Opinion
01 Civ. 6226 (SWK)
December 4, 2002
OPINION AND ORDER
Plaintiff Daniel Tepper brings this action to determine the joint and several liability of Bruce Bendell, Doron Cohen, Richard Feinstein, and Geoffrey Alexander, as principals and agents of Fidelity Holdings, Inc., now known as Major Automotive Companies, Inc. (hereafter "Fidelity" or the "Company"), for their alleged unlawful acts and intentional torts committed as officers and directors of the Company. Defendants Bendell, Cohen and Feinstein move to dismiss Tepper's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and under the doctrines of collateral estoppel and res judicata. For the following reasons, the motion is granted in part and denied in part.
Geoffrey Alexander has not answered or otherwise appeared in this action and is not a part of this motion.
BACKGROUND
The following allegations as set forth in the Amended Complaint are accepted as true for purposes of deciding this motion to dismiss. See Kalnit v. Eichler, 264 F.3d 131, 137-138 (2d Cir. 2001). Bendell, Cohen and Feinstein were and remain the CEO, President and CFO respectively of Fidelity. See Am. Compl. at ¶¶ 4-6.
The Old Shares
In late 1996, Fidelity issued 160,000 shares of its common stock to Progressive Polymerics International, Inc. ("PPI"), as part of a settlement agreement. See id. at ¶ 20. The stock was subject to certain resale restrictions pursuant to Rule 144 of the United States Securities and Exchange Commission ("SEC") ( 17 C.F.R. § 239.144) (the "144 Legend"). See id. at ¶ 21. The restricted securities bore the 144 Legend on their face and could be sold, after one year and once fully paid for, subject to certain volume and timing restrictions. See id. Tepper alleges that PPI would have been eligible to sell these shares after the one-year period expired. See id.
In 1996 and 1997, PPI became indebted to Tepper. See id. at ¶ 22. That indebtedness was secured by the 80,000 Fidelity shares that PPI had obtained from Fidelity. See id. Tepper then acquired a security interest in the remaining 80,000 shares of Fidelity owned by PPI. See id. at ¶ 23.
In early 1997, PPI acquired Investamerica, Inc. ("Investamerica") and began to use that name. See id. at ¶ 24. Following the acquisition, Investamerica failed to meet its obligations to Tepper, leading him to exercise his rights with respect to the 160,000 shares of Fidelity (the "Old Shares"). See id. at ¶ 25. The Old Shares were eventually re-issued in Tepper's name — 80,000 bore the 144 Legend and 80,000 bore a legend indicating they were subject to the Redemption Option (the "Option Legend"). See id. at ¶ 34. Tepper alleges that the two legends prevented him from selling the Old Shares on the open market.See id. at ¶ 33.
The New Shares
In or about May 1999, Tepper learned that Fidelity had announced a three for two stock dividend to be effective in or about June 1999. See id. at ¶ 65. Tepper contacted Fidelity's stock transfer agent, Olde Monmouth Transfer Co. ("Olde Monmouth"), and inquired about the status of the dividend. See id. Olde Monmouth advised Tepper that he would receive an additional 80,000 shares of Fidelity (the "New Shares"). See id. Tepper alleges that Olde Monmouth, at Feinstein's direction, wrongfully delivered the New Shares to Fidelity instead of delivering them to him.See id. at ¶ 66.
On or about September 9, 1999, Tepper, through his attorney, Mark Magnozzi, sent a letter to John Troster of Olde Monmouth, informing Olde Monmouth that neither Tepper nor his attorneys or agents authorized the issuance of the New Shares to anyone other than Tepper, and demanded that Olde Monmouth immediately reissue the New Shares to Tepper. See id. at ¶ 67. Magnozzi then sent a second letter on or about September 17, 1999 reiterating these demands to Olde Monmouth. See id. at ¶ 68. Following these letters, Olde Monmouth removed the 144 Legend on 80,000 of the Old Shares. See id. at ¶ 72. Accordingly, Tepper then had 80,000 of the Old Shares without restrictions, but the other 80,000 Old Shares still had the Option Legend and Tepper still had not received the 80,000 New Shares. During October 1999, Magnozzi repeatedly wrote to Olde Monmouth requesting them to remove the Option Legend from the remaining 80,000 Old Shares, to advise the company that Fidelity had refused to return the New Shares to Tepper, and to demand that they re-issue the New Shares to Tepper. See id. at ¶ 75.
