Kaufman v. Southwestern Bell Mobile Systems LLC, et al

Filing 41

Judge Nathaniel M. Gorton: ENDORSED ORDER entered. MEMORANDUM AND ORDERFor the foregoing reasons, defendants motion to dismiss is ALLOWED and plaintiffs claims are DISMISSED WITH PREJUDICE. So ordered.(Caruso, Stephanie)

United States District Court
District of Massachusetts
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ALAN M. KAUFMAN,
Plaintiff,
v.
ANDREW JOSEPH, ET AL.,
Defendants.

Civil Action No.
16-11961-NMG

MEMORANDUM & ORDER
GORTON, J.
This case involves a long-running dispute concerning a
business relationship between pro se plaintiff Alan Kaufman
(“Kaufman” or “plaintiff”) and defendants, Attorney Andrew
Joseph (“Joseph”), his law firm, Drinker Biddle & Reath LLP
(“DBR”), and Southwestern Bell Mobile Systems, LLC d/b/a
Cingular Wireless n/k/a AT&T Mobility (“AT&T” and, collectively
with Joseph and DBR, “defendants”).

Plaintiff alleges that

1) DBR breached the covenant of good faith and fair dealing and
all three defendants 2) defrauded the Court and 3) made
fraudulent misrepresentations.

Pending before the Court is

defendants’ joint motion to dismiss.
that motion will be allowed.

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For the following reasons,

I.

Background
A. Initial Business Relationship
Kaufman apparently was the controlling officer of Harvard

Cellular, Inc. (“Harvard Cellular”) between 1991 and 2002.

In

2002, Harvard Cellular entered into an agency agreement with the
predecessor-in-interest to New Cingular Wireless (“New
Cingular”), a subsidiary of AT&T, to open five retail stores in
New York City.

New Cingular advanced $350,000 to Harvard

Cellular to lease and build properties for the New York City
stores.

Harvard Cellular’s stores, which sold New Cingular

products, opened that July.
The agreement between Harvard Cellular and New Cingular
required that Harvard Cellular obtain authorization from New
Cingular before closing any of the stores.

Without doing so,

Harvard Cellular closed its New York City stores in December,
2002.

It failed to reimburse New Cingular for the advance,

building costs, the cost of handsets for which it had accepted
delivery and other operating costs.

New Cingular sought

recovery of those expenses and the parties went to arbitration.
B. Arbitration Decision
Arbitration proceedings between Harvard Cellular and New
Cingular lasted 13 days.

During and after the arbitration, New

Cingular was represented by attorneys from DBR, including
Joseph.

Kaufman alleges that Joseph began settlement
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negotiations with Harvard Cellular while the arbitration was
ongoing because he did not expect New Cingular to succeed.
Ultimately, the parties did not settle and the arbitrator ruled
in favor of New Cingular, ordered Harvard Cellular to pay New
Cingular $1.2 million for breaching its contractual obligations
and denied Harvard Cellular’s counterclaims for fraudulent
inducement and breach of contract.
C. New York and Florida Actions
New Cingular filed suit in the New York Supreme Court to
confirm the arbitration award (“New York Action”).
Cellular sought partial vacatur.

Harvard

In 2006, the New York Supreme

Court allowed the motion to confirm the arbitration award and
denied Harvard Cellular’s motion for partial vacatur.
In 2008, New Cingular brought a separate action in the
United States District Court for the Southern District of
Florida to enforce personal guarantees signed by Kaufman with
respect to the arbitration award (“Florida Action”).

Kaufman

counterclaimed that, among other things, he was fraudulently
induced to sign the personal guarantees.

The Court in the

Florida Action allowed New Cingular’s motion for summary
judgment and dismissed Kaufman’s counterclaims as barred by res
judicata.

The parties subsequently entered a settlement

agreement that deferred execution of the arbitration judgment

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until Kaufman reached a specified net worth (“the 2009
Settlement Agreement”).
D. Current Action
In 2010, Kaufman sent a letter to New Cingular allegedly
threatening to publish a book disparaging defendants.

DBR sent

a cease and desist letter that reminded Kaufman of his
obligations under the 2009 Settlement Agreement.

