Cite as: Klein v. Gutman, 47485/01, NYLJ 1202587050167, at *1 (Sup., KI, Decided December 7, 2012)

Justice David Schmidt

 

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Decided: December 7, 2012

The following papers numbered 1 to 15 read herein:

Papers Numbered

Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed1-2 9-10

Opposing Affidavits (Affirmations)3-4 11-12

Reply Affidavits (Affirmations)13

Sur-reply Affidavit (Affirmation)5

Other Papers Memoranda of Law6-8 14

Transcript of Oral Argument dated July 9, 201215

 

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Upon the foregoing papers, in this action brought by plaintiff Zalman Klein (Klein), individually and derivatively on behalf of 185 Marcy Corp., defendants Menachem Gutman (Menachem), Aryeh Gutman (Gutman), 185 Marcy Corp., and 185 Marcy, LLC (the Gutman defendants) move for an order: (1) pursuant to CPLR 3025 (b),

 

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granting them leave to amend their answer to the complaint to assert additional affirmative defenses, and (2) pursuant to CPLR 3211 (a) (4) and (5), dismissing this action as against all of the defendants in its entirety based upon res judicata, collateral estoppel, the assertion that there is another action pending between these parties for the same causes of action alleged herein, and/or Klein's adjudicated spoliation of evidence. Klein cross-moves for an order, pursuant to CPLR 3212 (e) and (g), granting him summary judgment in his favor as against Gutman and 185 Marcy Corp., and severing the claims against those defendants from the other claims on the grounds that a December 6, 2002 order in the case of Gutman v. A to Z Holding Corp. (Sup Ct, Kings County, index No. 50105/99) (the A to Z action), which was affirmed by the Appellate Division, Second Department, by a decision and order dated January 17, 2012 (Gutman v. A to Z Holding Corp., 91 AD3d 718 [2d Dept 2012]), acts as a bar pursuant to the doctrines of res judicata and/or collateral estoppel to all defenses of Gutman and 185 Marcy Corp. in this action and to the subsequent federal judgment upon which the Gutman defendants now claim acts as a res judicata bar to their claims in this action.

BACKGROUND

On December 4, 2001, Klein, individually and derivatively on behalf of 185 Marcy Corp., filed this action against the Gutman defendants, Abraham Singer (Singer), and Central Equities Credit Corp. (Central Equities). Klein's complaint in this action alleges that he was a shareholder and director of 185 Marcy Corp., that Gutman was a shareholder, officer, and director of 185 Marcy Corp., that Menachem was the principal and managing partner of 185 Marcy, LLC and the son of Gutman, and that Singer was an

 

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officer and director of Central Equities and the son-in-law of Gutman. The principal asset of 185 Marcy Corp was a parcel of commercial real estate situated at 185 Marcy Avenue, in Brooklyn, New York (the 185 Marcy Avenue premises). According to Klein's complaint, Central Equities is operated and controlled by Gutman and Singer, and was the vehicle through which 185 Marcy Corp. transferred a substantial portion of its assets without the authorization or consent from its shareholders and directors.

Klein's complaint claims that since 1983, he has been the actual owner and holder of record of substantially in excess of 40 percent of the common stock of 185 Marcy Corp., and that Gutman, as the director and officer of 185 Marcy Corp., exercised complete and exclusive control of its money, property, affairs, books, and records. Klein's complaint alleges that in May 1997, Gutman and Menachem, acting as officers and directors of 185 Marcy Corp., borrowed the sum of $3,937,000, and caused 185 Marcy Corp. to execute a note and mortgage. It further alleges that Singer and Gutman caused to be disbursed from the mortgage proceeds the sum of $1,040,000 to Central Equities, and that no consideration was received by 185 Marcy Corp for the transfer of this $1,040,000. In addition, Klein's complaint alleges that by a deed dated December 30, 1999, Gutman and Menachem, with the intent and purpose to divert the assets from 185 Marcy Corp. to themselves, conveyed the 185 Marcy Avenue premises to 185 Marcy, LLC. Klein alleges that this conveyance was made without the proper authorization and consent of the officers and directors of 185 Marcy Corp. and without any consideration by 185 Marcy, LLC.

Klein's first cause of action seeks restitution, an accounting, and damages.

 

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Klein's second cause of action demands the imposition of a constructive trust upon the assets of Central Equities for a sum in excess of the $1,040,000 withdrawn by Central Equities from 185 Marcy Corp. and upon the 185 Marcy Avenue premises which is presently vested in 185 Marcy, LLC. Klein's third cause of action seeks damages as against Gutman, Menachem, and Singer for their alleged breach of fiduciary duties and obligations and their alleged wrongful and fraudulent transfer and waste of the corporate assets of 185 Marcy Corp. The Gutman defendants interposed their answer, dated January 25, 2002, to Klein's complaint. Singer and Central Equities interposed their separate answer, dated January 24, 2003, to Klein's complaint following an unsuccessful motion by them to dismiss such complaint.

In or about April 2003, Gutman, individually and on behalf of A to Z Holding Corp., A to Z Capital Corp., PAZ Franklin Company, and Washington Greene Associates, and, individually, by 185 Marcy LLC and Park Offices, LLC (the Gutman plaintiffs) commenced an action in the United States District Court for the Eastern District of New York against Klein, Dina Klein (who is Klein's wife), Rachel Brach, Rodney Capital Company, Toyv Corporation, Republic Capital Group, LLC, Atlas Furniture Manufacturing Corp., A to Z Holding Corp., A to Z Capital Corp., Paz Franklyn Company, and Washington Greene Associates (the Klein defendants), alleging RICO causes of action and claims with respect to entities formed to invest in real estate ventures and various properties that he and Klein invested in jointly invested and developed, and seeking an accounting, a constructive trust, and damages (the Federal Action). The first amended complaint in the Federal Action was filed on August 29, 2003.

 

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The case in the Federal Action was assigned to United States District Judge John Gleeson (Judge Gleeson), who advised the parties to pick a forum to resolve all of the disputes arising out of their business relationship. The parties then filed several stipulations that sought to stay the several state court actions which were then pending between the parties (including the instant state court action, along with three additional state court actions, namely, the A to Z action, Klein v. Gutman [Sup Ct, King County, index No. 35890/01], and Klein v. Gutman [Sup Ct, Kings County, index No. 50292/02]), as well as three appeals pending in three other state court actions. To that end, on September 18, 2003, the parties, by their respective attorneys, executed, among other things: (1) a stipulation agreeing to the scope and timing of disclosure in the Federal Action (the Discovery Stipulation), (2) a stipulation to stay all of the state court actions, including the instant action (the Stay Stipulation), and (3) a stipulation concerning the confidentiality of all documents exchanged between the parties pursuant to the Discovery Stipulation (the Confidentiality Stipulation) (collectively, the Stipulations).

