Opinion
20-CV-00103 (PGG)(SN)
01-21-2022
REY OLSEN, Plaintiff, v. THE SHERRY NETHERLAND, INC., et al., Defendants.
REPORT AND RECOMMENDATION
SARAH NETBURN, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE PAUL G. GARDEPHE:
This suit is the latest chapter in a long-running dispute over the attempted purchase of an apartment in the Sherry Netherland, a cooperative condominium building located at 781 Fifth Avenue in New York City. See ECF No. 1 (Compl.) at 19. Plaintiff Rey Olsen, proceeding pro se, has filed this federal action against (1) the Sherry Netherland, (2) Michael J. Horvitz, Wendy Carduner, Mary McInnis Boies, Howard M. Lorber, Marjorie Fisher Furman, Arnold S. Gumowitz and Frederic M. Seegal, members of the Sherry Netherland's Board of Directors (the “Board,” and collectively with the Sherry Netherland, the “Sherry Netherland Defendants”), and (3) Curtis C. Mechling and Gabriel Sasson, attorneys with the law firm of Stroock & Stroock & Lavan, LLP, who represented the Sherry Netherland at a judicial sale of the apartment (the “Law Firm Defendants”). Id. at 6. Olsen alleges that the Defendants discriminated against Roque De La Fuente, a Mexican-American businessman and the assignor of Olsen's interest in the action, in denying his application to purchase the unit. He alleges ten separate causes of action under state and federal law, including the Fair Housing Act, 42 U.S.C. § 3601 et seq., the Civil Rights Act of 1866, 42 U.S.C. § 1982, Title II of the Civil Rights Act of 1964, 42 U.S.C. § 2000a, the New York Human Rights Law, N.Y. Exec. Law § 296, the New York City Human Rights Law, N.Y.C. Admin. Code § 8-101, fraudulent inducement, and a breach of the implied covenant of good faith and fair dealing. Id. at 25-37. All Defendants have moved to dismiss. I recommend that the Court grant Defendants' motion to dismiss.
Because Olsen divided his complaint into sections and numbers the paragraphs in each section separately, I cite to specific pages of the complaint in lieu of paragraphs.
BACKGROUND
In December 2016, an apartment in the Sherry Netherland was put up for sale pursuant to 11 U.S.C. § 363(b)(1). Id. at 10. Two potential purchasers bid on the apartment. Id. at 11. De La Fuente placed the highest bid, signed the bid contract, and provided a $100,000 down payment. Id. As required by the contract, De La Fuente subsequently applied to the Board, submitting financial statements prepared by an accountant, social reference letters, information on his membership in private clubs, and an assortment of news clippings describing his career as a real estate developer and his other properties around the world. Id. at 11-12. The Board rejected his application shortly thereafter. Id. at 12. The complaint alleges that this rejection was motivated by racial and ethnic animus due to De La Fuente's status as a Mexican-American. See, e.g., id. at 4-5, 6-7, 15-19, 21.
The complaint alleges that Defendants Lorber, Horvitz, Carduner, McInnis Boies, Furman, Gumowitz, Seegal, Gardiner, and Lipman are Directors of the Sherry Netherland. Compl. at 6. Gardiner and Lipman are now deceased. Def. Br. at 1.
In June 2017, De La Fuente sued the Sherry Netherland and the Board. See Complaint, De La Fuente v. Sherry Netherland, Inc., No. 17-cv-04759 (PAE), 2019 WL 3430207 (S.D.N.Y. July 30, 2019), ECF No. 1. In his second amended complaint, De La Fuente alleged violations of the Civil Rights Act of 1866, 42 U.S.C § 1982, Title II of the Civil Rights Act of 1964, 2 U.S.C. § 2000a, the Fair Housing Act (“FHA”), 42 U.S.C. § 3601 et seq., the New York Human Rights Law, N.Y. Exec. Law § 296(5)(a)(2), the New York City Human Rights Law, N.Y.C. Admin. Code §§ 8-107(4)-(5), and the New York Civil Rights Law, N.Y. Civ. Rights Law § 19-a. See Second Amended Complaint, De La Fuente, 2019 WL 3430207, ECF No. 41. Judge Engelmayer dismissed De La Fuente's FHA disparate impact claim and his public accommodations claim under Title II of the Civil Rights Act of 1964 for failure to state a claim, but the remaining claims proceeded to discovery. See De La Fuente, 2018 WL 1597649, at *6-9 (S.D.N.Y. Mar. 27, 2018).
