Baumgartner et al v. Salzman et al

Filing 349

MEMORANDUM AND ORDER ADOPTING REPORT AND RECOMMENDATION - For the foregoing reasons, it is hereby ORDERED that: (1) Blükbasi, Ozkan, and Metin's objections (Docket Entry 347) to Judge Tomlinson's R&Rs are SUSTAINED and Plaintiffs' ; objections (Docket Entry 343) are OVERRULED; (2) Judge Tomlinson's R&Rs (Docket Entries 329, 333) are hereby ADOPTED IN PART to the extent that they recommend dismissal of the negligence claims against Bolükbasi, Ozkan, and Metin and o f the RICO claims against Ambiente, CBOD, Greenbaum, Slacum, and ADC; and those claims are hereby DISMISSED WITH PREJUDICE; (3) Plaintiffs' motions for default judgments (Docket Entries 247, 306) are DENIED with leave to renew as outlined above; (4) Plaintiffs' motion to reinstate its claims against the Salzman Defendants (Docket Entry 315) is DENIED; (5) Plaintiffs' motion to reinstate its claims against Gibbins and Meytec (Docket Entry 311) is DENIED; (6) Gibbins and Meytec&# 039;s motion to enforce the Gibbins/Meytec Agreement (Docket Entry 319) is DENIED; (7) all claims against Defendants Blackstone, Rana, Sampaio, Sino, It's Investment, Schramm, Lider, Cetin, A. Rashid, John M. Preston Limited, Kazan, Sahin, Urkmez, Sinclair, Harrison, Halley, Renfrew, and London Financial will be dismissed without prejudice pursuant to Rule 4(m) of the Federal Rules of Procedure for failure to timely effectuate service unless Plaintiffs provide proof of service within s even (7) days of the date of this Memorandum and Order; (8) all remaining claims against the defendants that have been served--specifically, Schmidt, Ambiente, Wagner, CBOD, Greenbaum, Ralston, Slacum, ADC, Coban, Veli, Kocabas, Karli, Bolükbasi , Ozkan, and Metin--will be dismissed with prejudice pursuant to Rule 41(b) of the Federal Rules of Civil Procedure for failure to prosecute unless Plaintiffs move for a default judgment on those claims or voluntarily dismiss those claims within thir ty(30) days of the date of this Memorandum and Order. It is further ORDERED that counsel for Plaintiffs shall serve a copy of this Memorandum and Order on Defendants Schmidt, Ambiente, Wagner, CBOD, Greenbaum, Ralston, Slacum, ADC, Coban, Veli, Kocabas, Karli, Blükbasi, Ozkan, and Metin and the Salzman Defendants and file proof of service within (7) days of the date of this Memorandum and Order. So Ordered by Judge Joanna Seybert on 9/3/2013. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
JOHANNES BAUMGARTNER WIRTSCHAFTSUND VERMÖGENSBERATUNG GMBH and
HOLGER KNUT THEILER,
Plaintiffs,
-againstSTANLEY P. SALZMAN, ESQ.; STANLEY P.
SALZMAN, P.C.; FRIESNER & SALZMAN P.C.;
MARILYN J. SALZMAN; POSTBANK
FINANZBERATUNG AG; BHW BAUSPARKASSE AG
a/k/a DEUTSCHE POSTBANK AG; MICHAEL
KAUBISCH; STEFAN KRÖNER; PETER SCHMIDT;
AMBIENTE GMBH; BLACKSTONE CAPITAL TRADE
AG; HARI RANA; MORITZ JOHANNES WAGNER
d/b/a C.B.O.D. SERVICEBÜRO GERMANY;
CARTER, BAILEY, OPPENHEIM & DRYFUS,
INC.; J. GREENBAUM; JOHN RALSTON; KAREN
SLACUM a/k/a KAREN SLOCUMB; AGENTS FOR
DELAWARE CORPORATIONS; FERNANDO
FARIA SAMPAIO; SINO-IBERIAN HOLDINGS
LIMITED; IT’S INVESTMENT TREUHAND &
SERVICE GMBH; NORBERT SCHRAMM; MEHMED
KOCABAS; ALI KARLI; LIDER INTERNATIONAL
IMPORT & EXPERT GMBH; MESUT CETIN;
HÜSEYIN COBAN; AYKUT HASAN BÖLÜKBASI;
MURAT ÖZKAN; FIFO TRUST LIMITED; FIFO
TRUSTEES LIMITED; MEYTEC CAPITAL
HOLDINGS LTD; MARTIN BRIAN TOBIASGIBBINS; A. RASHID; JOHN M. PRESTON
LIMITED; KAZAN INVESTMENTS LIMITED;
UNIVERSAL METAL TRADING LTD.; HAKAN
METIN; SERKET SAHIN; HILMI ÜRKMEZ;
MUHSIN KARAKURT a/k/a VELI; PHILIP
SINCLAIR; LES HARRISON; MARTIN HALLEY,
RENFREW SECURITY BANK & TRUST (OFFSHORE)
LTD.; LONDON FINANCIAL INVESTMENT GROUP
LTD.; and DEFENDANT DOES 1-50;
Defendants.
---------------------------------------X

MEMORANDUM & ORDER
08-CV-2582(JS)(AKT)

APPEARANCES
For Plaintiffs:

Ivo G. Caytas, Esq.
Caytas & Associates
146 West 57th Street, Suite 57d
New York, NY 10019

For Defendants:
Postbank
Finanzberatung,
BHW Bausparkasse,
Kaubisch, and Kroner

Howard Zelbo, Esq.
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, NY 10006

FIFO Trust Limited,
FIFO Trustees Limited,
Tobias-Gibbins, and
Meytec Capital Holdings

Charles Hyman, Esq.
Kissel Hirsch & Wilmer LLP
580 White Plains Road, 5th Floor
Tarrytown, NY 10591

Salzman & Stanley P.
Salzman, P.C.

Peter J. Biging, Esq.
Lewis, Brisbois, Bisgaard & Smith, LLP
77 Water Street, Suite 2100
New York, NY 10005

Remaining Defendants

No appearances.

SEYBERT, District Judge:
Pending

before

the

Court

are

the

following:

(1)

Magistrate Judge A. Kathleen Tomlinson’s Report and Recommendation
(“R&R”) that the motion for partial default judgment filed by
Plaintiffs Johannes Baumgartner Wirtschafts-Und Vermögensberatung
GmbH (“JBWV”) and Holger Knut Theiler (“Theiler,” and together
with JBWV, “Plaintiffs”) on their claims for fraud, conversion,
unjust

enrichment,

Defendants

Aykut

conspiracy,
Hasan

and

Bölükbasi

gross

negligence

(“Bölükbasi”),

Murat

against
Özkan

(“Özkan”), and Hakan Metin (“Metin”) be granted in part and denied
in part (Docket Entries 247, 329) and Bölükbasi, Özkan, and Metin’s
objections thereto (Docket Entry 347); (2) Judge Tomlinson’s R&R
2

that Plaintiffs’ motion for final partial default judgment on their
claims for breach of contract, securities fraud, and violations of
the Racketeer Influenced and Corrupt Organizations Act (“RICO”)
against

Defendants

Peter

Schmidt

(“Schmidt”),

Ambiente

GmbH

(“Ambiente”), Moritz Johannes Wagner (“Wagner”), Carter Bailey
Oppenheim & Dryfus Inc. (“CBOD”), J. Greenbaum (“Greenbaum”), John
Ralston (“Ralston”), Karen Slacum a/k/a Karen Slocumb (“Slacum”),
Agents for Delaware Corporations (“ADC”), Hüseyin Coban (“Coban”),
Bölükbasi, Özkan, and Metin be granted in part and denied in part
(Docket Entries 306, 333) and Plaintiffs’ and Bölükbasi, Özkan,
and Metin’s objections thereto (Docket Entries 343, 347); (3)
Plaintiffs’ unopposed motion to reinstate their claims against
Defendants Stanley P. Salzman (“Salzman”), Stanley P. Salzman P.C.
(“Salzman P.C.”), and Friesner & Salzman P.C. (together, the
“Salzman Defendants”) (Docket Entry 315); (4) Plaintiffs’ motion
to reinstate their claims against Defendants Martin Brian TobiasGibbins (“Gibbins”) and Meytec Capital Holdings Limited (“Meytec”)
(Docket Entry 311); and (5) Gibbins and Meytec’s cross-motion to
declare the settlement agreement between Plaintiffs and Gibbins
and Meytec breached (Docket Entry 319).
For the following reasons, the Court SUSTAINS Bölükbasi,
Özkan,

and

Metin’s

objections

to

Judge

Tomlinson’s

R&Rs

and

OVERRULES Plaintiffs’ objections; ADOPTS IN PART Judge Tomlinson’s
R&Rs; DENIES Plaintiffs’ motions for default judgment; DENIES
3

