State ex rel. City of N.Y. v. Credit Suisse Sec. (USA) LLC

210 A.D.3d 609

180 N.Y.S.3d 69

STATE of New York FOR the CITY OF NEW YORK ex rel. Thomas C. Willcox, Plaintiff–Appellant,

v.CREDIT SUISSE SECURITIES (USA) LLC, as successor-in-interest to Donaldson Lufkin & Jenrette Securities Corporation et al., Defendants–Respondents.

16758

Index No. 100356/16

Case No. 2021–03942

Supreme Court, Appellate Division, First Department, New York.

Entered November 29, 2022

Thomas C. Willcox, New York, for appellant.

Shearman & Sterling LLP, New York (Grace J. Lee of counsel), for respondents.

Acosta, P.J., Kern, Singh, Scarpulla, Pitt, JJ.

Order, Supreme Court, New York County (James Edward D'Auguste, J.), entered on or about June 22, 2021, which, to the extent appealed from as limited by the briefs, granted defendants’ motion to dismiss the first amended complaint and denied plaintiff-relator's motion for leave to file a second amended complaint, unanimously affirmed, with costs.

The court correctly concluded that the complaint was barred by res judicata, as plaintiff-relator's claims that defendant defrauded the City of tax revenue in two transactions involving the private placement of notes in 1999 arose out of the same transactions that were at issue in a prior action involving the same parties (see State of N.Y. ex rel. Willcox v. Credit Suisse Sec. [USA] LLC, 140 A.D.3d 622, 36 N.Y.S.3d 89 [1st Dept. 2016] [ Willcox I ]; see generally Marinelli Assoc. v. Helmsley–Noyes Co., 265 A.D.2d 1, 5, 705 N.Y.S.2d 571 [1st Dept. 2000] ). The claims in both actions were "grounded on the same gravamen of the wrong" – evasion of taxes – notwithstanding that relator alleged evasion of State taxes in Willcox I and evasion of City taxes in this action ( Smith v. Russell Sage Coll., 54 N.Y.2d 185, 192, 445 N.Y.S.2d 68, 429 N.E.2d 746 [1981] ; see Jacobson Dev. Group, LLC v. Grossman, 198 A.D.3d 956, 959–960, 156 N.Y.S.3d 363 [2d Dept. 2021] ).

The court also correctly dismissed the complaint on the ground that relator was collaterally estopped from relitigating his implied false certification theory of liability, raised in an attempt to circumvent the statute of limitations, as the theory was rejected on the merits in Willcox I (see Willcox I, 140 A.D.3d at 623, 36 N.Y.S.3d 89 ; see generally Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 349, 690 N.Y.S.2d 478, 712 N.E.2d 647 [1999] ). Although collateral estoppel does not preclude relitigation of pure issues of law, this Court's prior holding was on a mixed question of law and fact, involving the application of principles of law to substantially the same facts as here (see American Home Assur. Co. v. International Ins. Co., 90 N.Y.2d 433, 440, 661 N.Y.S.2d 584, 684 N.E.2d 14 [1997] ). Contrary to relator's contention, the newly-submitted expert opinions did not render this action factually dissimilar from Willcox I . In any event, the expert reports were insufficient to undo the finality of the prior ruling (see Matter of Reilly v. Reid, 45 N.Y.2d 24, 28, 407 N.Y.S.2d 645, 379 N.E.2d 172 [1978] ; Marinelli, 265 A.D.2d at 6–7, 705 N.Y.S.2d 571 ).

Relator's contention that the preclusive effect of Willcox I had been invalidated by the overruling of caselaw on which our prior ruling was based is unavailing. Although the United States Supreme Court decision in ( Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 136 S.Ct. 1989, 195 L.Ed.2d 348 [2016] ) endorsed an arguably more expansive view of implied false certification, it did not address the specific situation here (tax refund requests). Further, cases decided after Escobar undermine the viability of relator's implied false certification theory of liability in reviving time-barred claims (see Total Asset Recovery Servs. LLC v. Metlife, Inc., 189 A.D.3d 519, 524, 139 N.Y.S.3d 3 [1st Dept. 2020] ; United States ex rel. Pelullo v. American Intl. Group, Inc., 2017 WL 3610514, *3, 2017 U.S. Dist LEXIS 134100 [S.D.N.Y., Aug. 21, 2017, No. 16–CV–5694 (KBF)], affd 757 Fed. Appx. 15 [2d Cir.2019] ). In any event, even if the cases on which this Court relied had been overruled, "[t]he conclusive effect of a final disposition is not to be disturbed by a...