Kaufman v. Joseph
| Decision Date | 01 June 2017 |
| Docket Number | Civil Action No. 16-11961-NMG |
| Parties | ALAN M. KAUFMAN, Plaintiff, v. ANDREW JOSEPH, ET AL., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
This case involves a long-running dispute concerning a business relationship between pro se plaintiff Alan Kaufman ("Kaufman" or "plaintiff") and defendants, Attorney Andrew Joseph ("Joseph"), his law firm, Drinker Biddle & Reath LLP ("DBR"), and Southwestern Bell Mobile Systems, LLC d/b/a Cingular Wireless n/k/a AT&T Mobility ("AT&T" and, collectively with Joseph and DBR, "defendants"). Plaintiff alleges that 1) DBR breached the covenant of good faith and fair dealing and all three defendants 2) defrauded the Court and 3) made fraudulent misrepresentations. Pending before the Court is defendants' joint motion to dismiss. For the following reasons, that motion will be allowed.
Kaufman apparently was the controlling officer of Harvard Cellular, Inc. ("Harvard Cellular") between 1991 and 2002. In 2002, Harvard Cellular entered into an agency agreement with the predecessor-in-interest to New Cingular Wireless ("New Cingular"), a subsidiary of AT&T, to open five retail stores in New York City. New Cingular advanced $350,000 to Harvard Cellular to lease and build properties for the New York City stores. Harvard Cellular's stores, which sold New Cingular products, opened that July.
The agreement between Harvard Cellular and New Cingular required that Harvard Cellular obtain authorization from New Cingular before closing any of the stores. Without doing so, Harvard Cellular closed its New York City stores in December, 2002. It failed to reimburse New Cingular for the advance, building costs, the cost of handsets for which it had accepted delivery and other operating costs. New Cingular sought recovery of those expenses and the parties went to arbitration.
Arbitration proceedings between Harvard Cellular and New Cingular lasted 13 days. During and after the arbitration, New Cingular was represented by attorneys from DBR, including Joseph. Kaufman alleges that Joseph began settlementnegotiations with Harvard Cellular while the arbitration was ongoing because he did not expect New Cingular to succeed. Ultimately, the parties did not settle and the arbitrator ruled in favor of New Cingular, ordered Harvard Cellular to pay New Cingular $1.2 million for breaching its contractual obligations and denied Harvard Cellular's counterclaims for fraudulent inducement and breach of contract.
New Cingular filed suit in the New York Supreme Court to confirm the arbitration award ("New York Action"). Harvard Cellular sought partial vacatur. In 2006, the New York Supreme Court allowed the motion to confirm the arbitration award and denied Harvard Cellular's motion for partial vacatur.
In 2008, New Cingular brought a separate action in the United States District Court for the Southern District of Florida to enforce personal guarantees signed by Kaufman with respect to the arbitration award ("Florida Action"). Kaufman counterclaimed that, among other things, he was fraudulently induced to sign the personal guarantees. The Court in the Florida Action allowed New Cingular's motion for summary judgment and dismissed Kaufman's counterclaims as barred by res judicata. The parties subsequently entered a settlement agreement that deferred execution of the arbitration judgmentuntil Kaufman reached a specified net worth ("the 2009 Settlement Agreement").
In 2010, Kaufman sent a letter to New Cingular allegedly threatening to publish a book disparaging defendants. DBR sent a cease and desist letter that reminded Kaufman of his obligations under the 2009 Settlement Agreement. In 2016, Kaufman informed AT&T, Joseph and the arbitrator, John Wilkinson, by letter, that he intended to file this suit.1
Kaufman filed the instant complaint in September, 2016, in the Massachusetts Superior Court for Suffolk County alleging that, during the arbitration that occurred in 2003 and 2004 and thereafter, DBR breached its covenant of good faith and fair dealing and all the defendants committed fraud upon the court and made fraudulent misrepresentations. Defendants removed the case to this Court and filed a joint motion to dismiss for failure to state a claim upon which relief can be granted. That motion, which Kaufman timely opposed, is the subject matter of this memorandum and order and will be allowed.