The Discovery Stipulation, which attached and incorporated the Stay Stipulation by reference, stated that it was submitted "in order to explore a global settlement of the state and federal litigation pending between the parties and all claims which may exist, whether or not asserted." The Discovery Stipulation stated that: "[i]t [wa]s the intent of the parties that the outcome of this federal litigation will also determine the state court litigations, and that during the pendency of this federal litigation the parties will not file any further state court litigations against each other." In the Discovery Stipulation, the parties also agreed that prior to either side filing amended or additional pleadings, they

 

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would exchange a list of "all persons and business entities that involve or concern the [Federal A]ction, including persons and entities that would be included in any counterclaim that would be pled or impleaded by the [Klein d]efendants." The parties further agreed, in the Discovery Stipulation, that they would exchange detailed discovery relating to "the adversary parties and all of the persons or business entities that are involved or would become involved…and concern the disputes between all of the parties."

The parties executed the Stay Stipulation to prevent the prosecution of the "numerous claims" they had against each other, including the state court actions, while they were "engaged in an effort to achieve a global settlement of all state and federal claims and litigation pending between them." The Confidentiality Stipulation provided, in relevant part, that "within sixty (60) days after a final global settlement or trial determining all the disputes between the parties and the payment of all sums due under such settlement or after a trial and determination of all the issues and the time for appeal has lapsed, each party shall assemble and destroy or return to the opposing party the Confidential documents in its possession."

Although Judge Gleeson initially signed the Stay Stipulation, staying the state actions, he later reconsidered, observing that he lacked authority, at least before a judgment was reached, to effectuate an agreement between the parties to litigate exclusively in Federal Court. In an October 20, 2003 order, Judge Gleeson required the parties to seek stays in state court, which they obtained.

The parties commenced discovery in the Federal Action, with the parties, pursuant

 

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to the Discovery Stipulation, exchanging lists of "all persons and business entities that involve or concern the [Federal A]ction, including persons and entities that would be included in any counterclaims that would be pled or impleaded by the [Klein d]efendants." When the plaintiffs in the Federal Action objected to the magnitude of the Klein defendants' list of 80 persons, 71 entities, and 29 real estate parcels (including all of the defendants in the present action and the 185 Marcy Avenue premises), the Klein defendants responded, in a letter to the Federal Court, dated December 2, 2003, that "all of the persons, entities and real estate parcels, identified on [their] lists, [we]re involved in the litigation [in the Federal Action]." The parties pursued this discovery regarding the persons, entities, and properties set forth in the lists in the Federal Action and filed motions to compel discovery from such persons and entities.

During the course of discovery, the Gutman plaintiffs in the Federal Action uncovered what they believed to have been the spoliation of crucial evidence on Klein's laptop computer, and moved, in the Federal Action, to sanction the Klein defendants for destroying this evidence. United States Magistrate Judge Robert M. Levy (Judge Levy), in the Federal Action, engaged an expert, Stroz Friedberg, LLC, to conduct an independent forensic analysis of Klein's laptop computer to analyze the spoliation. On October 15, 2008, following a hearing, Judge Levy concluded that Klein's spoliation of evidence was "potentially relevant to any or all aspects of the case" and as a result of the spoliation, "it [wa]s impossible to know what [the Gutman plaintiffs] would have found if [the Klein defendants] and [their] counsel had complied with their discovery obligations." Judge Levy, in a Report and Recommendation dated October 15, 2008, recommended

 

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that the Federal Court enter a default judgment against the Klein defendants and award the Gutman plaintiffs attorneys' fees and costs based on the spoliation of evidence contained on Klein's laptop computer.

By an order dated December 1, 2008, United States District Judge Brian M. Cogan (Judge Cogan) adopted this Report and Recommendation in its entirety as the decision of the Federal Court, ordered that a default judgment be entered against the Klein defendants, and referred the matter to Judge Levy to conduct an inquest as to damages. By a Memorandum Decision and Order dated July 21, 2010, Judge Cogan refused to enjoin the Klein defendants from resuming the pending state court actions, and ruled that they could seek to revive their pending state court claims in state court if the state court granted them relief from the state court stays.

A week before the Federal Court in the Federal Action entered a final judgment, Klein, Dina Klein, and Secor Homes, Inc. (one of their entities) commenced another RICO action in the Federal Court for the Southern District of New York (the Second Federal Action). The Second Federal Action alleged claims against some 45 defendants, including not only Gutman and many of the same corporate entities involved in the Federal Action, but also much, if not all, of his immediate family.

Following an inquest, significant money judgments were awarded to the Gutman plaintiffs against the Klein defendants in the Federal Action. The Gutman plaintiffs, thereafter, moved to amend the Final Judgment to include an award of post-judgment interest, to enjoin the Klein defendants from further litigating the pending litigation in state court, and to enjoin the Klein defendants and related entities from future litigation

 

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against them and certain individuals and entities involved in the Federal Action.

In a Memorandum Decision and Order dated May 31, 2011, Judge Cogan awarded post judgment interest, denied the Gutman plaintiffs' request to enjoin the pending state actions, and granted a permanent injunction, enjoining and restraining "the Klein Defendants, their agents, entities, servants, employees, attorneys, and all persons in active concert or participation with them from commencing any litigation against [the Gutman p]laintiffs or any person, business, entity or real estate parcel listed and named in the stipulations that were signed by the parties and presented to the [Federal] Court and which the parties agreed were involved in th[e Federal Action] litigation without first receiving leave from th[e Federal] Court."