At the close of discovery, the defendants moved for summary judgment. See Motion for Summary Judgment, De La Fuente, 2019 WL 3430207, ECF No. 108. Judge Engelmayer granted that motion in its entirety. See De La Fuente, 2019 WL 3430207, at *1. Judge Engelmayer held that while De La Fuente had made out a prima facie case of housing discrimination, the defendants had articulated three independent reasons why the Board had rejected his application. Id. at *12-13. These nondiscriminatory explanations included a sanction issued against De La Fuente by the Federal Deposit Insurance Corporation as a result of financial misconduct during his time as the director of the First International Bank; De La Fuente's history of initiating lawsuits; and evidence that De La Fuente did not possess the liquid assets or annual income sufficient to pay the cash purchase price and pay maintenance charges. Id. at *13. Judge Engelmayer concluded that De La Fuente had failed to meet his burden of showing that these stated reasons were pretextual. Id. at *14-15.
De La Roque moved for reconsideration of Judge Engelmayer's order. Motion to Set Aside Judgment, De La Fuente, 2019 WL 4409475 (S.D.N.Y. Sept. 16, 2019), ECF No. 142. De La Fuente maintained that the defendants had not produced documentary evidence to substantiate their proffered nondiscriminatory basis for rejecting his application, asserting that a report prepared by Stroock & Stroock & Lavan (the Law Firm Defendants' firm) detailing his history of litigation was undated and so raised a material issue of fact regarding whether it was given to the Board prior to its decision. Id. at 12-13. He also argued that the report was never produced in discovery and that it was not properly authenticated and so was inadmissible. Id. at 13-14. Judge Engelmayer denied the motion for reconsideration, reasoning that De La Fuente “simply reassert[ed] arguments that the Court previously considered and rejected in granting defendants' motion for summary judgment.” De La Fuente, 2019 WL 4409475, at *2. Judge Engelmayer emphasized that De La Fuente's supposition that the Board did not receive the report before the meeting was speculative, and noted that he had failed to raise the argument that the report was inadmissible in opposition to the motion for summary judgment. Id. at *2-3. “In any event,” he concluded, “the Court has reviewed the September 11, 2018 email sent by defense counsel Peter Shapiro to plaintiff's counsel [. . .], which demonstrates that De La Fuente's claim not to have received this document in discovery is a falsehood.” Id. at *3.
The Court of Appeals affirmed Judge Engelmayer's decision. De La Fuente, 845 Fed.Appx. 29 (2d Cir. 2021).
While De La Fuente's appeal was pending, Plaintiff Rey Olsen filed this lawsuit against the Sherry Netherland, the Board members, and Sasson and Mechling. See Compl. In the complaint, Olsen avers that he is the assignee of De La Fuente and that he was authorized to bring the action “under a prior Judgment” in the previous case. Id. at 3. Olsen brings a housing discrimination claim under the FHA and the Civil Rights Act of 1866, a disparate treatment and disparate impact claim under the FHA, and a public accommodations claim under Title II of the Civil Rights Act of 1964. Id. at 25-30. Olsen also contends that defendants violated the New York Human Rights Law and the New York City Human Rights Law. Id. at 32-33. Additionally, Olsen alleges that the Law Firm Defendants fraudulently induced De La Fuente to pay the $100,000 down payment, violated the covenant of good faith and fair dealing, and did not produce De La Fuente's litigation record until after the Board had rejected his application, providing a pretextual explanation for its rejection of his application. Id. at 33-37.
After Judge Engelmayer granted defendants' summary judgment motion, Olsen moved, pro se, to vacate the Court's judgment pursuant to Rule 59(b)(3). De La Fuente, 2019 WL 4409475, at *1 (S.D.N.Y. Sept. 16, 2019). The Court denied the motion. Id. In addition, Olsen moved to join the case as a party. Id. The Court also denied this motion:
Entirely apart from the belated nature of this motion, Olsen has failed to demonstrate that he was a required party, as set out in Rule 19(a)(1)(B). Because he is entitled to bring his own action against the Sherry, he has not shown that his absence from this case “as a practical matter impair[s] or impede[s] [his] ability to protect the interest” he has in the case, as required by Rule 19(a)(1)(B)(i). Nor has he shown that he would be “subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest,” as required by Rule 19(a)(1)(B)(ii). And Olsen made no effort to join the case as a party until after summary judgment had been entered against the existing plaintiff.Id. at *1 n.1. Olsen claims that Judge Engelmayer's statement that “he is entitled to bring his own action against the Sherry” constitutes court permission to file the present action. Pl. Br. at 4.
