclusion to bar plaintiffs' LLC claims | Miller: South Carolina dissolution order did not adjudicate or encompass plaintiffs’ fiduciary-duty, fraud, conspiracy, and accounting claims | Defendants: South Carolina res judicata bars claims that were or could have been raised in the dissolution action; Full Faith and Credit compels New York to give that preclusive effect | Held: Full Faith and Credit requires giving the South Carolina order the same preclusive effect it would have in SC, but under SC law the dissolution order did not preclude these separate claims, so dismissal was erroneous |
| Whether South Carolina res judicata (claim preclusion) applies here | Miller: The actions do not share the same subject matter, primary right, evidence, or transaction; dissolution focused only on statutory frustration of corporate purpose | Defendants: Res judicata in SC bars subsequent actions arising from the same transaction or occurrence and bars issues that could have been raised | Held: Under SC law there was identity of parties but not identity of subject matter or adjudication; res judicata does not bar plaintiffs’ claims |
| Whether the South Carolina court’s jurisdiction was challenged such that preclusion should not apply | Miller: Did not contest jurisdiction | Defendants: Not applicable; they relied on SC order | Held: No jurisdictional challenge was made; Full Faith and Credit analysis proceeded on assumption of SC court jurisdiction |
| Whether summary judgment dismissal of the specified causes of action was appropriate | Miller: Genuine issues of material fact and distinct claims preclude summary judgment | Defendants: Preclusion doctrine mandates dismissal as a matter of law | Held: Summary judgment dismissing those causes was improper; cross-motion branches denied |
Key Cases Cited
- Matter of Luna v. Dobson, 97 N.Y.2d 178 (New York case explaining Full Faith and Credit requirement)
- Underwriters Nat. Assurance Co. v. North Carolina Life & Accident & Health Ins. Guaranty Assn., 455 U.S. 691 (Supreme Court on effect of sister-state judgments)
- Judy v. Judy, 393 S.C. 160 (South Carolina res judicata standard; identity of parties and subject-matter analysis)
- Plum Creek Dev. Co. v. City of Conway, 334 S.C. 30 (SC guidance on whether underlying facts/law give rise to subsequent claims)
- Catawba Indian Nation v. State, 407 S.C. 526 (SC discussion of res judicata elements and identity of subject matter)