The Split Shares
In or about December 1999, Fidelity announced another three for two stock dividend to be effective on or about January 3, 2000. See id. at ¶ 76. Consequently, Tepper was allegedly due an additional 80,000 shares of Fidelity (the "Split Shares"), bringing the total number of Plaintiff's shares to 240,000. See id. In January 2000, Olde Monmouth delivered 240,000 shares to Tepper subject to the following restrictions: a certificate for 60,000 shares with the 144 Legend; a certificate for 120,000 shares with the Option Legend; and a certificate for 60,000 shares with both legends. See id. at ¶ 77. Olde Monmouth then removed the Option Legend on March 28, 2000. See id. at ¶ 78.
Tepper does not indicate which shares represented the Old Shares, the New Shares or Split Shares.
Tepper alleges that Fidelity then took further steps to impede his ability to sell his shares by blocking the delivery of the unlegended shares and contending that Tepper was not the rightful owner of the shares. See id. at ¶¶ 71, 78. Tepper also alleges that defendants were motivated to interfere with his right to sell the shares because defendants wanted to maintain the market price of Fidelity stock. See id. at ¶¶ 33, 80-82. Tepper further alleges that Bendell was motivated by self-interest because Bendell wanted to sell his own shares prior to the April 2000 disclosure of a multi-million dollar loss for Fidelity for fiscal year 1999 in an annual filing with the SEC. See id. at ¶ 79.
The Nevada Action
On July 27, 1999 Tepper brought an action against Fidelity in Nevada state court, which was later removed to the United States. District Court for the District of Nevada, Tepper v. Fidelity Holdings, Inc., Case No. CV-S-99-1199-JLQ (the "Nevada Action"). See Affidavit of Daniel Tepper in Opposition to Defendants' Motion to Dismiss, dated Jan. 23, 2002, at ¶ 4 (hereafter the "Tepper Aff."). Bendell, Cohen, and Feinstein were named as defendants in the Nevada Action but were dismissed by stipulation and without prejudice on the grounds of lack of personal jurisdiction. See Am. Compl. at ¶ 2. On October 15-17, 2001, Judge Quackenbush, upon stipulation of the parties, held a binding mediation.See Tepper Aff. at ¶ 8. On November 2, 2001, Judge Quackenbush issued his findings and ruled that Tepper did not suffer any monetary loss by reason of Fidelity's delay in issuing the Old Shares. See id. at ¶ 8, Exhibit E, ¶ 4. However, Judge Quackenbush found that Tepper suffered $300,000 in damages as a result of Fidelity's delay in issuing the New Shares, and $222,000 in attorney's fees. See id. at ¶ 8, Exhibit E, ¶¶ 6-7.
Procedural History
Tepper brought this action on July 10, 2001 against Bendell, Cohen, Feinstein, Alexander, Mitchell C. Littman, Littman Krooks Roth Ball, P.C., Robert L. Rimberg, and Rimberg Associates, P.C. Plaintiff then filed the amended complaint on August 29, 2001.
On October 31, 2001, Bendell, Cohen and Feinstein moved to dismiss. Tepper then withdrew the following causes of action: breach of covenant of good faith and fair dealing (count two); interference of prospective economic advantage (count four); fraud (count five); and slander of title (count eight). See id. at ¶ 13. Accordingly, four claims remain: violation of obligations under Article 8 of the New York Uniform Commercial Code (count one); conversion (count three); breach of fiduciary duty (count six); and negligence (count seven). See id. at ¶ 14. Pursuant to Federal Rule of Civil Procedure Rule 41(a)(1) defendants Mitchell C. Littman, Esq., Littman Krooks Roth, P.C., Robert L. Rimberg, Esq., and Rimberg Associates, P.C. were dismissed without prejudice. See id. at ¶ 1.