All the Defendants have moved to dismiss. ECF Nos. 31 & 33. Olsen has opposed the motions, ECF No. 40, and moved to strike the Law Firm Defendants' reply brief, which the Court denied. ECF Nos. 49, 63. Olsen's objection to the denial of his motion to strike is currently pending before Judge Gardephe. ECF Nos. 65, 75.
DISCUSSION
The Sherry Netherlands Defendants move to dismiss Plaintiff's complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the claims are precluded by the doctrines of res judicata and collateral estoppel. The Law Firm Defendants separately argue that Olsen's claims are barred by New York Civil Rights Law § 76-a (New York's anti-SLAPP law), the litigation privilege under New York law, and collateral estoppel.
I. Dismissal under Rule 12(b)(6), Construction of Pro Se Submissions, and Universe of Materials for Review
To survive a 12(b)(6) motion to dismiss, a complaint “must allege sufficient facts . . . to state a plausible claim for relief.” Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp v. Twombly, 550 U.S. 544, 555-56 (2007)). In reviewing such a motion, courts “accept as true all factual statements alleged in the complaint and draw all reasonable inferences in favor of the non-moving party.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007).
The “submissions of a pro se litigant must be construed liberally and interpreted to raise the strongest arguments that they suggest.” Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (cleaned up); see also Hill v. Curcione, 657 F.3d 116, 122 (2d Cir. 2011). The Court must, however, examine a pro se plaintiff's complaint “for factual allegations sufficient to meet the plausibility requirement.” Hill, 657 F.3d at 122; see Twombly, 550 U.S. at 570 (a complaint must allege “enough facts to state a claim for relief that is plausible on its face”). Courts “are obligated to draw the most favorable inferences that [a pro se] complaint supports,” but “cannot invent factual allegations that [the plaintiff] has not pled.” Chavis v. Chappius, 618 F.3d 162, 170 (2d Cir. 2010). The Court will not assume the truth of mere legal conclusions or conclusory statements. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).
Because a motion to dismiss “challenges the complaint as presented by the plaintiff,” the Court may ordinarily review “only a narrow universe” of materials in assessing whether the motion should be granted. Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d Cir. 2016). Courts may consider the complaint itself, as well as documents incorporated by reference or appended. Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). “[I]n ruling on a 12(b) motion to dismiss,” courts are also “permitted to consider matters of which judicial notice may be taken.” Simmons v. Trans Express Inc., 16 F.4th 357, 360 (2d Cir. 2021) (internal quotation omitted). Court records are subject to judicial notice, and so may be properly considered on a motion to dismiss. See Akhenaten v. Najee, LLC, 544 F.Supp.2d 320, 327 n.9 (S.D.N.Y. 2008); see also Day v. Moscow, 955 F.2d 807, 811 (2d Cir. 1992) (“Generally res judicata is an affirmative defense to be pleaded in the defendant's answer. However, when all relevant facts are shown by the court's own records, of which the court takes notice, the defense may be upheld on a Rule 12(b)(6) motion without requiring an answer.”) (citations omitted).
II. Res Judicata
“Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Allen v. McCurry, 449 U.S. 90, 94 (1980). “The doctrine bars later litigation if ‘an earlier decision was (1) a final judgment on the merits, (2) by a court of competent jurisdiction, (3) in a case involving the same parties or their privies, and (4) involving the same cause of action.'” Cho v. Blackberry Ltd., 991 F.3d 155, 168 (2d Cir. 2021) (quoting EDP Med. Comput. Sys., Inc. v. United States, 430 F.3d 621, 624. (2d Cir. 2007)). Both res judicata and collateral estoppel “relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication.” Allen, 449 U.S. at 94.
