Associated Financial Corp. v. Kleckner

SUMMARY ORDER

Plaintiffs-Appellants Associated Financial Corporation and Community Housing Enterprises, Incorporated appeal from a judgment of the United- States District Court for the Southern District of New York (Koeltl, /.), granting Defendants’ motion to dismiss Plaintiffs’ complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court ruled that Plaintiffs’ claims against Defendants Stanley M. Kleckner and Polar International Brokerage were barred by the doctrine of res judicata and failed to state a claim upon which relief can be granted. Plaintiffs appeal only the dismissal of their claim to recover damages from Defendants’ breach of a covenant not to sue. We assume the parties’ familiarity with the underlying facts and procedural history of the case.

Plaintiffs contend that their claim seeking damages in an amount equal to the attorneys’ fees they incurred in a previous state court action is not barred by the res judicata effect of the state court’s decision to deny their post-judgment motion for those fees. We review de novo a district court’s dismissal of a complaint for failure to state a claim, Conopeo, Inc. v. Roll Int’l, 281 F.3d 82, 86 (2d Cir. 2000), as well as its application of the principles of res judicata, Legnani v. Alitalia Linee Aeree Italiane, S.P.A., 400 F.3d 139, 141 (2d Cir. 2005) (per curiam). Dismissal under Federal Rule of Civil Procedure 12(b)(6) is appropriate when “it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the plaintiffs claims are barred as a matter of law.” Conopco, 231 F.3d at 86. “Under both New York law and federal law, the doctrine of res judicata, or claim preclusion, provides that [a] final judgment on the merits of an action precludes the parties ... from relitigating issues that were or could have been raised in that action.” Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 600 F.3d 190, 195 (2d Cir. 2010) (alterations in original) (internal quotation marks omitted).

Having conducted an independent review of the record in light of these principles, we conclude that the state court’s decision precludes Plaintiffs’ attempt to recoup the attorneys’ fees in the form of damages in the federal action for substantially the same reasons stated by the district court in its Memorandum Opinion and Order. Because we conclude that Plaintiffs’ claim for breach of a covenant not to sue is barred by the doctrine of res judica-ta, we need not address whether the claim is permissible under the American Rule.

We have considered Plaintiffs’ remaining arguments and find them to be without merit. For the foregoing reasons, the judgment of the district court is hereby AFFIRMED.