In denying the Gutman plaintiffs' motion insofar as it sought to enjoin the pending state actions, Judge Cogan, in his May 31, 2011 Memorandum Decision and Order, noted that the Anti-Injunction Act (28 USC §2283) prohibits federal courts from enjoining state actions unless an exception applies, and found that no exception applied. Judge Cogan specifically determined that the relitigation exception did not apply since the claims in the state court must have been actually decided by the Federal Court, and they were not decided in the Federal Action. He found that the mere fact that the parties intended to resolve all their previous state court litigation in the Federal Action and had the ability to bring all their state court claims in the Federal Action did not authorize the Federal Court to enjoin the pending state actions since the state court claims were not actually litigated in the Federal Court and the complaint in the Federal Court was never amended to include the state court claims. He contrasted this difference between the

 

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relitigation exception to the Anti-Injunction Act to the doctrine of res judicata, noting that res judicata "bars claims that might have and should have been raised but were not, whereas the relitigation exception protects only matters that actually have been decided by a federal court, regardless of whether they could have been raised before the court" (citing Hutton Constr. Co. v. County of Rockland, 1997 WL 291954, *2, 1997 US Dist LEXIS 7666, at *7 [SD NY June 2, 1997, No. 87-CV-4027], affd 152 F3d 918 [2d Cir 1998]). Judge Cogan further noted, in passing, that it was likely that the pending state actions, as well as the Second Federal Action, would be "barred by the doctrine of res judicata."

The Amended Judgment in the Federal Action, dated May 31, 2011, directed that Klein, Dina Klein, Rodney Capital Company, Toyv Corporation, and Atlas Furniture Manufacturing Corp. were jointly and severally liable to: (1) A to Z Capital Corporation for the sum of $3,334,500, (2) A to Z Holding Corporation in the sum of $1,506,979.98, and (3) Washington Greene Associates in the sum of $1,357,500, with post judgment interest for these three plaintiffs awarded at an annual rate of.30 percent from February 16, 2011. In addition, this Amended Judgment removed Klein as a partner of Paz Franklin Company and Washington Greene Associates and directed that Klein would have no further interest in those entities. This Amended Judgment also contained the permanent injunction, enjoining the Klein defendants from commencing any new litigation against the Gutman defendants as stated in the May 31, 2011 Memorandum Decision and Order. A Second Amended Judgment in the Federal Action, dated August 12, 2011, adjudged that Gutman recover of Klein, Dina Klein, Rodney Capital Company, Toyv Corporation,

 

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and Atlas Furniture Manufacturing Corp., jointly and severally, the sum of $751,062.13 for legal fees.

United States District Judge Cathy Seibel of the United States District Court for the Southern District of New York transferred the Second Federal Action to the Eastern District of New York to proceed before Judge Cogan because it was related to the Federal Action. On June 7, 2011, Klein, Dina Klein, and Secor Homes, Inc. filed a notice of dismissal with prejudice, discontinuing the Second Federal Action.

DISCUSSION

THE GUTMAN DEFENDANTS' MOTION

The Gutman defendants seek to amend their answer in this action to assert the affirmative defenses of res judicata, collateral estoppel, spoliation, and another action pending. They seek, upon such amendment, to dismiss this action based upon each of these defenses.

RES JUDICATA

"'[T]he general doctrine of res judicata gives binding effect to the judgment of a court of competent jurisdiction and prevents the parties to an action, and those in privity with them, from subsequently relitigating any questions that were necessarily decided therein'" (Landau, P.C. v. LaRossa, Mitchell & Ross, 11 NY3d 8, 13 [2008], quoting Matter of Shea, 309 NY 605, 616 [1956]). Under New York's transactional approach to res judicata, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (O'Brien v. City of Syracuse, 54 NY2d 353, 357

 

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[1981]; see also Toscano v. 4B's Realty VIII Southampton Brick & Tile, LLC, 84 AD3d 780, 780 [2d Dept 2011]).

A court must apply the rules of res judicata followed in the jurisdiction that rendered the earlier court decision (see Insurance Co. of State of Pa. v. HSBC Bank USA, 10 NY3d 32, 38 n 3 [2008], citing Marrese v. American Academy of Orthopaedic Surgeons, 470 US 373, 380-381 [1985]; see also Uzamere v. Uzamere, 89 AD3d 1013, 1014 [2d Dept 2011]), and, thus, this court looks to federal res judicata law in determining whether the doctrine of res judicata bars this action. "In federal court, subsequent litigation is prohibited if a prior court ruling '"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"'" (Insurance Co. of State of Pa., 10 NY3d at 38, quoting EDP Med. Computer Sys., Inc. v. U.S., 480 F3d 621, 624 [2007], quoting In re Teltronics Servs., Inc., 762 F2d 185, 190 [2d Cir 1985]).

The only parties which are the same in both this action and the Federal action are Klein and Gutman. 185 Marcy Corp. was never a party to the Federal action and, while Gutman included 185 Marcy LLC as a named party to the Federal Action, no claims were pleaded on its behalf, no evidence of damages was submitted on its behalf, and it was terminated as a party by the Federal Court sua sponte on February 16, 2011.

Gutman contends that his and Klein's involvement in both actions and the inclusion of the 185 Marcy entities on the lists exchanged by the parties pursuant to the Discovery Stipulation and in contemplation of the ultimately failed attempt by him and Klein to reach a global settlement of their claims against one another is sufficient to

 

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render the parties to be deemed the same in this action and the Federal Action. This contention is devoid of merit. These parties were not properly joined in the Federal Action, and, as such, res judicata cannot apply (see Insurance Co. of State of Pa., 10 NY3d at 38).

Furthermore, this action is not based upon the same cause of action as those involved in the Federal Action since the claims in this action do not arise from the same transaction as the Federal Action. The transactions underlying the claims in this action involve the diversion of the assets of 185 Marcy Corp. to 185 Marcy, LLC, while the transactions underlying the claims in the Federal Action involved the alleged diversion of assets of A-Z Holding Corp., Washington Greene Associates, and Paz Franklin Company, none of whom are parties to the present action.