“Although there is no generally prevailing definition of privity which can be automatically applied to all cases, [. . .] it is abundantly clear that the defense of res judicata applies against an assignee as it does against his assignor.” Savini v. Sheriff of Nassau Cty., 209 F.Supp. 946, 952 (E.D.N.Y. 1962); see also Taylor v. Sturgell, 553 U.S. 880, 894 (2008) (explaining that the nonparty preclusion may be based on pre-existing substantive legal relationships including that between an assignee and assignor); 7 West 75th St. Realty Co., LLC v. Citigroup, Inc., No. 13-cv-981 (PGG), 2015 WL 1514539, at *26 (S.D.N.Y. Mar. 31, 2015) (holding that assignee plaintiff's claims were barred by res judicata where assignor and defendant had previously litigated the matter in state court).
The simple fact that a suit involves “the same parties, similar or overlapping facts, and similar legal issues” as a previous suit does not, however, necessarily bar the action. S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 1463 (2d Cir. 1996). Rather, “[a] first judgment will generally have preclusive effect only where the transaction or connected series of transactions at issue in both suits is the same, that is ‘whe[re] the same evidence is needed to support both claims, and whe[re] the facts essential to the second were present in the first.'” Id. at 1463-64 (quoting NLRB v. United Tech. Corp., 706 F.2d 1254, 1259-60 (2d Cir. 1983)).
Courts apply federal law in determining the preclusive effect of a federal judgment. Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002); see also Taylor, 553 U.S. at 891 (“The preclusive effect of a federal-court judgment is determined by federal common law.”).
The elements of res judicata are satisfied here. First, Olsen's claims against the Sherry Netherland Defendants were previously adjudicated on the merits in the De La Fuente action by a court of competent jurisdiction. Judge Engelmayer dismissed both the disparate impact and the public accommodations causes of action for failure to state a claim, which constitutes a final judgment on the merits. Berrios v. New York City Hous. Auth., 564 F.3d 130, 134 (2d Cir. 2009) (“[T]he sufficiency of a complaint to state a claim on which relief may be granted is a question of law, [and so] the dismissal for failure to state a claim is a final judgment on the merits and thus has res judicata effects.”). The Court then granted the defendants' summary judgment motion on the housing discrimination claims under the FHA, the Civil Rights Act of 1866, and the equivalent state and city laws. Summary judgment constitutes an adjudication on the merits for the purpose of res judicata. See Weston Funding Corp. v. Lafayette Towers, Inc., 550 F.2d 710, 713-14 (2d Cir. 1977). Judge Engelmayer also considered and rejected the argument that the lack of a date on the litigation report proved that the Board did not receive the report before the meeting when considering the motion for reconsideration. See Saabiraah El v. City of New York, No. 04-cv-1591 (LMM), 2007 WL 1834692, at *3-4 (S.D.N.Y. June 26, 2007) (concluding that second action was barred by res judicata where plaintiff's claims had been raised and rejected on a motion for reconsideration in the first action). The judgment became final when the Court of Appeals rejected De La Fuente's appeal. See Cho, 991 F.3d at 160-61.
The Court had jurisdiction over De La Fuente's federal law claims under 28 U.S.C. § 1331 and his state law claims under 28 U.S.C. § 1367.
Second, Olsen is in privity with De La Fuente as his assignee. Compl. at 3. Although this fact is generally alleged in the complaint, in his memorandum in opposition to Defendants' motions to dismiss, he claims that De La Fuente assigned him an interest before the judicial sale of the unit. Pl. Br. at 7. Olsen does not clearly state the nature of the assigned interest in his complaint or brief, but De La Fuente previously testified that he entered into a verbal contract with Olsen and offered him a two percent interest in any judgment in exchange for assistance with the litigation. Exhibit C, Motion for Summary Judgment, De La Fuente, 2019 WL 3430207, ECF No. 109-3, at 15-16. De La Fuente further testified that this agreement was made during the proceedings in Bankruptcy Court. Id. at 16-17. As such, Olsen's interest in the case derives directly from De La Fuente's extinguished claims.
