Boguslavsky v. Kaplan

Citation159 F.3d 715
Decision Date09 October 1998
Docket NumberDocket No. 97-9422
PartiesIlya BOGUSLAVSKY, Plaintiff-Appellant, v. Martin H. KAPLAN and Gusrae, Kaplan & Bruno, Defendants-Appellees, Paul T. Russo, Defendant.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Ilya Boguslavsky, pro se, Short Hills, NJ.

Mark J. Astarita, New York, NY (Gusrae, Kaplan & Bruno), for Defendants-Appellees.

Before: CALABRESI, CABRANES, and STRAUB, Circuit Judges.

STRAUB, Circuit Judge:

Plaintiff-appellant Ilya Boguslavsky appeals from a judgment of the United States District Court for the Southern District of New York (Sidney H. Stein, Judge ), dismissing his complaint based on the doctrine of collateral estoppel. Judge Stein found that Boguslavsky was precluded from bringing his pro se securities action in the District Court because he had already litigated a claim for securities fraud before an arbitration panel of the National Association of Securities Dealers. As a result, the District Court granted summary judgment to defendants Martin H. Kaplan, Paul T. Russo, and the law firm of Gusrae, Kaplan & Bruno, and dismissed Boguslavsky's complaint in its entirety. We conclude, however, that Boguslavsky's District Court action asserted certain claims that had not been presented in the prior arbitration and, therefore, the doctrine of collateral estoppel did not bar Boguslavsky's suit in its entirety. Thus, while we affirm the District Court's order granting summary judgment to the defendants as to the claim presented in the NASD arbitration, we vacate that part of the District Court's order dismissing Boguslavsky's action in toto and remand the case for further proceedings.

BACKGROUND

Following an October 20, 1994, telephone conversation with Boguslavsky, Dmitry Aranovich ("Aranovich"), an account representative at South Richmond Securities, Inc. ("SRSI"), on October 21, opened an account at SRSI in the names of Boguslavsky and his wife, Irina. Over the next two months, Aranovich prompted Boguslavsky to make a series of purchases in three securities--CPI Aerostructures, Inc. ("CPIA"), Telmed, Inc. ("TEMD"), and Diplomat Corporation warrants ("DIPLW")--which, according to Boguslavsky, SRSI sold from its own inventory and for which SRSI served as a market maker. In addition, SRSI underwrote the TEMD and DIPLW securities purchased for Boguslavsky's account. Boguslavsky alleges that SRSI did not inform him of either its market making or underwriting role with respect to these securities at the time of his purchases. Boguslavsky learned that SRSI On December 20, 1994, Martin H. Kaplan ("Kaplan"), a member of Gusrae, Kaplan & Bruno ("GK & B") and the Voting Trustee for all outstanding shares of SRSI, completed a sale of all SRSI assets to another broker-dealer, Rickel & Associates ("Rickel"). Boguslavsky claims that in anticipation of its cessation of business, SRSI attempted to convince unsuspecting account holders to purchase securities from its inventory without disclosing its market making and underwriting activities for those securities. Boguslavsky also maintains that SRSI, through Kaplan, transferred his account to Rickel without notifying him, and that GK & B now possesses the proceeds from the sale of SRSI's assets as well as the money fraudulently procured from him.

was a market maker in CPIA and TEMD from the transaction confirmations that he received following his purchases of these two securities. The confirmations, however, did not reflect SRSI's market making status in DIPLW, and Boguslavsky only discovered this fact during a conversation with Aranovich on January 12, 1995--several weeks after the DIPLW transaction had been completed and after SRSI had ceased operations.

As a result, Boguslavsky filed a complaint with the New York State Attorney General's Office. The Attorney General's Office contacted Paul T. Russo ("Russo"), former Executive Vice President of SRSI, and instructed him to respond directly to Boguslavsky concerning his complaint. On October 19, 1995, when Russo failed to respond, Boguslavsky filed an arbitration action with the NASD (the "NASD proceeding") against: Rickel; Aranovich; Andreas Zigouras ("Zigouras"), supervising sales manager and an executive officer at SRSI; Joseph Fedorko ("Fedorko"), an account supervisor at SRSI; John Kawas ("Kawas"), an individual whom Boguslavsky claimed was SRSI's Director of Compliance; and GK & B. Boguslavsky subsequently dismissed Kawas from the NASD proceeding, and GK & B refused to submit to the NASD panel's jurisdiction, so it was not a party to the arbitration.

In the NASD proceeding, Boguslavsky alleged that the respondents violated Rules 10b-5 and 10b-10, 17 C.F.R. §§ 240.10b-5, 240.10b-10 (1998), promulgated under the Securities Exchange Act of 1934 (the "1934 Act"), by failing to disclose SRSI's roles as market maker and underwriter for DIPLW securities. Boguslavsky sought $13,023.75 in compensatory damages, the amount he claimed he deposited in his SRSI account between October 21 and December 29, 1994, and an additional $13,023.75 in punitive damages.