Moreover, res judicata will only apply if "the party against whom res judicata is invoked had a full and fair opportunity to litigate the claim in a prior proceeding based on the same transaction" (Schwartzreich v. E.P.C. Carting Co., 246 AD2d 439, 441 [1st Dept 1998]; see also Browning Ave. Realty Corp. v. Rubin, 207 AD2d 263, 264-65 [1st Dept 1994], lv denied 85 NY2d 804 [1995]). Here, Klein was unable to plead his present claims in the Federal Action. The Stay Stipulation, which became effective before Klein filed an answer in the Federal action, provided that "[a]ny further proceedings, including, but not limited to, the service and filing of pleadings and motions, and responses thereto, in this case…are hereby stayed pending further Order of this Court," and, thereafter, stay stipulations were entered into in state court. Due to this stay, Klein could not then plead the claims now raised in this action as a counterclaim in the Federal Action. Klein

 

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claims that he moved on multiple occasions to lift the stay, but his motions were denied by the Federal Court, preventing him from filing counterclaims, and, as noted above, Judge Cogan first ruled that the Klein defendants could seek to revive their pending state court claims in state court if the state court allowed such relief on July 21, 2010. Thus, the Federal Court, in effect, refused to entertain Klein's counterclaims, denying him a full and fair opportunity to place them squarely before that court (see SMD Capital Group LLC v. Reichenbaum,19 Misc 3d 1141[A], 2008 NY Slip Op 51136[U] [Sup Ct, NY County 2008]). Consequently, Klein cannot be foreclosed by the doctrine of res judicata from maintaining the present action since the claims asserted in the present complaint were never actually litigated and could not have been litigated in the prior Federal Action.

While (as discussed above), Judge Cogan, in his May 31, 2011 Memorandum Decision, noted, in passing, that it was likely that the pending state actions, as well as the Second Federal Action would be "barred by the doctrine of res judicata," such mere dictum cannot be relied upon by the Gutman defendants as a basis for invoking this doctrine. In making this statement, Judge Cogan did not address this particular state court action or the claims asserted herein, and his rationale was that res judicata would apply to claims which could have been raised in the Federal Action. Here, as previously noted, Klein's claims could not have been raised in the Federal Action, and (as stated above) they involve different parties and are not based upon the same transactions as were at issue in the Federal Action.

The Gutman defendants rely upon the principle that a judgment by a federal court

 

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has res judicata effect even if obtained upon default (see Saud v. Bank of New York, 929 F2d 916, 919 [2d Cir 1991]). However, this reliance is misplaced since in order to invoke the principles of res judicata and/or collateral estoppel as a defense to an action, it must be established…that 'the issue in the prior action is identical [to], and thus decisive, of [the] issue [to be determined] in the current action'" (Kossover v. Trattler, 82 AD2d 610, 611 [2d Dept 1981], quoting Gramatan Home Invs. Corp. v. Lopez, 46 NY2d 481, 485 [1979]). Here, the principles of res judicata and collateral estoppel can have no application since the issues litigated and necessarily determined in the Federal Action were not the same as those presented in this action (see Lewis v. Levick, 99 AD2d 659, 659 [4th Dept 1984]; Kossover, 82 AD2d at 611-612). Klein cannot be estopped from pleading claims that are different from those for which the judgment was entered against him in the Federal Action.

In this regard, it is noted that while Judge Levy, in his Report and Recommendation, which was adopted by Judge Cogan, imposed the sanction of a default judgment against Klein pursuant to Rule 37 (b) (2) (vi) of the Federal Rules of Civil Procedure due to his spoliation of evidence, he did not prohibit Klein from supporting any of his own affirmative claims. Rather, the Federal Court did not find that any unpleaded claims1 by Klein in Federal Court could not be pursued in the state court actions, or that Klein was prohibited from pursuing his pre-existing claims in state court.

The Gutman defendants argue, however, that the Stipulations expressed the

 

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parties' intent and agreement that the outcome of the federal litigation would determine the state court actions, and that this should result in the barring of this action under res judicata principles. This argument is rejected. The express language of the Stay Stipulation provided that the intent of the parties was solely to permit their counsel "to explore a global settlement of the state and federal litigation." There was no language in the Stay Stipulation stating that the parties agreed to submit all claims to the Federal Court for adjudication. To the contrary, the Stay Stipulation provided only for a stay of the actions in state court pending global settlement efforts. Indeed, the Stay Stipulation attached and made a part thereof an order which gave the parties the right to resume the state actions in the event the stay were vacated or modified.

Notably, the separate Federal Court order by Judge Gleeson staying the state court actions, including the instant action, which was referenced and incorporated by the Stipulation, expressly set forth that the stay of all further proceedings in these actions "shall be without prejudice to the rights of any party to proceed in any action or appeal in the event that the stay [were to be] subsequently vacated or modified by th[e federal c]ourt." It specified that "[i]n the event the stay [were to be] vacated or modified by th[e federal c]ourt, the parties shall be able to proceed [in the state court actions] and take any action [therein] which would have been timely as of September 12, 2003." Similarly, the stipulated stay orders, dated September 26, 2003, entered in the state court actions reference the Federal stay, and contain the same language creating a stay, with the right to proceed if the stays were to be vacated or modified.

The Gutman defendants, in support of their res judicata argument, rely upon a

 

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statement in the Discovery Stipulation that "[i]t is the intent of the parties that the outcome of this federal litigation will also determine the state court litigations, and that during the pendency of this federal litigation, the parties will not file any further state court litigations against each other." This statement in the Discovery Stipulation (which pertained to an exchange of discovery), however, merely expressed the intent of the parties to attempt to resolve all claims by global settlement. It did not alter the express language of the stay orders incorporated into the Stay Stipulation which permitted the parties to resume the state court actions if no settlement were reached by the parties. Thus, since the global settlement failed, the Federal Court lifted its stay on July 21, 2010, and this court lifted its own stays and the state court actions resumed, the parties were expressly authorized to proceed with this state court action. In addition, as further indicative of the fact that the state court actions were not barred by the judgment in the Federal Action, it is noted that the Appellate Division issued its ruling in the A to Z action (see Gutman v. A to Z Holding Corp., 91 AD3d 718 [2012]) (which is discussed below), following that Federal judgment, the necessity of which would have been rendered moot if all issues had already been determined by the Federal Action.

The Gutman defendants further argue that the Stipulation of Discontinuance with prejudice, dated June 7, 2011, in the Second Federal Action operates as a final judgment on the merits to bar this action under the doctrine of res judicata. As noted above, the Second Federal Action was brought by Klein and others against Gutman and numerous others, including the defendants named in this action, and asserted RICO claims based upon fraudulent acts that included, among many others, Gutman's alleged fraudulent

 

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misappropriation of the assets of 185 Marcy Corp. The Gutman defendants base their res judicata argument on the fact that the Second Federal Action included these same parties and claims, along with the additional causes of action against the numerous other parties that were unrelated to the instant state action.

The Gutman defendants' argument must be rejected. Klein's attorney, in response to this argument, explains that the Second Federal Action was voluntarily dismissed when it became clear that there would be multiple motions to dismiss by multiple defendants, that the Federal Court disapproved of the inclusion of some attorneys as defendants, and that such action would encounter many delays before the merits were reached. He further explains that it was, therefore, decided that the RICO claims in the Second Federal Action would be discontinued in favor of the pending state court actions.

