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Melikian v. Corradetti

May 28, 1986

MENATSAGAN MELIKIAN AND KAMBIZ AFTASSI, APPELLANTS
v.
ANTHONY CORRADETTI; MORRIS COPPERSMITH; RUBIN BERNSTEIN; BERNARD WEINSTEIN; AS INDIVIDUALS AND IN THEIR CORPORATE CAPACITIES, INDIVIDUALLY, JOINTLY, SEVERALLY AND IN THE ALTERNATIVE AND CORRADETTI ENTERPRISES, INC., T/A ANTHONY SALES, A NEW JERSEY CORPORATION; ANTHONY ASSOCIATES, INC., A NEW JERSEY CORPORATION; R.A.M. PACKAGING, A NEW JERSEY FICTITIOUS NAME; MEMCO TRADING CO., INC., A PENNSYLVANIA CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY; PHILBER SALES CORPORATION, T/A BERNIE WEINSTEIN, A NEW JERSEY CORPORATION, AND ANTHONY EXPORTING CO., INC., JOINTLY AND SEVERALLY



Appeal from the United States District Court for the District of New Jersey - Camden (Civil Action No. 84-3480)

Author: Stapleton

Before HIGGINBOTHAM and STAPLETON, Circuit Judges and TEITELBAUM, District Judge*fn*

STAPLETON, Circuit Judge:

I.

In 1982, Menatsagan Melikian and Kambiz Aftassi ("plaintiffs") instituted an action against Anthony Exporting Company ("Exporting") in the United States District Court for the District of New Jersey. Jurisdiction was based on diversity of citizenship. The complaint alleged causes of action for the breach of large contracts for the sale of barley, rice, chickens, and corn by Exporting and requested compensatory and punitive damages. The alleged sales price of the corn contract alone was $44,000,000. The district court dismissed all but the corn contract claim. The jury returned a verdict by special interrogatory in favor of plaintiffs for breach of this contract and awarded them compensatory damages totalling $1,128,000 but no punitive damages.

Due to Exporting's insolvency, plaintiffs have been unable to satisfy their judgment. After the district court denied plaintiffs' post-judgment motion to amend their original complaint and add as defendants the principals of Exporting, plaintiffs filed this second suit in the same court. Named as defendants are Anthony Corradetti; Morris Coppersmith; Rubin Bernstein; Bernard Weinstein; Corradetti Enterprises, Inc., trading as Anthony Sales; Anthony Associates, Inc.; R.A.M. Packaging; Memco Trading Company, Inc.; Philber Sales Corporation trading as Bernie Weinstein; and Exporting.

Plaintiffs' amended complaint asserts in count one claims based upon alleged fraudulent misrepresentation of the financial condition of Exporting, fraudulent concealment of the true financial condition of that company, and fraudulent inducement to contract. Count two seeks to pierce the corporate veil of Exporting and to hold Anthony Corradetti, Morris Coppersmith, Rubin Bernstein, Anthony Associates, Inc., R.A.M. Packaging Partnership, Memco Trading Company, Inc., and Corradetti Enterprises liable on the judgment obtained against Exporting as the "alter egos" of that corporation. In count three, plaintiffs allege that Anthony Corradetti, Morris Coppersmith, Rubin Bernstein, and Bernard Weinstein conspired, using a variety of business entities, "to set up a sham and shell corporation as a 'conduct of funds' to take unjust and unfair advantage of the enormous potential in the export field for their type of 'scam.'"

All defendants moved to dismiss plaintiffs' second action under Fed. R. Civ. P. 12(b)(6). Upon the granting of these motions by the district court, plaintiffs filed this appeal. We reverse.

II.

A. STANDARD OF REVIEW

On defendants' motion to dismiss the complaint for failure to state a claim upon which relief may be granted, all allegations in the complaint and all reasonable inferences that can be drawn therefrom must be accepted as true and viewed in the light most favorable to plaintiffs. Therefore, we may affirm the district court only if we agree that it is beyond doubt that the plaintiffs can prove no facts in support of their claims that would entitle them to relief. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 444 (3d Cir. 1977), cert. denied 434 U.S. 1086, 55 L. Ed. 2d 791, 98 S. Ct. 1280 (1978).

As this suit is based on the diversity jurisdiction of the federal court, the relevant law is that of the forum -- New Jersey. Erie Railroad v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938).

B. THE FRAUD CLAIMS

Plaintiffs' first count alleges that Corradetti, Coppersmith, and Bernstein, officers of Exporting, fraudulently induced the corn contract between plaintiffs and Exporting by misrepresenting, during the course of contract negotiations, the financial condition of the company and by breaching their duty to disclose the company's true financial condition. More specifically, plaintiffs allege that these men, acting in the name of Exporting on July 2 and 9, 1980, misrepresented to plaintiffs that Exporting had the ability to post a substantial three percent performance bond and to obtain a five percent bank guarantee in connection with the proposed $44,000,000 corn sale. In addition, plaintiffs allege that during this same time period, Corradetti, Coppersmith and Bernstein had a duty, arising from their association with Exporting and a principal-agent relationship between Exporting and plaintiffs, to disclose Exporting's true financial condition to plaintiffs. Because of this affirmative duty, the failure to disclose the true state of Exporting's finances is alleged to constitute fraudulent concealment of a material fact.

1. Collateral Estoppel

The district court dismissed count one on the basis of collateral estoppel, finding that the plaintiffs had "fully and fairly litigated the issue of fraud in the inducement of contract in their first action."

Collateral estoppel precludes the litigations of an issue that has been put in issue and directly determined adversely to the party against whom the estoppel is asserted. New Jersey-Philadelphia Presbytery of the Bible Presbyterian Church v. New Jersey State Board of Higher Education, 654 F.2d 868, 876 (3d Cir. 1981); State v. Gonzalez, 75 N.J. 181, 380 A.2d 1128, 1131 (1977); Eatough v. Board of Medical Examiners, 191 N.J. Super. 166, 465 A.2d 934, 938 (App. Div. 1983). However, the bar of collateral estoppel does not extend to "any matter which came collaterally in question, . . . nor any matter to be inferred by argument from the judgment.'" Allesandra v. Gross, 187 N.J. Super. 96, 453 A.2d 904 (App. Div. 1982) (citations omitted). Thus, the factual issue must actually have been litigated and determined. Id.

If a party is precluded from litigating an issue with an opposing party, he is also precluded from doing so with another person unless he lacked a full and fair opportunity to litigate the issue in the first action or unless other circumstances justify affording him an opportunity to litigate the issue. United Rental Equipment Co. v. Aetna Life & Casualty Insurance Co., 74 N.J. 92, 376 A.2d 1183, 1188 (1977); Feniello v. University of Pennsylvania Hospital, 558 F. Supp. 1365, 1367 (D.N.J. 1983). Therefore, since no special circumstances are here cited, if collateral estoppel applies, plaintiffs are estopped from litigating the precluded issues against other parties as well as against Exporting.

The district court found that plaintiffs' first complaint had "asserted a fraud claim," and that "plaintiffs [had] identified fraud in the inducement as an integral and essential ...


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