Plaintiffs’ motions to reinstate their claims against the Salzman
Defendants

and

Defendants

Gibbins

and

Meytec;

and

DENIES

Defendants Gibbins and Meytec’s motion to enforce the settlement
agreement.
BACKGROUND
The Court assumes familiarity with the underlying facts
of this case, which are detailed in both of Judge Tomlinson’s R&Rs.
Thus,

this

section

will

be

limited

to

this

case’s

lengthy

procedural history.
Plaintiffs

commenced

this

action

on

June

27,

2008,

asserting violations of RICO, federal securities laws, and New
York state common law arising out of a purported advanced fee
fraud.1

On September 10, 2008, the Clerk of the Court noted the

default of Defendants CBOD, Greenbaum, and Ralston (Docket Entries
11-13), and, on September 11, 2008, Plaintiffs filed a motion for
a partial default judgment against those defendants on their state
law fraud, conversion, unjust enrichment, conspiracy, and gross
negligence

claims

(Docket

Entry

14),

which

the

undersigned

The defendants named in the original Complaint were Salzman,
Salzman P.C., Postbank Finanzberatung AG (“Postbank”), BHW
Bausparkasse AG (“BHW”), Schmidt, Ambiente, Blackstone Capital
Trade AG (“Blackstone”), CBOD, Greenbaum, Ralston, Fernando
Faria Sampaio (“Sampaio”), Sino-Iberian Holdings Limited
(“Sino”), It’s Investment Treuhand & Service GmbH (“It’s
Investment”), Norbert Schramm (“Schramm”), Ali Karli (“Karli”),
Lider International Import & Export GmbH (“Lider”), Mesut Cetin
(“Cetin”), Coban, and Defendant Does 1-50.
1

4

referred to Judge Tomlinson for an R&R (Docket Entry 26).

Judge

Tomlinson issued her R&R on August 14, 2009, recommending that the
Court enter a partial default judgment against these defendants on
those claims but defer calculating damages until resolution of the
entire case.

(Docket Entry 57.)

its entirety on September 10, 2009.

The Court adopted this R&R in
(Docket Entry 60.)

On September 11, 2009, Plaintiffs moved for leave to
file

a

Second

defendants.3

Amended

Complaint2

(Docket Entry 62.)

motion on September 17, 2009.
Plaintiffs

voluntarily

which

set

forth

Judge Tomlinson granted that

(Docket Entry 63.)

dismissed

additional

the

claims

Thereafter,

against

Marilyn

Salzman with prejudice (Docket Entry 86), against the Salzman
Defendants without prejudice (Docket Entry 128), against Universal

Plaintiffs had previously moved for leave to file a First
Amended Complaint (Docket Entry 31) but that motion, which was
still pending on September 11, 2009, was rendered moot by
Plaintiffs’ filing the motion for leave to file a Second Amended
Complaint.
2

The Second Amended Complaint added the following defendants:
Friesner & Salzman P.C., Marilyn Salzman, Michael Kaubisch
(“Kaubisch”), Stefan Kröner (“Kröner”), Hari Rana (“Rana”),
Wagner, Slacum, ADC, Mehmed Kocabas (“Kocabas”), Bölükbasi,
Özkan, FiFo Trust Limited, FIFO Trustees Limited (together with
“FiFo Trust Limited,” the “FIFO Defendants”), Meytec, Gibbins,
A. Rashid, John M. Preston Limited, Kazan Investments Limited
(“Kazan”), Universal Metal Trading Limited (“Universal Metal”),
Metin, Serket Sahin (“Sahin”), Hilmi Ürkmez (“Ürkmez”), Muhsin
Karakurt a/k/a Veli (“Veli”), Philip Sinclair (“Sinclair”), Les
Harrison (“Harrison”), Martin Halley (“Halley”), Renfrew
Security Bank & Trust (Offshore) Ltd. (“Renfrew”), and London
Financial Investment Group Ltd. (“London Financial”).
3

5

Metal without prejudice (Docket Entry 171), against BHW, Postbank,
Kaubisch, and Kröner without prejudice (Docket Entry 235), and
against the FIFO Defendants with prejudice (Docket Entry 253).
Plaintiffs also consented to the entry of judgment against Gibbins
and Meytec in the amount of $7,536,345.00.

(Docket Entry 234.)

In the interim, Plaintiffs requested that the default of
Defendants Slacum and ADC be entered by the Clerk of the Court and
moved for a partial default judgment against Slacum and ADC on
their state law fraud, conversion, unjust enrichment, conspiracy,
and gross negligence claims.

(Docket Entries 73, 77.)

The Clerk

of the Court noted their defaults (Docket Entries 75-76), and the
Court referred the motion for a partial default judgment to Judge
Tomlinson for an R&R (Docket Entry 91).

Judge Tomlinson issued an

R&R on August 24, 2010, recommending that the Court enter a partial
default judgment against these defendants on these claim but defer
calculating damages until resolution of the entire case.
Entry 217.)

(Docket

Plaintiffs filed objections to Judge Tomlinson’s R&R

to the extent that she recommended deferring the calcuation of
damages and the entry of judgment.

(Docket Entry 220.)

The Court

sustained Plaintiffs’ objections, thus overruling the portion of
Judge Tomlinson’s R&R that recommended delaying an assessment of
damages, and granted Plaintiffs’ motion for a partial default
judgment in its entirety.

(Docket Entry 240.)

A partial judgment

was entered against Slacum and ADC jointly and severally in the
6

amount of $3,600,000 in liquidated damages plus $821,982.42 in
statutory

interest

in

favor

of

JBWV

and

in

the

amount

of

$200,000.00 in liquidated damages plus $68,301.33 in statutory
interest in favor of Theiler.

(Docket Entry 240.)

Plaintiffs filed similar motions for partial default
judgment against Defendants Ambiente, Schmidt, Veli, Kocabas,
Coban, Karli, and Wagner (Docket Entries 145, 149, 157, 173, 184,
189) after receiving certifications of their respective defaults
from the Clerk of the Court (Docket Entries 138-39, 141, 143, 153,
169, 180).

These motions were all referred to Judge Tomlinson for

R&Rs. (Docket Entries 154, 177, 187, 194.) Judge Tomlinson issued
three separate R&Rs addressing these motions on February 24, 2011
(Docket Entries 262-64), which the Court adopted in their entirety
(Docket Entry 269).

That Order concluded, in relevant part, as

follows:
1.

A partial default judgment is entered in
Plaintiffs’ favor, and against Defendants
Ambiente GMBH, Peter Schmidt, Muhsin Karakurt
a/k/a Muhsin Veli, Mehmed Kocabas, Hüseyin
Coban, Ali Karli, Moritz Johannes Wagner d/b/a
C.B.O.D. Serviceburo Germany, on the state law
claims
of
fraud,
conversion,
unjust
enrichment, conspiracy and gross negligence.

2.

Defendants Ambiente GMBH, Peter Schmidt,
Muhsin Karakurt a/k/a Muhsin Veli, Mehmed
Kocabas, Hüseyin Coban, Ali Karli, Moritz
Johannes Wagner d/b/a C.B.O.D. Serviceburo
Germany; Carter Bailey Oppenheim & Dryfus,
Inc., J. Greenbaum, and John Ralston are
jointly and severally liable:

7

a.