Notably, the claims before this court were already pending and being actively litigated when the Second Federal Action was discontinued. Klein has submitted evidence, including letters among counsel and this court contemporaneous to the voluntary dismissal of that action, which indicate that Klein did not intend for such voluntary dismissal by him to detrimentally affect his rights to pursue this already pending action. Such correspondence shows that Gutman was well aware that Klein had no intention of discontinuing the claims in this action at the time he discontinued the Second Federal Action.

While "'a stipulation dismissing an action with prejudice can have the preclusive effect of res judicata'" (Official Publications, Inc. v. Kable News Co., Inc., 811 F Supp 143, 146 [SD NY 1993], quoting Samuels v. Northern Telecom, Inc., 942 F2d 834, 836

 

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[2d Cir 1991]), "'the language "with prejudice" is narrowly interpreted when the interests of justice, or the particular equities involved, warrant such an approach'" (Pawling Lake Prop. Owners Assn., Inc. v. Greiner, 72 AD3d 665, 667 [2d Dept 2010], quoting Dolitsky's Dry Cleaners v. YL Jericho Dry Cleaners, 203 AD2d 322, 323 [2d Dept 1994]). Here, the claims presently before the court in this action do not include the civil RICO claims, which were the gravamen of the discontinued Second Federal Action. Although it cannot be disputed that Klein's discontinuance of the Second Federal Action would prevent Klein from commencing any future similar RICO claims, it would work an unintended injustice to deny Klein the right to continue these prior state claims, which had been stayed, and which Klein evinced no intention to abandon at the time of his discontinuance of the Second Federal Action. These equities, in conjunction with the fact that the gravamen of the discontinued Second Federal Action was civil RICO claims, the voluntary dismissal of this later commenced Second Federal Action cannot create a res judicata barrier to the resolution of this earlier action on related issues. Thus, the Gutman defendants' motion, insofar as it seeks dismissal of this action based upon the ground of res judicata, must be denied.

COLLATERAL ESTOPPEL

The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a later action "an issue which has previously been decided against him [or her] in a proceeding in which he [or she] had a fair opportunity to fully litigate the point" (Kaufman v. Eli Lilly & Co., 65 NY2d 449, 455 [1985] [internal quotations and citation omitted]; see also Ryan v. New York Tel. Co., 62 NY2d 494, 500-

 

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501 [1984]). The two requirements which must be satisfied before the doctrine of collateral estoppel can be invoked are that "the identical issue necessarily must have been decided in the prior action and be decisive of the present action," and that "the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination" (Kaufman, 65 NY2d at 455). "[T]he fair application of collateral estoppel requires a practical inquiry into the 'realities' of the prior litigation" (Lewis, 99 AD2d at 659, citing Gilberg v. Barbieri, 53 NY2d 285, 292 [1981]).

Here, as discussed above, the issue in this action, i.e., the diversion of property owned by 185 Marcy Corp. to 185 Marcy LLC for no consideration, was never presented to nor considered by the Federal Court in the Federal Action. Thus, the identical issue was not decided in the Federal Action. Further (as already discussed above), Klein never had a full and fair opportunity to pursue these claims in the Federal Action since he could not plead those claims. Consequently, collateral estoppel does not apply to bar Klein's claims in this action (see Lewis, 99 AD2d at 659). The Gutman defendants' motion, insofar as it seeks dismissal of this action based upon the ground of collateral estoppel, must, therefore, be denied.

SPOLIATION

The Gutman defendants argue that this action should be dismissed by reason of Klein's adjudicated spoliation of evidence in the Federal Action. It is well established that a plaintiff's complaint may be stricken where the plaintiff has willfully destroyed key evidence which is crucial to a defendant's defense (see Horace Mann Ins. Co. v. E.T. Appliances, 290 AD2d 418, 419 [2d Dept 2002]; Kirkland v. New York City Hous. Auth.,

 

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236 AD2d 170, 174-175 [1st Dept 1997]).

The Gutman defendants contend that based upon Judge Levy's finding in the Federal Action that there was spoliation of evidence in bad faith which was "potentially relevant to any or all aspects of the [Federal Action]," and that, as a result of the spoliation, it was "impossible to know what [the Gutman plaintiffs] would have found if the [Klein defendants] and their counsel had complied with their discovery obligations," this action should be dismissed as a result of this spoliation.

Klein, in opposition, notes that the default entered by the Federal Court in the Federal Action as a sanction for the finding of spoliation of his laptop computer was based in part on the prejudice allegedly sustained by Gutman in not having access to the original laptop records to help him prove his claims. Klein asserts that Gutman is not similarly prejudiced in his defense of the claims in this action since Gutman alone managed and maintained all of the records, including the day-to-day business of the entities from which, Klein alleges, he discovered assets were diverted by Gutman, including 185 Marcy Corp. Klein contends that Gutman has failed to submit any proof to establish any prejudice in defending his claims or that his defense has been hampered in any way in this action, and that he cannot do so since Gutman maintained the records of 185 Marcy Corp. and 185 Marcy LLC. He notes that no where in the 29-page Report and Recommendation of Judge Levy dated October 15, 2008 does he mention 185 Marcy Corp. or 185 Marcy LLC's records. He also notes that in the subsequent 49-page Report and Recommendation dated August 19, 2010, Judge Levy stated that his finding of spoliation on Klein's laptop computer "by no means found that [Klein] destroyed all

 

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records from the parties' decades-long business relationship." In reply to this opposition, Gutman fails to respond to these assertions. Gutman simply conclusorily states that Klein's "adjudicated spoliation of evidence [is] necessarily relevant to the instant State Actions [and this issue] will be vigorously litigated before this [c]ourt." Thus, Gutman fails to dispute that he alone exclusively managed, controlled, and maintained these records, as claimed by Klein.

"The Federal Rules of Civil Procedure do not authorize dismissal of an entirely separate action for violations in a related action" (Atchison, Topeka and Santa Fe Ry. Co. v. Hercules Inc., 146 F3d 1071, 1073 [9th Cir 1998]). Rather, "[t]he effect of a district court's sanction may not pervade beyond the action in which the violation occurred" (id.). Thus, since Gutman has not asserted how this spoliation is relevant to the claims in the instant action, he has failed to show any basis for dismissal of this action due to the spoliation found in the Federal Action. The Gutman defendants' motion for dismissal based upon the alleged ground of spoliation must, therefore, be denied.

