Acme American Repairs, Inc. et al v. Katzenberg et al

Filing 139

MEMORANDUM AND ORDER: For the reasons set forth in the attached Memorandum and Order, defendants motion to amend this Courts September 24, 2010 Order pursuant to Federal Rule of Civil Procedure 60(a) or Local Civil Rule 6.3, based on an oversight or omission in the order, is GRANTED, and, as previously Ordered by this Court, summary judgment dismissing all causes of action brought by Acme Pacific Repairs, Inc., Bana Parts, Inc. and Bana Commercial Kitchen Parts, Inc. remains GRANTED. (Defs. Mo t. to Modify Order (Doc. No. 132) at 1.) Plaintiffs motion for reconsideration under Federal Rule of Civil Procedure 60(a), regarding the dismissal of the breach of contract claim and denial of summary judgment on the fraud, breach of fiduciary duty , breach of duty of loyalty, conversion, and employee disloyalty claims is DENIED. (Pls. Aff. in Oppn to Mot. (Doc. No. 135) at 2.) Plaintiffs Rule 60(a) motion requesting that the Court reconsider its discussion of in pari delicto is likewise DENI ED. (Id. at 4-5, 8.) Finally, the Court DENIES plaintiffs request that the Court alter its judgment based on the preclusive effect of two previous court judgments involving some of the same parties and events as the present action. (Mot. Alter J. (Doc. No. 137) at 1.) Ordered by Judge Roslynn R. Mauskopf on 8/31/2011. (Mauskopf, Roslynn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
ACME AMERICAN REPAIRS, INC.; ACME
AMERICAN ENVIRONMENTAL CO., INC.;
ACME COMMERCIAL KITCHEN DESIGN,
INC.; ACME AMERICAN REFRIGERATION,
INC.; ACME PACIFIC REPAIRS, INC.; BANA
PARTS, INC.; and BANA COMMERICAL
KITCHEN, INC.,
Plaintiffs,
- against -

MEMORANDUM & ORDER
03-CV-4740 (RRM)(SMG)

HARVEY KATZENBERG and PEARL
KATZENBERG, f/k/a PEARL FEUER,
Defendants.
---------------------------------------------------------------X
MAUSKOPF, United States District Judge.
Currently before the Court are motions relating to the Court’s September 24, 2010 Order
granting defendants’ motion for summary judgment. Defendants motion to amend this Court’s
September 24, 2010 Order pursuant to Federal Rule of Civil Procedure 60(a) or Local Civil Rule
6.3, based on an oversight or omission in the order, is GRANTED, and, as previously Ordered by
this Court, summary judgment dismissing all causes of action brought by Acme Pacific Repairs,
Inc., Bana Parts, Inc. and Bana Commercial Kitchen Parts, Inc. remains GRANTED. (Defs.’
Mot. to Modify Order (Doc. No. 132) at 1.) Plaintiffs’ motion for reconsideration under Federal
Rule of Civil Procedure 60(a), regarding the dismissal of the breach of contract claim and denial
of summary judgment on the fraud, breach of fiduciary duty, breach of duty of loyalty,
conversion, and employee disloyalty claims is DENIED. (Pls.’ Aff. in Opp’n to Mot. (Doc. No.
135) at 2.) Plaintiffs Rule 60(a) motion requesting that the Court reconsider its discussion of in
pari delicto is likewise DENIED. (Id. at 4-5, 8.) Finally, the Court DENIES plaintiffs’ request

that the Court alter its judgment based on the preclusive effect of two previous court judgments
involving some of the same parties and events as the present action. (Mot. Alter J. (Doc. No.
137) at 1.)
BACKGROUND
The Court adopts the factual recitation previously set forth in the September 24, 2010
Memorandum & Order. (Mem. & Order (Doc. No. 130) at 2-4.)
DISCUSSION
I.