Olsen contends that because De La Fuente allegedly assigned the two percent interest to Olsen before the judicial sale, the two men are not privies. See, e.g., Gramatan Home Inv'r Corp. v. Lopez, 46 N.Y.2d 481 (1979). The assignments in the cases Olsen cites concern property interests in real property and securities -not a legal claim- and so are easily distinguishable from the case at bar. Compare id. at 486-87 (holding that assignment of mortgage occurred before initiation of Attorney General's consumer fraud case against plaintiff's assignor, and so plaintiff was not bound by the judgment) and Teleprompter Corp. v. Polinsky, 447 F.Supp. 53, 56 n.5 (S.D.N.Y. 1977) (noting that bank was not bound by potential judgment where assignment of interest in contested Stock Subscription Agreement occurred before the commencement of litigation) with 7 West 75th St. Realty Co., LLC, 2015 WL 1514539, at *26 (holding that assignee's legal claims were barred where the same claims had been litigated in state court). Like the plaintiffs in 7 West 75th Street Realty Company, Olsen's assigned interest in the potential judgment derives from the causes of action asserted by De La Fuente, and so his claims are subject to preclusion regardless of the timing of the assignment.
Olsen argues that Judge Engelmayer gave him “permission” to file his own action in his decision on the motions for reconsideration, but this argument misinterprets the Court's reasoning. In denying Olsen's motion to join the case as a party, the Court concluded that Olsen had not shown that “his absence from this case ‘as a practical matter impair[s] or impede[s] his ability to protect the interest” because Olsen could bring his own action. De La Fuente, 2019 WL 4409475, at *1 n.1. This statement did not give Olsen permission to sue, but rather explains one of the reasons why he was not a required party to De La Fuente's suit under Federal Rule of Civil Procedure 19(a)(1)(B). As such, Olsen's argument is without merit.
Third, Olsen's first seven claims against the Sherry Netherland Defendants are indistinguishable from those raised in the previous action. Olsen bases his claims on the same set of facts, cites the same statutory provisions, and seeks the same relief. Even the text of the complaint is virtually identical. Compare Compl. at 25-26 (asserting that defendants violated the FHA in refusing to approve De La Fuente's application “solely because of his race and ethnicity” and seeking declaratory relief and compensatory damages) with Second Amended Complaint, De La Fuente, 2019 WL 3430207, at 19-20 (asserting that defendants violated the FHA in refusing to approve De La Fuente's application “solely because of his race and ethnicity” and seeking declaratory relief and compensatory damages). Olsen's tenth claim that the lack of a date on the litigation record is evidence of pretext was also raised by De La Fuente in his motion for reconsideration. Because Olsen's claims arising under the FHA, the Civil Rights Act of 1866, Title II of the Civil Rights Act of 1964, the New York Human Rights Law, and the New York City Human Rights Law were previously raised by De La Fuente, they are precluded by res judicata. Olsen's tenth claim is also precluded as to the Sherry Netherland Defendants. Teltronics Serv., Inc. v. L M Ericsson Telecomm., Inc., 642 F.2d 31, 35 (2d Cir. 1981) (plaintiff's claims barred by res judicata where “the same parties, the same cause of action, and the same facts form the basis of the second complaint”).
Additionally, Olsen's eighth and ninth claims could have been raised in the prior action, and so both are precluded. Cho, 991 F.3d at 168-69 (holding that plaintiffs' claims arose out of the same transaction or occurrence as a prior suit and so were precluded by res judicata). The eighth claim alleges that the Sherry Netherland Defendants conspired with defendants Mechling and Sasson to fraudulently induce De La Fuente to make a $100,000 down payment as a precondition of submitting an application to the Board with the intent of creating “an extra-legal condition to prevent [De La Fuente], a Mexican-American from purchasing” the apartment and depriving him of his deposit. Compl. at 33-34. Olsen's ninth claim alleges that the defendants violated the covenant of good faith and fair dealing by failing to consider De La Fuente's application. Id. at 35-36. Both of these claims concern De La Fuente's bid on the apartment in the judicial sale and his failed application to the Board, the exact same transactions at issue in the previous case. As such, they could have been raised in the prior action, and Olsen's eighth and ninth causes of action are barred by res judicata.
I conclude that all of Olsen's claims against the Sherry Netherland Defendants are barred by res judicata, and recommend they be dismissed on that ground.