To
Plaintiff
Johannes
Baumgartner
Wirtschaftsund
Vermöegensberatung
[sic] GMBH for: (a) liquidated damages in
the amount of $3,600,000; plus (b)
prejudgment interest in the amount of
$970,223.31;

b.

To Plaintiff Holger Knut Theiler for: (a)
liquidated damages in the amount of
$200,000; plus (b) prejudgment interest
in the amount of $81,079.32.

3.

The Clerk of the Court is directed to issue a
judgment in Plaintiffs’ favor on those
amounts, against those Defendants.

4.

Additionally, the Clerk of the Court is
directed to amend the judgment entered by
Electronic Order on September 30, 2010 against
Ms.
Slacum
and
Agents
for
Delaware
Corporations. The Amended Judgment should
reflect that Ms. Slacum and Agents for
Delaware
Corporations
are
jointly
and
severally liable with Ambiente GMBH, Peter
Schmidt, Muhsin Karakurt a/k/a Muhsin Veli,
Mehmed Kocabas, Hüseyin Coban, Ali Karli,
Moritz
Johannes
Wagner
d/b/a
C.B.O.D.
Serviceburo Germany; Carter Bailey Oppenheim
& Dryfus, Inc., J. Greenbaum, John Ralston,
and not just each other.
. . .

8.

Any assets that Plaintiffs recover from any
Defendant shall be deposited in the Court’s
registry pending this case’s resolution or
further order of the Court. Plaintiffs are
directed to consult with Judge Tomlinson
concerning the proper procedure for depositing
said assets.

9.

The Court shall retain jurisdiction of this
matter for all purposes.

8

(Docket Entry 274, at 6-7.)4

A partial default judgment consistent

with that Order was entered, and the prior partial default judgment
against CBOD, Greenbaum, and Ralston was amended to reflect that
they were jointly and severally liable with all of the defaulting
defendants, not just with each other.

(Docket Entry 275.)

In the interim, Plaintiffs filed another motion for a
partial default judgment (Docket Entry 247) after the Clerk of the
Court noted the defaults of Defendants Bölükbasi, Özkan, and Metin
(Docket Entries 244-46).

This motion was referred to Judge

Tomlinson for an R&R on November 29, 2010.

(Docket Entry 251.)

Before Judge Tomlinson issued an R&R on that motion,
Plaintiffs filed a letter requesting, inter alia: (1) leave to
move for a second partial default judgment against Defendants
Ambiente, Schmidt, Veli, Kocabas, Coban, Karli, Wagner, Greenbaum,
Ralston, Slacum, CBOD, and ADC on their RICO, securities fraud,
and

breach

Plaintiffs

of
of

contract
the

claims

condition

in

and
the

(2)

an

order

existing

“relieving”

partial

default

judgment that all assets recovered had to be deposited with the
Court pending resolution of the entire action. (Docket Entry 294.)
The Court granted Plaintiffs’ request to move for partial default

The Court is actually citing to and quoting from an amended
version of the original Order adopting Judge Tomlinson’s R&Rs
that was edited to correct some typographical errors.
4

9

judgment and denied Plaintiffs’ request for an order amending the
partial default judgment.

(Docket Entry 303.)

Plaintiffs, in that letter, also asserted that they
would

voluntarily

dismiss

the

remaining

claims

against

the

remaining defendants with the intention of commencing a new action
in which they would: (1) add new defendants, (2) reinstate claims
against defendants that were dismissed from this action without
prejudice, and (3) reinstate their claims against the Salzman
Defendants, Gibbins, and Meytec, who were previously dismissed
pursuant to settlement agreements.

(Docket Entry 294.)

Although

the Court was amenable to Plaintiffs discontinuing the remaining
claims in this action without prejudice, the Court expressed
concern regarding Plaintiffs’ ability to reinstate their claims
against the Salzman Defendants, Gibbins, and Meytec in a new
action.

(Order, Docket Entry 303, at 9-11.)

Thus, the Court

granted Plaintiffs’ leave to move to reinstate those claims in the
present action.
Thereafter,

Plaintiffs

moved

for

a

partial

default

judgment on its RICO, securities fraud, and breach of contract
claims against Defendants Schmidt, Ambiente, Ralston, Greenbaum,
CBOD, ADC, Slacum, Wagner, Coban, Bölükbasi, Özkan, and Metin
(Docket Entry 306)5 and filed motions to reinstate its claims

Plaintiffs did not move for partial default judgment against
Defendants Kocabas, Karli, or Veli--three defendants whose
5

10

against the Salzman Defendants and Gibbins and Meytec (Docket
Entries

311,

315).

The

Salzman

Defendants

did

not

oppose

Plaintiffs’ motion, but Gibbins and Meytec filed a cross-motion
alleging that Plaintiffs had breached their settlement agreement
(Docket Entry 319).
Judge Tomlinson issued R&Rs on the pending motions for
default judgment on February 21, 2013 (the “February 21 R&R”) and
March 8, 2013 (the “March 8 R&R”) respectively.
329, 333.)
deny

The February 21 R&R recommended that the Court:

Plaintiffs’

motion

Defendant

Özkan

for

prejudice

and

give

additional

(Docket Entries

for

unjust

partial

default

enrichment

and

Plaintiffs

information

in

twenty-one

support

of

such

(1)

judgment

against

conversion

without

days

to

claims;

provide
(2)

deny

Plaintiffs’ motion for partial default judgment against Bölükbasi,
Özkan, and Metin on their claim for gross negligence; (3) grant
Plaintiffs’ motion for partial default judgment against Bölükbasi
and Metin on their unjust enrichment and conversion claims and
hold them jointly and severally liable on these claims with Slacum,
ADC, Ambiente, Schmidt, Veli, Kocabas, Coban, Karli, Wagner, CBOD,
Greenbaum, and Ralston; (4) grant Plaintiffs’ motion for partial
default judgment against Bölükbasi, Özkan, and Metin on their

default has been noted and against whom partial default
judgments on some of the state law claims have been entered--for
reasons unknown to the Court.
11

claims for fraud and conspiracy and hold them jointly and severally
liable on these claims with Slacum, ADC, Ambiente, Schmidt, Veli,
Kocabas, Coban, Karli, Wagner, CBOD, Greenbaum, and Ralston; and
(5) award damages to JBWV in the amount of $3,600,000 plus interest
and to Theiler in the amount of $200,000 plus interest.

(Docket

Entry 329.)
Judge

Tomlinson’s

March

8

R&R

recommended

that

the

Court: (1) grant Plaintiffs’ motion for a partial default judgment
against Schmidt, Ambiente, and CBOD on the breach of contract
claims; (2) grant Plaintiffs’ motion for a partial default judgment
against Schmidt, Ambiente, Ralston, Greenbaum, CBOD, ADC, Slacum,
Wagner, Coban, Bölükbasi, Özkan, and Metin on the securities fraud
claims; (3) grant Plaintiffs’ motion for a partial default judgment
against Wagner on the RICO claims; (4) deny Plaintiffs’ motion for
a partial default judgment against Schmidt, Ambiente, Ralston,
Greenbaum, CBOD, ADC, Slacum, Coban, Bölükbasi, Özkan, and Metin
on the RICO claims; and (5) award Plaintiff JBWV $3,600,000 plus
interest on the breach of contract and securities fraud claims
against Schmidt, Ambiente, Ralston, Greenbaum, CBOD, ADC, Slacum,
Wagner, Coban, Bölükbasi, Özkan, and Metin jointly and severally
and $10,800,000 against Wagner only on the RICO claims and award
Plaintiff Theiler $200,000 plus interest on the breach of contract
and securities fraud claims against Schmidt, Ambiente, Ralston,
Greenbaum, CBOD, ADC, Slacum, Wagner, Coban, Bölükbasi, Özkan, and
12

Metin jointly and severally and $600,000 against Wagner only on
the RICO claims.

(Docket Entry 333.)

