F.T.C. v. Metropolitan Communications Corp., 94 Civ. 0142(JSR).

• Decision Date: 29 September 1997
• Docket Number: No. 94 Civ. 0142(JSR).,94 Civ. 0142(JSR).
• Citation: 977 F.Supp. 295
• Parties: FEDERAL TRADE COMMISSION, Plaintiff, v. METROPOLITAN COMMUNICATIONS CORP., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

Page 295

977 F.Supp. 295

FEDERAL TRADE COMMISSION, Plaintiff, v. METROPOLITAN COMMUNICATIONS CORP., et al., Defendants.

No. 94 Civ. 0142(JSR).

United States District Court, S.D. New York.

September 29, 1997.

Ahmed A. Massoud, Massoud & Pashkoff, P.C., for Plaintiff.

Peter B. Zlotnick, Olshan Grundman Frome & Rosenzweig, LLP, New York City, for Defendants.

MEMORANDUM ORDER

RAKOFF, District Judge.

NexStar Communications, Inc. ("NexStar"), not a party to this litigation, seeks to assert a claim in quantum meruit against certain of the defendant receivership companies and has moved for leave of the Court to interpose such a claim here. For the reasons that follow, NexStar's motion is denied.

By way of background, on January 11, 1994 plaintiff Federal Trade Commission ("FTC") commenced this action against various corporate and individual defendants, alleging violations of the Federal Trade Commission Act, 15 U.S.C. § 41 et seq. Among other things, the defendants were alleged to have fraudulently represented to victims that, in return for a fee of $7,000 apiece, the defendants would help them apply for and obtain federal licenses for specialized mobile radio ("SMR") systems that were falsely represented to be high-earning, low-risk investments — whereas in actuality they were licenses of speculative value that could be readily obtained for $200. On January 14, 1994, the Honorable John F. Keenan, U.S.D.J., to whom this case was initially assigned, temporarily enjoined defendants from further business activities with respect to SMR licenses and placed the defendant companies in receivership. On January 31, 1994 the defendants stipulated to continuance of the injunction and receivership.

After assuming control of the defendant companies, the Receiver discontinued defendants' SMR license activities and sought to mitigate the damages suffered by those customers who alleged they had been defrauded into purchasing SMR licenses from defendants. Among other things, the Receiver negotiated agreements with CenCall Communications, Inc. ("CenCall") and Dial Call Communications, Inc. ("Dial Call") to repurchase most of the 4,000 SMR licenses sold by the defendants. One of these defendants, Nationwide Digital Data ("NDD"), had previously entered into a brokerage agreement with NexStar that entitled NexStar to commissions on those license sales arranged by NexStar. The Receiver, asserting that this brokerage agreement was inapplicable to the license sales that the Receiver had arranged with CenCall and Dial Call, brought a motion to reject any claim by NexStar for commissions. Opposing on the merits, NexStar maintained that it had substantially performed its obligations under the brokerage agreement in connection with the original license sales by NDD and argued that the Receiver had availed himself of the benefits of NexStar's efforts and therefore had forfeited the right to reject the contract.

On September 27, 1995, Judge Keenan issued an Opinion and Order ("9/27/95 Opinion & Order") granting the Receiver's motion to reject the brokerage agreement. Judge Keenan specifically found that the Receiver had independently arranged for and consummated the sales of NDD's licenses to CenCall and Dial Call, 9/27/95 Opinion & Order at 10-11, and that NexStar was not entitled to any commissions for any of its alleged prior services. Id.

Neither in this Court nor in any other forum did NexStar challenge this final determination. Now, however, more than a year and one half later, NexStar has reappeared and seeks leave of this Judge (to whom this case was reassigned on March 1, 1997) to interpose a claim against the receivership companies, based on the same factual allegations addressed by Judge Keenan but premised on the "different" theory of quantum meruit (as opposed to its prior contractual theory).

At the threshold, there is a question as to whether NexStar's new claim is legally barred, in these unusual circumstances, by principles of res judicata. While ordinarily that doctrine is inapplicable to determinations made in an ongoing case that has not yet been concluded by entry of a final judgment, see. e.g., Ferris v. Cuevas, 118 F.3d 122, 126 (2d Cir.1997); Barrett v. United States, 651 F.Supp. 611, 612 (S.D.N.Y.1986), here, NexStar was a nonparty whose potential rights and claims to recovery were not only collateral to the instant action but also were adjudicated conclusively by the September 27th Order of Judge Keenan. As such, Judge Keenan's order was final and appealable. See Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 513-15, 70 S.Ct. 322, 325, 94 L.Ed. 299 (1950) (order prior to judgment that rejected potential intervenor's claims considered "final" for purposes of appeal where order "was not tentative, informal nor incomplete as to [the potential intervenor]"); Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949) (interlocutory orders that "finally determine claims of right separable from, and collateral to, rights asserted in the action" are final for purposes of appeal); Pomerantz v. Schandler, 704 F.2d 681, 682 (2d Cir.1983) ("The district court's two orders, being directed to non-parties, are ... final orders as to them....").

More importantly for present purposes, such finality, in respect of a claim of a non-party intervenor,...