2:06-cv-06575 | E.D.N.Y | May 23, 2007
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
_____________________ N o 06-6575 (JFB) (AKT) _____________________ N EIL J. G IANNONE ,
Plaintiff, VERSUS Y ORK T APE & L ABEL , I NC ., Defendant. ___________________ MEMORANDUM AND ORDER May 23, 2007 ___________________ J OSEPH F. B IANCO , District Judge: injunctive relief was sought (and in fact obtained) in the prior state court action and, Plaintiff Neil J. Giannone brings the thus, this lawsuit is barred by the doctrine of instant action against his former employer, res judicata . York Tape & Label, Inc., seeking damages for the employer’s enforcement of a non- I. B ACKGROUND competition agreement that was later declared void by the New York State Supreme Court. Plaintiff commenced an action in the After removing the action to this Court, Supreme Court of the State of New York, defendant filed a pre-answer motion to Suffolk County against defendant, his former dismiss the complaint pursuant to Federal employer, seeking a declaration of his rights Rule of Civil Procedure 12(b)(6) based on the under a restrictive covenant not to compete doctrine of res judicata . The instant motion and an order permanently enjoining defendant addresses a very discrete issue – that is, from enforcing the restrictive employment whether, under New York law, the declaratory covenants against him. By order dated judgment exception to the doctrine of res September 21, 2005, the Supreme Court judicata applies where the prior state action granted summary judgment on plaintiff’s sought both declaratory and injunctive relief. complaint, declaring the restrictive covenant As set forth below, the Court concludes that void for lack of consideration and enjoining the exception does not apply because the enforcement of the restrictive covenant.
On September 25, 2006, plaintiff Here, defendant argues that the complaint commenced the instant action against is barred by the doctrine of res judicata . defendant, seeking damages for its Under the doctrine of res judicata , otherwise commission of a commercial tort under New known as claim preclusion, “‘a final judgment York law in enforcing the restrictive covenant on the merits of an action precludes the parties that had been declared void by the September or their privies from relitigating issues that 21, 2005 order. Defendant removed the action were or could have been raised in that to this Court on the basis of diversity of the action.’” Flaherty v. Lang , 199 F.3d 607, 612 parties on December 11, 2006. (2d Cir. 1999) (quoting Rivet v. Regions Bank
of La. , 522 U.S. 470, 476 (1998) (internal II. D ISCUSSION quotation marks omitted) (emphasis added)); accord Allen v. McCurry , 449 U.S. 90, 94 In reviewing a motion to dismiss pursuant (1980). The doctrine applies only if “(1) the to Rule 12(b)(6) for failure to state a claim previous action involved an adjudication on upon which relief can be granted, the court the merits; (2) the previous action involved must accept the factual allegations set forth in the [parties] or those in privity with them; and the complaint as true, and draw all reasonable (3) the claims asserted in the subsequent inferences in favor of the plaintiff. [1] See action were, or could have been, raised in the Cleveland v. Caplaw Enterp. , 448 F.3d 518, prior action.” Monahan v. N. Y. City Dep’t of 521 (2d Cir. 2006); Nechis v. Oxford Health Corr ., 214 F.3d 275, 285 (2d Cir. 2000) Plans, Inc. , 421 F.3d 96, 100 (2d Cir. 2005). (citations omitted). “In determining whether a A complaint should be dismissed under Rule second suit is barred by this doctrine, the fact 12(b)(6) “‘only if it appears beyond doubt that that the first and second suits involved the the plaintiff can prove no set of facts in same parties, similar legal issues, similar support of his claim which would entitle him facts, or essentially the same type of wrongful to relief.’” Overton v. Todman & Co., CPAs, conduct is not dispositive.” Maharaj v. P.C. , 478 F.3d 479, 483 (2d Cir. 2007) Bankamerica Corp ., 128 F.3d 94, 97 (2d Cir. (quoting Rombach v. Chang , 355 F.3d 164, 1997). “Rather, the first judgment will 169 (2d Cir. 2004) (internal quotation marks preclude a second suit only when it involves omitted)). The appropriate inquiry is “not the same ‘transaction’ or connected series of whether a plaintiff will ultimately prevail, but transactions as the earlier suit.” Id . whether the claimant is entitled to offer Therefore, as the Second Circuit has noted, evidence to support the claims.” Twombly v. “the obvious starting point in a preclusion Bell Atl. Corp. , 425 F.3d 99, 106 (2d Cir. analysis is a determination of the issues that 2005). were litigated in the first action.” Flaherty ,