III. Collateral Estoppel
“Collateral estoppel, or issue preclusion, prevents parties or their privies from relitigating in a subsequent action an issue of fact or law that was fully and fairly litigated in a prior proceeding.” Marvel Characters, Inc., 310 F.3d at 288. Under federal law, collateral estoppel applies where “(i) an identical issue was raised in a previous proceeding; (ii) the issue was actually litigated and decided in the previous proceeding against the party; (iii) the party had a full and fair opportunity to litigate the issue; and (iv) resolution of the issue was necessary to support a valid and final judgment on the merits.” Ferring B.V. v. Serenity Pharm., LLC, 391 F.Supp.3d 265, 282 (S.D.N.Y. 2019); see also Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir. 1986).
Defining the “issue” in question is the key challenge in applying collateral estoppel. The Court of Appeals has defined an issue as:
[A] single, certain and material point arising out of the allegations and contentions of the parties. It may concern only the existence or non-existence of certain facts, or it may concern the legal significance of those facts. If the issues are merely [factual], they need only deal with the same past events to be considered identical. However, if they concern the legal significance of those facts, the legal standards to be applied must also be identical; different legal standards as applied to the same set of facts create different issues.Matusick v. Erie Cty. Water Auth., 757 F.3d 31, 48 (2d Cir. 2014) (quotation omitted).
The Law Firm Defendants were not defendants in the prior suit. Their firm, Stroock & Stroock & Lavan, represented the Sherry Netherland in the judicial sale of the apartment. Olsen alleges that Sasson “asserted to the bankruptcy judge that under its proprietary lease with the Debtor, the shares and lease could only be sold . . . if the Sherry's Board approved the buyer which could withhold consent for any or no reason.” Compl. at 22. He further alleges that the Sherry Netherland, through its attorneys, insisted that De La Fuente make a $100,000 deposit, a condition not imposed, he claims, on white applicants. Id. at 23, 33. Olsen brings three claims against the Law Firm Defendants. First, in his eighth cause of action he argues that they acted in conspiracy with the Sherry Netherland to fraudulently induce De La Fuente to make the $100,000 deposit and that their statements regarding the conditions of his application constituted material misrepresentations. Id. at 33-34. Second, in his ninth cause of action, Olsen contends that the Law Firm Defendants violated the covenant of good faith and fair dealing by requiring him to submit a board package and make a $100,000 deposit and allegedly falsely informing the Trustee that his application had been rejected by the Board. Id. at 35-36. Third, in his tenth cause of action, he vaguely alleges that they did not produce the litigation report until after De La Fuente's application had been rejected, and the defendants' proffered non-discriminatory explanation was therefore pretextual. Id. at 37-38.
The Law Firm Defendants assert that all of these claims are precluded by collateral estoppel because “all the issues here are essentially the same as those in the De La Fuente action.” ECF No. 33 (“Law Firm Def. Br.”) at 7. However, they do not clearly identify the issue that is, in fact, at issue in each claim. Arguably, each of these issues is factual. Although Olsen presents different legal theories of relief in his eighth and ninth causes of action, all three claims rest on the same contested facts that were extensively litigated in the prior action, namely the requirements of the Sherry Netherland's application process and the grounds on which De La Fuente's application was rejected. In support of his fraudulent inducement claim, Olsen contends that the Sherry Netherland imposed conditions on De La Fuente that it did not require of other applicants and failed to follow the standard process for considering applications. His claim that the Law Firm Defendants violated the covenant of good faith and fair dealing is based on similar factual allegations. These factual questions were necessarily raised by the discrimination claims presented in the De La Fuente action. Ultimately, then, the issue is one of the “existence or nonexistence of certain facts.” Matusick, 757 F.3d at 48. Because they deal with the same past events, the issues are identical. Id. Similarly, the question of whether the litigation report was produced before or after the Board decision is a factual question that was raised in the prior litigation.
