Global Auto, Inc. et al v. Hitrinov et al
MEMORANDUM AND ORDER denying EUL's 111 Motion for Reconsideration re 109 Order on Motion to Dismiss/Lack of Prosecution, Order on Motion for Permanent Injunction, Order on Motion to Change Venue. Ordered by Judge Sandra L. Townes on 11/13/2015. (Barrett, C)
IN CLERK'S OFFICE
U.S. DISTRICT COURT E.D.N.Y.
UNITED STATES DISTRICT COURT
-----------EASTERN DISTRICT OF NEW YORK
* NOV 192015 *
GLOBAL AUTO, INC., et al.,
MEMORANDUM AND ORDER
MICHAEL HITRINOV, a/k/a MICHAEL
KHITRINOV, et al.,
EMPIRE UNITED LINES CO., INC., et al.,
SK IMPORTS, INC., et al.,
TOWNES, United States District Judge:
In a memorandum and order entered September 30, 2015 (the "Prior M&O"), the Court
dismissed without prejudice the plaintiffs' claims in the first above-captioned action: Global
Auto, Inc. v. Hitrinov, No. 13-CV-2479 (SLT)(RER) ("Global Auto"). Global Auto, Inc. v.
Hitrinov, No. 13-CV-2479 SLT RER, 2015 WL 5793383, at *6 (E.D.N.Y. Sept. 30, 2015). The
Court also denied a motion by the defendants in Global Auto—Empire United Lines Co., Inc.,
and its principal, Michael Hitrinov (collectively, "EUL")—which sought to enjoin the plaintiffs
in Global Auto—Global Auto, Inc.; G Auto Sales, Inc.; and Effect Auto Sales, Inc. (collectively,
"Plaintiffs")—from pursuing cross-claims in a subsequently filed New Jersey action which were
almost identical to the claims the Plaintiffs had brought against EUL in Global Auto.
Id., at *7..
8. EUL now moves for reconsideration of these decisions pursuant to Rules 59(e) and 60(b) of
the Federal Rules of Civil Procedure and Local Civil Rule 6.3 of the Local Rules of the United
States District Courts for the Southern and Eastern Districts of New York. For the reasons set
forth below, EUL's motion for reconsideration is denied.
The facts relating to this case are set forth in the Prior M&O and other memoranda and
orders which the Court has previously entered in the above-captioned cases. Familiarity with
those memoranda and orders is assumed. However, for the convenience of the reader, the Court
will provide a brief summary.
The two above-captioned actions principally involve disputes between corporations
engaged in selling American automobiles to European consumers and Empire United Lines, Co.,
Inc., a non-vessel operating common carrier which was involved in transporting those
automobiles from New Jersey to Finland. After unsuccessfully attempted to intervene in Global
Auto, some of the European consumers commenced a lawsuit in the United States District Court
for the District of New Jersey: Akishev v. Kapustin, No. 13-cv-7152-NHL-AMD ("Akishev").
The original complaint in that action named 13 defendants (excluding Does), including
Plaintiffs, their principals, and related entities (collectively, the "Global Defendants") and EUL
and a related entity (collectively, the "EUL Defendants"). After that complaint was amended,
the Global Defendants filed an amended answer which incorporated cross-claims against the
EUL Defendants which closely resembled the claims contained in Plaintiffs' First Amended
Complaint in Global Auto.
After the attorneys representing the Plaintiffs in Global Auto and the Global Defendants
in Akishev withdrew as counsel, EUL moved to dismiss the Plaintiffs' claims in Global Auto for
failure to prosecute pursuant to Rule 41 (b) of the Federal Rules of Civil Procedure. Three weeks
later—after one of Plaintiffs' principals, Sergey Kapustin, indicated that he might be able to
retain counsel in Akishev but would not retain counsel in Global Auto— EUL moved to enjoin
the Plaintiffs from pursuing the cross-claims in Akishev, relying on the "first-filed rule." In the
Prior M&O, the Court granted the first motion, but dismissed the Plaintiffs' claims in Global
Auto without prejudice at the urging of the plaintiffs in Akishev (the "NJ Plaintiffs"), noting that
"dismissal with prejudice might impede the NJ Plaintiffs' ability to recover on a judgment
against Plaintiffs." GlobalAuto, 2015 WL 5793383, at *6. The Court denied the second
motion, noting that the "first-filed rule" created only a rebuttable presumption that the district in
which the first of two competing lawsuits was filed would be the appropriate venue. The Court
noted that, in light of the dismissal of the Plaintiffs' claims in Global Auto, it was unclear
whether there were two conflicting lawsuits and that EUL had not established that the balance of
convenience did not favor New Jersey.