199 F.3d at 613. Furthermore, in evaluating the res judicata effect of a prior action, “courts routinely take judicial notice of [1] A motion to dismiss on res judicata grounds is documents filed in other courts, again not for considered under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See Thompson v. the truth of the matters asserted in the other County of Franklin, 15 F.3d 245, 253 (2d Cir. litigation, but rather to establish the fact of 1994) ( res judicata “in no way implicates
such litigation and related filings.” Kramer v. jurisdiction” and “challenges may properly be Time Warner Inc ., 937 F.2d 767, 774 (2d Cir. raised via a motion to dismiss for failure to state a 1991). claim under Rule 12(b)(6)”). Plaintiff does not dispute that the prior Refrig. Servs. , 959 F.2d at 372 (emphasis action involved an adjudication on the merits, added); see also Minneapolis Auto Parts Co. that the prior action involved the same parties, v. City of Minneapolis, 739 F.2d 408, 410 (8th and that the claims asserted in the instant Cir. 1984) (applying Restatement (Second) § action could have been raised in the prior 33 and holding “we agree with the district action. However, plaintiff argues that an court that claim preclusion applies when exception to the doctrine of collateral estoppel coercive relief is sought and granted in the allows this case to proceed – namely, the first suit”); accord Mandarino v. Pollard , 718 declaratory judgment exception. F.2d 845, 848-49 (7th Cir. 1983)
(“[P]ermitting [plaintiff] to proceed with his It is well established that “both federal and federal lawsuit would not further the purpose New York State law recognize the declaratory of declaratory actions, since his state court judgment exception articulated in the action did not seek ‘solely’ declaratory relief. Restatement.” Harborside Refrig. Servs., Inc. Instead, his request for a judicial declaration v. Vogel , 959 F.2d 368, 373 (2d Cir. 1992). was coupled with a request for a preliminary The Restatement provides in relevant part: injunction . . . We conclude that even if the
rule stated in Restatement (Second) of When a plaintiff seeks solely Judgments governed resolution of this appeal, declaratory relief, the weight of [plaintiff’s] pursuit of injunctive relief in his authority does not view him as state court action would remove him from the seeking to enforce a claim against the protections of the rule.”); MTS, Inc. v. 200 E. defendant. Instead, he is seen as 87th St. Assoc. , 899 F. Supp. 1180, 1185-86 merely requesting a judicial (S.D.N.Y. 1995) (“An action that seeks only declaration as to the existence and declaratory relief may be subject to a nature of a relation between himself restrictive application of claim preclusion and the defendant. The effect of such principles. However, a prior action . . . that a declaration, under this approach, is sought both declaratory and coercive relief is not to merge a claim in the judgment subject to the claim preclusion rules that apply or to bar it. Accordingly, regardless of to actions for coercive relief alone.”) outcome, the plaintiff or defendant (citations and quotations omitted); Univ. of may pursue further declaratory or N.H. v. April , 347 A.2d 446, 450 (N.H. 1975) coercive relief in a subsequent action. (“While the res judicata effect of a
declaratory judgment as to matters which Restatement (Second) of Judgments § 33, could have been litigated but were not has comment c (1982). However, as noted above, been held more restrictive than that of a full this narrow exception in the Restatement is judgment on the merits, the basis for such limited to cases where “a plaintiff seeks differential treatment is lacking in the present solely declaratory relief.” Id. (emphasis action, where coercive relief was sought and added). granted in the prior one.”).