To survive a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), a complaint must contain "sufficient factual matter" to state a claim for relief that is actionable as a matter of law and "plausible on its face". Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible if, after accepting as true all non-conclusory factual allegations, a court can draw the reasonable inference that the defendant is liable for the misconduct alleged. Ocasio-Hernandez v. Fortuno Burset, 640 F.3d 1, 12 (1st Cir. 2011). A court may not disregard properly pled factual allegations even if actual proof of those facts is improbable. Id. Rather, the relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw. Id. at 13.
When rendering that determination, a court may not look beyond the facts alleged in the complaint, documents incorporated by reference therein and facts susceptible to judicial notice. Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011).
Defendants contend that plaintiff's claims must be dismissed because 1) he has failed to state a claim for breach of the covenant of good faith and fair dealing, 2) his claim of fraud upon the court is barred by the doctrine of res judicata, and 3) his fraudulent misrepresentation claim is time-barred. Defendants further assert that the claims are precluded by the 2009 Settlement Agreement, lack of personal jurisdiction and plaintiff's failure to pierce the corporate veil.
Kaufman alleges that the responses of defendants DBR and Joseph to Kaufman's 2010 and 2016 letters constitute a breach of the covenant of good faith and fair dealing. Specifically, Kaufman claims that the letters violate "Disciplinary Rule 7-105(A) of the New York Code of Professional Responsibility" for attorneys.2 DBR and Joseph contend that plaintiff fails to state a claim upon which relief can be granted because 1) such a breach must be predicated on a contractual relationship, 2) there is no private right of action for claims pursuant tothe New York Code of Professional Responsibility and 3) the claim fails under the Massachusetts Anti-SLAPP statute.
The contention of DBR and Joseph that plaintiff fails to state a plausible claim for breach of the covenant of good faith and fair dealing is well taken. Both parties correctly apply New York law to this claim because the purported breach occurred in New York. See Bergin v. Dartmouth Pharm. Inc., 326 F. Supp. 2d 179, 181 (D. Mass. 2004). Plaintiff fails to state a claim of breach of the covenant of good faith and fair dealing because such a claim must arise from contract. Duration Mun. Fund, L.P. v. J.P. Morgan Sec., Inc., 908 N.Y.S.2d 684 (2010). Although there was an agency agreement between Harvard Cellular and New Cingular, and there is also a settlement agreement between those parties, even accepting all allegations as true, there is no plausible claim that a contract existed between Kaufman, on the one hand, and either Joseph or DBR, the attorney and law firm which represented New Cingular, on the other hand. See Ocasio-Hernandez, 640 F.3d at 12. Therefore, the claim must be dismissed because, absent a contractual relationship, there can be no breach of the covenant of good faith and fair dealing. See Duration Mun. Fund, 908 N.Y.S.2d at 684.
Moreover, as DBR and Joseph point out, the New York Code of Professional Responsibility does not create a private right of action for violations. Weinberg v. Sultan, 142 A.D.3d 767, 769(N.Y. App. Div. 2016). Therefore, even if defendants' actions constituted a violation of Rule 3.4, plaintiff's complaint is to the New York Board of Bar Overseers not for this forum and therefore that claim must be dismissed. See Iqbal, 556 U.S. at 667. Because the claim will be dismissed on other grounds, the Court need not consider defendants' remaining contention that the claim also fails under the Massachusetts Anti-SLAPP statute, M.G.L. c. 231, § 59H. Plaintiff's claim of breach of covenant of good faith and fair dealing will therefore be dismissed for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6).
The doctrine of res judicata, or claim preclusion, prohibits a party from bringing a second action on a claim previously litigated and resolved on the merits. Nunez Colon v. Toledo-Davila, 648 F.3d 15, 19 (1st Cir. 2011). A court may consider the record in the original action along with well-pled facts in the complaint in the second action in determining whether a claim is precluded. Medina-Padilla v. U.S. Aviation Underwriters Inc., 815 F.3d 83, 85 (1st Cir. 2016).
If the original action was in state court, a federal court applies the res judicata law of the state in which the case wasdecided. Dillon v. Select Portfolio Servicing, 630 F.3d 75, 80 (1st Cir. 2011). If the original action was before a federal court sitting in diversity, federal common law governs. Medina-Padilla, 815 F.3d at 86. Under federal common law, the law of the state in which the federal court sits governs unless "incompatible with federal...
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