Marshall Caro & Indii.Com United Statese, LLC v. Fid. Brokerage Servs., 3:14-CV-01028 (CSH)

• Decision Date: 30 April 2015
• Docket Number: 3:14-CV-01028 (CSH)
• Court: U.S. District Court — District of Connecticut
• Parties: MARSHALL CARO and INDII.com USE, LLC Plaintiffs, v. FIDELITY BROKERAGE SERVICES, KATHERINE HO, BILL ROTHFARB, EVAN ROTHFARB, MICHAEL SHANNON, and MICHAEL HOENIG Defendants.

MARSHALL CARO and INDII.com USE, LLC Plaintiffs,
v.
FIDELITY BROKERAGE SERVICES, KATHERINE HO, BILL ROTHFARB,
EVAN ROTHFARB, MICHAEL SHANNON, and MICHAEL HOENIG Defendants.

3:14-CV-01028 (CSH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT

April 30, 2015
April 30, 2015

RULING ON MOTIONS TO DISMISS

HAIGHT, Senior District Judge:

Plaintiffs Marshall Caro, pro se, and Indii.com USE ("Indii") bring this diversity action seeking damages arising from Defendants' allegedly unlawful restraint of Indii's Fidelity Brokerage account. Defendants are Bill Rothfarb, a judgment creditor, his attorney, Evan Rothfarb (the "Rothfarb Defendants") Fidelity Brokerage Services ("Fidelity"), the custodian of the Indii account, Katherine Ho, a Fidelity employee, and Michael Shannon and Michael Hoenig, Fidelity's attorneys (the "Fidelity Defendants").

The complaint sets forth claims arising under state common and statutory law. The Rothfarb Defendants and the Fidelity Defendants have filed separate motions to dismiss the complaint. Docs. [25] and [37]. Each set of defendants moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure12(b)(6) on the ground that the complaint fails to state a claim upon which relief can be granted and is barred by the doctrines of res judicata and collateral estoppel. The Fidelity

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Defendants also move to dismiss the complaint for lack of personal jurisdiction over Ho, Hoenig and Shannon, pursuant to Federal Rule of Civil Procedure 12(b)(2). Plaintiffs oppose Defendants' motions to dismiss. The motions are ripe for adjudication. This Ruling decides them.

I. BACKGROUND

The following facts are derived from the allegations of Plaintiffs' amended complaint, doc. [6-1], and from court records of the priors litigations between the parties, which have been filed by Defendants in support of their respective motions to dismiss and specifically, their arguments that the complaint should be dismissed on the grounds of res judicata and collateral estoppel. In that latter regard, it is well-settled that the Court is entitled to take judicial notice of court records in evaluating a motion to dismiss. See, e.g., Ambase Corp v. City Investing Co. Liquidating Trust, 326 F.3d 63, 72-72 (2d Cir. 2003); Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991) ("[C]ourts routinely take judicial notice of documents filed in other courts"). We recount the history of prior litigations and recite the complaint's well-pleaded allegations in order to evaluate the viability of Plaintiffs' claims, and Defendants' defenses, under the governing law.

A. Bill Rothfarb wins Judgment in New York State Supreme Court (Moskowitz, J.)

The present action is the latest installment in a dispute between Marshall Caro and Bill Rothfarb three decades in the making. It begins with a judgment Bill Rothfarb won against Caro in March 1995 in New York State Supreme Court (Moskowitz, J.). The facts culminating in that judgment are recounted below. They are derived from that court's Decision After Trial, dated May 11, 1993. Doc. [29-1]; see Bill Rothfarb v. Programit, Inc. et al., Index No. 19178/87 (Sup. Ct. New York County May 11, 1993).

In February 1985, Bill Rothfarb was hired as a salesman by Programit, Inc. ("Programit"),

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a company in the "package computer software business" formed by Caro and other business associates. Id. at 1-2. When Caro terminated Bill Rothfarb's employment two years later, Bill Rothfarb filed the action in New York State Supreme Court (Moskowitz, J.) against Caro and his business partners, Programit, and several named "successor corporations" of Programit, seeking to recover sales commissions owed to him pursuant to the sales compensation agreement he entered with Caro and Programit. Id. at 2, 4. Following a six-day bench trial, the court issued a decision finding that Bill Rothfarb "was credible and knowledgeable of the issues," while Caro "not credible," "his testimony unclear and contradictory," id. at 4, and his conduct reflective of a "cavalier use" and "blatant disregard of the corporate form," id. at 5-6. The court concluded that Bill Rothfarb was entitled to certain unpaid sales commissions, a two percent equity interest in Programit (and its successor corporations), and reasonable attorneys' fees. Id. 6-7, 10-11. The court held that Caro was jointly and severally liable for Bill Rothfarb's damages, and, in keeping with New York practice, ordered the parties to "settle judgment in accordance with the foregoing conclusions of fact and law." Id. at 6, 11. On March 28, 1995, in accordance with its Decision After Trial, the court entered a final Judgment and Order in favor of Bill Rothfarb in the amount of $204,018.23 "plus capital stock equal to a 2% equity interest" in Programit and its successor corporations (hereinafter, the "New York Judgment"). Doc. [29-2]; Bill Rothfarb v. Programit, Inc. et al., Index No. 19178/87 (Sup. Ct. New York County March 28, 1995).