Defendants Bölükbasi, Özkan, and Metin filed objections
to both R&Rs (Docket Entry 347), and Plaintiffs objected only to
the March 8 R&R (Docket Entry 343).

Also pending before the Court

are Plaintiffs’ motions to reinstate their claims against the
Salzman Defendants, Gibbins, and Meytec, and Gibbins and Meytec’s
cross-motion

to

enforce

their

settlement

agreement.

(Docket

Entries 311, 315, 319.)
DISCUSSION
The Court will first address the objections to Judge
Tomlinson’s R&Rs, followed by Plaintiffs’ unopposed motion to
reinstate their claims against the Salzman Defendants, and finally
the

cross-motions

regarding

the

settlement

agreement

between

Plaintiffs and Gibbins and Meytec.
I.

Objections to Judge Tomlinson’s R&Rs
The Court will summarize the applicable standard of

review before turning to the merits of the parties’ objections.
A.

Standard of Review
“When evaluating the report and recommendation of a

magistrate judge, the district court may adopt those portions of
the report to which no objections have been made and which are not
facially erroneous.”
(S.D.N.Y. 2002).

Walker v. Vaughan, 216 F. Supp. 2d 290, 291

A party may serve and file specific, written
13

objections to a magistrate’s report and recommendation within
fourteen days of being served with the recommended disposition.
See FED. R. CIV. P. 72(b)(2).

Upon receiving any timely objections

to the magistrate judge’s recommendation, the district “court may
accept, reject, or modify, in whole or in part, the findings or
recommendations

made

by

the

magistrate

judge.”

28

U.S.C.

§ 636(b)(1); see also FED. R. CIV. P. 72(b)(3). A party that objects
to a report and recommendation must point out the specific portions
of the report and recommendation to which they object.

See Pall

Corp. v Entegris, Inc., 249 F.R.D. 48, 52 (E.D.N.Y. 2008).
When a party raises an objection to a magistrate judge's
report, the Court must conduct a de novo review of any contested
sections of the report.

See 28 U.S.C. § 636(b)(1); Pizarro v.

Bartlett, 776 F. Supp. 815, 817 (S.D.N.Y. 1991).

But if a party

“makes only conclusory or general objections, or simply reiterates
his

original

arguments,

the

Court

Recommendation only for clear error.”

reviews

the

Report

and

Pall Corp., 249 F.R.D. at

51 (internal quotation marks and citation omitted).

Furthermore,

even in a de novo review of a party’s specific objections, a Court
ordinarily
evidentiary

will

not

material

consider
which

“arguments,

could

have

been

case
but

law

and/or

[were]

presented to the magistrate judge in the first instance.”

not,

J.P.T.

Auto., Inc. v. Toyota Motor Sales, U.S.A., Inc., 659 F. Supp. 2d

14

350, 353 (E.D.N.Y. 2009) (internal quotation marks and citation
omitted).
B.

Objections to the February 21 R&R
Bölükbasi, Özkan, and Metin object to the February 21

R&R on the grounds that Judge Tomlinson improperly relied upon,
inter alia, a statement made by Defendant Coban to the Istanbul
Police on March 11, 2009 and deposition testimony of Defendant
Gibbins from November 3, 2010, arguing that these individuals are
not credible and pointing the Court to other evidence extrinsic to
the

Second

Amended

Complaint

that

arguably

evidence relied upon by Judge Tomlinson.

contradicts

the

The Court agrees that it

was improper for Judge Tomlinson to rely on such evidence, although
not for the reasons articulated in the objections.
A party’s default constitutes an “admi[ssion] of all
‘well-pleaded’ factual allegations contained in the complaint.”
City of N.Y. v. Mickalis Pawn Shop, L.L.C., 645 F.3d 114, 137 (2d
Cir. 2011) (emphasis added) (quoting Vt. Teddy Bear Co. v. 1-800
Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); accord Cablevision
Sys. N.Y.C. Corp. v. Lokshin, 980 F. Supp. 107, 111 (E.D.N.Y.
1997).

Thus, “a district court may not enter a default judgment

unless the plaintiff’s complaint states a valid facial claim for
relief.” Mickalis Pawn Shop, 645 F.3d at 137 n.23 (emphasis added)
(collecting cases from other circuits); see also Jackson v. Corr.
Corp. of Am., 564 F. Supp. 2d 22, 27 (D.D.C. 2008) (“[T]he
15

defendants’ default notwithstanding, the plaintiff is entitled to
a default judgment only if the complaint states a claim for
relief.” (internal quotation marks and citation omitted)); GMAC
Commercial Mortg. Corp. v. Maitland Hotel Assocs., Ltd., 218 F.
Supp. 2d 1355, 1359 (M.D. Fla. 2002) (“A default judgment cannot
stand on a complaint that fails to state a claim.”).
however,

the

February

21

R&R

relies,

almost

Here,

exclusively,

on

exhibits attached to Plaintiffs’ motion for default judgment-exhibits that were not attached to or referenced in the Second
Amended Complaint.

Thus, the allegations contained in those

exhibits were not deemed “admitted” upon Bölükbasi, Özkan, and
Metin’s default and should not have been considered in deciding
Plaintiffs’ motion for a default judgment.6

Accordingly, their

objections are SUSTAINED and this Court declines to adopt Judge
Tomlinson’s February 21 R&R to the extent that it recommends a
finding of liability.7

Default judgments are disfavored, see State St. Bank & Trust
Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 168 (2d
Cir. 2004), so before a district court will enter one, it must
ensure that the defaulting defendants received notice of the
claims against them and were provided an opportunity to answer
those allegations. To the extent that Plaintiffs here rely upon
evidence extrinsic to the Second Amended Complaint to state a
claim, the defaulting defendants were not given adequate notice
and were deprived of a meaningful opportunity to respond.
6

The February 21 R&R also recommends denying Plaintiffs’ motion
for default judgment on their gross negligence claims against
these Defendants. As Plaintiffs did not object to this finding,
7

16

In reviewing, de novo, whether Plaintiffs are entitled
to a default judgment against Bölükbasi, Özkan, and Metin, the
Court is limited to the non-conclusory, factual allegations in the
Second Amended Complaint.

See Wildlife Ctr., Inc. v. Fasig Tipton

Ky., Inc. (In re Wildlife Ctr., Inc.), 102 B.R. 321, 325 (E.D.N.Y.
1989) (“[A] party in default does not admit mere conclusions of
law.” (internal quotation marks and citation omitted)); accord
Trs. of the Plumbers Local Union No. 1 Welfare Fund v. Philip Gen.
Constr., No. 05-CV-1655, 2007 WL 3124612, at *3 (E.D.N.Y. Oct. 23,
2007).

With respect to these defendants, the Second Amended

Complaint makes the following non-conclusory allegations: that the
Salzman Defendants paid Bölükbasi and Özkan $799,950.00 each from
Plaintiffs’ escrowed funds in the Salzman Defendants’ possession
(Second Am. Compl. ¶ 179); that Bölükbasi and Özkan did not
“deliver[]

any

contractual

performance”

or

“give[]

any

other

lawful valuable consideration” in exchange for their receipt of
that money (id. ¶¶ 181, 186); and that Bölükbasi, Özkan, and Metin
are Turkish organized crime figures that are “actively involved in
promoting similar schemes in the U.S. and elsewhere” (id. ¶ 71).
Whether such allegations are sufficient to state a claim for fraud,
conspiracy, conversion, unjust enrichment, or gross negligence was

the Court hereby ADOPTS this portion of Judge Tomlinson’s R&R
and DISMISSES those claims WITH PREJUDICE.
17

not briefed by Plaintiffs in their moving papers,8 and it is not
this Court’s obligation to “make a party’s arguments for it or
‘fill in the blanks’ on that party’s behalf,” Bey v. New York, No.
11-CV-3296, 2013 WL 3282277, at *6 (E.D.N.Y. June 25, 2013)
(internal quotation marks and citation omitted); cf. Sioson v.
Knights of Columbus, 303 F.3d 458, 460 (2d Cir. 2002) (stating
that the Circuit will generally decline to scour the record for
evidence

to

Plaintiffs’
Bölükbasi,

support
motion
Özkan,

a

party’s

for

default

and

Metin

arguments).
judgment

on

their

Accordingly,

against
fraud,

Defendants
conspiracy,

conversion, unjust enrichment, and gross negligence claims is
DENIED, and for the reason explained above, see supra note 7,
Plaintiffs’

negligence

claims

against

these

defendants

are

DISMISSED WITH PREJUDICE.
The Court will, however, allow Plaintiffs to submit a
new motion for default judgment that applies the appropriate
standard articulated above on their fraud, conspiracy, conversion
and unjust enrichment claims. Such motion shall be received within
thirty (30) days of the date of this Memorandum and Order or these
claims against these defendants will be dismissed pursuant to Rule