DISCUSSION
A. LEGAL STANDARD
In evaluating a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept as true all material allegations in the complaint and draw all reasonable inferences from them in the plaintiff's favor. Harris v. City of New York, 186 F.3d 243, 247 (2d Cir. 1999). The Court may also look to the facts stated in any documents attached to the complaint as exhibits, any documents incorporated by reference, and any documents that the plaintiff either possessed or knew about and upon which he relied in bringing the suit. Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000);Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 44 (2d Cir. 1991). Dismissal of a complaint should result only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
B. UNIFORM COMMERCIAL CODE
Tepper alleges defendants violated provisions of Article 8 of the New York Uniform Commercial Code, specifically sections 8-202, 8-401, 8-403, 8-404 and 8-407. Bendell, Cohen and Feinstein argue that this claim fails because Article 8 defines the obligations of "issuers", and defendants, as defined under 8-201, are not "issuers" of the securities in question.
In the official comment to the UCC, an issuer is defined "as those persons whose defenses may be cut off under the rules in Part 2." U.C.C. § 8-201(a) cmt. 1 (2002). The issuer is the person responsible for the performance of the obligations represented by a security. See Sandra M. Rocks Carl S. Bjerre, The ABCs of the UCC Article 8, Investment Securities 14 (1997). This is usually the enterprise that places its name on the security certificate as an indication that the security represents debt of that enterprise. See id.
Here, Tepper has not named Fidelity as a defendant, which is the entity whose name appears on the certificates at issue. Instead, the Amended Complaint names Bendell, Cohen and Feinstein as defendants. Because the names of Bendell, Cohen and Feinstein do not appear on the certificate, they are not personally liable for the obligations thereunder. Therefore, Tepper has failed to plead that Bendell, Cohen and Feinstein were the "issuer" under 8-201. Accordingly, Plaintiff's claim for violations of UCC Sections 8-202, 8-403, 8-404 and 8-407 against Bendell, Cohen and Feinstein is hereby dismissed.
C. CONVERSION
To state a claim for conversion, a plaintiff must allege that "(1) an actionable wrong, other than breach of contract, caused plaintiff's injury; (2) plaintiff had ownership of the [shares] at the time they were converted; (3) defendant[s] exercised unauthorized dominion over the [shares]; (4) the [shares] were specific and identifiable; and (5) defendant[s] were to have treated the [shares] in a particular manner, but they were not so treated." See Roza v. May Group, Inc., 152 F. Supp.2d 526, 534 (S.D.N.Y. 2001). Bendell, Cohen and Feinstein argue that the facts regarding the New Shares fail to support a claim for conversion.
As to the first element, an actionable wrong other than breach of contract, Tepper contends that Bendell, Cohen and Feinstein caused Olde Monmouth to transfer his shares to Fidelity, thereby preventing the timely delivery of the shares and causing him economic loss. See Am. Compl. ¶¶ 95-101. Thus, Plaintiff has adequately pled the first element.
As to the second element, Bendell, Cohen and Feinstein argue that the conversion claim fails because Tepper never had possession of the New Shares. However, by referring to the shares as "Plaintiff's Fidelity shares" and "the common shares of Fidelity which Plaintiff was legally entitled to sell and possess", Tepper adequately alleges ownership of the shares. See Am. Compl. at ¶¶ 97-98. Additionally, the Nevada Action resolved the issue of ownership of the shares. Judge Quackenbush found that Tepper owned both the Old Shares and the New Shares. See Tepper Aff. at ¶ 8, Ex. E at ¶ 9. "Federal courts must recognize the judgments of other federal courts." 18-130 Moore's Federal Practice — Civil § 130.01. Therefore, Plaintiff has adequately pled that he had ownership of the shares.
