Urfirer v. Cornfeld

• Decision Date: 05 May 2005
• Docket Number: No. 04-14264.,No. 04-10274.,04-10274.,04-14264.
• Citation: 408 F.3d 710
• Parties: Michael URFIRER, Plaintiff-Appellant, v. Robert CORNFELD, Jeffrey Cornfeld, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

408 F.3d 710

Michael URFIRER, Plaintiff-Appellant, v. Robert CORNFELD, Jeffrey Cornfeld, et al., Defendants-Appellees.

No. 04-10274.

No. 04-14264.

United States Court of Appeals, Eleventh Circuit.

May 5, 2005.

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Chilton Davis Varner, Carmen R. Toledo, King & Spalding, Atlanta, GA, Howard M. Camerik, Blank, Rome, Comisky & McCauley, Boca Raton, FL, for Plaintiff-Appellant.

Franklin L. Zemel, Broad & Cassell, P.A., Fort Lauderdale, FL, for Defendants-Appellees.

Appeals from the United States District Court for the Southern District of Florida.

Before BLACK, MARCUS and FAY, Circuit Judges.

MARCUS, Circuit Judge:

At issue in this case is whether prior rulings rendered by a New York State Supreme Court in divorce proceedings between Appellant Michael Urfirer and his wife, Leslie Cornfeld, collaterally estop Urfirer from now bringing fraud and breach of fiduciary duty claims against his wife's father and brother, Appellees Robert and Jeffrey Cornfeld, in federal district court in the Southern District of Florida. Urfirer's claims allege that Robert and Jeffrey Cornfeld fraudulently induced him to sign a provision of his divorce settlement agreement with Leslie Cornfeld waiving any claims he might have to any of his wife's family's property and other holdings.

Because we find that the prior rulings of the New York divorce court have only interpreted the scope of the waiver—without ever reaching the question of whether Robert and Jeffrey Cornfeld fraudulently obtained the waiver—and because Urfirer's claims against the Cornfelds seek damages from nonparties to the divorce proceedings, they are claims that the divorce court did not and could not have previously adjudicated. Accordingly, we reverse the district court's grant of summary judgment as to Counts I and II of Urfirer's complaint. As to the remaining claims seeking disclosure of financial information related to the alleged fraud, we hold that collateral estoppel bars only Count VI of Urfirer's complaint, since the New York court has already determined that Urfirer waived his right to raise any claims arising out of his status as nominal shareholder of Cambridge Asset Management, Inc. Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

This case has its origins in the complex, protracted, and on-going divorce proceedings between Appellant Michael Urfirer and his wife, Leslie Cornfeld, who is the daughter of Appellee Robert Cornfeld and the sister of Appellee Jeffrey Cornfeld. Urfirer and Leslie Cornfeld entered into a settlement agreement (the "Agreement" or the "settlement agreement") on June 1, 2001, resolving many of their financial and property distribution issues in anticipation of their divorce. Divorce proceedings commenced in the Supreme Court of the State of New York, County of New York, IAS 51 (the "divorce court") in 2001.

Pursuant to the settlement agreement, Urfirer waived all claims against the real or personal property of his wife's family. The waiver, section 9.2 of the Agreement, stated:

The Husband hereby waives any claim he has or may have in the future arising out of the Wife's family's real estate or other holdings including, but not limited to, the Cornfeld Family Partnerships, the Paul Koenig Note, the Chapel Trail Investment and Cambridge Asset Management, Inc.

A second waiver provision, section 19.3 of the Agreement, provided:

Except as otherwise expressly set forth in this Agreement, the Husband and Wife each waives, renounces and releases to the other party any and all rights and claims which the Husband or Wife now has or may in the future acquire in the real or personal property or estate of the other party, wheresoever situated, whether before or after the date of execution of this Agreement, by reason of (i) inheritance or descent, (ii) any decedent estate law, (iii) any other statute or custom, (iv) the marital relationship, or (v) any other reason whatsoever.

Subsequent disagreement arose between Urfirer and Leslie Cornfeld as to the interpretation of the first waiver provision. As a result, the divorce court issued two orders addressing this question.

First, in an order dated December 3, 2001 (which the parties refer to as the "Discovery Order"), the New York divorce court rejected Urfirer's attempt to obtain certain financial discovery pertaining to Cambridge Asset Management, Inc. ("Cambridge") and LJS Investors, Ltd. ("LJS"). LJS is a partnership in which Urfirer had a 33% ownership interest during his marriage. The remainder was owned by members of the Cornfeld family, with Robert Cornfeld serving as general manager and Jeffrey Cornfeld as general partner. Cambridge was 100% owned by Urfirer and managed by Robert Cornfeld. The businesses were not included among the marital assets, and were subject to the waiver provision of the settlement agreement.