B. Bill Rothfarb Domesticates New York Judgment in Connecticut

Caro did not satisfy the New York judgment until after Bill Rothfarb resumed efforts, some fifteen years later, to collect on it. In March 2010, Bill Rothfarb, through his attorney, Evan Rothfarb, moved to domesticate the New York Judgment in Connecticut pursuant to the Uniform

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Enforcement of Foreign Judgments Act (UEFJA), General Statutes § 52-604 et seq., by filing a certified copy of the Judgment in the Connecticut Superior Court for the Judicial District of Norwalk/Stamford, Docket No. FST-CV10-4018360-S. Doc. [29-4]; Doc. [29-7] at 2. On March 18, 2010, in accord with the New York Judgment, the Clerk of the Connecticut Superior Court entered judgment in favor of Bill Rothfarb in the amount of $204,018.23. Doc. [29-7] at 3, 13. Shortly thereafter, Bill Rothfarb recorded a judgment lien in the amount of $475,006.92 on Caro's property in Greenwich, Connecticut. The value of the judgment lien reflected the value of the domesticated judgment plus post-judgment interest. Doc. [6-1] at 6 ¶ 31; Doc. [39-3] at 2-3.

On May 5, 2010, Caro filed a motion in Connecticut Superior Court to set aside the judgment, claiming principally that Bill Rothfarb docketed the New York Judgment by fraud by failing to comply with New York's procedural requirements for settling judgments. In that regard, Caro claimed that the judgment was procedurally improper because Bill Rothfarb did not serve Caro with a proposed judgment and did not file the proposed judgment within sixty days of the court's order to "settle judgment." Doc. [29-5] at 8-12. Those procedural defects, in Caro's estimation, meant that the "purported New York Judgment was docketed by fraud and [was] therefore not entitled to enforcement in Connecticut." Id. at 11 (emphasis omitted). Caro claimed moreover that he "was unaware of the existence of [the] 'judgment'" until Rothfarb sought to domesticate it in Connecticut. Id.

In a Memorandum of Decision dated September 21, 2010, the Connecticut Superior Court (Brazzel-Massaro, J), rejected Caro's argument that the New York Judgment had been docketed by fraud, finding that service of the proposed judgment had been properly effected on Caro or his attorney and that the proposed judgment was not rendered null by its late filing. Doc. [29-7] at 8-11.

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Noting also that the record revealed that "Caro's counsel was served with the notice of entry of judgment on March 29, 1995 and that Caro commenced an appeal to the Appellate Division, First Department on April 27, 1995," the court stated that it was "disingenuous for Caro to argue that he did not have notice of the underlying New York Judgment until [Bill Rothfarb] sought to domesticate the judgment in Connecticut." Id. Accordingly, the court denied Caro's motion to set aside the domesticated judgment. Id. at 14.

C. Bill Rothfarb Serves Restraining Notices on Fidelity to Restrain the Indii Account

On or about July 16, 2010, Bill Rothfarb, through his attorney Evan Rothfarb, sent a letter to Fidelity informing Fidelity of the New York Judgment. Doc. [49] at 2-3. Enclosed with the letter were copies of a Restraining Notice and Information Subpoena ("first restraining notice" or "July 2010 restraining notice") directing Fidelity to restrain and identify accounts in which Caro had an interest. Docs. [20-8-], [29-25] at 3.

On July 27, 2010, Fidelity wrote to Evan Rothfarb confirming that Caro had an interest in the Indii account. Doc. [29-9]. On July 30, 2010, Fidelity sent a letter to Evan Rothfarb indicating that it had determined that the Indii account might be exempt from the restraining notice and stating that it would remove the restraint on the Indii account not later than August 5, 2010, unless it received a court order, restraining order, or other process from a court of competent jurisdiction directing it to continue the restraint. Doc. [29-25] at 3; Doc. [29-14] at ¶ 20. On or about August 2, 2010, Fidelity received a letter from Evan Rothfarb formally objecting to the removal of the restraint on the Indii account and threatening Fidelity with contempt proceedings if it did not continue the restraint. Id.; Doc. [29-14] at ¶ 21. On August 3, 2010, Fidelity received a letter from Donna Drumm, counsel for Indii, stating Indii's objection to the restraint on the Indii account and

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informing Fidelity of its intention to file exemptions to the restraining notice. Id.; Doc. [29-14] at ¶ 22.

D. Bill Rothfarb Moves for an Order to Show Cause in New York State Supreme Court (Gische, J).

Based on Fidelity's representation that it would remove the restraint on the Indii account unless it received a court order directing the continued restraint of the account, Bill Rothfarb, on or about August 6, 2010, obtained a temporary restraining order from the New York State Supreme Court (Gische, J.) prohibiting Fidelity from lifting the restraint on the Indii account until an Order to Show Cause hearing could be held in that...