ANOTHER ACTION PENDING

The Gutman defendants argue that this action must be dismissed, pursuant to CPLR 3211 (a) (4), which provides that the court may dismiss an action or "may make such order as justice requires" where "there is another action pending between the same parties for the same cause of action in a court of any state or the United States." They contend that the other action pending is the Klein defendants' appeals of the Federal judgments.

The appeal of the Federal judgments do not constitute a basis for dismissal of this

 

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action. As noted above, the Federal Court, in its July 21, 2010 order, expressly lifted the stay of this action and refused to enjoin this action from proceeding, finding that the Klein defendants "may proceed" on their claims in state court "if the state court allows it." Moreover, the pendency of appeals of the judgments in the Federal action would not bar this action on the ground of another action pending since the outcome of such appeals would not be dispositive of the claims asserted in this action (see D'Aprile v. Blythe, 53 AD2d 1059, 1060-1061 [4th Dept 1976]). Thus, the Gutman defendants' motion for dismissal of the complaint in this action on this ground must be denied.

AMENDMENT

As previously noted, the Gutman defendants, in their motion, seek to amend their answer, pursuant to CPLR 3025 (b), to assert the affirmative defenses of res judicata, collateral estoppel, another action pending (i.e., Klein's appeals of the judgments in the Federal Action), and spoliation of evidence. Under CPLR 3025 (b), leave to amend a pleading is generally freely given absent prejudice or surprise caused by the delay in seeking the amendment (see Clark v. Clark, 93 AD3d 812, 816 [2d Dept 2012]).

However, "[w]here the proposed amended pleading is palpably insufficient or patently devoid of merit…the motion for leave to amend should be denied" (Lucido v. Mancuso, 49 AD3d 220, 229 [2d Dept 2008]; see also Douglas Elliman, LLC v. Bergere, 98 AD3d 642, 643 [2d Dept 2012]; Putnam County Sav. Bank v. Aditya, 91 AD3d 840, 841 [2d Dept 2012]; Scofield v. DeGroodt, 54 AD3d 1017, 1018 [2d Dept 2008]; Shovak

 

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v Long Is. Commercial Bank, 50 AD3d 1118, 1120 [2d Dept 2008], lv dismissed in part, denied in part 11 NY3d 762 [2008]). The Gutman defendants argue that the court should not examine the merits of their proposed amendments. However, since the court has already fully examined the merits of these proposed affirmative defenses in the context of Gutman's instant post-answer motion to dismiss (which is, in essence, a motion for summary judgment dismissing Klein's complaint) and has found them to be palpably insufficient and devoid of merit, the Gutman defendants' motion, insofar as they seek leave to amend their January 25, 2002 answer to assert these affirmative defenses, must be denied.

KLEIN'S CROSS MOTION

Klein, in his cross motion, seeks summary judgment in his favor, pursuant to the doctrines of res judicata and/or collateral estoppel, based upon this court's order dated December 6, 2002 in the A to Z action. The A to Z action was filed by Gutman on December 30, 1999 against Klein, A to Z Holding Corp., A to Z Capital Corp., and Washington Greene Association (the Klein defendants). In his complaint in the A to Z action, Gutman alleged, among other things, that he and Klein were the sole and equal owners of three business entities, i.e., A to Z Holding Corp., A to Z Capital Corp., and Washington Greene Associates, and that, since 1984, Klein had failed to pay him a share of the income and profits of these businesses. In their answer in the A to Z action, the Klein defendants interposed counterclaims, which, in essence, charged Gutman with misappropriating funds from 11 named other entities and "numerous other [unnamed] entities" with which Klein and Gutman were associated. These entities included the

 

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corporation,185 Marcy Corp.

The Klein defendants' first counterclaim in the A to Z action, which sought damages, alleged that Klein and Gutman were shareholders in these corporate entities, including 185 Marcy Corp., which owned real property, and that Gutman had engaged in fraudulent conduct in violation of his fiduciary responsibilities to Klein by allegedly pocketing rents and proceeds from the properties. The Klein defendants' second counterclaim sought an accounting from Gutman with respect to the assets of these various entities in which Klein allegedly had an interest and any entity which Gutman purchased with monies misappropriated from him and placed in Gutman's own name or names unknown to him. The Klein defendants' third counterclaim sought a declaratory judgment, declaring Klein's rights in the entities, as well as the real property. The Klein defendants' fourth counterclaim sought an injunction, enjoining Gutman from misappropriating any further funds or from transferring or encumbering through a mortgage or otherwise any interest in property in which Klein has an interest.

In an order dated June 6, 2002 in the A to Z action, the court directed the conditional dismissal of Gutman's complaint unless he complied with the Klein defendants' outstanding discovery demands on or before June 20, 2002, and appeared for the continuation of his deposition on July 2, 2002 and July 3, 2002. Gutman failed to appear for the continuation of his deposition on those days. Consequently, by an order dated December 6, 2002 in the A to Z action, the court granted an absolute order dismissing Gutman's complaint and his reply to the Klein defendants' counterclaims, and precluding Gutman from offering any evidence at the trial on the issue of defendants'

 

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counterclaims. In its December 6, 2002 order, the court noted that before issuing the conditional order of dismissal, it had warned Gutman orally and as part of that order that violation would result in dismissal. The court also noted, in that December 6, 2002 order, that Gutman had claimed that he could not attend the deposition because he was actually engaged at a hearing in front of Justice Leon Ruchelsman, which was untrue.

Thereafter, Gutman moved, in the A to Z action, for leave to renew his opposition to the Klein defendants' motion to dismiss his complaint and to strike his reply to the Klein defendants' counterclaims. Gutman claimed that the defaults were attributable entirely to his former counsel, James Klatsky, Esq. (Klatsky), who had not informed him of any of the court orders, or any directive to attend the June 6, 2002 conference, or the directive to appear on July 2, 2002 and July 3, 2002 for the continuation of his deposition on penalty of dismissal. Gutman also claimed that Klatsky, without his knowledge or consent, had told the court and the Klein defendants' counsel that he could not attend the July 2, 2002 continuation of his deposition because he was testifying in another matter. In a decision and order dated August 7, 2003, the court, in effect, granted leave to renew, and, upon renewal, vacated the determination in its order dated December 6, 2002, and reinstated Gutman's complaint and his reply to the counterclaims on the condition that he pay the sum of $5,000 to the Klein defendants.