Furthermore, these factual issues were actually litigated and decided in the De La Fuente action. In his summary of facts from the parties' Rule 56.1 statements, facts the Court finds to be true where “supported by testimonial, video, or documentary evidence and not denied by the other party, or denied by a party without citation to conflicting admissible evidence,” Judge Engelmayer noted that the Sherry Netherland had, at times, required that “prospective purchasers whose primary residences and assets are located outside the United States” pay a security deposit “which the Sherry may keep to protect its interests in the event that such a foreign shareholder were to become delinquent on his or her obligations to the Sherry.” De La Fuente, 2019 WL 3430207, at *2. He added that the requirement had been imposed on white applicants from Australia, Italy, Canada, and Belgium. Id. Judge Engelmayer further wrote that Stroock & Stroock & Lavan provided the Sherry Netherland with a report on their research on De La Fuente, including a list of “approximately 60 lawsuits to which De La Fuente was either a party, the corporate officer of a party, or a witness, or in which his name was otherwise associated.” Id. at *3. The Court stated that the Board “unanimously, with the exception of one board member not present who appears not to have voted, rejected De La Fuente's application.” Id. at *5. Judge Engelmayer later dismissed as “speculative” De La Fuente's arguments that the report was not provided to the Board before deciding on his application and that the Board's minutes were false in stating otherwise. Id. at *14. Ultimately, the Court concluded that the defendants had articulated three non-discriminatory explanations for their denial of De La Fuente's application, and De La Fuente had failed to produce evidence showing that these explanations were pretextual. Consequently, the Court in the prior action soundly rejected the contentions that Olsen relies on in his eighth, ninth, and tenth causes of action.
De La Fuente, and, by extension, his assignee and privy Olsen, had a full and fair opportunity to litigate the case. The action was vigorously litigated by all parties over the course of more than two years and involved extensive discovery and motion practice. Because his housing discrimination claim centered on the Sherry Netherland's application process, De La Fuente had a strong incentive to litigate the factual issues involved. See Blonder-Tongue Lab'ys, Inc. v. Univ. of Illinois Found., 402 U.S. 313, 333-34 (1971) (identifying the incentive to litigate as one of the factors relevant to determining whether the party had a full and fair opportunity to litigate). Furthermore, as the party seeking to avoid preclusion, it is Olsen's burden to show that De La Fuente was denied a full and fair opportunity to litigate, and he has presented no such argument. Id. at 333. Indeed, the Law Firm Defendants point out that even though Olsen was neither a party nor an attorney, he attended hearings, spoke on behalf of De La Fuente, worked with De La Fuente's legal counsel, and filed documents with the Court, including his motion for reconsideration. ECF No. 44 (“Law Firm Def. Reply Br.”) at 4. Ultimately, nothing in the prior action offends this Court's “sense of justice and equity.” Blonder-Tongue Lab'ys, Inc., 402 U.S. at 334.
Finally, resolution of the factual issues regarding the application process was necessary to the resolution of De La Fuente's housing discrimination claims. To survive the defendants' motion for summary judgment, De La Fuente had to establish a prima facie case of discrimination, and, in response to defendants' asserted legitimate nondiscriminatory rationale for rejecting his application, demonstrate that discrimination was, in fact, the real reason the Board rejected his application. De La Fuente, 2019 WL 3430207, at *11. As such, the defendants were required to show that there was no question of material fact regarding the Board's application process and decision to reject De La Fuente's application, and De La Fuente was required to present “admissible evidence sufficient to raise a genuine issue of fact for trial” as to whether the Board's explanations were pretextual. Id. at *8 (quoting Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008)). De La Fuente attempted to show that the defendants' proffered explanations were pretextual by asserting that the Board “used a more stringent review process for him,” and by arguing that there was no evidence the report had been produced prior to the Board's decision. Id. at *14. As such, it was necessary for the Court to determine whether there was admissible evidence supporting De La Fuente's claim of an irregular application process. In rejecting De La Fuente's arguments and granting summary judgment to the defendants, the Court necessarily decided that there was not. See id. at *14-16.
I conclude that Olsen's additional claims against the Law Firm Defendants are precluded by collateral estoppel, and recommend that his eighth, ninth and tenth causes of action against them be dismissed on those grounds.
IV. Failure to State a Claim
In the alternative, the Law Firm Defendants argue that the eighth and ninth causes of action, both of which assert claim under New York law, should be dismissed for failure to state a claim. See Law Firm Def. Br. at 3-5.