In 2016,

Kaufman informed AT&T, Joseph and the arbitrator, John
Wilkinson, by letter, that he intended to file this suit.1
Kaufman filed the instant complaint in September, 2016, in
the Massachusetts Superior Court for Suffolk County alleging
that, during the arbitration that occurred in 2003 and 2004 and
thereafter, DBR breached its covenant of good faith and fair
dealing and all the defendants committed fraud upon the court
and made fraudulent misrepresentations.

Defendants removed the

case to this Court and filed a joint motion to dismiss for
failure to state a claim upon which relief can be granted.

That

motion, which Kaufman timely opposed, is the subject matter of
this memorandum and order and will be allowed.

1

This Court dismissed plaintiff’s claims against the arbitrator
in February, 2017.
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II.

Motion to Dismiss
A. Legal Standard
To survive a motion to dismiss for failure to state a claim

under Fed. R. Civ. P. 12(b)(6), a complaint must contain
“sufficient factual matter” to state a claim for relief that is
actionable as a matter of law and “plausible on its face”.
Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A claim is

facially plausible if, after accepting as true all nonconclusory factual allegations, a court can draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Ocasio-Hernandez v. Fortuno Burset, 640 F.3d 1, 12 (1st
Cir. 2011).

A court may not disregard properly pled factual

allegations even if actual proof of those facts is improbable.
Id.

Rather, the relevant inquiry focuses on the reasonableness

of the inference of liability that the plaintiff is asking the
court to draw. Id. at 13.
When rendering that determination, a court may not look
beyond the facts alleged in the complaint, documents
incorporated by reference therein and facts susceptible to
judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st
Cir. 2011).

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B. Analysis
Defendants contend that plaintiff’s claims must be
dismissed because 1) he has failed to state a claim for breach
of the covenant of good faith and fair dealing, 2) his claim of
fraud upon the court is barred by the doctrine of res judicata,
and 3) his fraudulent misrepresentation claim is time-barred.
Defendants further assert that the claims are precluded by the
2009 Settlement Agreement, lack of personal jurisdiction and
plaintiff’s failure to pierce the corporate veil.
1. Plaintiff Fails to State a Plausible Claim for
Breach of the Covenant of Good Faith and Fair
Dealing
Kaufman alleges that the responses of defendants DBR and
Joseph to Kaufman’s 2010 and 2016 letters constitute a breach of
the covenant of good faith and fair dealing.

Specifically,

Kaufman claims that the letters violate “Disciplinary Rule 7105(A) of the New York Code of Professional Responsibility” for
attorneys.2

DBR and Joseph contend that plaintiff fails to state

a claim upon which relief can be granted because 1) such a
breach must be predicated on a contractual relationship,
2) there is no private right of action for claims pursuant to

2

That rule was repealed in 2009 and is now codified as Rule 3.4
of N.Y. Comp. Codes R. & Regs. tit. 22, § 1200.0 to which this
Court will henceforth refer.
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the New York Code of Professional Responsibility and 3) the
claim fails under the Massachusetts Anti-SLAPP statute.
The contention of DBR and Joseph that plaintiff fails to
state a plausible claim for breach of the covenant of good faith
and fair dealing is well taken.

Both parties correctly apply

New York law to this claim because the purported breach occurred
in New York. See Bergin v. Dartmouth Pharm. Inc., 326 F. Supp.
2d 179, 181 (D. Mass. 2004).

Plaintiff fails to state a claim

of breach of the covenant of good faith and fair dealing because
such a claim must arise from contract. Duration Mun. Fund, L.P.
v. J.P. Morgan Sec., Inc., 908 N.Y.S.2d 684 (2010).

Although

there was an agency agreement between Harvard Cellular and New
Cingular, and there is also a settlement agreement between those
parties, even accepting all allegations as true, there is no
plausible claim that a contract existed between Kaufman, on the
one hand, and either Joseph or DBR, the attorney and law firm
which represented New Cingular, on the other hand. See OcasioHernandez, 640 F.3d at 12.

Therefore, the claim must be

dismissed because, absent a contractual relationship, there can
be no breach of the covenant of good faith and fair dealing. See
Duration Mun. Fund, 908 N.Y.S.2d at 684.
Moreover, as DBR and Joseph point out, the New York Code of
Professional Responsibility does not create a private right of
action for violations. Weinberg v. Sultan, 142 A.D.3d 767, 769
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(N.Y. App. Div. 2016).