DEFENDANTS’ 60(a) MOTION TO AMEND
On October 4, 2010, defendants filed a motion pursuant to Rule 60 of the Federal Rules

of Civil Procedure and/or Local Civil Rule 6.3. (Defs.’ Mot. to Modify Order at 1.) The Court
did not address defendants’ motion for summary judgment dismissing all causes of action
asserted by plaintiffs Acme Pacific and the Bana Companies in its September 24, 2010 Order
(Doc. No. 130). (Id.) Federal Rule of Civil Procedure 60(a) allows a court to “correct a clerical
mistake or a mistake arising from oversight or omission whenever one is found in a judgment,
order, or other part of the record.” Fed. R. Civ. P. 60(a); Libaire v. Kaplan, No. 06-CV-1500,
2010 WL 317893, at *8 (E.D.N.Y. Jan. 21, 2010) (amending an order pursuant to Federal Rule
of Civil Procedure 60). Accordingly, the Court now supplements its previous Order with a
ruling on the motion to amend, and grants defendants’ motion for summary judgment as to all
causes of action asserted by plaintiffs Acme Pacific Repairs, Inc. (“Acme Pacific”), Bana Parts,
Inc., and Bana Commercial Kitchen Parts, Inc. (“the Bana Companies”). (Defs.’ Mem. Supp.
Summ. J. at 2.)
Defendants maintain that Acme Pacific cannot properly bring this action because the
Acme Pacific shareholder agreement states that “[n]o stockholder shall act in any manner other

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than in the ordinary course of business without the consent of the Directors acting at a meeting of
the Directors,” and “Acme Pacific has not called a meeting for purposes of voting on initiating
this action.” (Defs.’ Mem. Supp. Summ. J. at 6.) Defendants argue that “this lawsuit is not in
the ordinary course of business,” and that, since there was never a meeting of directors at which
this lawsuit was discussed, any action by Acme Pacific must be dismissed. (Defs.’ Mem. Supp.
Mot. (Doc. No. 121-6) at 24-25.) Likewise, defendants maintain that the Bana companies cannot
properly bring this action because “the Bana companies [did not] conduct a duly noticed meeting
of the directors to address initiation of a lawsuit.” (Id. at 30.)
Summary judgment is appropriate when the pleadings, depositions, interrogatories,
admissions, and affidavits demonstrate that there are no issues of material fact in dispute and that
one party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). A genuine issue of material fact exists “if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
In a sworn declaration, defendants maintain that Acme Pacific and the Bana Companies
never held a meeting of the directors to authorize this suit. (Def. Harvey Katzenberg’s Decl.
Supp. Mot. Partial Summ. J. (Doc. No. 121) at 19.) There is no evidence in the record that any
meeting did occur; plaintiffs offer only an unsworn flat denial of defendants’ sworn assertion.
(Pls.’ Resp. Defs.’ Rule 56.1 Statement Uncontested Material Facts (Doc. No. 121-11) at 8.)
Plaintiffs’ flat denial, unsupported by any evidence that an authorization meeting occurred, is
insufficient to create a genuine issue of material fact as to that issue. See Fed. R. Civ. P.
56(e)(2); Tycoons Worldwide Grp. (Thai.) Pub. Co. v. JBL Supply, Inc., 721 F. Supp. 2d 194,
202 (S.D.N.Y. 2010) (“Mere assertions, unsupported by any affirmative and specific evidence,

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are insufficient to raise a genuine issue of material fact for trial.”). Accordingly, defendants’
request for summary judgment dismissing all causes of action asserted by Acme Pacific and the
Bana Companies is GRANTED.
III.