EUL now moves for reconsideration of the Prior M&O. EUL does not contest the
decision to dismiss the Plaintiffs' claims in Global Auto, but argues that the dismissal should
have been with prejudice. EUL also seeks reconsideration of the denial of the motion for
injunctive relief, but does not address the issue of whether there are still two competing lawsuits.
Rather, EUL contests only the balance of convenience analysis, arguing that the Court
improperly placed the burden on EUL to prove that New Jersey was not the more convenient
forum and relied on incorrect factual assumptions in performing the balance of convenience
analysis. These arguments are described in more detail in the discussion below.
Although EUL brings this motion pursuant to Fed. R. Civ. P. 59(e) and 60(b) and Local
Civil Rule 6.3, the standards under these three rules are the same. See Maaloufv. Salomon
Smith Barney, Inc., No. 02 Civ. 4770 (SAS), 2004 WL 2782876, at *1 (S.D.N.Y. Dec. 3, 2004)
(citing cases) (standards for granting a motion under Rule 59(e) or a motion for reconsideration
under Rule 60(b) are the same); First Fin. Ins. Co. v. Allstate Interior Demolition Corp., No. 96
Civ. 8243 (RLC), 1998 WL 567900, at *3 (S.D.N.Y. Sept. 3, 1998) ("Grounds for relief under
Rule 5 9(e) are equivalent to the grounds for relief on a motion for reconsideration under Local
Civil Rule 6.3."). Under these rules, "[t]he standard for granting... [reconsideration] is strict,
and reconsideration will generally be denied unless the moving party can point to controlling
decisions or data that the court overlooked—matters, in other words, that might reasonably be
expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d
255, 257 (2d Cir. 1995).
The rules do "not provide a party with the opportunity to relitigate the merits of a case in
an attempt to win a point already 'carefully analyzed and justifiably disposed." Feldman Law
Grp. P. C. v. Liberty Mut. Ins. Co., 819 F. Supp. 2d 247, 266 (S.D.N.Y. 2011); see also Fleming
v. N. Y Univ., 865 F.2d 478, 484 (2d Cir. 1989) ("[A] Rule 60(b)(3) motion cannot ... serve as
an attempt to relitigate the merits."). Accordingly, a motion for reconsideration "is properly
denied where it seeks only to relitigate issues already decided." Maldonado v. Local 803 I.B. of
T Health & Welfare Fund, 490 F. App'x 405, 406 (2d Cir. 2013) (summary order) (citing
Zerman v. Jacobs, 751 F.2d 82, 85 (2d Cir. 1984)). Moreover, such motions cannot be used to
raise new claims or defenses or present new arguments that could have been raised earlier. See
United States v. Cirami, 563 F.2d 26, 33 (2d Cir. 1977) ("[C]ourts should not encourage the
reopening of final judgments or casually permit the relitigation of litigated issues out of a
friendliness to claims of unfortunate failures to put in one's best case."); Westport Ins. Corp. v.
Goldberger & Dubin, P.C., 255 F. App'x 593, 595 (2d Cir. 2007) (summary order) ("New
arguments based on hindsight regarding how a movant would have preferred to have argued its
case do not provide grounds for Rule 60(b) relief.")
Dismissal Without Prejudice
In arguing that the Court erred in dismissing Plaintiffs' claims in Global Auto without
prejudice, rather than with prejudice, EUL raises both issues of law and fact. With respect to the
law, EUL provides the Court with a statistical analysis of reported cases in which claims were
dismissed pursuant to Rule 4 1(b), noting that only 2.4% of those cases in this Circuit, and only
4.15% of such cases nationally, were dismissed without prejudice. Assuming EUL's analysis is
correct, it serves only to establish that district courts have the discretion to dismiss without
prejudice, even if that discretion is not frequently exercised.