Thus, courts that “recognize an exception The Second Circuit made clear in to ordinary res judicata principles” do so only Harborside that New York law is consistent where “the prior action involved only a with the declaratory judgment exception request for declaratory relief.” Harborside articulated in the Restatement. See Harborside Refrig. Servs., 959 F.2d at 373 Despite the language of the Restatement (concluding that the court need not decide and Harborside , plaintiff argues that, although whether federal or New York law applies to he sought injunctive relief in addition to res judicata issue because “both federal and declaratory relief in the prior action, the New York State law recognize the declaratory declaratory judgment exception still applies. judgment exception articulated in the The only case plaintiff cites in support of his Restatement”). In other words, if a plaintiff position is Lynch v. Bailey , 99 N.Y.S.2d 585 seeks coercive relief (such as injunctive relief) (N.Y. Sup. Ct. 1950), aff’d 108 N.Y.S.2d 134 in connection with a declaratory judgment (N.Y. App. Div. 1951), aff’d 107 N.E.2d 591 action, the exception does not apply and a (1952). In Lynch , the New York Court of subsequent lawsuit for damages arising from Appeals upheld the application of the the same conduct is barred by the doctrine of declaratory judgment exception. Lynch v. res judicata . Bailey , 107 N.E.2d 591 (1952). In Lynch , the
Supreme Court recognized that, in the prior In the instant case, it is undisputed that state court action, defendants were enjoined plaintiff sought both declaratory and from enforcing a restrictive covenant that was injunctive relief in the prior state court action. declared void. Lynch , 99 N.Y.S.2d at 586. Specifically, in addition to declaratory relief However, the court held that res judicata did regarding the restrictive covenant and not bar the subsequent action. Id . at 687. confidentiality agreement, the complaint in Plaintiff argues that, because the plaintiff in state court sought judgment “enjoining the Lynch had also sought injunctive relief in his defendant from taking any action, by litigation prior declaratory judgment action, New York or otherwise, based upon the restrictive law requires the application of the declaratory covenant, either for monetary damages or to judgment exception, even where injunctive hinder or prevent plaintiff from seeking and relief was sought. performing employment freed from the provisions of the restrictive covenant.” (Nov. As a threshold matter, neither the First 18, 2004 Compl., Ex. A to Def.’s Motion, at Department nor the New York Court of 5.) Furthermore, the September 25, 2005 Appeals in their brief orders of affirmance in Order of the Supreme Court of the State of Lynch addressed the fact that the declaratory New York granted summary judgment on judgment also involved injunctive relief. In plaintiff’s motion to “permanently enjoin[] the fact, the dissent in the First Department case defendant from enforcing certain restrictive employment covenants against him.” (Def.’s Ex. B, at 1.) Therefore, under New York law
456 U.S. 461, 467 (1982) (“Accordingly the as articulated in the Restatement and by the federal courts consistently have applied res Second Circuit in Harborside , the declaratory judicata and collateral estoppel to causes of action judgment exception does not apply and this and issues decided by state courts.”); see also lawsuit is barred by the doctrine of res Burka v. N.Y. City Transit Auth ., 32 F.3d 654, 657 judicata . [2] (2d Cir. 1994) (“In applying the doctrine of res
judicata , [a court] must keep in mind that a state court judgment has the same preclusive effect in [2] The fact that the prior action was a state, rather federal court as the judgment would have had in than federal, action has no impact for res judicata state court.”); accord Jacobson v. Fireman’s Fund purposes. See Kremer v. Chem. Constr. Corp. , Ins. Co. , 111 F.3d 261, 267-68 (2d Cir. 1997). noted the failure of the majority to address Therefore, it is final as to all things that issue. See Lynch, 108 N.Y.S.2d at 135 which might have been litigated as (“the plaintiff sought an injunction as well as well as those actually litigated. The declaratory judgment and he might have plaintiff is precluded from suing for secured damages in that suit and the judgment damages upon the first cause of action is, therefore, res judicata ”). Moreover, just of the complaint herein. In Inderlied three years after the decision in Lynch , the v. Whaley , [32 N.Y.S. 640 (N.Y. Sup. New York Court of Appeals again Ct. 1895), aff’d 156 N.E. 1118 (N.Y. emphasized that when injunctive relief is 1898)], it was held that since a sought in one lawsuit, a plaintiff cannot sue plaintiff could