Melikian v. Corradetti

• Decision Date: 28 May 1986
• Docket Number: No. 85-5370,85-5370
• Citation: 791 F.2d 274
• Parties: Menatsagan MELIKIAN and Kambiz Aftassi, Appellants, v. Anthony CORRADETTI; Morris Coppersmith; Rubin Bernstein; Bernard Weinstein; as individuals and in their corporate capacities, individually, jointly, severally and in the alternative and Corradetti Enterprises, Inc., t/a Anthony Sales, a New Jersey corporation; Anthony Associates, Inc., a New Jersey corporation; R.A.M. Packaging, a New Jersey Fictitious Name; Memco Trading Co., Inc., a Pennsylvania Corporation authorized to do business in New Jersey; Philber Sales Corporation, t/a Bernie Weinstein, a New Jersey Corporation, and Anthony Exporting Co., Inc., jointly and severally.
• Court: U.S. Court of Appeals — Third Circuit

Page 274

791 F.2d 274

Menatsagan MELIKIAN and Kambiz Aftassi, Appellants, v. Anthony CORRADETTI; Morris Coppersmith; Rubin Bernstein Bernard Weinstein; as individuals and in their corporate capacities, individually, jointly, severally and in the alternative and Corradetti Enterprises, Inc., t/a Anthony Sales, a New Jersey corporation; Anthony Associates, Inc. a New Jersey corporation; R.A.M. Packaging, a New Jersey Fictitious Name; Memco Trading Co., Inc., a Pennsylvania Corporation authorized to do business in New Jersey Philber Sales Corporation, t/a Bernie Weinstein, a New Jersey Corporation, and Anthony Exporting Co., Inc., jointly and severally.

No. 85-5370.

United States Court of Appeals Third Circuit.

Argued Feb. 12, 1986.

Decided May 28, 1986.

Daniel B. Zonies (argued), Cherry Hill, N.J., for appellants.

Charles W. Heuisler (argued), Archer & Greiner, P.C., Haddonfield, N.J., Jack Beasley, Mount Holly, N.J., for appellees Anthony Exporting Co., Inc., Anthony Associates, Inc., Morris Coppersmith, Rubin Bernstein, and Memco Trading Co., Inc.

James A. Landgraf (argued), Myers, Matteo, Rabil & Norcross, Cherry Hill, N.J., for appellee R.A.M. Packaging.

E. Gerald Donnelly, Jr. (argued), Fox, Rothschild, O'Brien & Frankel, Philadelphia, Pa., for appellee Bernard Weinstein and Philber Sales Corp., t/a Bernie Weinstein.

Before HIGGINBOTHAM and STAPLETON, Circuit Judges and TEITELBAUM, District Judge. ^*

OPINION OF THE COURT

STAPLETON, Circuit Judge:

I.

In 1982, Menatsagan Melikian and Kambiz Aftassi ("plaintiffs") instituted an action against Anthony Exporting Company ("Exporting") in the United States District Court for the District of New Jersey. Jurisdiction was based on diversity of citizenship. The complaint alleged causes of action for the breach of large contracts for the sale of barley, rice, chickens, and corn by Exporting and requested compensatory and punitive damages. The alleged sales price of the corn contract alone was $44,000,000. The district court dismissed all but the corn contract claim. The jury returned a verdict by special interrogatory in favor of plaintiffs for breach of this contract and awarded them compensatory damages totalling $1,128,000 but no punitive damages.

Due to Exporting's insolvency, plaintiffs have been unable to satisfy their judgment. After the district court denied plaintiffs' post-judgment motion to amend their original complaint and add as defendants the principals of Exporting, plaintiffs filed this second suit in the same court. Named as defendants are Anthony Corradetti; Morris Coppersmith; Rubin Bernstein; Bernard Weinstein; Corradetti Enterprises, Inc., trading as Anthony Sales; Anthony Associates, Inc.; R.A.M. Packaging; Memco Trading Company, Inc.; Philber Sales Corporation trading as Bernie Weinstein; and Exporting.

Plaintiffs' amended complaint asserts in count one claims based upon alleged fraudulent misrepresentation of the financial condition of Exporting, fraudulent concealment of the true financial condition of that company, and fraudulent inducement to contract. Count two seeks to pierce the corporate veil of Exporting and to hold Anthony Corradetti, Morris Coppersmith, Rubin Bernstein, Anthony Associates, Inc., R.A.M. Packaging Partnership, Memco Trading Company, Inc., and Corradetti Enterprises liable on the judgment obtained against Exporting as the "alter egos" of that corporation. In count three, plaintiffs allege that Anthony Corradetti, Morris Coppersmith, Rubin Bernstein, and Bernard Weinstein conspired, using a variety of business entities, "to set up a sham and shell corporation as a 'conduit of funds' to take unjust and unfair advantage of the enormous potential in the export field for their type of 'scam.' "

All defendants moved to dismiss plaintiffs' second action under Fed.R.Civ.P. 12(b)(6). Upon the granting of these motions by the district court, plaintiffs filed this appeal. We reverse.