Therefore, even if defendants’ actions

constituted a violation of Rule 3.4, plaintiff’s complaint is to
the New York Board of Bar Overseers not for this forum and
therefore that claim must be dismissed. See Iqbal, 556 U.S. at
667.

Because the claim will be dismissed on other grounds, the

Court need not consider defendants’ remaining contention that
the claim also fails under the Massachusetts Anti-SLAPP statute,
M.G.L. c. 231, § 59H.

Plaintiff’s claim of breach of covenant

of good faith and fair dealing will therefore be dismissed for
failure to state a claim upon which relief can be granted. See
Fed. R. Civ. P. 12(b)(6).
2. Plaintiff’s Claim of Fraud Upon the Court is
Precluded by the Doctrine of Res Judicata
a. Legal Standard
The doctrine of res judicata, or claim preclusion,
prohibits a party from bringing a second action on a claim
previously litigated and resolved on the merits. Nunez Colon v.
Toledo-Davila, 648 F.3d 15, 19 (1st Cir. 2011).

A court may

consider the record in the original action along with well-pled
facts in the complaint in the second action in determining
whether a claim is precluded. Medina-Padilla v. U.S. Aviation
Underwriters Inc., 815 F.3d 83, 85 (1st Cir. 2016).
If the original action was in state court, a federal court
applies the res judicata law of the state in which the case was

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decided. Dillon v. Select Portfolio Servicing, 630 F.3d 75, 80
(1st Cir. 2011).

If the original action was before a federal

court sitting in diversity, federal common law governs. MedinaPadilla, 815 F.3d at 86.

Under federal common law, the law of

the state in which the federal court sits governs unless
“incompatible with federal interests”. Medina-Padilla, 815 F.3d
at 86.
b. Application
Kaufman contends that defendants perpetrated fraud upon the
court when they allegedly bribed the arbitrator.

Defendants

persuasively respond that res judicata bars all claims that
plaintiff could and should have raised in the prior actions,
including a claim of fraud upon the court.
This claim of the plaintiff is precluded by the New York
and Florida Actions.

With respect to the New York Action, New

York law applies. See Dillon, 630 F.3d at 80.

New York law

precludes claims if 1) the prior action was adjudged on the
merits, 2) it involved plaintiffs or their privies and 3) “the
claims asserted in the subsequent action were, or could have
been, raised in the prior action”. Monahan v. N.Y. City Dep’t of
Corr., 214 F.3d 275, 285 (2d Cir. 2000).
Turning to the first factor, the judicial confirmation of
the arbitration award by the New York Supreme Court constituted
a judgment on the merits under New York law. N.Y.
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C.P.L.R. 7514(a); see Jacobson v. Fireman’s Fund Ins. Co., 111
F.3d 261, 266 (2d Cir. 1997).

Kaufman’s contention that the New

York Action does not warrant claim preclusion because it was a
“mere procedural proceeding” is therefore unavailing.
As for the second requirement, privity exists where the
party’s “interests were adequately represented by another vested
with the authority of representation”. Monahan, 214 F.3d at 285
(internal citation omitted).

Kaufman, as president of Harvard

Cellular, had “the right to control the conduct of the
litigation and appeal from the judgment” and thus he is in
privity with Harvard Cellular, a party to the New York Action.
Willsey v. Strawway, 255 N.Y.S.2d 224, 229 (Sup. Ct. 1963),
aff’d, 254 N.Y.S.2d 830 (1964); see also Prudential Lines, Inc.
v. Firemen’s Ins. Co. of Newark, N. J., 457 N.Y.S.2d 272, 275
n.* (1982).
Finally, as to the third prerequisite, the alleged fraud
occurred during and arose from the arbitration process. See
Monahan, 214 F.3d at 285.

The facts that supposedly support

plaintiff’s claim occurred prior to the confirmation of the
arbitration award and plaintiff provides no plausible
explanation for failing to raise them earlier. See Monahan, 214
F.3d at 285; Jacobson, 111 F.3d at 266.

