Newman v. Krintzman

Decision Date24 July 2013
Docket NumberNo. 12–1995.,12–1995.
Citation723 F.3d 308
PartiesMarc NEWMAN and Jeffrey Honig, as Trustees of Wendy Honig Trust, Plaintiffs, Appellants, v. Steven E. KRINTZMAN, Defendant, Appellee.
CourtU.S. Court of Appeals — First Circuit

OPINION TEXT STARTS HERE

Richard C. Bardi, with whom Law Office of Richard C. Bardi was on brief, for appellants.

Colleen C. Cook, with whom Michael Paris and Nystrom Beckman & Paris LLP were on brief, for appellee.

Before LYNCH, Chief Judge, LIPEZ and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

Overview

Dealing with a doctrine like claim preclusion (the modern name for res judicata ) can sometimes be difficult. But difficult is not impossible, even for today's issue (which, by the way, reads like something lifted from a law-school exam): Does a judgment dismissing a case as time-barred under New York law preclude a later suit on the same claim in another jurisdiction involving a longer, unexpired limitations period? Plaintiffs Marc Newman and Jeffrey Honig, trustees of Wendy Honig Trust, say no. Defendant Steven Krintzman says yes. The district judge answered yes and so dismissed the trustees' complaint against Krintzman alleging default on a promissory note. SeeFed.R.Civ.P. 12(b)(6). Reviewing that decision de novo, see Schatz v. Republican Leadership Comm., 669 F.3d 50, 55 (1st Cir.2012), which is a fancy way of saying that we give a fresh look to the judge's reasoning, we affirm.

How It All Began

Before diving into the details of our story, we offer these reminders: Like the district judge, we must take the complaint's well-pleaded facts as true, construing them in the light most favorable to the trustees. Id. And, also like the judge below, we may “consider (a) ‘implications from documents' attached to or fairly ‘incorporated into the complaint,’ (b) ‘facts' susceptible to ‘judicial notice,’ and (c) ‘concessions' in plaintiff[s'] ‘response to the motion to dismiss.’ Id. at 55–56 (footnote omitted) (quoting Arturet–Vélez v. R.J. Reynolds Tobacco Co., 429 F.3d 10, 13 n. 2 (1st Cir.2005)); see also Giragosian v. Ryan, 547 F.3d 59, 66 (1st Cir.2008) (stressing that courts can mull over “matters of public record in resolving a Rule 12(b)(6) motion,” adding that [m]atters of public record” typically “include ‘documents from prior state court adjudications' (citation omitted) (quoting Boateng v. InterAmerican Univ., Inc., 210 F.3d 56, 60 (1st Cir.2000))); Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993) (emphasizing that courts can look to “documents the authenticity of which are not disputed by the parties). Now on to the facts.

In the late 1980s and early 1990s, Krintzman and his company, Technicraft Industries, Inc., borrowed a boatload of money from the Wendy Honig Trust. His then-wife Wendy Honig was the trust's beneficiary. But to get the funds, Krintzman or Technicraft executed promissory notes in favor of the Trust, with Krintzman also personally guaranteeing the company's borrowing. One note says that it shall be governed by Massachusetts law. The others say that they shall be governed by New York law.

Alleging that Krintzman and Technicraft had defaulted on all the notes, the Trust's trustees sued the two in New York state court in 2009 for (most pertinently here) breach of contract. There, the parties sparred over whether the trustees had filed suit within New York's 6–year limitations period for contract actions. SeeN.Y. C.P.L.R. § 213(2). They agreed that this statute governed the lawsuit. But the trustees thought that certain events not relevant here tolled the statute's running, while Krintzman and Technicraft thought otherwise. The New York trial court eventually sided with Krintzman and Technicraft, granting their motion to dismiss based on the expiration of the New York statute of limitations.

Not willing to let things go, the trustees headed for New York's intermediate-appellate court, the Appellate Division. There, the adversaries continued quarreling about the New York statute of limitations. But the trustees also débuted another argument: Stressing that the note governed by Massachusetts law is a “sealed instrument,” they insisted that a Massachusetts 20–year statute of limitations applied, seeMass. Gen. Laws ch. 260, § 1, which, they added, meant that their suit was timely, at least when it came to that note. In a terse, 2–page decision, the Appellate Division affirmed, concluding that the trustees' case was time-barred under New York law. And while the court did not directly mention the trustees' Massachusetts-based statute-of-limitations argument, it did close with these words: We have considered [the trustees'] remainingarguments and find them unavailing.”