Although Plaintiffs acknowledge in their brief that the Court’s
analysis is limited to the “well-pleaded allegations [in] the
complaint” (Pls. Mot., Docket Entry 248, at 22), they proceed to
explain “what [they] expect[] the evidence would have shown at a
trial of this matter” (id. at 10), not whether those wellpleaded allegations state a claim for relief.
8

18

41(b) of the Federal Rules of Civil Procedure for failure to
prosecute.

If, upon reviewing the allegations in the Second

Amended Complaint, Plaintiffs do not believe that they have stated
a

claim

for

relief,

they

may

voluntarily

dismiss

those

claims/defendants pursuant to Rule 41(a)(1)(A)(i).9
C.

Objections to the March 8 R&R
Plaintiffs, as well as Defendants Bölükbasi, Özkan, and

Metin, submitted objections to Judge Tomlinson’s March 8 R&R.
Bölükbasi, Özkan, and Metin again argue that Judge Tomlinson erred
in considering the statements of Coban and Gibbins, which were
extrinsic to the Second Amended Complaint, and for the reasons
articulated above, those objections are SUSTAINED.

Because, in

determining whether the Second Amended Complaint established the
liability of Defendants Schmidt, Ambiente, Ralston, Greenbaum,
CBOD, ADC, Slacum, Wagner, Coban, Bölükbasi, Özkan, and Metin on
Plaintiffs’ RICO, securities fraud, and breach of contract claims,

Given that partial judgments have been entered in this action,
the Court questions whether Plaintiffs could move to file a
Third Amended Complaint without first vacating the existing
partial default judgments. See Ruotolo v. City of N.Y., 514
F.3d 184, 191 (2d Cir. 2008) (“A party seeking to file an
amended complaint postjudgment must first have the judgment
vacated or set aside pursuant to [Rules] 59(e) or 60(b).”); see
also, e.g., F.D.I.C. v. Weise Apartments, 192 F.R.D. 100, 103
(S.D.N.Y. 2000) (finding that parties could not stipulate to the
amendment of the complaint without first moving to vacate the
existing partial default judgment because “once final judgment
has been entered, the complaint is merged into the judgment”
(citing Paganis v. Blonstein, 3 F.3d 1067, 1072 (7th Cir.
1993)).
9

19

Judge Tomlinson relied heavily on evidence extrinsic to the Second
Amended Complaint,10 the Court cannot adopt the March 8 R&R’s
finding of liability.
Further, as Plaintiffs’ moving papers relied almost
exclusively on evidence extrinsic to the Second Amended Complaint
in attempting to establish liability, the Court will not conduct
a de novo review at this time.

Rather, Plaintiffs’ current motion

is DENIED with leave to refile in accordance with the standards
articulated in this Memorandum and Order.

Such motion shall be

received within thirty (30) days of the date of this Memorandum
and

Order

or

these

claims

against

these

defendants

will

be

dismissed pursuant to Rule 41(b) of the Federal Rules of Civil
Procedure for failure to prosecute.

If, upon reviewing the

In reviewing the docket in this action, the Court realized
that it has previously entered partial default judgments based
on other R&Rs that also improperly relied on evidence extrinsic
to the Second Amended Complaint to establish liability. The
Court cannot, however, sua sponte amend a judgment based on a
mistake of law. Compare FED. R. CIV. P. 60(a) (allowing the court
to sua sponte correct a final order or judgment to correct a
clerical mistake, oversight or omission), with FED. R. CIV. P.
60(b) (providing other grounds for relief from judgment “[o]n
motion”). See also Weeks v. Jones, 100 F.3d 124, 128-29 (11th
Cir. 1996) (collecting cases that state that mistakes of law
that “affect substantial rights of the parties” are beyond the
scope of Rule 60(a) and, thus, cannot be raised by a court sua
sponte (internal quotation marks and citations omitted)).
10

Thus, counsel for Plaintiffs is hereby ORDERED to serve a copy
of this Memorandum and Order on all defendants against whom
Plaintiffs have received partial default judgments within seven
(7) days of the date of this Memorandum and Order.
20

allegations in the Second Amended Complaint, Plaintiffs do not
believe

that

voluntarily

they

have

dismiss

stated

those

a

claim

for

relief,

may

pursuant

claims/defendants

they
to

Rule

41(a)(1)(A)(i).
Given that the Court is granting Plaintiffs leave to refile, it must make a few additional points.

First, Plaintiffs’

fraud and RICO claims must satisfy Federal Rule of Civil Procedure
9(b)’s heightened pleading standard.

FED. R. CIV. P. 9(b) (“In

alleging fraud or mistake, a party must state with particularity
the

circumstances

constituting

fraud

or

mistake.”);

see

also

Ganino v. Citizens Utils. Co., 228 F.3d 154, 168 (2d Cir. 2000)
(applying Rule 9(b) to a complaint alleging securities fraud);
First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159,
178-79 (2d Cir. 2004) (applying Rule 9(b) to substantive RICO
claims).

In order to comply with Rule 9(b), the Second Amended

Complaint must:

“(1) specify the statements that the plaintiff

contends were fraudulent, (2) identify the speaker, (3) state where
and

when

the

statements

were

statements were fraudulent.”

made,

and

(4)

explain

why

the

Lerner v. Fleet Bank, N.A., 459 F.3d

273, 290 (2d Cir. 2006) (internal quotation marks and citation
omitted). Further, “Rule 9(b) is not satisfied where the complaint
vaguely

attributes

‘defendants.’”
(2d Cir. 1993).

the

alleged

fraudulent

statements

to

Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175
Rather, where, as here, multiple defendants are
21

alleged to have been involved in the fraud, the complaint must
“inform each defendant of the nature of his alleged participation
in the fraud.”

DiVittorio v. Equidyne Extractive Indus., Inc.,

822 F.2d 1242, 1247 (2d Cir. 1987).
Second,

to

the

extent

that

Plaintiffs

already

have

partial default judgments on their unjust enrichment claims, they
are likely barred from recovering for breach of contract.

Under

New York law, “[t]he existence of a valid and enforceable written
contract

governing

a

particular

subject

matter

ordinarily

precludes recovery in quasi contract for events arising out of the
same subject matter.”

Clark-Fitzpatrick, Inc. v. Long Island R.R.

Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 656, 516 N.E.2d 190,
193 (1987); accord U.S. E. Telecomms., Inc. v. U.S. W. Commc’ns
Servs., Inc., 38 F.3d 1289, 1296 (2d Cir. 1994).

Here, in

obtaining judgments on their unjust enrichment claims, Plaintiffs
have, in effect, conceded that no valid contract governing the
dispute exists.

Thus, it appears as though Plaintiffs will not be

able to recover under a breach of contract theory.
Third, Plaintiffs objected to the March 8 R&R, arguing
that Judge Tomlinson erred in recommending the denial of their
motion for default judgment on the RICO claims against Defendants
Schmidt, Ralston, Coban, Bölükbasi, Özkan, and Metin11 on the

Plaintiffs do not object to Judge Tomlinson’s recommendation
that default judgment be denied on their RICO claims against
11

22

grounds that those claims were barred by 18 U.S.C. § 1964(c), the
so-called “RICO Amendment.”