Kaufman did not raise

his claim of fraud upon the court in the New York Action even
though New York law allowed him to do so. See C.P.L.R. 7511.
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In a last ditch effort to persuade the Court that his
claims are not precluded, Kaufman contends that res judicata may
not apply if a party demonstrates fraud by clear and convincing,
newly-discovered evidence. N.Y. C.P.L.R. 7511; Allstate Ins. Co.
v. GEICO, 955 N.Y.S.2d 100, 102 (2012).

He avers that a bribe

warrants a new action but the facts that supposedly support
plaintiff’s allegation of a bribe in the arbitration proceedings
are neither new nor clear and convincing evidence that a fraud
occurred.

See Allstate Ins., 955 N.Y.S.2d at 102.

Kaufman’s

other claims of evidence are conclusory and lack factual
specificity. See Iqbal, 556 U.S. at 667.

Accordingly, res

judicata deriving from the New York Action precludes plaintiff’s
claim of fraud upon the court. See Allstate Ins., 955 N.Y.S.2d
at 102.
Even assuming, arguendo, that plaintiff’s claim was not
precluded under New York law, it would be precluded under
Florida law.

Florida law applies to the Florida Action because

that Court sat in diversity. See Medina-Padilla, 815 F.3d at 86.
Florida law precludes a claim if the prior action was adjudged
on the merits “by a court of competent jurisdiction” for the
same cause of action or a cause of action that could have been
brought at that time “between the same parties or their
privies”. Philip Morris USA, Inc. v. Douglas, 110 So. 3d 419,
425 (Fla. 2013) (internal citation omitted); see also United
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Auto. Ins. Co. v. Law Offices of Michael I. Libman, 46 So. 3d
1101, 1104 (Fla. Dist. Ct. App. 2010).
The Florida Action was a final judgment by a court of
competent jurisdiction. See Philip Morris USA, 110 So. 3d at
425.

Plaintiff in this case was also the plaintiff in that

action.

Defendants are, for the purpose of claim preclusion, in

privity as successors-in-interest. See Metro. Dade Cty. Bd. of
Cty. Comm’rs v. Rockmatt Corp., 231 So. 2d 41, 44 n.5 (Fla.
Dist. Ct. App. 1970); see also Philip Morris USA, 110 So. 3d at
425.

Moreover, once again, plaintiff did not initiate a claim

for fraud upon the court in the Florida Action even though
Florida law allowed him to do so. See Fla. Stat. § 682.13(1);
Davenport v. Dimitrijevic, 857 So. 2d 957, 961 (Fla. Dist. Ct.
App. 2003).
Kaufman contends that res judicata does not preclude his
claim under Florida law because he could not have brought the
claim without the purportedly new evidence. See Kowallek, 183
So. 3d at 1177; Hialeah Race Course, 245 So. 2d at 628.

For the

reasons previously stated, the Court is not persuaded by
plaintiff’s conclusory pleadings that the “new” evidence is
sufficient to warrant a new action. See Iqbal, 556 U.S. at 667.
Accordingly, res judicata deriving from the Florida Action also
bars the claim of fraud upon the court and that claim will be
dismissed. See United Auto. Ins., 46 So. 3d at 1104.
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3. Plaintiff’s Claim of Fraudulent Misrepresentation is
Time Barred
a. Legal Standard
Defendants may raise an affirmative defense that the
fraudulent misrepresentation claim is time-barred at the motion
to dismiss stage. See Pike v. N.Y. Life Ins. Co., 901 N.Y.S.2d
76, 81 (2010).

A federal court sitting in diversity applies the

choice-of-law framework of the forum state. Levin v. Dalva
Bros., Inc., 459 F.3d 68, 73 (1st Cir.2006) (citing Klaxon Co.
v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)).

Under

Massachusetts law, fraudulent misrepresentation claims are
governed by the three-year statute of limitations that is
applicable to tort actions. M.G.L. c. 260, § 2A; see Kent v.
Dupree, 429 N.E.2d 1041, 1043 (1982).

Under New York law,

fraudulent misrepresentation claims are subject to a six-year
statute of limitations. N.Y. C.P.L.R. 213(2), (8); Pike, 901
N.Y.S.2d at 81.
The statute of limitations begins to accrue at the time
plaintiff knew or should have known of the injury. See Kent, 429
N.E.2d at 1043; City of Syracuse v. Loomis Armored US, LLC, 900
F. Supp. 2d 274, 290 (N.D.N.Y. 2012).