To plead fraudulent inducement under New York law, “the party must allege: (i) a material misrepresentation of a presently existing or past fact; (ii) an intent to deceive; (iii) reasonable reliance on the misrepresentation by appellants; and (iv) resulting damages.” State St. Glob. Advisors Tr. Co. v. Visbal, 431 F.Supp.3d 322, 352 (S.D.N.Y. 2020) (quotation omitted). “[T]he plaintiff must allege specific facts as to the fraud, including the misleading statements, speaker time, place, individuals involved, and specific conduct at issue.” Id. The plaintiff must also “(i) demonstrate a legal duty separate from the duty to perform under the contract; or (ii) demonstrate a fraudulent misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are caused by the misrepresentation and unrecoverable as contract damages.” Bridgestone/Firestone v. Recovery Credit Servs., 98 F.3d 13, 20 (2d Cir. 1996) (citations omitted).
The Law Firm Defendants argue that because the statements alleged to be fraudulent misrepresentations were made in open court, New York's anti-SLAPP (“Strategic Litigation Against Public Participation”) law applies. See N.Y. Civ. Rights Law § 76-a. The law provides that “[i]n an action involving public petition and participation, damages may be recovered if the plaintiff, in addition to all other necessary elements, shall have established by clear and convincing evidence that any communication which gives rise to the action was made with knowledge of its falsity or with reckless disregard of whether it was false, where the truth or falsity of such communication is material to the cause of action at issue.” N.Y. Civ. Rights Law § 76-a. This includes “any communication in a place open to the public or a public forum in connection with an issue of public interest.” Id. § 76-a (1)(a)(1).
Although New York Civil Rights Law § 76-a is “to be construed broadly,” it does not apply to “purely private matter[s].” See Palin v. New York Times Co., 510 F.Supp.3d 21, 25 (S.D.N.Y. 2020). The Law Firm Defendants have not cited to any authority to support their contention that the contractual requirements governing the sale of an apartment is a matter of public interest, even a sale pursuant to 11 U.S.C. § 363(b)(1). See generally Time, Inc. v. Firestone, 424 U.S. 448, 457 (“The details of many, if not most, courtroom battles would add almost nothing toward advancing the uninhibited debate on public issues.”). As such, New York's anti-SLAPP law does not apply, and Olsen is not required to plead actual malice.
The Law Firm Defendants also argue that Olsen's ninth cause of action should be dismissed for failure to state a claim because they were not parties to a contract with either De La Fuente or Olsen. Law Firm Def. Brf. at 7 n.3. “Absent the existence of a contract, a claim alleging breach of the implied covenant of good faith and fair dealing is legally unavailing.” Keefe v. New York Law School, 71 A.D.3d 569, 570 (1st Dep't 2010). Because there was never a contract between the Law Firm Defendants and De La Fuente, Olsen cannot bring an action for breach of the implied covenant of good faith and fair dealing.
I conclude that Olsen failed to state a claim for breach of the implied covenant of good faith and fair dealing, and his ninth cause of action can also be dismissed on those grounds.
V. Litigation Privilege
Finally, the Law Firm Defendants assert that because the statements in question were made in open court, New York's litigation privilege provides “absolute immunity” from liability. Law Firm Def. Br. at 4 (quoting Yukos Capital S.A.R.L. v. Feldman, No. 15-cv-4964 (LAK), 2016 WL 4940200, at *4 (S.D.N.Y. Sept. 14, 2016)). However, as they admit, the litigation privilege applies only to defamation claims, and they do not cite to any authority for extending the privilege to provide immunity from other tortious claims. See Front, Inc. v. Khalil, 24 N.Y.3d 713, 718 (2015). As such, I do not recommend that Olsen's cause of action for fraudulent inducement be dismissed on this ground.
CONCLUSION
Olsen's claims against the Sherry Netherland Defendants are barred by the doctrine of res judicata. His claims against the Law Firm Defendants are barred by the doctrine of collateral estoppel, and his ninth cause of action for breach of the implied covenant of good faith and fair dealing failed to state a plausible claim sufficient to satisfy Rule 12(b)(6). Accordingly, I recommend that the Court grant the defendants' motions to dismiss. See ECF Nos. 31, 33. The Court should further deny as moot Olsen's motion to disqualify the Sherry Netherland Defendants' counsel. See ECF No. 42. The Clerk of Court is respectfully requested to mail a copy of this Report and Recommendation to the pro se Plaintiff.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days from the service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Paul G. Gardephe at the United States Courthouse, 40 Foley Square, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Gardephe. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).