As to the third element, conversion occurs when a defendant exercises unauthorized dominion over a plaintiff's superior right of possession.See Lopresti v. Terwilliger, 126 F.3d 34, 41 (2d Cir. 1997). "Any meddling with personal property beyond the scope of authority conferred is a conversion of the property." Argonaut Ins. Co. v. Goepfert, 76 Civ. 802, 1980 U.S. Dist. LEXIS 15619, at *20-21 (S.D.N.Y. Dec. 9, 1980). Tepper alleges that Feinstein instructed Olde Monmouth to wrongly transfer the New Shares to Fidelity. See Am. Compl. at ¶ 66. Thus, Tepper has adequately pled that Bendell, Cohen and Feinstein exercised unauthorized dominion over the shares.
As pled, the shares were specifically identifiable and defendants did not treat them as they should have. Olde Monmouth told Tepper that he was entitled to the New Shares pursuant to the May 1999 three for two stock dividend. See id. at ¶ 65. It is reasonable to infer that but for Feinstein's instructions, Olde Monmouth would have delivered the shares to Tepper. Plaintiff has therefore adequately pled that the shares were specific and identifiable and that defendants did not treat the shares in the manner they were to have been treated, which, therefore interfered with Tepper's right to possess the New Shares. See Am. Compl. at ¶ 96.
Additionally, a plaintiff must also allege that a demand for the return of property was made followed by a refusal to comply with this demand.See Schloss v. Danka Bus. Sys., No. 99 Civ. 817, 2000 U.S. Dist. LEXIS 2909, at *18-19 (S.D.N.Y. Mar. 15, 2000). Tepper alleges that two letters were sent to Olde Monmouth in September 1999 demanding the delivery or re-issuance of the New Shares to him, and Olde Monmouth refused to comply with these demands. See Am. Compl. ¶¶ 67-68. Tepper further alleges that despite lawful instructions given to defendants by him and his attorneys, defendants wrongfully refused to transfer or reissue the shares. See Am. Compl. at ¶ 98.
Bendell, Cohen and Feinstein argue that any conversion was by Fidelity, the issuer, and not by them. Fidelity was found liable in the Nevada Action. See Tepper Aff. at ¶ 8, Ex. E at ¶ 6. However, a corporate officer or director may be personally liable for conversion if he personally participates in interfering with the owner's possession.See Argonaut, 1980 U.S. Dist. LEXIS 15619, at *21. Tepper alleges that Troster, an employee of Olde Monmouth, stated that he had received instruction from Feinstein to deliver the shares to Fidelity. See Am. Compl. at ¶ 66. Tepper further alleges that Feinstein's instruction to Olde Monmouth came from Cohen and/or Bendell. See id. Therefore, Tepper has adequately pled that defendants personally participated in the conversion. Accordingly, Plaintiff adequately pleads a cause of action for conversion and Bendell, Cohen and Feinstein's motion to dismiss this claim is denied.
D. BREACH OF FIDUCIARY DUTY
Bendell, Cohen and Feinstein argue that Tepper failed to plead that they did not discharge their duties with conscientious fairness, morality and without discriminating practices prohibited by law. Both parties cite New York cases in support of their respective arguments. However, Nevada law controls because Fidelity is incorporated in that state. Questions relating to the internal affairs of corporations should be decided in accordance with the laws of the state of incorporation. See Scottish Air Int'l v. British Caledonian Group, PLC, 81 F.3d 1224, 1234 (2d Cir. 1996). Claims for breach of fiduciary duty brought by a shareholder against an officer of a corporation are governed by the law of the state of incorporation. See Carr v. Equistar Offshore, Ltd., 94 Civ. 5567, 1995 U.S. Dist. LEXIS 13703, at *11-12 (S.D.N.Y. Sept. 20, 1995).