But that was not the end of the matter. Asserting diversity jurisdiction, three months later the trustees sued Krintzman in Massachusetts federal court to recover on the note controlled by Massachusetts law. Krintzman responded with a motion to dismiss, contending that the dismissal of the New York lawsuit barred the trustees' current claim.1 Apparently, everyone agreed that the trustees filed suit within the 20–year window framed by the Massachusetts statute of limitations. Nevertheless, the district judge in his written opinion ruled that the limitations dismissal was on the merits and claim preclusive and thus dismissed the present case. See Newman v. Krintzman, No. 11–10540–GAO, 2012 WL 2912941, at *1–3 (D.Mass. July 17, 2012). Which brings us to today.

A Primer on the Parties' Opposing Positions

The trustees insist that a limitations dismissal under New York law is not an on-the-merits decision, and so, their argument continues, such a dismissal cannot preclude suit on the same claim in another jurisdiction involving a different limitations period. Krintzman believes exactly the opposite, naturally. Working through this issue will take us down a fairly dense legal trail. But fortunately, there is enough law out there to guide our way.

Our Analysis

We begin with a few basics. Respect for prior judgments is deeply ingrained in our legal regime—the Constitution's full-faith-and-credit clause, U.S. Const. art. IV, § 1, and its statutory equivalent, 28 U.S.C. § 1738, combine with the common law's claim-preclusion doctrine to help make it so. See R.G. Fin. Corp. v. Vergara–Nuñez, 446 F.3d 178, 182 (1st Cir.2006). And under § 1738's full-faith-and-credit mandate, federal courts must give preclusive effect to a state-court judgment if the state court itself would. See, e.g., Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996); Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 80–81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); R.G. Fin. Corp., 446 F.3d at 182. In other words, we must accept that state's rules for deciding the effect of the judgment, which here means that New York preclusion law controls. See, e.g., Matsushita Elect. Indus. Co., 516 U.S. at 373, 116 S.Ct. 873;Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985); R.G. Fin. Corp., 446 F.3d at 182–83.

Reduced to its essentials, New York law bars successive suits between the same parties or their privies on causes of action that were or could have been litigated in the first case—if but only if the first case resulted in a judgment “on the merits” by a court of competent jurisdiction. See, e.g., People ex rel. Spitzer v. Applied Card Sys., Inc., 11 N.Y.3d 105, 863 N.Y.S.2d 615, 894 N.E.2d 1, 12 (2008); In re Hunter, 4 N.Y.3d 260, 794 N.Y.S.2d 286, 827 N.E.2d 269, 274 (2005). Every part of this claim-preclusion rule has been fought over in cases and in commentaries. See Rick v. Wyeth, Inc., 662 F.3d 1067, 1070 (8th Cir.2011) (discussing New York law). But as argued by the parties, only the quoted phrase is of concern to us, i.e., whether a limitations dismissal under New York law is a judgment “on the merits.”

New York law on this issue is unsettled—that is what our Second Circuit colleagues recently concluded, which is why they opted to certify the issue to the New York Court of Appeals (which is the Empire State's highest court). See Joseph v. Athanasopoulos, 648 F.3d 58, 67–68 (2d Cir.2011) (certifying the question whether a limitations dismissal constitutes a judgment “on the merits,” entitled to preclusive effect, “such that the plaintiff cannot litigate her claim in another jurisdiction with a longer, unexpired limitations period”) (internal quotation marks omitted). Having received the request, the New York Court of Appeals initially accepted. See Joseph v. Athanasopoulos, 18 N.Y.3d 946, 944 N.Y.S.2d 469, 967 N.E.2d 694, 694–95 (2012). But appellant no longer had enough money to pay for its appeal and wanted to drop the matter. See Joseph v. Athanasopoulos, 478 Fed.Appx. 701, 703 (2d Cir.2012) (unpublished); see also Joseph, 944 N.Y.S.2d 469, 967 N.E.2d at 694–95. So the New York Court of Appeals reconsidered its earlier order and declined to accept certification. Joseph, 944 N.Y.S.2d 469, 967 N.E.2d at 694–95. Acting on appellant's motion, the Second Circuit dismissed appellant's federal appeal, emphasizing, though, that “this dismissal in no way reflects a change” in its view that the issues implicated in the certified question remain “unresolved under New York law.” Joseph, 478 Fed.Appx. at 703. No party here has asked us to certify the question to the New York Court of Appeals. And we think there are enough clues—including clues from New York cases decided after the certification request in Joseph v. Athanasopoulos—for us to decide the matter. See Samaan v. St. Joseph Hosp., 670 F.3d 21, 31 (1st Cir.2012) (discussing our standard for certification); González–Figueroa v. J.C. Penney P.R., Inc., 568 F.3d 313, 323 (1st Cir.2009) (same). So we soldier on, knowing that New York “is free to tell us that our state-law analysis is “all wet,” since, obviously, state courts are not bound by our take on state law. See Candelario del Moral v. UBS Fin. Servs....

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