have demanded for damages in connection with the same damages in the injunction action and injury in a subsequent lawsuit. See Maflo did not do so, he was precluded from Holding Corp. v. S.J.Blume , 127 N.E.2d 558 suing for them in a later action. This is (N.Y. 1955). In Maflo Holding Corp ., the rule in this State. In New York plaintiff, a landlord, had sought an injunction there is only one form of civil action. and damages from a tenant who refused to The distinction between actions at law allow plaintiff access to the leased premises to and suits in equity and the forms of perform certain repair work. Id . at 560. those actions and suits have been Plaintiff had been granted an injunction, abolished. (Civ. Prac. Act, § 8.) “permanently enjoining the defendant from Therefore, the merger of legal and interfering with the plaintiff and its contractor equitable remedies compels a plaintiff in the performance of the necessary to seek in the equity proceeding construction work.” Id . Plaintiff did not offer whatever damages he may be entitled proof as to damages in that action and to and, if he made no demand for “plaintiff’s request for an additional damages or failed to introduce proof allowance and costs was denied.” Id . as to damages, he is precluded from Plaintiff instituted a subsequent action seeking thereafter maintaining an action at law (1) damages from defendant’s refusal to to recover damages. permit plaintiff access to the premises pursuant to a provision of the lease, and (2) Id . at 560-61 (internal citations and quotation additional rent and attorneys’ fees for marks omitted). defendant’s failure to abide by the lease. Id . at 559. The New York Court of Appeals In addition, the New York Court of affirmed the dismissal of the first cause of Appeals in Maflo distinguished Lynch as a action, holding that it was barred by the final declaratory judgment case and made no judgment that was entered in the prior suit for mention that it also involved an injunction: an injunction. Id . at 561. Specifically, the Court held: The appellant claims that the case of
Lynch v. Bailey [108 N.Y.S.2d 134 The first cause of action is based on (N.Y. App. Div. 1951), aff’d 107 the failure to allow access to the N.E.2d 591 (1952)] has modified the premises. It is the same cause of rule. Such is not the fact. The action which has been litigated on the Appellate Division was careful to merits to a final adjudication. point out that special rules apply to the reiterated by New York courts. [4] See, e.g. , preclusive effect of declaratory judgment proceedings, as a court may Indus. Dev. Found. of Auburn v. U.S. Hoffman in its discretion refuse to award all the Mach. Corp ., 229 N.Y.S.2d 857, 858 (N.Y. relief sought and relegate the parties to App. Div. 1962) (per curiam) (“In the equity an independent action for such other action the plaintiff had not sought a recovery relief. Here, the evidence needed to of any incidental damages, for the value of use sustain the first cause of action in its and occupation or otherwise. The present second action would have sustained effort to recover such damages to the time of the first action and the violation was a the entry of the decree is violative of the violation of but one right by a single principle forbidding the splitting of a single legal wrong. cause of action.”); Brandt v. Lawson Assoc.,
Inc. , 196 N.Y.S.2d 835, 838 (N.Y. Sup. Ct. Id . at 561 (internal citations and quotation 1960) (“It is the law of this State that when marks omitted). Thus, despite the fact that one brings an action in equity for an Lynch involved an injunction, this Court reads injunction and obtains it, he cannot thereafter the later case of Maflo as limiting Lynch to bring another action for money damages for cases involving only declaratory judgments – the same cause which entitled him to an a conclusion that was implicitly reached by injunction.”). It would be completely the Second Circuit in Harborside . [3] See also inconsistent with the Restatement (which the Umhey v. County of Orange, N.Y. , 957 F. Second Circuit has equated with New York Supp. 525, 530 (S.D.N.Y. 1997) (recognizing the need to “determine whether [plaintiff’s] prior action sought coercive or injunctive [4] Defendant also heavily relies on Regan v. Metro. relief” and that the declaratory judgment Life Ins. , an unpublished decision of the Second exception would not apply where a prior Circuit. 80 Fed. Appx. 718 (2d Cir. Nov. 13, remedy was “one that award[ed] damages or 2003). In Regan , the Second Circuit held that the command[ed] a defendant to do something or declaratory judgment exception did not apply to a refrain from doing something.”). subsequent lawsuit because plaintiff “explicitly sought monetary damages” in his prior lawsuit.