Bendell, Cohen and Feinstein argue that: (1) they did not owe a duty to Tepper; (2) the business judgment rule precludes inquiry into their actions; (3) Fidelity's Certificate of Incorporation removes any personal liability of a director; and (4) Tepper has not alleged that the corporate officers failed to discharge their responsibilities with conscientious fairness.
The Court rejects their first argument. Under Nevada law, directors are fiduciaries, and owe duties of care and loyalty to shareholders. See Horwitz v. Southwest Forest Indus., Inc., 604 F. Supp. 1130, 1134 (D. Nev. 1985). Plaintiff adequately pleads that, as a shareholder of Fidelity, defendants owed him a duty of care. See Am. Compl. at ¶¶ 97, 121, 126.
The Court also rejects Bendell, Cohen and Feinstein's second argument that the Court is precluded from inquiring into their actions under the business judgment rule. Under Nevada law, the business judgment rule "bars judicial inquiry into actions of corporate directors taken in good faith and in the exercise of honest judgment in lawful furtherance of corporate purposes." See Horwitz, 604 F. Supp. at 1134. Corporate directors, however, may not rely on the business judgment rule where there are allegations that the directors acted in their own self interest. See id. Here, Tepper alleges that Feinstein, under instructions from Cohen and Bendell, did not act in good faith when he directed Olde Monmouth to transfer Tepper's shares to Fidelity instead of to Tepper.See Am. Compl. ¶ 75. Tepper further alleges that Bendell acted in his own self interest by interfering with Tepper's right to obtain freely traded shares in order to sell his own shares prior to the April 2000 disclosure of Fidelity's multi-million dollar loss for fiscal year 1999.See id. at ¶ 79.
Bendell, Cohen and Feinstein further argue that they are not liable pursuant to Fidelity's Certificate of Incorporation, which exempts them from personal liability. This argument is also unpersuasive. At the time this action was commenced, the Nevada Revised Statutes allowed a Nevada corporation's articles of incorporation to contain a provision eliminating or limiting the personal liability of a director or officer to a shareholder for damages for breach of fiduciary duty except for acts or omissions involving intentional misconduct, fraud or a knowing violation of the law. See NEV. REV. STAT. 78.037 (2000) (amended 2001) (emphasis added). Tepper has adequately pled that defendants engaged in intentional misconduct when they instructed Olde Monmouth to deliver Tepper's shares to Fidelity, and when they refused to either return or allow the re-issue of those shares to Tepper. See Am. Compl. ¶¶ 66-68, 72, 75. Therefore, Fidelity's certificate of incorporation does not serve to shield defendants from liability.
Lastly, Bendell Cohen and Feinstein argue that Tepper has not adequately alleged that the corporate officers failed to discharge their responsibilities with conscientious fairness. Bendell, Cohen and Feinstein again wrongly rely on New York law in support of their argument. Such an allegation of conscientious fairness is not required under Nevada law. Nevada law requires of its corporate officers and directors a duty to its shareholders to act in good faith. See NEV. REV. STAT. 78.138 (2001). Tepper's pleadings are sufficient for the Court to infer that defendants did not act in good faith. Therefore, Bendell, Cohen and Feinstein's motion to dismiss the claim for breach of fiduciary duty is denied.
E. NEGLIGENCE
Bendell, Cohen and Feinstein argue that Tepper failed to plead facts to establish the requisite elements of negligence. Under New York law a plaintiff must allege "1) the existence of a duty flowing from defendant to plaintiff; 2) a breach of that duty; 3) a reasonably close causal connection between the acts in issue and the resulting injury; and 4) actual loss, harm or damage." Integrated Waste Services, Inc. v. Akzo Nobel Salt, Inc., 113 F.3d 296, 299 (2d Cir. 1997).
Tepper has adequately pled that defendants, as officers and director of Fidelity, owed him a duty. See Am. Compl. at ¶ 126. Plaintiff also sufficiently alleges that defendants' conduct was a breach of that duty.See Am. Compl. ¶¶ 66-79.