EUL distinguishes the three cases cited by the Court—Gabayzadeh, Berrios, and
Cheung—on the ground that the plaintiffs in those cases were incompetent persons, children, or
improperly represented parties without standing, not "confirmed members of a massive RICO
conspiracy who have repeatedly attempted to defraud the Federal courts." Defendants' Memo at
5. EUL then cites to three other cases—United States ex rel. Pilon v. Martin Marietta Corp., 60
F.3d 995 (2d Cir. 1995), Tradeways Inc. v. Chrysler Corp., 342 F.2d 350 (2d Cir. 1965), and
AlliedAir Freight, Inc. v. Pan Am. WorldAirways, Inc., 393 F.2d 441, 443 (2d Cir. 1968)—in
support of the assertion that "in the absence of mitigating factors such as incompetent or minor
plaintiffs, the Second Circuit has not shied away from affirming with prejudice dismissals or
even reversing lower courts for failing to dismiss with prejudice." Defendants' Memo at 7.
The Court agrees that the cases cited in the Prior M&O were not on point. Rather, they
were cited in support of the general proposition that dismissal without prejudice can be
appropriate in cases "where dismissal with prejudice 'could potentially prejudice a properly
represented party withstanding in a subsequent litigation." Global Auto, 2015 WL 5793383, at
*6 (citing Gabayzadeh, 2009 WL 2983013, at *4). The three cited cases were similar to this
one in two respects: they involved the dismissal of claims brought by pro se litigants under Rule
41 (b) and involved instances in which dismissal with prejudice would have prejudiced third
parties who could not represent themselves in the action.
The cases cited by EUL, however, are also not on point. Indeed, only Allied Air Freight
is at all relevant to this action. In Allied Air Freight, a plaintiff seeking review of an
interlocutory order allowed its action to be dismissed for lack of prosecution, knowing that such
dismissals, under practices then followed by the United States District Court for the Southern
District of New York (the "SDNY"), were typically without prejudice. The plaintiff then
appealed the interlocutory order. The defendant argued that considering the merits of that
appeal "would encourage all would-be appellants from interlocutory orders to do nothing,
procure a dismissal," then appeal to the Second Circuit for review of the interlocutory order.
Allied Air Freight, 393 F.2d at 444.
The Second Circuit held that it had jurisdiction to hear the appeal and proceeded to reach
the merits. However, the Court criticized the SDNY's practice of routinely dismissing without
prejudice. In a footnote, the Second Circuit opined: "It may be a better practice for the district
court routinely to order that dismissals for failure to prosecute be with prejudice, unless plaintiff
makes a showing to the calendar judge that the dismissal should be without prejudice." Id., at
444, n. 2. This dictum did not enunciate a procedural rule which is controlling in this case, and
EUL does not cite to any other authority for such a proposition.
The other two cases cited by EUL are entirely irrelevant to this action. In the first
case—United States ex rel. Pilon—a district court concluded that it lacked subject-matter
jurisdiction over the plaintiffs' qui tam claims because of the plaintiffs' counsel's failure to
comply with filing and service requirements for bringing such claims. The district court
nonetheless dismissed the qui tam claims without prejudice, then failed to address a motion for
reconsideration in which defendant argued that dismissal with prejudice was "the only remedy
that properly preserves the congressional objectives embodied in the qui tam statutory scheme."
United States ex rel. Pilon, 60 F.3d at 998. On appeal, the Second Circuit ruled that it was an
abuse of discretion not to dismiss the qui tam claims with prejudice because "the Pilons' failure
to comply with the filing and service provisions ... irreversibly frustrate[d] the congressional
goals underlying those provisions." Id., at 1000 (internal citations and quotation omitted;
brackets in original). This holding is irrelevant to this case, which does not involve a qui tam
In the second case—Tradeways Inc.—the Second Circuit ruled that it was an abuse of
discretion not to dismiss for failure to prosecute an action in which the plaintiff's repeated
delays of the litigation prejudiced the defendant. That action had been commenced in 1958, and
had been dismissed twice for lack of prosecution during 1960 and 1961. On both occasions, it
was restored to the calendar on consent of the defendant. In May 1963, on the eve of trial, the
plaintiff sought to stay the trial in order to depose a witness who, although known to the plaintiff
for a considerable period of time, was not listed in the pre-trial order. The stay was nevertheless
granted and a deposition was taken in mid-June 1963. Although plaintiff was denied permission
to extend discovery in early October 1963, plaintiff moved in November 1963 for an order
allowing it to continue the deposition. A district judge not only denied that motion, but
encouraged the defendant to move to dismiss for failure to prosecute.