The court, in so holding in its August 7, 2003 decision and order found that since Gutman was apparently unaware of the prior discovery orders, it would be inequitable not to consider the matter anew. It further found that Gutman had appeared on two occasions for depositions and provided almost 2,000 pages of documents, and that there was no

 

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showing that he was guilty of a deliberately evasive, misleading, or uncooperative course of conduct to justify that he be deprived of his day in court. It determined that there was no willful failure by Gutman to provide discovery, and vacated its prior dismissal of Gutman's complaint and the reply to the Klein defendants' counterclaims on this basis. It further determined that the Klein defendants had not been prejudiced and that dismissal would be unduly harsh, and, therefore, merely a financial sanction was warranted.

Upon an appeal by the Klein defendants of the court's August 7, 2003 order in the A to Z action, the Appellate Division, Second Department, in a decision and order dated January 17, 2012 (Gutman, 91 AD3d at 718), modified that order, on the facts and in the exercise of discretion, by deleting the provisions thereof, which, upon renewal, denied the Klein defendants' motion to dismiss Gutman's complaint, struck the reply to the counterclaims on the condition that Gutman pay the sum of $5,000 to the Klein defendants, and vacated this determination in the order dated December 6, 2002, and substituted therefor a provision, upon renewal, adhering to the determination in the court's December 6, 2002 order, which granted the Klein defendants' motion to dismiss Gutman's complaint and to strike the reply to the counterclaims. As so modified, the Appellate Division, Second Department, affirmed this court's order dated August 7, 2003 insofar as appealed from, with costs to the Klein defendants (id.).

In so ruling, the Appellate Division, Second Department, found that upon Gutman's failure to comply with the conditional order of dismissal entered on June 6, 2002, that order became absolute, and that, as a result, Gutman, in opposing the Klein defendants' motion to dismiss the complaint and to strike the reply to the counterclaims,

 

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was required to demonstrate both that he had a reasonable excuse for the default and a potentially meritorious cause of action (Id. at 719, citing Matter of Denton v. City of Mount Vernon, 30 AD3d 600, 600-601 [2d Dept 2006]). It determined that Gutman had failed to establish a reasonable excuse for his defaults since the defaults on the part of his former attorney, Klatsky, were imputed to him despite Klatsky's alleged failure to inform him of the outstanding discovery issues and the court's conditional order of dismissal (Gutman, 91 AD3d at 719, citing Greenwald v. Zyvith, 23 AD2d 201, 203 [2d Dept 1965]). It further noted that "'[w]hen a default results not from an isolated, inadvertent mistake, but from repeated neglect, as here, there is no requirement that the court grant the requested relief'"(Gutman, 91 AD3d at 719, quoting Chery v. Anthony, 156 AD2d 414, 417 [2d Dept 1989]). It thus held that it was an improvident exercise of discretion for this court to vacate the determination in the December 6, 2002 order granting the Klein defendants' motion to dismiss the complaint and the reply to the counterclaims and to reinstate the complaint and the reply (Gutman, 91 AD3d at 719).

The Appellate Division, Second Department, in its January 17, 2012 decision and order, however, did not reinstate the order of preclusion set forth in the December 6, 2002 order, but (as noted above) affirmed this court's August 7, 2003 decision and order as so modified. In addition, the Appellate Division's decision and order did not provide that it was with prejudice and it never addressed the issue of the Klein defendants' counterclaims on the merits.

Despite the fact that the merits of the Klein defendants' counterclaims were never litigated and Gutman never had a full and fair opportunity to address the merits of such

 

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counterclaims, Klein, in seeking summary judgment, argues that the dismissal of Gutman's claims and his defenses to his counterclaims in the A to Z action was a dismissal on the merits. Although Klein, as noted above, has vehemently argued with respect to Gutman's motion that where a full and fair opportunity to address the merits of a claim in one action should not bar a second action, he nevertheless contends, in support of his cross motion, that summary judgment should be granted against Gutman in this action based upon the doctrines of res judicata and/or collateral estoppel due to the order granted in the A to Z action.2

As to collateral estoppel, "only issues that are 'actually litigated' in a prior action will be given collateral estoppel effect, and '[a]n issue is not actually litigated if…there has been a default'" (Matter of Frontier Ins. Co., 73 AD3d 36, 41 [3d Dept 2010], quoting Kaufman, 65 NY2d at 456-457; see also Pigliavento v. Tyler Equip. Corp., 233 AD2d 810, 811 [3d Dept 1996]). Since there is no question that the issues in this action were not actually litigated in the A to Z action, collateral estoppel cannot bar this action (see Kaufman, 65 NY2d at 456-457).

Furthermore, Klein seeks to use the doctrines of collateral estoppel and res judicata offensively to affirmatively obtain summary judgment in his favor in this action based upon the striking of Gutman's reply, which had merely been interposed defensively to defend against the Klein defendants' counterclaims in the A to Z action that were never

 

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litigated on the merits. While the abolition of the doctrine of mutuality of parties may now permit collateral estoppel and res judicata to be applied offensively in subsequent litigation, a party seeking to apply res judicata or collateral estoppel must still show that his or her opponent participated in the prior litigation and had a full opportunity to litigate the action on its merits (see B. R. De Witt, Inc. v. Hall, 19 NY2d 141, 149 [1967]; Community Natl. Bank & Trust Co. of N.Y. v. Wisan,185 AD2d 870, 871 [2d Dept 1992]). Here, as previously noted, Gutman did not defend against the counterclaims with full vigor and never had a full opportunity to litigate the issues now raised in this action.