PLAINTIFFS’ 60(a) MOTION TO AMEND: IN PARI DELICTO
A. Waiver
Plaintiffs request that the Court “review its decision under Fed. R. Civ. Pro. 60(a) in light

of the defenses extant in the defendants’ Answer.” (Pls.’ Aff. in Opp’n to Mot. at 1.) In its
September 24, 2010 Order, the Court declined to grant summary judgment for plaintiffs on their
claims of breach of fiduciary duty and fraud because “the possible participation in the fraudulent
activity by Acme’s current ownership[] implicates the doctrine of in pari delicto, giv[ing] rise to
triable questions of fact[] and preclud[ing] the grant of summary judgment.” (Mem. & Order
(Doc. No. 130) at 19.) The Court notes that, as an initial matter, this argument does not fall
under the purview of Rule 60(a); nonetheless, the Court finds that it is without merit.
Plaintiffs first contend that defendants waived in pari delicto as a defense because
defendants did not assert it in their answer to the amended complaint. (Pls.’ Aff. Opp’n Mot. at
4.) While it is true that defendants did not raise in pari delicto in their answer to the amended
complaint (see Doc. No. 8), in pari delicto is an equitable defense; thus “courts have discretion
whether to apply the defense in any particular case.” Buckley v. Deloitte & Touche USA LLP,
No. 06-CV-3291 (SHS), 2007 WL 1491403, at *1 (S.D.N.Y. May 22, 2007). Since this is the
summary judgment stage, and there remain unresolved issues of fact, the Court’s previous order
stands. Summary judgment will not be granted when the issue of plaintiffs’ complicity is
undetermined. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

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B. Relevance
Second, plaintiffs contend that, regardless of waiver, in pari delicto is inapplicable
because it “does not exist where the parties are not equally at fault or, as here, where the agents’
fraud was so egregiously self-interested, so adverse, that it cannot be said either was acting
within the scope of their employment.” (Pls.’ Aff. Opp’n Mot. at 5.) Plaintiffs add that
“[s]ubstantively, in pari delicto does not apply here because [defendants] admittedly acted for
themselves alone and not the Acme companies.” (Id.) They base this argument on their
interpretation of a related state action, G.K. Alan Assoc., Inc. v. Lazzari, 867 N.Y.S.2d 374 (Sup.
Ct. 2008). Plaintiffs maintain that, in that case, the New York Supreme Court, Nassau County,
found that Lazzari and the Acme Companies did not take part in the Katzenberg’s insurance
fraud and that the Appellate Division affirmed that finding of fact on appeal.1 See 887 N.Y.S.2d
233 (App. Div. 2009); (Pls.’ Aff. in Opp’n to Mot. at 1, 6). The New York state courts, plaintiffs
contend, found that Lazzari and the Acme Companies were not complicit in the fraud, and thus
they contend this Court must give that decision full faith and credit in accordance with 28 U.S.C.
§ 1738. (Id. at 8.) Were this Court to recognize that Lazzarri and the Acme Companies were not
at fault in the Katzenbergs’ scheme, then in pari delicto would be inapplicable. (Id.)
Plaintiffs’ logic is premised on a fallacy. As the September 24, 2010 Order indicated,
contrary to plaintiffs’ assertions, the Appellate Division “rejected an earlier trial court
exonerating the Acme Companies.” (Mem. & Order at 22 n.13.) The Appellate Division upheld
the trial court’s finding that Lazzari and the Acme Companies did not know that the Katzenbergs
were overbilling the Acme Companies, but also found that whether Lazzari and the Acme
Companies were complicit in the underlying insurance fraud scheme of “making material

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The Court notes that these materials were submitted without leave of the Court months after the original 60(a)
motions. Nevertheless, the “motion” is without merit as discussed below.
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misrepresentations to the Corporation’s insurers” was an undetermined issue of fact. G.K. Alan
Assoc., 887 N.Y.S.2d at 233. “The Appellate Division made clear that the underlying
evidentiary record did not establish the Acme Plaintiff’s innocence and that the trial court’s
finding to the contrary was not warranted.” (Mem. & Order at 22 n.13.) Thus, plaintiffs’ fault is
an unresolved issue of fact, and, as discussed supra, summary judgment is inappropriate.
Globaltex Grp., Ltd. v. Trends Sportswear, Ltd., No. 09-CV-0235, 2010 WL 1633438, at * 4
(E.D.N.Y. Apr. 22, 2010).
The Court will not grant summary judgment based on a perceived apportion of fault,
when the parties at fault are not established. Id., 2010 WL 1633438, at * 4 (Weinstein, J.)
(denying summary judgment on the basis of in pari delicto because there was “a genuine issue of
material fact as to the parties’ relative levels of fault”). Accordingly, plaintiffs’ request that
summary judgment be granted in their favor for breach of fiduciary duty and fraud is DENIED.
IV.