Although the defendant made that motion, another judge denied it and scheduled a trial.
After that trial, in which a jury awarded the plaintiff $108,000, the defendant appealed the
denial of its motion to dismiss. The Second Circuit ruled that it was an abuse of discretion not
to grant the motion to dismiss since "[t]he delays appear[ed] to be almost entirely the fault of
[the plaintiff]" and "eventually worked to the prejudice of [the defendant]," who lost a valuable
witness in an airplane accident in May 1962, three and a half years after the start of the
litigation. Tradeways, 342 F.2d at 352.
In this case, unlike in Tradeways, there is no evidence that EUL would be disadvantaged
by dismissal without prejudice. To the contrary, EUL would be unfairly advantaged by
dismissal with prejudice. According to a declaration executed by defendant Hitrinov on May
23, 2013 (the "Hitrinov Declaration"), which was filed as Document 14 in Global Auto, EUL
not only provided shipping and storage services to Plaintiffs, but also helped to finance
Plaintiffs' scheme. EUL would take a "60% interest" in particular vehicles (so-called
"Investment Vehicles"), and would be paid interest at a rate of 1.5% per month on those
investments. Hitrinov Declaration, ¶ 16. The investment was "secured by a 60% interest in the
Investment Vehicles." Id., ¶ 18. Kapustin agreed that "that EUL would be entitled to a right of
possession in any Investment Vehicle ... until such time as it was released to a third-party buyer"
and, to that end, delivered the documents of title for each such vehicle to EUL. Hitrinov
Declaration, ¶ 5. However, the Hitrinov Declaration does not state if there was any agreement
regarding whether or when EUL could sell the vehicles.
By December 2011, EUL had invested over $450,000 in this manner. However, by late
December 2012, Hitrinov began to question Kapustin's integrity. "Concerned about
Kapustin's/[P]laintiffs' ability and even willingness to abide by [the] agreement," Hitrinov
demanded repayment of the principal and interest within 30 days. Id., ¶J 31-32. When
Kapustin and the Plaintiffs failed to comply with that demand, Hitrinov directed that Investment
Vehicles be "sold to third party buyers to satisfy plaintiffs' indebtedness to EUL." Id., ¶ 40.
It is unclear precisely when EUL sold the cars, how many cars EUL sold, or what the
vehicles were worth. In a motion for a temporary restraining order and preliminary injunction
filed in early May 2013, the Plaintiffs alleged that EUL was in possession of approximately 58
vehicles belonging to the Plaintiffs, which were specifically identified in Exhibits C-i and C-3
to the Plaintiffs' Complaint. Those exhibits indicated that the 58 vehicles were valued at over
one million dollars. In responding to that motion for injunctive relief, Hitrinov admitted that all
but two of the vehicles had been sold, but expressed doubts as to whether the sale would net the
$422,018.00 in principal and other amounts that the Plaintiffs allegedly owed EUL. Id., ¶ 41.
At a hearing on June 4, 2013, the Court orally denied the Plaintiffs' motion for injunctive
relief on the ground that they had not met the exacting standard for obtaining a mandatory
injunction. See Transcript of June 4, 2013, Hearing (Document 24 in Global Auto). However,
the colloquy at that hearing made it clear that there was a substantial question regarding whether
EUL was authorized to sell the Investment Vehicles. Neither party could produce a written
agreement documenting EUL's rights in the Investment Vehicles, and the Plaintiffs maintained
that the vehicles were illegally sold. Id., pp. 4-5.
