You are here: / / THE STATE ACTION ON A MULTI-MILLION DOLLAR DEBT SHOULD NOT HAVE BEEN DISMISSED...
,

THE STATE ACTION ON A MULTI-MILLION DOLLAR DEBT SHOULD NOT HAVE BEEN DISMISSED ON CLAIM PRECLUSION OR RES JUDICATA GROUNDS BASED UPON THE DISMISSAL OF A FEDERAL ACTION AGAINST A DEFENDANT WHO WAS NOT A PARTY IN THE STATE ACTION, THE FACT THAT THE PLAINTIFFS IN THE STATE ACTION MAY HAVE BEEN ABLE TO INTERVENE OR ASSIGN THEIR RIGHTS TO THE DEFENDANT IN THE FEDERAL ACTION WAS NOT A PROPER GROUND FOR CLAIM PRECLUSION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Moulton, reversing Supreme Court determined that the dismissal of action in federal court to recover on a multi-million dollar notes did not preclude the state action on claim preclusion (res judicata) grounds. The opinion is fact-specific and too complicated to be fairly summarized here:

Supreme Court dismissed the action with prejudice on claim preclusion grounds, and denied the motion to amend as moot. The court found that plaintiffs herein should have intervened in the federal action, or assigned their claims to [the defendant in the federal action,] Varshavsky. The failure to do so was a “blatant misuse of the federal forum,” which resulted in a “stunning” amount of discovery, and several motions, which Supreme Court found were wasted because plaintiffs herein failed to use the federal forum to resolve all “claims aris[ing] from a common nucleus of operative facts.” * * *

The doctrine of claim preclusion does not bar plaintiffs’ claims herein. Varshavsky, the sole defendant in the federal action, was not himself the creditor of the subject loans and had no standing to assert a counterclaim for recovery of plaintiffs’ loans in that action. Plaintiffs’ putative rights to intervene as party defendants in the federal action, or to assign their claims to Varshavsky, are far from clear. Either option, intervention or assignment, might have been rejected by the federal court as an attempt to evade the strictures of diversity jurisdiction. Apart from the efficacy of these options, even if intervention or assignment were possible, there is no legal doctrine that would compel plaintiffs herein to litigate in the federal action. In short, plaintiffs herein, as nonparties to the federal litigation, are not precluded from asserting claims that no party in the federal litigation had standing to pursue. To hold otherwise would mean that a debtor may, by suing a creditor’s principal or associate, require the creditor to participate in the action or have its claims precluded. Avilon Auto. Group v Leontiev, 2019 NY Slip Op 00058, First Dept 1-3-19

 

You might also like
A HEAVY STONE SLAB SLIPPED OUT OF A SLING AS IT WAS BEING HOISTED AND FELL ON PLAINTIFF; PLAINTIFF DID NOT HAVE TO SHOW THE EQUIPMENT WAS DEFECTIVE AND DID NOT HAVE TO SHOW HE AND A CO-WORKER WERE NOT NEGLIGENT; PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) CAUSE OF ACTION SHOULD HAVE BEEN GRANTED (FIRST DEPT).
Evidence of a Prior Crime Not Admissible to Prove Intent and Not Admissible As Part of a Common Scheme or Plan/Conviction Reversed
A LEASE BETWEEN PLAINTIFF CORPORATION AND DEFENDANTS (ONE OF WHOM WAS A MEMBER OF PLAINTIFF’S BOARD) WAS NOT VOTED ON BY A MAJORITY OF DISINTERESTED DIRECTORS AND WAS THEREFORE VOIDABLE UNDER BUSINESS CORPORATION LAW 713(B); DEFENDANTS BREACHED THEIR FIDUCIARAY DUTY TO THE CORPORATION BY SUBLETTING THE LEASED PREMISES FOR A MUCH HIGHER RENT WITHOUT PLAINTIFF’S KNOWLEDGE (FIRST DEPT).
PLAINTIFF, A SOPHISTICATED INVESTOR, DID NOT STATE A CAUSE OF ACTION FOR FRAUD ON THE PART OF THE COMPANY IN WHICH PLAINTIFF INVESTED AND PURCHASED A CONTROLLING INTEREST, PLAINTIFF HAD THE MEANS TO DISCOVER THE TRUTH BEHIND ANY ALLEGED FALSE CLAIMS.
THE JUDGE PRONOUNCED A FELONY SENTENCE WITHOUT AN UPDATED AND COMPLETE PRESENTENCE REPORT; SENTENCE VACATED (FIRST DEPT).
CUSTODY SHOULD NOT HAVE BEEN TRANSFERRED TO FATHER AND ALL CONTACT BETWEEN MOTHER AND CHILD SHOULD NOT HAVE BEEN SUSPENDED WITHOUT A HEARING, JUDGE, SUA SPONTE, SHOULD NOT HAVE PROHIBITED FUTURE PETITIONS FOR CUSTODY OR VISITATION BY MOTHER (FIRST DEPT).
CERTAIN ASPECTS OF PLAINTIFF’S QUANTUM MERUIT AND UNJUST ENRICHMENT CAUSES OF ACTION PROPERLY SURVIVED A MOTION TO DISMISS, OTHER ASPECTS WERE BARRED BY THE STATUTE OF FRAUDS.
PLAINTIFFS’ EXPERTS PRESENTED SUFFICIENT PROOF TO WARRANT A FRYE HEARING ON WHETHER A TUMOR MAY HAVE BEEN DETECTABLE BEFORE BIRTH.

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

THE TRIAL EVIDENCE DID NOT SUPPORT THE PLAINTIFF’S EXPERT’S TESTIMONY... DEFENDANT WAS CONVICTED OF 37 COUNTS OF SEXUAL OFFENSES, THE TESTIMONY AT TRIAL...