In October of 1996, during the pendency of the arbitration, Boguslavsky also filed this pro se action in the Southern District of New York (the "District Court action"). In his Amended Complaint, he alleged that the defendants violated Rules 10b-5 and 10b-10 based on the failure of SRSI's employees, whom the defendants controlled, to disclose the company's market making and underwriting roles with respect to its sale of DIPLW securities to him. Boguslavsky sought compensatory damages of $13,072.75 and punitive damages of $1,300,000. He also alleged that his transaction with SRSI was "unlawful and void" under § 29 of the 1934 Act, 15 U.S.C. § 78cc (1994).

On February 19, 1997, the NASD arbitrators rendered a decision "[a]fter considering the pleadings, the testimony and the evidence presented at the hearing." The three-member panel determined that Boguslavsky was entitled to recover a total of $3,128.76, with $2,190.13 due from Aranovich, $625.75 from Fedorko, and $312.88 from Zigouras. The panel, however, dismissed all claims against Rickel. In addition, by a two-to-one vote, the arbitrators held that Boguslavsky was not entitled to punitive damages from the respondents, although the dissenting member of the panel would have awarded Boguslavsky $10,000. The panel did not explain its decision, 1 although the award is reported in Boguslavsky v. Rickel & Assocs Following the issuance of the NASD panel's decision, defendants Kaplan and GK & B moved for summary judgment in the District Court action pursuant to Rule 56 of the Federal Rules of Civil Procedure. They argued that Boguslavsky's suit was based solely on acts committed by SRSI's employees, and that, because the issues of primary liability and damages with respect to these acts had already been decided in the NASD arbitration, any further litigation of these issues was barred by collateral estoppel. Moreover, they contended that Kaplan was not a "controlling person" within the meaning of § 20(a) of the Securities Exchange Act, 15 U.S.C. § 78t(a) (1994), and therefore, he could not be held secondarily liable for the $3,128.63 that Boguslavsky was awarded in the NASD proceeding. In response, Boguslavsky opposed the defendants' motion and moved for summary judgment with respect to Kaplan's liability.

Inc., et al., 1997 WL 288397 (N.A.S.D.1997) (Getzler, Maden, and Kaplan, Arbs.).

In an Opinion and Order, the District Court held that Boguslavsky's suit was precluded in its entirety by the doctrine of collateral estoppel, concluding that it raised but one issue--"whether securities fraud was committed by South Richmond or its employees in connection with its sale of DIPLW securities to plaintiff in December of 1994." Boguslavsky v. Kaplan, No. 96-7826, 1997 WL 672007, at * 3 (S.D.N.Y. Oct. 29, 1997). It therefore denied Boguslavsky's motion for partial summary judgment, granted the defendants' motion for summary judgment, and dismissed Boguslavsky's complaint. 2 Id. at * 4.

DISCUSSION

On appeal, Boguslavsky argues that the District Court erred in applying collateral estoppel to his action because, inter alia, his claims were not limited to the precluded issue and he did not have a full and fair opportunity to litigate the issues during the arbitration. 3 We review de novo a district court's entry of summary judgment barring claims under the doctrine of collateral estoppel, construing the record in the light most favorable to the non-moving party and drawing all inferences in that party's favor. See Levy v. Kosher Overseers Ass'n of Am., Inc., 104 F.3d 38, 41 (2d Cir.1997); Valley Disposal, Inc. v. Central Vt. Solid Waste Management Dist., 31 F.3d 89, 93 (2d Cir.1994). In addition, because Boguslavsky is a pro se litigant, we allow him some degree of flexibility in pleading his action. See, e.g., Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972) (per curiam); Platsky v. CIA, 953 F.2d 26, 28 (2d Cir.1991) (per curiam). Indeed, courts may look to submissions beyond the complaint to determine what claims are presented by an uncounseled party. See, e.g., Drake v. Delta Air Lines, Inc., 147 F.3d 169, 170 n. 1 (2d Cir.1998) (per curiam); Le Grand v. Evan, 702 F.2d 415, 416 n. 3 (2d Cir.1983). Thus, "[b]ecause [Boguslavsky] is a pro se litigant, we read his supporting papers liberally, and will interpret them to raise the strongest arguments that they suggest." Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994) (citing Mikinberg v. Baltic S.S. Co., 988 F.2d 327, 330 (2d Cir.1993)).

Guided by these principles and construing his pleadings generously, we conclude that Boguslavsky's District Court action was not precluded in toto by the NASD proceeding.

I. Collateral Estoppel

The doctrine of collateral estoppel precludes a party from relitigating in a subsequent proceeding an issue of law or fact that has already...

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