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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: March 8, 2019

Claims Not Barred by Collateral Estoppel or Res Judicata Because They Had Not Matured When First Action Brought

On February 13, 2019, Justice Cohen of the New York County Commercial Division issued a decision in Triantafillakis v. Madden, 2019 NY Slip Op. 30355(U), holding that the plaintiff’s claims were not barred by collateral estoppel or res judicata because the claims had not accrued when the first action was brought, explaining:

Plaintiffs’ claims are not barred by res judicata. In Matter of Hunter, 4 N.Y.3d 260 (2005), the Court of Appeals explained that under the doctrine of res judicata, a party may not litigate a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. The rule applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation. However, where a claim could not have been raised in the prior litigation because it had not yet matured, res judicata does not apply.

In the First Action, Plaintiffs sought to enjoin Defendants from selling the Diner, and to enforce the Option Agreement giving Plaintiffs their share in Trian West. Since the termination of that action, Defendants have sold the Diner, and have failed to distribute the proceeds to Plaintiffs. This suit was brought to enforce an Operating Agreement mandating that Plaintiffs share in the proceeds from any sale of the Diner. Plaintiffs’ claims in the instant action, therefore, are based upon new conduct which could not have been raised in the original litigation (i.e., failure to distribute proceeds from the sale) and a separate agreement that was not at issue in the First Action (the Operating Agreement).

In the First Action, Defendant Jennifer Madden submitted an affidavit which included a section titled “Trian West’s Intention to disburse the Sale Proceeds.” In this section of the affidavit Madden represented to the court, under oath, that in the event Trian West is permitted to close the Purchase Agreement and thereby sell all of its assets to HR Porn Porn, Trian West will disburse the sale proceeds in accordance with the terms of the Operating Agreement. The affidavit further represented that after all payments of debts are made the funds will be placed in escrow pending equal distribution to the three optionees under the Option Agreement, Plaintiff John Triantifillakis, Anthanasios Triantifillakis, and Lako Kokotas. As it turned out, Defendant Madden failed to proceed as she represented she would. It was only when she allegedly reneged on her representation and refused to share the proceeds with the Plaintiffs that Plaintiffs’ claims in this suit arose. As such, Plaintiffs claims in the instant action are not barred by res judicata.

Plaintiffs’ claims also are not barred by collateral estoppel. Plaintiffs raise a breach of contract claim that was not litigated in the previous action. In Beuchel v. Bain, 97 N.Y.2d 295 (2001), the Court of Appeals explained that collateral estoppel precludes a party from relitigating in a subsequent action or proceeding an issue raised in a prior action or proceeding and decided against that party or those in privity. Here, Plaintiffs’ breach of contract claim is based upon a different contract, one that was not raised or litigated in the previous action. As such, Plaintiffs’ claims are not barred by collateral estoppel.

(Internal quotations and citations omitted).

Doctrines such as collateral estoppel and res judicata limit a plaintiff’s ability to litigate a dispute more than once. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a claim is barred by an earlier action.

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