Accordingly, the divorce court observed, whether Urfirer was entitled to discovery regarding these businesses "hinge[d] on the scope of the waiver," since discovery was not appropriate if Urfirer retained no interest in those businesses. Discovery Order at 2. The divorce court ultimately rejected the discovery request, reasoning:

The waiver is unequivocal and speaks not only in terms of waiver of any future rights but rights that accrued before June 1, 2001 as well. Assuming arguendo that the income distributions prior to June 1, 2001 were improper, the waiver precludes defendant from contesting such distributions. He is not entitled to the third party discovery because he has no past or future rights to the assets.

Id. at 3.

In spite of the divorce court's declaration that Urfirer had no rights to the assets of LJS and Cambridge, Urfirer never executed the documents necessary to transfer his titled interests in these and other Cornfeld family businesses (the "Cornfeld Family Holdings") to his wife. Accordingly, Leslie Cornfeld moved for partial summary judgment declaring that pursuant to the settlement agreement, Urfirer waived his rights and transferred his ownership interests in the Cornfeld Family Holdings to his wife.

Urfirer argued that the Agreement's waiver provision waived only his right to claim that the Cornfeld Family Holdings were marital property; that it did not waive any rights he had in the Cornfeld Family Holdings prior to June 1, 2001; and that he retained his ownership interest until he actually signed the documents transferring it to Leslie Cornfeld. The divorce court, in what the parties refer to as the "Title Order" of September 25, 2002, found all of these arguments "unsupportable" under "the plain language of the parties' agreement." Title Order at 5. The divorce court thus held:

Accordingly, plaintiff's motion for partial summary judgment is granted to the extent that the court declares that as of June 1, 2001, defendant has no ownership Interest in the Cornfeld Family Real Estate and Holdings, including: Cornfeld Family Partnerships, The Paul Koenig Note, The Chapel Trail Investment and Cambridge Asset Management, Inc. The court further directs that defendant execute, no later than 30 days from the date of this decision, such documents as may be required to transfer ownership of such holdings to plaintiff as of June 1, 2002. The entry of any judgment hereon, however, shall be held in abeyance pending final adjudication of the instant divorce action.

Id. at 11.

Shortly thereafter, Urfirer claims, he inadvertently obtained a copy of LJS's 2001 tax return and learned for the first time that Leslie, Robert, and Jeffrey Cornfeld had concealed from him an LJS bank account containing nearly $2 million in cash. This cash, Urfirer argues, should have been included among the marital property to be divided equally between himself and Leslie Cornfeld.

Urfirer attempted to raise this claim against Leslie Cornfeld in the divorce court, and the divorce court dismissed it without prejudice. In an order dated July 16, 2003, the divorce court stated:

Defendant seeks to have this court "adjust" plaintiff's equitable distribution, claiming he is entitled to compensatory and punitive damages because he waived whatever rights he may have had in plaintiff's interest in certain family owned businesses based upon plaintiff's alleged fraud. He seeks such an adjudication by motion. This motion fails procedurally and must be denied.

Procedurally defendant's motion for summary adjudication on a claim of fraud is defective because there is no pleading interposed by defendant in which he alleges a cause of action for fraud against plaintiff. A fortiori, if there is no pleading, there is no joinder of issue, which is a necessary predicate to the summary adjudication defendant now seeks. CPLR § 3212. Further, where there is no underlying cause of action, there is no basis for punitive damages. Collision Plan Unlimited v. Bankers Trust, 63 N.Y.2d 827, 831, 482 N.Y.S.2d 252, 472 N.E.2d 28 (1984). Even were a proper pleading interposed, the facts claimed arise from a private transaction, and do not rise to a high degree of moral turpitude that would otherwise implicate punitive damages. JGS, Inc. v. Lifetime Cutlery Corp., 87 A.D.2d 810, 448 N.Y.S.2d 780 (2nd Dept. 1982). Finally there is no basis for summary [judgment] even with a proper pleading, because issues of fraud are almost inevitably questions of fact. DeRossi v. Rubinsten, 233 A.D.2d 220, 650 N.Y.S.2d 10 (1st Dept.1996).

In view of the procedural defects, the court does not reach the issue of whether, if properly interposed, defendant even makes out a claim of fraud.

Order at 18-19.

Subsequent to this order, Urfirer brought a claim against Leslie Cornfeld in the New York divorce court alleging fraud, breach of fiduciary duty, and unjust enrichment.

Urfirer also filed the instant action against Robert and Jeffrey Cornfeld in the United States District Court for the Southern District of Florida. Count I...