Stamford Holding Company v. Clark, No. 3:02CV1236(CFD) (D. Conn. 3/25/2003)
| Decision Date | 25 March 2003 |
| Docket Number | No. 3:02CV1236(CFD).,3:02CV1236(CFD). |
| Court | U.S. District Court — District of Connecticut |
| Parties | STAMFORD HOLDING COMPANY, Plaintiff v. MAUREEN CLARK, ET AL., Defendants. |
Plaintiff Stamford Holding Company brought this action against Maureen Clark ("Clark"), Christopher Plummer ("Plummer"), New England Equity, Inc. ("New England Equity"), Charles J. Irving ("Irving"), Ramona E. DeSalvo ("DeSalvo"), and Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch"), alleging violations of the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1964(c), 18 U.S.C. § 1962(c) and § 1962(d), Organized Crime Control Act of 1970, and state law claims of fraud, conversion, legal malpractice, fraudulent concealment, malicious interference with business, and breach of the duty of good faith and fair dealing.
This case was originally filed in the Eastern District of Pennsylvania and assigned to United States District Judge Robert F. Kelly. Judge Kelly transferred the case to this Court pursuant to 28 U.S.C. § 1404(a) in a memorandum order. Judge Kelly indicated that the defendants' motions to dismiss were to remain outstanding, pending resolution by this Court.
Pending are the following motions to dismiss: Merrill Lynch's Motion to Dismiss, or in the Alternative, to Refer to Arbitration and for a Stay [Docs. ##8-1, 8-2, 8-3]; Clark, Plummer, and New England Equity's Motion to Dismiss and for other Relief [Doc. #12]; Irving's Motion to Dismiss and for Costs [Docs. #18-1, #18-2]; and DeSalvo's Motion to Dismiss [Doc. #66].1 A hearing was held on the motions and the parties were given an opportunity to file supplemental briefs.
On October 18, 1993, Edward A. Massullo, M.D., F.A.C.S. ("Dr. Massullo"), and his wife, Anne Marie Massullo, entered into an Agreement ("Agreement") with defendant New England Equity. New England Equity is located in Niantic, Connecticut, and defendants Clark and Plummer are its owners and officers. On March 18, 1994, the Massullos and New England Equity entered into a supplemental agreement (the "Addendum"). Pursuant to the Agreement and Addendum, New England Equity was to perform certain services relating to the financial restructuring and possible resolution of the Massullos' severe financial problems, including debts in excess of $12,000,000. Both the Agreement and Addendum provided that all disputes between the Massullos and New England Equity would be resolved by arbitration pursuant to the rules of the American Arbitration Association.
In order to manage the Massullos' financial and business affairs, all of the defendants, except for Merrill, Lynch, formed the Massullo Financial Group. Defendants Clark and Plummer acted as the financial advisors and managers, defendant Irving was the attorney for New England Equity, and defendant DeSalvo acted as the stock escrow agent and counsel.
The Massullo Financial Group submitted a plan calling for the creation of the plaintiff Stamford Holding Company. The plan was to fund the Stamford Holding Company with the proceeds from the sale of certain properties owned by the Massullos located in Bucks County, Pennsylvania and proceeds from the liquidation of assets contained in the existing Massullo Ohio Pension Plan from Dr. Massullo's Ohio medical practice and to increase the funds with investment through Merrill Lynch. On June 24, 1994, defendant Irving, through Pacific Assets, Inc., obtained title to the Bucks County properties at a County Sheriff's sale for $2,273.88. On August 27, 1994, the Massullo Financial Group sold the properties for $2.4 million dollars.3 At that time, the Massullo Ohio Pension Plan amounted to approximately $3 million dollars. On July 18, 1995, Stamford Holding Company was incorporated in Delaware with Dr. Massullo as the sole shareholder, Clark as the president/secretary, and Plummer as the vice-president. On August 8, 1995, Stamford Holding Company opened two accounts with defendant Merrill Lynch. The two account agreements required arbitration of any disputes. In 1995, Stamford Holding Company was funded by the Massullo Financial Group in the amount of $2,288,306.10. In 1998, Stamford Holding Company had a closing balance of $5,838.24.