Tepper has also adequately pled that defendants' conduct was the proximate cause of the economic damages he suffered, and that he suffered actual damages. See Am. Compl. ¶¶ 125-128. In the Nevada Action, Judge Quackenbush found that Tepper suffered actual damages and that those damages were the proximate result of the wrongful actions of Fidelity. See Tepper Aff. at ¶ 8, Ex. E. Furthermore, a corporate officer or director can be held personally liable if he commits or participates in the commission of a tort. See Wormer v. McCasland Truck Ctr., Inc., 163 A.D.2d 632; 558 N.Y.S.2d 683, 635 (N.Y.App.Div. 1990). Accordingly, Bendell, Cohen and Feinstein's motion to dismiss for failure to state a claim for negligence is denied.
F. NON-MUTUAL COLLATERAL ESTOPPEL
In this action, Tepper alleges violations of UCC Article 8, conversion, breach of fiduciary duty, and negligence against the defendants. In the Nevada Action, Tepper sued only Fidelity. Bendell, Cohen and Feinstein argue that even though they were not parties to the Nevada Action, Tepper is still barred by the doctrine of non-mutual collateral estoppel from re-litigating facts that were resolved adversely to him in that action. Collateral estoppel bars the re-litigation of issues previously litigated if: "(1) the issues in both proceedings are identical; (2) the issue in the prior proceeding was actually litigated and actually decided; (3) there was full and fair opportunity to litigate the issue in a prior proceeding; and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits." See Transaero, Inc. v. La Fuerza Aerea Boliviana, 162 F.3d 724, 731 (2d Cir. 1998).
It is unclear from the submissions in this case precisely what causes of action Tepper presented in the Nevada Action.
With respect to the first element, the party asserting collateral estoppel has the burden of proving the identity of issues. See Khandar v. Elfenbein, 943 F.2d 244, 247 (2d. Cir. 1991). Bendell, Cohen and Feinstein contend that Tepper sued Fidelity in the Nevada Action for conversion, breach of duty/commercial code violations, slander of title, and fraud regarding the Old Shares and the New Shares. See Bendell, Cohen and Feinstein's Mem. of Law at 22 ("Defs.' Mem."). Additionally, Bendell, Cohen and Feinstein argue that the same facts presented in the Nevada Action are asserted by Tepper in this action to support his claims for conversion and UCC violations. However, they have not mentioned what facts were asserted in the Nevada Action, nor have they attached a copy of the complaint from that action.
As to the second element, Bendell, Cohen and Feinstein contend that Tepper seeks to relitigate facts and issues already decided by Judge Quackenbush in the Nevada Action. See Defs.' Mem. at 22. Judge Quackenbush decided that Tepper owned the Old Shares and the New Shares, Fidelity unlawfully delayed the issuance of unrestricted Fidelity shares to Tepper, and that Tepper suffered damages. See Tepper Aff. at ¶ 8, Exhibit E. Additionally, it is also required for collateral estoppel that the litigated and decided facts must have been necessary to the judgment in the prior action. Judge Quackenbush's findings were necessary to support the final judgment against Fidelity in the Nevada Action.
As to the third element, the party challenging collateral estoppel has the burden of proving that he did not have a full and fair opportunity to litigate those issues. See Khandar v. Elfenbein, 943 F.2d 244, 247 (2d. Cir. 1991). The importance of this safeguard was articulated inBlonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 329 (1971). Tepper argues that he did not have a full and fair opportunity to litigate the issues as to Bendell, Cohen and Feinstein because defendants were dismissed from the two forums in which Tepper tried to bring suit against them — California and Nevada. See Tepper Aff. at ¶¶ 74-75.
Defensive use of collateral estoppel arises when a defendant seeks to preclude a plaintiff from re-litigating an issue that the plaintiff lost against another defendant and it serves as a strong incentive to join all potential parties in the first action to avoid preclusion. See Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 329 (1979). Tepper was the prevailing party in the Nevada Action against Fidelity with respect to the New Shares. See Tepper Aff. at ¶ 74. However, he lost on the claims pertaining to the Old Shares because Judge Quackenbush found that Tepper suffered no damages in connection with the Old Shares. Tepper also attempted to join Bendell, Cohen and Feinstein in the Nevada Action, but the Nevada District Court lacked personal jurisdiction over them. See Tepper Aff. at ¶ 75.