Res judicata may only apply when there is a final judgment on the merits in the first action (see Hae Sheng Wang v. Pao-Mei Wang, 96 AD3d 1005, 1007 [2d Dept 2012]). Klein argues that the Appellate Division's reinstatement of the December 6, 2002 order constituted a judgment on the merits. However, when a dismissal of a claim occurs prior to the close of a proponent's evidence, the dismissal will not be deemed to be on the merits so as to preclude the commencement of a second action (see CPLR 5013; Maitland v. Trojan Elec. & Mach. Co., 65 NY2d 614, 615 [1985]). Thus, where a party's noncompliance with a disclosure order does not result in a dismissal with prejudice or an order of preclusion or summary judgment in favor of the other party so as to effectively close that party's proof, a dismissal resulting from the noncompliance is not a determination on the merits so as to bar the commencement of a second action pursuant to the doctrine of res judicata (see Maitland, 65 NY2d at 615-616; Daluise v. Sottile, 40 AD3d 801, 802-803 [2d Dept 2007]; Aguilar v. Jacoby, 34 AD3d 706, 707 [2d Dept 2006]; Stray v. Lutz, 306 AD2d 836, 836-837 [4th Dept 2003], lv dismissed 100 NY2d

 

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615 [2003]; Bullock v. Wehner, 263 AD2d 739, 740 [3d Dept 1999]). Therefore, a previous court order granting a party's motion to strike the other party's pleading does not preclude, under the doctrine of res judicata, the party's second action against the other party, where the previous order did not grant preclusion and, instead, granted only the relief sought in requesting a motion to strike for the party's failure to comply with a disclosure order (see Daluise, 40 AD3d at 802; Stray, 306 AD2d at 836-837; Bullock, 263 AD2d at 740).

It is true that this court, in its December 6, 2002 order, had granted the relief of striking Gutman's reply to the Klein defendants' counterclaims and precluding Gutman from offering any evidence at the trial on the issue of the Klein defendants' counterclaims. However, the court, by its August 7, 2003 order, vacated this determination and reinstated Gutman's reply to Klein's counterclaims with a monetary sanction. While the Appellate Division, in its January 17, 2012 decision and order, modified the August 7, 2003 order by deleting this reinstatement and monetary sanction, it merely substituted therefor a provision which adhered to the court's December 6, 2002 order insofar as it dismissed Gutman's complaint and struck the reply to the counterclaims.

Significantly, such Appellate Division order did not reinstate the order of preclusion in the December 6, 2002 order and was silent as to the issue of preclusion. The merits of Klein's counterclaims were never addressed and there was never a determination on the merits or any finding on the issue of liability. Therefore, since the Appellate Division affirmed this court's August 7, 2003 decision and order as so

 

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modified, i.e., striking the reply but without an order of preclusion, such Appellate Division decision and order was not tantamount to the granting of an order of preclusion which would be required in order to effectively close Gutman's proof regarding the Klein defendants' counterclaims (see Maitland, 65 NY2d at 615-616 [1985]; Daluise, 40 AD3d at 802; Aguilar, 34 AD3d at 707; Stray, 306 AD2d at 836-837; Bullock, 263 AD2d at 739-740). Consequently, the dismissal of the prior action on the ground of noncompliance with discovery requests was not a determination on the merits so as to bar commencement of the instant action as the prior dismissal was not the result of an order of preclusion and there was no indication that the dismissal was with prejudice (see Maitland, 65 NY2d at 615-616; Daluise, 40 AD3d at 802; Aguilar, 34 AD3d at 707; Stray, 306 AD2d at 836-837; Bullock, 263 AD2d at 739-740; cf. Kalinka v. Saint Francis Hosp., 34 AD3d 742, 744 [2d Dept 2006]).

The court further notes that the order in the A to Z action dated March 28, 2012, prepared by the Klein defendants and signed by the court following the Appellate Division's January 17, 2012 decision and order, did not provide a determination on the merits, with prejudice, as to Klein's interest in 185 Marcy Corp. Rather, it awarded Klein a judgment as to the first counterclaim for fraud if he were found to have been damaged after a determination as to the extent of his ownership interests following a hearing which was referred for determination. Notably, the Klein defendants' first counterclaim did not plead fraud as to 185 Marcy Corp. with the detail and particularity required by CPLR 3016 (b). Moreover, a party seeking a default judgment must generally present prima facie proof of a claim (see Silberstein v. Presbyterian Hosp. in City of N.Y., 96 AD2d

 

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1096, 1096 [2d Dept 1983]). Furthermore, "[w]hile a default admits all factual allegations of the [pleading] and all reasonable inferences therefrom, it does not admit legal conclusions which are reserved for the court's determination (see id.).

In addition, as to the second counterclaim, Klein was awarded judgment only to the extent that an accounting of the assets of the entities was to be provided after all assets were declared. As to the third counterclaim, judgment was awarded declaring only that the extent of the amount of Klein's ownership interest in 185 Marcy Corp. would be determined following the hearing, and the judgment on the fourth counterclaim enjoined Gutman from transferring or encumbering any interest in the property belonging to the entities at issue. This judgment may not properly be construed as providing a final adjudication on the merits of Gutman's claims in the present action, which was never adjudicated on the merits in the A to Z action. No where in the Appellate Division's decision and order was it determined that striking of Gutman's reply constituted a judgment on the merits of the Klein defendants' counterclaims so as to bar this action, and such a judgment on the merits was not required to comply with the directive of the Appellate Division's order. To the extent that it may have the unintended effect of being construed as such, the court (as provided in the December 7, 2012 order in the A to Z action decided herewith), pursuant to the inherent authority of the court to vacate its own orders and in the interests of justice, vacates such order to that extent (see Ruben v. American & Foreign Ins. Co., 185 AD2d 63, 67 [4th Dept 1992]; Correa v. Maimonides Med Ctr., 165 Misc 2d 614, 616 [Sup Ct, Kings County 1995]). Consequently, Klein's cross motion, insofar as it seeks to dismiss this action on the ground of res judicata based

 

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upon the Appellate Division's January 17, 2012 decision and order in the A to Z action, must be denied.

CONCLUSION

Accordingly, the Gutman defendants' motion for leave to amend their answer and to dismiss this action is denied in its entirety. Klein's cross motion for summary judgment is also denied in its entirety.

This constitutes the decision and order of the court.

Written with the assistance of Linda Horn.

1. Notably, Klein was not required to plead his claims in this action as a compulsory counterclaim in the Federal Action since his claims in this action were already pending before the Federal Action was commenced (see Fed Rules Civ Pro rule 13 [a] [2] [A]).

2. Klein also argues that the December 6, 2002 order in the A to Z action, pursuant to the doctrines of res judicata and collateral estoppel, should have served as a bar to the subsequent judgment in the Federal Action upon which the Gutman defendants, in their motion, claimed acted as a res judicata bar to his claims in this action. Since, as discussed above, the court has denied the Gutman defendants' motion, finding that the judgment in the Federal Action did not bar Klein's claims in this action, such argument is rendered moot.