Equitable tolling may be

applied if defendant concealed facts such that a plaintiff
“exercis[ing] reasonable diligence” could not have known of the
injury caused until after the statute of limitations expired.

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Philibotte v. Nisource Corp. Servs. Co., 793 F.3d 159, 164 (1st
Cir. 2015); City of Syracuse, 900 F. Supp. 2d at 293.
b. Application
Liberally construing the ambiguous pro se complaint, the
Court will read the allegation of fraudulent misrepresentation
as a claim against all remaining defendants for conduct and
statements made during the arbitration settlement negotiations.
See Erickson v. Pardus, 551 U.S. 89, 94 (2007).

Defendants

assert that Kaufman’s claim must be dismissed as a matter of law
because it is time-barred under both New York and Massachusetts
law.

Kaufman responds that the statute of limitations has not

accrued or, in the alternative, that equitable tolling should be
applied. See id.
Under both Massachusetts and New York law, the statute of
limitations for the fraudulent misrepresentation claim began
tolling no later than April 5, 2006, upon confirmation of the
arbitration award.

Therefore, the claim expired no later than

April 5, 2012. M.G.L. c. 260, § 2A; C.P.L.R. 213(2), (8).
Kaufman’s instant complaint was filed more than four years after
the claim expired, in August, 2016.

Therefore, the fraudulent

misrepresentation claim will be dismissed as time-barred unless
equitable tolling applies.
The threshold requirements for equitable tolling are the
same under Massachusetts and New York law: 1) fraudulent
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concealment and 2) reasonable diligence. See Philibotte, 793
F.3d at 164; City of Syracuse, 900 F. Supp. 2d at 293.

Kaufman

supports his fraudulent misrepresentation claim with allegations
related to the arbitration settlement negotiations that were
available to him before the statute of limitations expired.

He

asserts that DBR and Joseph bribed the arbitrator but provides
no facts about the alleged bribe or how, if at all, it was
related to the alleged fraudulent misrepresentation.

Nor does

he provide any facts demonstrating fraudulent concealment or
reasonable diligence. See Philibotte, 793 F.3d at 164; City of
Syracuse, 900 F. Supp. 2d at 293.

Because there are no facts

alleged to flesh out the claim and no plausible new evidence,
the fraudulent misrepresentation claim will be dismissed as
time-barred. See Philibotte, 793 F.3d at 164; City of Syracuse,
900 F. Supp. 2d at 293.
4. Other Grounds for Dismissing the Complaint
Defendants also contend that Kaufman’s claims should be
dismissed because 1) his claims of fraud upon the court and
fraudulent misrepresentation are barred by the 2009 Settlement
Agreement, 2) this Court lacks personal jurisdiction over
defendants and 3) plaintiff failed to pierce the corporate veil
such that AT&T should be made a party.

Because all the claims

are dismissed on other grounds, the Court declines to address
those grounds for dismissing the complaint.
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C. Defendants’ Request that the Claim be Dismissed with
Prejudice
Defendants request that the Court dismiss the claims with
prejudice.

Kaufman does not respond but the Court presumes he

opposes their request and would amend his complaint given the
opportunity to do so.

The United States Court of Appeals for

the First Circuit has held that leave to amend a complaint
should “be freely given” unless doing so “would be futile or
would serve no legitimate purpose”. Fed. R. Civ. P. 15(a);
Epstein v. C.R. Bard, Inc., 460 F.3d 183, 191 (1st Cir 2006).
It is proper to consider the prior arbitration and the New York
and Florida Actions in deciding whether to permit plaintiff to
amend his complaint. See Haley, 657 F.3d at 46.

Kaufman

unsuccessfully brought claims sounding in fraud in each action.
Accordingly, it would be futile for the plaintiff to amend the
complaint and would only serve to perpetuate a 13-year-old
litigation which is not a “legitimate purpose”. See Epstein, 460
F.3d at 191.

Therefore, the claims will be dismissed with

prejudice.

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ORDER
For the foregoing reasons, defendant’s motion to dismiss is
ALLOWED and plaintiff’s claims are DISMISSED WITH PREJUDICE.

So ordered.

/s/ Nathaniel M. Gorton______
Nathaniel M. Gorton
United States District Judge
Dated June 1, 2017

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