If the Court were to dismiss the Plaintiffs' claims in Global Auto with prejudice, it might
foreclose resolution of this substantial question. This result would permit EUL, who helped
finance Plaintiffs' scheme, to recoup at least part of its "investment" at the expense of unwitting
consumers who were victimized by the Plaintiffs' scheme. This Court will not permit this
EUL's motion for reconsideration also identifies several facts which this Court may have
overlooked. In the Prior M&O, the Court noted that the NJ Plaintiffs had filed several motions
for sanctions against the Global Defendants, including a motion which sought the entry of a
default judgment against them. Although the Prior M&O stated that the motion was still
pending, Global Auto, 2015 WL 5793383, at *3, that motion was actually decided on September
21, 201 5—eight days before the Prior M&O was issued. Judge Hillman, who presides over the
Akishev case, granted the motion for a default judgment and awarded the NJ Plaintiffs
$2,228,069.29. In the wake of Judge Hillman's decision, the NJ Plaintiffs and the Global
Defendants entered into an "Assignment of Claims," which purports to assign to the NJ
Plaintiffs the Global Defendants' interests in their claims and cross-claims against the EUL and
the EUL Defendants. Defendants', Memo, Ex. 3.
The facts do not alter the Court's conclusion that the Plaintiffs' claims in Global Auto
should be dismissed without prejudice. In the Prior M&O, the Court explained its rationale as
To the extent that Plaintiff's claims against the EUL Defendants
are meritorious, Plaintiffs' creditors may wish to pursue those
claims in the event they obtain judgment against Plaintiffs. For
that reason, counsel for some of the NJ Plaintiffs have urged the
Court to dismiss Plaintiffs' claims against the EUL Defendants
without prejudice. Since dismissal with prejudice might impede
the NJ Plaintiffs' ability to recover on a judgment against
Plaintiffs, the Court will dismiss Plaintiffs' claims in this action
Global Auto, 2015 WL 5793383, at *6. The facts that the NJ Plaintiffs have now recovered a
substantial judgment against the Global Defendants and have entered into an agreement which
purports to assign the Plaintiffs' claims against the EUL Defendants to the NJ Plaintiffs only
lends support to the Court's rationale.
Defendants argue that the Plaintiffs' claims in Global Auto are non-assignable as a
matter of public policy under New Jersey law, that the assignment violates a preliminary
injunction entered by Judge Hillman which prevented the Global Defendants from alienating
their assets, and is unnecessary because the NJ Plaintiffs have "numerous other methods of
enforcing their judgment" against the Global Defendants. Defendants' Memo at 9. None of
these arguments are persuasive. First, even assuming that New Jersey law prohibits the
assignment of claims, the NJ Plaintiffs, as judgment creditors of the Global Defendants, could
attempt to levy upon any recovery that the Global Defendants obtain as a result of their litigation
against the EUL Defendants. Second, Judge Hillman's injunction' was entered at the request of
the NJ Plaintiffs, who sought to prevent the Global Defendants from dissipating their assets.
That injunction was not intended to prevent the NJ Plaintiffs from recovering upon their
judgment against the Global Defendants, but rather to ensure that the Global Defendants still
had assets which the NJ Plaintiffs could recover.
Third, while the NJ Plaintiffs unquestionably have "other methods of enforcing their
judgment" against the Global Defendants, Defendants' Memo at 9, there is nothing to suggest
that the funds recovered using those methods will satisfy the $2,228,069.28 award. First, that
award does not reflect actual damages, but includes substantial punitive damages awarded under
the treble damages provisions of the RICO statute and federal odometer laws. There is nothing
to suggest that the Global Defendants' scheme netted over $2.2 million. Even if it did, the
Global Defendants have a history of secreting their assets. Indeed, on June 18, 2015, Judge
Hillman enjoined the Global Defendants from withdrawing money from any bank accounts
based on the NJ Plaintiffs' representation that the Global Defendants were diverting funds to a
Finnish bank in order to avoid complying with a Consent Order requiring the Global Defendants
to deposit funds into the court's registry. Judge Hillman later accused Mr. Kapustin of perjuring
himself and perpetrating a fraud on the court, stating that he had "never seen someone so willing
to lie and cheat and steal" as Kapustin. Transcript of Aug. 31, 2015, Proof Hearing, p. 91. In
light of this history, the assertion that the NJ Plaintiffs will be able to execute on enough assets
to satisfy the multi-million dollar judgment without pursuing the assigned claims is highly
The First-Filed Rule
EUL also moves for reconsideration of the denial of its motion to enjoin the Plaintiffs
from pursuing their cross-claims against the EUL Defendants in Akishev. EUL does not address
the question of whether the first-filed rule, on which their argument relies, even applies in light
of the fact that Plaintiffs' claims against EUL in Global Auto have been dismissed without
prejudice. Rather, EUL' s motion focuses entirely on the balance of convenience analysis, noting
that the Court incorrectly placed the burden of proof on EUL and that the analysis was factually
Even assuming that EUL's arguments are correct, engaging in the balance of
convenience analysis now would be to answer a purely hypothetical question. The "first-filed
rule" applies "[w]hen two actions involving the same parties and issues are pending concurrently
...." Reliance Ins. Co. v. Six Star, Inc., 155 F. Supp. 2d 49, 54 (S.D.N.Y. 2001). The rule
"seeks to advance judicial economy, protect a plaintiff's choice of forum and avoid duplicative
litigation," as well as "the considerable expense and potential for inconsistent judgments that
duplicate litigation entails." Id. (internal citations omitted).