MOTION FOR RECONSIDERATION: COLLATERAL ESTOPPEL
A. State Court Case
Plaintiffs also request that the Court “[a]ddress the findings by the trial Court in” the

related state action of G.K. Alan Assoc., Inc. v. Lazzari, 867 N.Y.S.2d 374 (Sup. Ct. 2008) with
respect to the doctrine of collateral estoppel. Plaintiffs argue that defendants “are collaterally
estopped from relitigating these findings of fraud, concealment of their activities to the other
shareholders of the Acme Group companies, self-dealing and admitted conversion of Acme
assets to themselves.” (Pls.’ Aff. in Opp’n to Mot. at 8.)
Based on the same flawed premise as that advanced to support their arguments with
respect to in pari delicto, see supra, plaintiffs argue that defendants “are collaterally estopped
from relitigating these findings of fraud, concealment of their activities to the other shareholders

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of the Acme Group companies, self-dealing and admitted conversion of Acme assets to
themselves.” (Pls.’ Aff. Opp’n Mot. at 8.) Since plaintiffs’ potential complicity in the insurance
fraud scheme was left as an open issue in the state court litigation, neither party is estopped from
bringing them in the present case. Austin v. Downs, 114 F. App’x 21, 22 (2d Cir. 2004)
(“[C]ollateral estoppel applies when: ‘(1) the identical issue was raised in a previous proceeding;
(2) the issue was actually litigated and decided in the previous proceeding; (3) the party had a
full and fair opportunity to litigate the issue; and (4) the resolution of the issue was necessary to
support a valid and final judgment on the merits.’”) (quoting Interoceanica Corp. v. Sound
Pilots, Inc., 107 F.3d 86, 91 (2d Cir. 1997)). Accordingly, plaintiffs’ request that the Court
“address the findings by the trial court” is GRANTED, but summary judgment remains
DENIED.
B. District Court Case
Plaintiffs bring to the Court’s attention another decision involving some of the same
parties as the present suit, Katzenberg v. Lazzari, No. 1-04-CV-5100, 2010 WL 680985
(E.D.N.Y. Feb. 24, 2010). (Mot. Alter J. at 1.) While plaintiffs do not make clear their purpose
in mentioning Katzenberg, it is grouped with a discussion of collateral estoppel. To the extent
that plaintiffs believe that Katzenberg should be given preclusive effect, the Court will addresses
this issue.
Katzenberg deals exclusively with Harvey Katzenberg’s actions as trustee of the Acme
pension plan and as the plan administrator. See Katzenberg, 2010 WL 680985, at *6, 10. The
present action deals not with Acme’s pension plan but, rather, with a separate insurance fraud
scheme. (Am. Compl. (Doc. No. 5) at 9-27.) Since this disparate action is certainly not the
“identical issue” that must ordinarily be raised in a previous proceeding, there appear to be no

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findings from that judgment that have bearing on the current action. Austin, 114 F. App’x at 22
(emphasis added) (quoting Interoceanica Corp., 107 F.3d at 91). This claim is thus DENIED.
V.

60(a) MOTION FOR RECONSIDERATION
Plaintiffs ask the Court to “modify the decision and order on the summary judgment