(March 8 R&R at 20-21 (stating that

under the RICO Amendment, “no person may rely upon any conduct
that would have been actionable as fraud in the purchase or sale
of securities to establish a violation of section 1962 unless the
defendant is criminally convicted in connection with the fraud”
(quoting 18 U.S.C. § 1964 (internal quotation marks omitted).)
Plaintiffs argue that this was in error because: (1) “their
allegations of RICO-relevant fraudulent conduct by the Defaulted
Defendants far exceed mere securities violations” (Pls. Objs.,
Docket Entry 343, ¶ 7) and (2) given that “a substantial likelihood
exists that criminal convictions may yet be obtained,” Plaintiffs
should be granted a stay until the resolution of the criminal
proceedings pending against these defendants (id. ¶¶ 7-8).
objections are OVERRULED.

Both

Plaintiffs chose not to brief their

first objection, stating that “it may not be in the interest of
judicial economy” to fully brief their non-securities-related
predicate acts and that they would prefer a stay (id. ¶ 7), and

a

Court need not entertain an argument that was not briefed, see,
e.g., Fidelity Bank, Nat’l Ass’n v. Avrutick, 740 F. Supp. 222,
228 n.6 (S.D.N.Y. 1990) (refusing to address a defense that was
mentioned only in passing but not briefed).

Plaintiffs’ second

Ambiente, CBOD, Greenbaum, Skalum, and ADC, and, accordingly,
those claims are hereby DISMISSED WITH PREJUDICE.
23

objection--their request for a stay--was not raised in their
initial moving papers, see J.P.T. Auto., 659 F. Supp. 2d at 353
(stating that a court in reviewing specific objections to an R&R
will not consider arguments that “could have been but [were] not,
presented to the magistrate judge in the first instance”).
Fourth, Plaintiffs also objected to the March 8 R&R to
the extent that it denied their request for compensatory and
benefit-of-the-bargain damages, including the nearly $160 million
in profits that were allegedly promised as a return on their
investment.

However, as the Court has rejected Judge Tomlinson’s

finding as to liability, the issue of damages is premature.
Accordingly, Plaintiffs’ objection is OVERRULED.12
Finally, while the Court is granting Plaintiffs leave to
file a new motion for default judgment on their remaining claims,
they are not required to do so and may, instead, voluntarily
dismiss those claims without prejudice.

Plaintiffs are warned

that if they do so move and the allegations as pled in their Second

The Court questions, without deciding, whether Plaintiffs
would be entitled to the “benefit-of-the-bargain” damages they
request even if they establish liability. See Sender v.
Buchanan (In re Hedged-Invs. Assocs., Inc.), 84 F.3d 1286, 1290
(10th Cir. 1996) (finding that an innocent investor in a Ponzi
scheme was not entitled to benefit-of-the-bargain damages
because there were many innocent investors, so “[t]o allow [her]
to enforce h[er] contract to recover promised returns in excess
of h[er] [investment] would be to further the [defendants’]
fraudulent scheme at the expense of other [investors]” (internal
quotation marks and citation omitted)).
12

24

Amended Complaint fail to state a claim, they risk having those
claims dismissed with prejudice.
II.

Motion to Reinstate Claims against the Salzman Defendants
Plaintiffs entered into a settlement agreement (the

“Salzman Agreement”) on or around December 18, 2009 (Pls.’ Mot. to
Reinstate Salzman Defs. (“Pls.’ Salzman Mot.”), Docket Entry 316,
Ex.

A),

pursuant

to

which

the

parties

stipulated

to

the

discontinuance of this action as against the Salzman Defendants
without prejudice (to be converted to a stipulation with prejudice
upon

conclusion

of

the

pending

action)

(Docket

Entry

83).

Plaintiffs now seek to rescind the Salzman Agreement and reinstate
the claims against the Salzman Defendants on the grounds that: (1)
the Salzman Agreement is voidable as there was fraud in the
inducement--namely, Salzman provided Plaintiffs with an inaccurate
and incomplete accounting prior to entering into the agreement
and/or (2) Salzman materially breached its terms.
315.)

(Docket Entry

The Salzman Defendants have not opposed this motion.
The Court will first review the pertinent terms of the

Salzman Agreement before turning to the merits of Plaintiffs’
arguments.
A.

The Salzman Agreement
In the simplest terms, the Salzman Agreement provided

that,

in

against

exchange
the

for

Salzman

Plaintiffs

Defendants,
25

discontinuing
they

were

their

required

claims
to

pay

Plaintiffs $225,000 and cooperate in good faith with Plaintiffs’
efforts to recover the funds allegedly lost in the advanced fee
fraud scheme.

The Salzman Agreement states that the Salzman

Defendants’ cooperation included the following:
the obligation (to the extent not already
complied with) to provide all documents
concerning the transactions referred to in the
Second Amended Complaint filed in the Action,
including without limitation all documents
concerning communications with any of the
other defendants in the Action (other than
Marilyn Salzman) concerning the transactions
referred to therein, assisting Plaintiffs’
review of these records, and providing full
and
truthful
testimony
concerning
the
transactions in any action, arbitration,
investigation or proceeding at the request of
Plaintiffs . . . .
(Pls.’ Salzman Mot. Ex. A ¶ 8.3.)

The Salzman Agreement further

provides that:
Th[e] discontinuance without prejudice shall
be deemed to be and shall be converted to one
with prejudice without further action of the
parties at the conclusion of this Action
unless it is established that Salzman, in
providing
documentation
and/or
sworn
testimony to Plaintiffs subsequent to and as
part of the cooperation aspect of this
Agreement has intentionally made a material
misrepresentation of fact or failed to
disclose a material fact of such significance
as to constitute fraudulent concealment . . . .
(Id. ¶ 2.)

That paragraph, however, qualifies Plaintiffs’ right

to reinstate its claims against the Salzman Defendants, stating
that:

26

Plaintiffs shall have no right to treat the
claims as against the Salzman Defendants as
having been discontinued without prejudice
and/or to attempt to revive the claims unless
and
until
such
intentional
material
misrepresentation
or
material
omission
constituting fraudulent concealment has been
determined to have occurred by a duly
appointed arbitration panel, following an
arbitration held pursuant to the provisions of
Paragraph 9 hereof.
(Id.)
Paragraph 9, titled “Arbitration” provides, in relevant
part, as follows:
The Parties agree that any dispute[,] claim or
controversy arising out of or relating to the
Agreement
or
the
breach,
termination,
enforcement,
interpretation
or
validity
thereof, including the determination of the
scope or applicability of this agreement to
arbitrate, shall be determined by a final and
binding arbitration at JAMS in New York, New
York before three arbitrators.
(Id. ¶ 9.)13
There are three other provisions that are relevant to
the Court’s discussion.

The first is titled “Waiver of Challenge

on Grounds of Nullity or Voidability” and provides as follows:
“The Parties hereto waive any and all challenges to the validity
and enforceability of this Agreement or of any payment made

The necessity of arbitration is mentioned two other times in
the agreement: in Paragraph 5.6 relating to the withdrawal and
retroactive revocation of the agreement’s releases, and in
Paragraph 8.3(d), which states that Salzman’s cooperation shall
be sufficient unless determined by an arbitrator to be
otherwise.
13

27

thereunder at any time, for any reason and in any forum, to the
fullest extent permitted by law.”

(Id. ¶ 4.)

The second is a

merger clause, which provides that the Salzman Agreement:
contains the entire Agreement between the
Parties and no compromise, inducement or
representation other than as set forth in this
Agreement has been made, offered or agreed
upon. Except as explicitly set forth in this
Agreement, there are no representations,
warranties or inducements whether oral,
written, expressed or implied, that in any way
affect or condition the validity of this
Agreement or any of its conditions or terms.
All prior negotiations, oral or written, are
merged into this Agreement.
(Id. ¶ 10.5.)

Finally, the Salzman Agreement provides that it

shall be governed by New York law.
B.

(Id. ¶ 10.6.)