The very timing of EUL's motion for injunctive relief makes it clear that EUL is not
seeking to vindicate these purposes. The Global Defendants' cross-claims against the EUL
Defendants in Akishev were filed on October 7, 2014. Yet, EUL did not move for injunctive
relief pursuant to the first-filed rule until July 31, 2015—almost 10 months later. By that time,
EUL had moved to dismiss Plaintiffs claims in Global Auto for failure to prosecute and had
learned that Kapustin had located "an attorney ... who showed interest" in representing the
Global Defendants in Akishev, but had "funds to hire representation for [the] New Jersey case
only." Letter to Hon. Sandra L. Townes from Sergey Kapustin, dated July 16, 2015, p. 1.
It is readily apparent from the timing of EUL's motion for injunctive relief that EUL is
attempting to use the first-filed rule to prevent adjudication of the merits of the Plaintiffs' claims
or cross-claims against EUL and the EUL Defendants. The Second Circuit has repeatedly
expressed a "clear preference ... for cases to be adjudicated on the merits."
See, e.g., Pecarsky v.
Galaxiworld.com Ltd., 249 F.3d 167,174 (2d Cir. 2001) (citing Cody v. Mello, 59 F.3d 13, 15
(2d Cir. 1995)). Since the Plaintiffs' claims in Global Auto have been dismissed and since
Kapustin lacks funds to attempt to resurrect those claims, it is clear that adjudication on the
merits will not occur if Plaintiffs are enjoined from pursuing their cross-claims in Akishev. It is
also clear that the question of whether this forum would be more convenient than the District of
New Jersey is now an entirely hypothetical inquiry, in which this Court need not engage.
E.1 Dupont de Nemours & Co. v. Invista B. V., 473 F.3d 44, 46 (2d Cir. 2006) ("The federal
judicial power extends only to actual cases and controversies; federal courts are without
jurisdiction to decide abstract or hypothetical questions ....")
To the extent that EUL is arguing that Plaintiffs and Kapustin engaged in "forum
shopping" by purposely refusing to retain counsel in this action, the Court notes that Plaintiffs
and Kapustin have no reason to prefer the New Jersey forum. The New Jersey litigation has not
gone at all well for the Global Defendants in general, or for Kapustin in particular. On October
29, 2014, after several contempt hearings, Judge Hillman, made a preliminary finding that the
Global Defendants committed at least two predicate acts of mail and wire fraud in the
furtherance of a RICO enterprise through a pattern of racketeering activity conducted operating
their websites (NJ Docket No. 110). In addition, as noted above, Judge Hillman has not only
accused Mr. Kapustin of perjuring himself and perpetrating a fraud on the court, but has also
stated that he has "never seen someone so willing to lie and cheat and steal" as Kapustin.
Transcript of Aug. 31, 2015, Proof Hearing, p. 91. There is no reason to believe that Plaintiffs
and Kapustin would prefer to, continue litigating before Judge Hillman.
For the reasons set forth above, EUL's motion for reconsideration is denied.
/s/ Sandra L. Townes
(SANDRA L. TOWN ES
United States District Judge
Dated: November 1$, 2015
Brooklyn, New York
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?