motions pursuant to Fed. R. Civ. Pro. 60(a)” as to fraud, breach of contract, breach of fiduciary
duty, breach of the duty of loyalty, conversion, and employee disloyalty. (Mot. Alter J. at 1.)
Rule 60(a) allows for corrections based on clerical mistakes, oversights, and omissions, which
plaintiffs do not allege. Fed. R. Civ. P. 60(a). Rather, their request could only possibly lie
pursuant to Federal Rule of Civil Procedure 60(b), which allows a court to reconsider a judgment
for “any . . . reason that justifies relief.” Fed. R. Civ. P. 60(b). The Court finds this claim to be
without merit.
A. Breach of Contract
In the September 24, 2010 Order, the Court dismissed plaintiffs’ breach of contract claim
against Pearl Katzenberg. (Mem. & Order at 16-17.) Plaintiffs claim that “the Court dismissed
the . . . cause of action for breach of contract . . . on a finding of no formal written contract.”
(Pls.’ Aff. Opp’n Mot. at 12.) Plaintiffs misstate the Court’s rationale. As the Order clearly
states, plaintiffs failed to offer “evidence of any contractual relationship with Pearl Katzenberg,”
and “Defendants state unequivocally that, while G.K. Alan did routinely perform brokerage
services for the Acme Companies, that relationship was not forged out of any specified
negotiation.” (Mem. & Order at 17.) The Court’s decision did not rest on the absence of a
formal written contract but, rather, on the absence of evidence of any contract at all. (Id.)
Plaintiffs do not outline any “matters or controlling decisions which counsel believes the court
has overlooked” and do not bring any new information to light that would warrant reevaluation

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of the dismissal. See IPC Info. Sys., LLC. v. Odyssey Grp., Inc., 232 F.R.D. 206, 207 (S.D.N.Y.
2005) (denying reconsideration because plaintiff did not demonstrate that the court overlooked
any information and did not allege new information). Accordingly, plaintiffs’ motion for
reconsideration of the dismissal of the breach of contract claim is DENIED.
B. Fraud, Breach of Fiduciary Duty, Breach of the Duty of Loyalty, Conversion, and
Employee Disloyalty
The Court previously declined to grant summary judgment on plaintiffs’ claims of fraud,
breach of fiduciary duty, breach of duty of loyalty, conversion, and employee disloyalty.
Plaintiffs fail to state any new information or any other reason that reconsideration of that
decision is justified. See Ross v. Cooper, No. 90-CV-304 (PGG), 2008 WL 5062727, at *4
(S.D.N.Y. Nov. 24, 2008) (denying reconsideration under Rule 60(b) because defendant did not
allege the requisite extraordinary circumstances or extreme hardship) (citing United States v.
Cirami, 563 F.2d 26, 32 (2d Cir. 1977)); IPC Info. Sys., LLC., 232 F.R.D. at 207. Accordingly,
plaintiffs’ motion for reconsideration of the Court’s treatment of these claims is DENIED.
CONCLUSION
For the reasons stated above, defendants motion to amend this Court’s September 24,
2010 Order pursuant to Federal Rule of Civil Procedure 60(a) or Local Civil Rule 6.3, based on
an oversight or omission in the order, is GRANTED, and, as previously Ordered by this Court,
summary judgment dismissing all causes of action brought by Acme Pacific Repairs, Inc., Bana
Parts, Inc. and Bana Commercial Kitchen Parts, Inc. remains GRANTED. (Defs.’ Mot. to
Modify Order (Doc. No. 132) at 1.) Plaintiffs’ motion for reconsideration under Federal Rule of
Civil Procedure 60(a), regarding the dismissal of the breach of contract claim and denial of
summary judgment on the fraud, breach of fiduciary duty, breach of duty of loyalty, conversion,
and employee disloyalty claims is DENIED. (Pls.’ Aff. in Opp’n to Mot. (Doc. No. 135) at 2.)
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Plaintiffs Rule 60(a) motion requesting that the Court reconsider its discussion of in pari delicto
is likewise DENIED. (Id. at 4-5, 8.) Finally, the Court DENIES plaintiffs’ request that the Court
alter its judgment based on the preclusive effect of two previous court judgments involving some
of the same parties and events as the present action. (Mot. Alter J. (Doc. No. 137) at 1.)

SO ORDERED.

Roslynn R. Mauskopf

Dated: Brooklyn, New York
August 31, 2011

________________________
ROSLYNN R. MAUSKOPF
United States District Judge

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