Plaintiffs’ Grounds for Relief
Although Plaintiffs have not formally fashioned their

motion as one pursuant to Rule 60(b) of the Federal Rules of Civil
Procedure, in order to reinstate their claims against the Salzman
Defendants, the Order dismissing them must be vacated. Therefore,
Rule 60(b) governs.

Rule 60(b) provides that a district court

may relieve a party from a final judgment for the following
reasons:
(1)

mistake, inadvertence, surprise, or excusable
neglect;

(2)

newly
discovered
evidence
that,
with
reasonable diligence, could not have been
discovered in time to move for a new trial
under Rule 59(b);

28

(3)

fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct
by an opposing party;

(4)

the judgment is void;

(5)

the judgment has been satisfied, released or
discharged; it is based on an earlier judgment
that has been reversed or vacated; or applying
it prospectively is no longer equitable; or

(6)

any other reason that justifies relief.

FED. R. CIV. P. 60(b).

Any motion under Rule 60(b) “must be made

within a reasonable time--and for reasons (1), (2), and (3) no
more than a year after the entry of the judgment or order or the
date of the proceeding.”

FED. R. CIV. P. 60(c)(1).

Here, Plaintiffs are seeking vacatur on the grounds of
fraud and material breach of the Salzman Agreement; thus, the only
applicable subsections are (3) and (6).

However, the Salzman

Defendants were dismissed from this action on March 16, 2010
(Docket Entry 128), more than two years before Plaintiffs filed
the present motion on October 1, 2012.

Thus, to the extent that

they seek vacatur under subsection (3), their motion is timebarred.

The Court also finds that their motion is time-barred

under subsection (6).
60(b)

motion

is

Although the time limit for filing a Rule

“within

a

reasonable

time,”

FED. R. CIV. P.

60(c)(1), Plaintiffs were aware of the grounds for filing their
motion as early as March 11, 2010, when they deposed Salzman and
discovered that his accounting was incomplete (see Pls.’ Salzman

29

Mot. Ex. D), and as late as December 22, 2010, when they first
wrote to the Court indicating their intention to move to reinstate
the claims against the Salzman Defendants on account of a material
breach

(Docket

Entry

254).

Plaintiffs

informed

the

Salzman

Defendants of their alleged breach on May 2, 2011 (Pls.’ Salzman
Mot. Ex. B) and again raised their intention to move to reinstate
the claims against the Salzman Defendants on August 7, 2011
(Docket Entry 289).

They failed, however, to so move for another

fourteen months, and they failed to provide any reason to justify
the delay.

See PRC Harris, Inc. v. Boeing Co., 700 F.2d 894, 897

(2d Cir. 1983) (stating that when “considering whether a Rule
60(b)(6) motion is timely, we must scrutinize the particular
circumstances of the case, and balance the interest in finality
with the reasons for delay”).
delay

of

eighteen

months

The Second Circuit has found a

was

“plainly”

not

made

within

a

reasonable time, see Truskoski v. ESPN, Inc., 60 F.3d 74, 77 (2d
Cir. 1995), and here we have a delay of nearly twenty-two months.
Accordingly, the Court DENIES Plaintiffs’ motion as untimely.14

Even if Plaintiffs’ motion was not untimely, the Court
questions whether Plaintiffs would otherwise be entitled to
relief under Rule 60(b). Although district courts have
discretion in evaluating Rule 60(b) motions, relief under this
provision is extraordinary and should be granted “upon a showing
of exceptional circumstances.” United States v. Int'l Bhd. of
Teamsters, 247 F.3d 370, 391 (2d Cir. 2001); accord Nemaizer v.
Baker, 793 F.2d 58, 61 (2d Cir. 1986). Here, Plaintiffs may
have waived their fraud-in-the-inducement argument due to the
Salzman Agreement’s “Waiver of Challenge on Grounds of Nullity
14

30

III. Cross Motions Regarding the Agreement Between Plaintiffs
and Defendants Gibbins and Meytec
Plaintiffs entered into a settlement agreement with
Defendants Gibbins and Meytec (the “Gibbins/Meytec Agreement”) on
or around September 9, 2010 (Pls. Mot. to Reinstate Defs. Gibbins
& Meytec (“Pls.’ G/M Mot.”), Docket Entry 312, Ex. A), pursuant to
which the parties consented to the entry of judgment against
Gibbins

and

Meytec

jointly

and

severally

in

the

amount

of

$7,536,345.00 (Docket Entry 234; Pls.’ G/M Mot. Ex. A). Plaintiffs
now seek to rescind the Gibbins/Meytec Agreement and reopen and
reinstate its claims against those defendants on the grounds that:
(1) the Gibbins/Meytec Agreement is voidable as there was fraud in
the inducement--namely, Gibbins entered into the Agreement knowing
that he had no intentions of complying with its terms and/or (2)
Gibbins materially breached its terms.

(Docket Entries 311-12.)

Gibbins and Meytec oppose this motion and have filed a crossmotion

for

a

declaration

that

Plaintiffs

breached

the

or Voidability” and merger clauses, see, e.g., Nat’l Westminster
Bank PLC v. Empire Energy Mgmt. Sys., Inc., No. 93-CV-5331, 1998
WL 47830, at *3 (S.D.N.Y. Feb. 5, 1998) (finding that a fraudin-the-inducement claim was barred by a provision of a guarantee
agreement waiving such a defense); VNB N.Y. Corp. v. M.
Lichtenstein L.L.C., No. 24851/10, 32 Misc. 3d 1240(A), 938
N.Y.S.2d 230, 2011 WL 4024664, at *10-11 (Sup. Ct. Kings Cnty.
Sept. 8, 2011) (similar), and they will be free to commence a
separate action against the Salzman Defendants upon receiving a
determination from an arbitrator that there was a breach (Pls.’
Salzman Mot. Ex. A ¶ 2). Thus, the need to reinstate the claims
against the Salzman Defendants in the present action does not
appear to be extraordinary or exceptional.
31

Gibbins/Meytec Agreement.

(Docket Entry 319.)

Plaintiffs have

opposed this motion.
The Court will first review the pertinent terms of the
Gibbins/Meytec Agreement and the Consent Judgment before turning
to the merits of the parties’ motions.
A.

G/M Settlement Agreement and the Consent Judgment
The Gibbins/Meytec Agreement provided that, in exchange

for $1,600,000 to be paid by the FIFO Defendants to Plaintiffs,
Gibbins’ cooperation in Plaintiffs’ efforts to recover the funds
allegedly lost in the advanced fee fraud scheme, and Gibbins and
Meytec’s consent to the entry of judgment against them in the
amount of approximately $7.5 million, Plaintiffs would discontinue
their claims against Gibbins and Meytec, as well as release the
following

individuals/entities

from

liability:

the

FIFO

Defendants, Natalia Adel Tobias-Gibbins (and other members of the
Tobias-Gibbins

family),

Sampaio,

Middle

HSBC

Defendant

East,

Halley,

Sulaiman

IS

AI

Katherine
Bassam,

Halley,
River

&

Mercantile Holding Ltd., James Denney, Tinwood Pension Trust,
Defendant A. Rashid, and Andrew Needleman.
at 1-2 & ¶¶ 7, 13.)

(Pls.’ G/M Mot. Ex. A.

So long as certain conditions were met--

namely, if: (1) Plaintiffs received the $1.6 million dollars; (2)
Gibbins cooperated with Plaintiffs;15 and (3) there was no other

Gibbins’ cooperation included “the obligation to provide
material admissible evidence and other substantial information
15

32

“Event

of

Default”--Plaintiffs

agreed

to

“permanently

and

unconditionally forbear enforcement” of the Consent Judgment.
(Id. ¶ 9.)
“Events

of

Default”

included

Gibbins’

failure

to

promptly provide Plaintiffs with requested information, Gibbins’
failure to provide Plaintiffs with current contact information,
the FIFO Defendants’ failure to make prompt payment of the monies
due,

and

the

failure

of

either

Plaintiffs

or

Gibbins

from

“refraining from taking any action which this Agreement requires
that party to refrain from taking.”
defaulted,

Gibbins

could:

(1)

(Id. ¶ 20.)

terminate

the

If Plaintiffs
Gibbins/Meytec

Agreement, (2) move to have the present action dismissed, and/or
(3) demand immediate repayment of the $1.6 million.