The limited precedential value of Lynch is Id . at 721. The Court also noted that, “[i]n addition to damages, [plaintiff] also sought a further confirmed by the fact that no New variety of coercive relief in his state lawsuit, York State court has cited it in over twenty- including an injunction requiring the defendants to five years. Meanwhile, the rule set forth in alter their health plan and attorneys’ fees and Maflo , that seeking injunctive relief in one costs.” Id . at 721-22. However, because Regan is lawsuit precludes seeking damages in a an unpublished summary order, the Local Rules of subsequent lawsuit relating to the same the Second Circuit prevent both the parties and conduct or transaction, has since been this Court from relying on this case. See Second Circuit Rule § 0.23 (“Citation to summary orders filed prior to January 1, 2007, is not permitted in this or any other court, except in a subsequent stage of a case in which the summary order has [3] In fact, in noting that the declaratory judgment been entered, in a related case, or in any case for exception in the Restatement was consistent with purposes of estoppel or res judicata .”). Therefore, New York law, the Second Circuit cited Lynch . the Court is not relying on Regan in connection See Harborside Refrig. Servs. , 959 F.2d at 373. with its decision on the instant motion. law), as well as Maflo and its progeny, for this III. C ONCLUSION Court to conclude that, even though a plaintiff clearly sought an injunction in connection For the foregoing reasons, defendant’s with an initial lawsuit, that plaintiff could motion to dismiss is GRANTED. The Clerk immunize himself from the doctrine of res of the Court shall close the case. judicata in a second lawsuit simply by also seeking declaratory relief in the first action. SO ORDERED. Thus, a plaintiff removes the lawsuit from the narrow confines of the declaratory judgment exception where the plaintiff seeks coercive ______________________ relief in the first action, in the form of JOSEPH F. BIANCO damages or an injunction. United States District Judge
In sum, it is clear that, where, as here, Dated: May 23, 2007 plaintiff sought an injunction in addition to Central Islip, New York declaratory relief in the first action, plaintiff is barred in this second lawsuit from seeking * * * further coercive relief, such as damages, by the doctrine of res judicata . [5] The attorney for plaintiff is John G. Poli, Esq.,
John G. Poli III, P.C., 200 Laurel Avenue, P.O. Box 59, Northport, New York 11768. The attorneys for defendant are Thomas M. Lancia, Esq., 217 Broadway, Suite 608, New York, New York 10007, and Maynard A. Buck, Esq., and William J. Shin, Esq., 200 Public Square, Suite 2300, Cleveland, Ohio 44114. [5] In a footnote, plaintiff also suggests that the doctrine of res judicata is inapplicable because there was never a final judgment in the state action. (Pl.’s Opp., at 1 n.1.) That argument is similarly unavailing. In the instant case, it is clear that the state court granted summary judgment in the September 21, 2005 Order and permanently enjoined certain conduct by the defendant. Therefore, this final decision on the merits, from which no appeal was taken, has res judicata effect even if not reduced to a formal final judgment. See Jacobson , 111 F.3d at 268 (holding that appraisal award had res judicata effect, although it was never confirmed or entered as a judgment in the state court, and noting that, “[o]ur ruling is consistent with related New York authority holding that res judicata applies where, as here, there has been a final disposition on the merits from which no appeal has been taken.”) (collecting cases).