On November 23, 1998, Dr. and Mrs. Massullo filed a complaint in the United States District Court for the Northern District of Ohio against the New England Equity defendants (Clark, Plummer, and New England Equity), Irving, DeSalvo, and Merrill Lynch, claiming breach of fiduciary duty and conversion in connection with the management of the assets and liabilities of the Massullos ("the Ohio lawsuit").
According to the docket sheet of the Ohio lawsuit, Merrill Lynch moved to compel arbitration of the claims against it on January 4, 1999. On April 7, 1999, the New England Equity defendants served a demand of arbitration upon the Massullos and moved to compel arbitration of the amount of unpaid fees for services rendered to the Massullos and of the claims alleged in the Ohio lawsuit by the Massullos, under the Agreement and Addendum. On May 26, 1999, the Massullos voluntarily dismissed their claims against Merrill Lynch, without prejudice. On October 18, 1999, the New England Equity defendants' motion to compel arbitration was granted. Shortly thereafter, the Massullos voluntarily dismissed their claims against the New England Equity defendants, DeSalvo, and Irving in the Ohio lawsuit.4
Arbitration began in Connecticut on February 10, 2000, pursuant to the arbitration clauses in the Agreement and Addendum.5 The Massullos filed a counterclaim in the arbitration proceeding setting forth claims of breach of contract, fraud, conversion, breach of fiduciary duty, negligence, breach of fiduciary duty in the retention and supervision of counsel, negligence in connection with accountants, and a request for an accounting, all in connection with the restructuring of the Massullos' debt by the New England Equity defendants.
The arbitration resulted in a settlement agreement, which was read into the record on April 5, 2000. This agreement included a payment to New England Equity by the Massullos and specifically resolved the Ohio lawsuit's claims by the Massullos against the New England Equity defendants and DeSalvo. On July 19, 2000, the arbitrator awarded and confirmed as binding and enforceable the terms of the settlement.
The New England Equity defendants subsequently requested the Superior Court of the State of Connecticut to confirm the settlement award, which was granted by the Superior Court on May 8, 2001. On August 15, 2001, the arbitration settlement was reduced to a judgment in the amount of $177,500 in favor of New England Equity, which was also recorded in the Court of Common Pleas in New London County, Ohio on August 15, 2001.
On January 17, 2002, the plaintiff Stamford Holding Company filed this action, alleging RICO violations, conversion, breach of contract, legal malpractice, fraudulent concealment, malicious interference with business, and breach of the duty of good faith and fair dealing. As noted above, each of the defendants here has a filed a motion to dismiss the plaintiff's complaint. Merrill Lynch has moved to dismiss on the basis of (1) lack of subject matter jurisdiction and (2) failure to state a claim. Merrill Lynch has also moved for arbitration and for a stay. The New England Equity defendants have moved to dismiss on the following bases: (1) res judicata and collateral estoppel; (2) lack of personal jurisdiction; (3) lack of subject matter jurisdiction; (4) improper venue; (5) failure to state a claim; and (6) expiration of the statute of limitations. These defendants have also moved for arbitration and for attorney's fees and costs. Irving has moved to dismiss on the following bases: (1) lack of personal jurisdiction; (2) lack of subject matter jurisdiction; (3) improper venue; (4) failure to state a claim; and (5) expiration of the statute of limitations.6 DeSalvo has moved to dismiss on the following bases: (1) lack of standing; (2) res judicata; (3) lack of subject matter jurisdiction; (4) failure to state a claim; and (5) expiration of the statute of limitations. DeSalvo has also joined Merrill, Lynch's request for arbitration and a stay.
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must accept as true all factual allegations in the complaint and draws inferences from these allegations in the light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183 (1984); Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991), cert. denied, 504 U.S. 911 (1992). Dismissal is warranted only if, under any set of facts that the plaintiff can prove consistent with his allegations, it is clear that no relief can be granted. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991). "The issue on a motion to dismiss is not whether the plaintiff will prevail, but whether the plaintiff is entitled to offer evidence to support his or her claims." United States v. Yale-New Haven Hosp., 727 F. Supp. 784, 786 (D.Conn. 1990) (citing Scheuer, 416 U.S. at 232).
Thus, a motion to dismiss under 12(b)(6) should not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994) (citations and internal quotations omitted), cert. denied, 513 U.S. 816 (1994). In its review of a 12(b)(6) motion to dismiss, a court may consider "only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken."...
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