II.

A. STANDARD OF REVIEW

On defendants' motion to dismiss the complaint for failure to state a claim upon which relief may be granted, all allegations in the complaint and all reasonable inferences that can be drawn therefrom must be accepted as true and viewed in the light most favorable to plaintiffs. Therefore, we may affirm the district court only if we agree that it is beyond doubt that the plaintiffs can prove no facts in support of their claims that would entitle them to relief. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 444 (3d Cir.1977), cert. denied 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978).

As this suit is based on the diversity jurisdiction of the federal courts, the relevant law is that of the forum--New Jersey. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

B. THE FRAUD CLAIMS

Plaintiffs' first count alleges that Corradetti, Coppersmith, and Bernstein, officers of Exporting, fraudulently induced the corn contract between plaintiffs and Exporting by misrepresenting, during the course of contract negotiations, the financial condition of the company and by breaching their duty to disclose the company's true financial condition. More specifically, plaintiffs allege that these men, acting in the name of Exporting on July 2 and 9, 1980, misrepresented to plaintiffs that Exporting had the ability to post a substantial three percent performance bond and to obtain a five percent bank guarantee in connection with the proposed $44,000,000 corn sale. In addition, plaintiffs allege that during this same time period, Corradetti, Coppersmith and Bernstein had a duty, arising from their association with Exporting and a principal-agent relationship between Exporting and plaintiffs, to disclose Exporting's true financial condition to plaintiffs. Because of this affirmative duty, the failure to disclose the true state of Exporting's finances is alleged to constitute fraudulent concealment of a material fact.

1. Collateral Estoppel

The district court dismissed count one on the basis of collateral estoppel, finding that the plaintiffs had "fully and fairly litigated the issue of fraud in the inducement of contract in their first action."

Collateral estoppel precludes the relitigation of an issue that has been put in issue and directly determined adversely to the party against whom the estoppel is asserted. New Jersey-Philadelphia Presbytery of the Bible Presbyterian Church v. New Jersey State Board of Higher Education, 654 F.2d 868, 876 (3d Cir.1981); State v. Gonzalez, 75 N.J. 181, 380 A.2d 1128, 1131 (1977); Eatough v. Board of Medical Examiners, 191 N.J.Super. 166, 465 A.2d 934, 938 (App.Div.1983). However, the bar of collateral estoppel does not extend to " 'any matter which came collaterally in question, ... nor any matter to be inferred by argument from the judgment.' " Allesandra v. Gross, 187 N.J.Super. 96, 453 A.2d 904 (App.Div.1982) (citations omitted). Thus, the factual issue must actually have been litigated and determined. Id.

If a party is precluded from relitigating an issue with an opposing party, he is also precluded from doing so with another person unless he lacked a full and fair opportunity to litigate the issue in the first action or unless other circumstances justify affording him an opportunity to relitigate the issue. United Rental Equipment Co. v. Aetna Life & Casualty Insurance Co., 74 N.J. 92, 376 A.2d 1183, 1188 (1977); Feniello v. University of Pennsylvania Hospital, 558 F.Supp. 1365, 1367 (D.N.J.1983). Therefore, since no special circumstances are here cited, if collateral estoppel applies, plaintiffs are estopped from relitigating the precluded issues against other parties as well as against Exporting.

The district court found that plaintiffs' first complaint had "asserted a fraud claim," and that "plaintiffs [had] identified fraud in the inducement as an integral and essential part of their case" in the final pre-trial order.

We agree that the plaintiffs, in their first suit, referred to the same incidents that form the basis of their fraud claim in this second lawsuit. Nonetheless, plaintiffs' first complaint did not raise claims of pre-contract misrepresentation or fraudulent inducement of contract. It relied solely on events following the alleged formation of the corn contract on July 17th to establish Exporting's liability. Count five of that complaint, which requested punitive damages, alleged "intentional and willful conduct of defendants in causing the above breach of contract," but did not refer to fraud in the inducement of the contract. Similarly, the references to fraud and misrepresentation in the pre-trial order, in context, relate exclusively to conduct following July 17th and to plaintiffs' punitive damage claim.

While the trial judge did discuss the law of misrepresentation in his charge to the jury, the case was presented to the jury as a breach of contract case. The jury was asked to consider the fraud issue only in the context of deciding whether to award plaintiffs punitive damages for Exporting's breach of contract. Accordingly, the special interrogatories and the jury's responses do not refer to fraud in the inducement of the corn contract. ¹

Thus, the prior judgment involved a determination only that the breach of the contract was not willful or malicious. This judgment therefore does not estop plaintiffs from contending that the individual defendants fraudulently misrepresented Exporting's financial condition before the contract came into existence.

This does not mean, however, that issue preclusion will play no role in this case on remand. Plaintiffs will be collaterally estopped from relitigating issues that were actually litigated and decided in the prior action. See United Rental Equipment Co., supra, 376 A.2d at 1188. To the extent, for example, that the applicable principles of the law of damages provide for recovery of the same items of loss which the jury evaluated in the first action, plaintiffs will be precluded from...