If Gibbins

defaulted, Plaintiffs could: (1) terminate the Gibbins/Meytec
Agreement and/or (2) move to reinstate and continue the present
litigation.

However,

before

taking

any

of

the

above-listed

actions, the non-defaulting party would have to “satisfy the Court,
on the balance of probabilities, that the alleged default has been
established.”

(Id. ¶ 22.)

Further, the Gibbins/Meytec Agreement provided that:

to and at the request of [Plaintiffs],” including both
documentary and testimonial evidence. (Id. ¶ 11.) Gibbins was
obligated to cooperate for twelve months after the execution of
the Agreement (id. ¶ 31); therefore, Gibbins’ obligations
extended through September 9, 2011.
33

Unless it is established that [Gibbins], in
providing
documentation
and/or
sworn
testimony to [Plaintiffs] as part of [his]
obligation to cooperate set forth in this
Agreement[,] has intentionally or with gross
negligence failed to disclose a material
document
or
fact
or
made
a
material
misrepresentation
of
fact,
or
that
[Plaintiffs] have materially breached the
terms of this Agreement[,] [Plaintiffs] shall
have no right to treat the claims as against
[Gibbins
and
Meytec]
as
having
been
discontinued without prejudice and/or to
attempt to revive the claims unless and until
such intentional or grossly negligent failure
to disclose a potentially material document or
fact or material misrepresentation has been
determined to have occurred by the Court on
motion.
(Id. ¶ 11(xiii).)

In addition, if Gibbins or Meytec breaches the

Agreement, Plaintiffs shall be entitled to execute the Consent
Judgment in addition to reinstating the claims against them.

(Id.

¶ 11(xiv).)
The Gibbins/Meytec Agreement also contains a “Waiver of
challenge for nullity or voidability,” similar to the Salzman
Agreement (id. ¶ 10), a merger clause (id. ¶ 24), as well as a New
York choice of law provision and an Eastern District of New York
venue provision (id. ¶ 23).

Although the Gibbins/Meytec Agreement

provided for the Eastern District of New York to “retain personal
and subject matter jurisdiction even after judgment by consent has
been entered,” (id.) the Consent Judgment did not contain any
language suggesting that the undersigned would retain jurisdiction
over the Gibbins/Meytec Agreement (Docket Entry 234).
34

B.

Plaintiffs’ Motion
Plaintiffs’

motion

to

reinstate

its

claims

against

Gibbins and Salzman is also governed by Rule 60(b) of the Federal
Rules of Civil Procedure, and, for the reasons described above, is
also time-barred.

Plaintiffs sent Gibbins a letter on June 29,

2011 seeking to terminate the Gibbins/Meytec Agreement and listing
the alleged Events of Default.

(Pls.’ G/M Mot. Ex. B.)

However,

Plaintiffs failed to make the present motion until October 1, 2012-more than fifteen months later--or provide any explanation as to
why such a significant delay was necessary.

Thus, the Court finds

that this delay was not reasonable, and accordingly Plaintiffs’
motion is DENIED as time-barred.
C.

Gibbins and Meytec’s Motion
Gibbins and Meytec move to enforce the Gibbins/Meytec

Agreement and, specifically, seek the immediate repayment of the
$1,600,000 settlement amount and dismissal of the action against
Gibbins and Meytec with prejudice.
entertain

this

motion,

as

it

does

The Court, however, cannot
not

have

subject

matter

jurisdiction.
“Enforcement of [a] settlement agreement, . . . whether
through an award of damages or a decree of specific performance,
is more than just a continuation or renewal of the dismissed suit,
and hence requires its own basis of jurisdiction.”

Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 378, 114 S. Ct. 1673,
35

128 L. Ed. 2d 391 (1994).

The Supreme Court has stated that,

unless “the order of dismissal--either by separate provision (such
as

a

provision

agreement)

or

‘retaining
by

jurisdiction’

incorporating

the

over

terms

of

the

settlement

the

settlement

agreement in the order,” a district court lacks jurisdiction to
enforce the terms of a settlement agreement.

Id. at 381; see also

Scelsa v. City Univ. of N.Y., 76 F.3d 37, 41 (2d Cir. 1996) (finding
that

where

a

dismissal

order

“neither

expressly

retains

jurisdiction over the Agreement nor incorporates its terms,” a
district court must decline to exercise jurisdiction); Murphy v.
Bd. of Educ., 79 F. Supp. 2d 239, 241-42 (W.D.N.Y. 1999) (denying
a motion to enforce a settlement agreement because the dismissal
order did not provide for the court’s continued jurisdiction).

In

the present action, the Court was not provided with a copy of the
Gibbins/Meytec Agreement, nor was it mentioned in the Consent
Judgment.

Accordingly, the Court lacks jurisdiction over this

dispute, and Gibbins and Meytec’s motion is DENIED.
CONCLUSION
For the foregoing reasons, it is hereby ORDERED that:
(1) Bölükbasi, Özkan, and Metin’s objections (Docket
Entry 347) to Judge Tomlinson’s R&Rs are SUSTAINED and Plaintiffs’
objections (Docket Entry 343) are OVERRULED;
(2)

Judge Tomlinson’s R&Rs (Docket Entries 329, 333)

are hereby ADOPTED IN PART to the extent that they recommend
36

dismissal of the negligence claims against Bölükbasi, Özkan, and
Metin and of the RICO claims against Ambiente, CBOD, Greenbaum,
Slacum, and ADC; and those claims are hereby DISMISSED WITH
PREJUDICE;
(3)

Plaintiffs’ motions for default judgments (Docket

Entries 247, 306) are DENIED with leave to renew as outlined above;
(4)

Plaintiffs’ motion to reinstate its claims against

the Salzman Defendants (Docket Entry 315) is DENIED;
(5)

Plaintiffs’ motion to reinstate its claims against

Gibbins and Meytec (Docket Entry 311) is DENIED;
(6)

Gibbins

and

Meytec’s

motion

to

enforce

the

Gibbins/Meytec Agreement (Docket Entry 319) is DENIED;
(7)

all claims against Defendants Blackstone, Rana,

Sampaio, Sino, It’s Investment, Schramm, Lider, Cetin, A. Rashid,
John M. Preston Limited, Kazan, Sahin, Ürkmez, Sinclair, Harrison,
Halley, Renfrew, and London Financial will be dismissed without
prejudice pursuant to Rule 4(m) of the Federal Rules of Procedure
for

failure

to

timely

effectuate

service16

unless

Plaintiffs

provide proof of service within seven (7) days of the date of this
Memorandum and Order;

Plaintiffs received an extension of time to serve all
remaining overseas defendants through January 12, 2011.
(Docket Entry 233.) Plaintiffs have not asked for any
further extensions, nor have any been granted.
16

37

(8)

all remaining claims against the defendants that

have been served--specifically, Schmidt, Ambiente, Wagner, CBOD,
Greenbaum, Ralston, Slacum, ADC, Coban, Veli, Kocabas, Karli,
Bölükbasi, Özkan, and Metin--will be dismissed with prejudice
pursuant to Rule 41(b) of the Federal Rules of Civil Procedure for
failure to prosecute unless Plaintiffs move for a default judgment
on those claims or voluntarily dismiss those claims within thirty
(30) days of the date of this Memorandum and Order.
It is further ORDERED that counsel for Plaintiffs shall
serve a copy of this Memorandum and Order on Defendants Schmidt,
Ambiente, Wagner, CBOD, Greenbaum, Ralston, Slacum, ADC, Coban,
Veli, Kocabas, Karli, Bölükbasi, Özkan, and Metin and the Salzman
Defendants and file proof of service within (7) days of the date
of this Memorandum and Order.
SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

September 3, 2013
Central Islip, NY

38