Accordingly, Tepper is estopped from re-litigating those issues pertaining to the Old Shares against defendants in this case because he did not prevail in his claims against Fidelity in the Nevada Action. However, collateral estoppel does not prevent Tepper from litigating against defendants those issues which are necessary for the claims pertaining to the New Shares.
Bendell, Cohen and Feinstein also argue that Tepper is collaterally estopped from re-litigating the issue of damages because he recovered in the Nevada Action. "When a litigant files consecutive lawsuits against separate parties for the same injury, the entry of a judgment in the prior action does not bar the claims against other potentially liable parties." Central Hudson Gas Elec. Corp. v. Empressa Naviera Santa S.A., 56 F.3d 359, 367 (2d Cir. 1995) (plaintiff did not seek duplicative or additional damages, but claimed defendant was also liable as a joint tortfeasor). However, double recovery is foreclosed. See Restatement (Second) of Judgments § 49 cmt. a (1982). Tepper asserts that he does not seek additional damages, but only seeks to recover the amount awarded to him by the Nevada District Court from either Fidelity or defendants.See Tepper Aff. ¶¶ 20-21, 76. Accordingly, Plaintiff is not estopped from litigating the issue of defendants' joint and several liability with Fidelity for damages.
G. RES JUDICATA
The doctrine of res judicata applies "if the 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." See Anaconda-Ericsson, Inc. v. Hessen (In re Teltronics Servs., Inc.), 762 F.2d 185, 190 (2d Cir. 1985). Res judicata bars litigation of any claim that could have been raised in the prior suit where all the claims arise from the same set of operative facts between the same parties or their privies, whether or not the claim was actually litigated. See Irish Lesbian Gay Org. v. Guiliani, 143 F.3d 638, 644 (2d Cir. 1998). The party seeking to invoke res judicata has the burden to prove that the second action should be barred. See Thomas v. City of New York, 814 F. Supp. 1139, 1148 (E.D.N.Y. Feb. 5, 1993).
Bendell, Cohen and Feinstein argue that Tepper's suit is barred by res judicata because the claims against them should have been raised in the Nevada Action. See Defs.' Reply Mem. at 3. Res judicata does not apply if the initial forum lacked the power to award the full measure of relief sought in the second action. See Ins. Corp. of Ireland, Ltd. v. Campagnie des Bauxites, 456 U.S. 694, 701 (1982) ("A court must have personal jurisdiction over the parties subject to its judgments."); see also Burgos v. Hopkins, 14 F.3d 787, 790 (2d. Cir. 1994) (res judicata did not bar action where the relief sought by plaintiff was not available in the prior proceeding). Tepper could not have raised any claims against defendants in the Nevada Action because the Nevada District Court lacked personal jurisdiction over them. Bendell, Cohen and Feinstein were each dismissed without prejudice from the Nevada Action. Therefore, Bendell, Cohen and Feinstein fail to meet their burden to prove that this action should be barred under the principles of res judicata.
CONCLUSION
For the reasons set forth above, Bendell, Cohen and Feinstein's motion to dismiss is granted with respect to the violation of the New York Uniform Commercial Code (Count I), and denied with respect to conversion (Count III), breach of fiduciary duty (Count VI), and negligence (Count VII). Additionally, Bendell, Cohen and Feinstein's motion to dismiss pursuant to the doctrine of collateral estoppel is granted with respect to the Old Shares and denied with respect to the New Shares, and the motion to dismiss pursuant to the doctrine of res judicata is denied. The parties are hereby directed to appear for a pre-trial conference on January 29, 2003, at 10:30 a.m. in Room 906, 40 Centre Street, New York, New York.