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GOEL v. HELLER

April 14, 1987

ANANT B. GOEL and ZARINA GOEL, Plaintiffs
v.
STEVEN B. HELLER, JAMES J. EDGETTE, FIRST CENTURY COMPANY, FIRST CENTURY PARTNERSHIP II, SMITH BARNEY HARRIS UPHAM CO., Defendants


Maryanne Trump Barry, United States District Judge.


The opinion of the court was delivered by: BARRY

Introduction

 Plaintiffs, Anant B. Goel and his wife Zarina, *fn1" bring this action against individual defendants Steven B. Heller and James J. Edgette, and the investment firm of Smith Barney, Harris Upham & Company and two related companies, First Century Company and First Century Partnership II (the "Smith Barney group"), alleging, in essence, three causes of action; fraud, civil RICO, and "indemnification." Heller and Edgette, together, and the Smith Barney group, now move to dismiss, or in the alternative for summary judgment. Because the court will rely upon materials outside the pleadings, the motions will be construed as ones for summary judgment. For the reasons that follow, those motions will be granted.

 Facts

 This case squarely places before the court the difficult and thorny problem of res judicata or "claim preclusion." A clear understanding of the issue now before the Court calls for a brief recitation of some recent -and sordid- history.

 The Case Known to the Parties as "Goel I "

 The Goels are not strangers to litigation before this Court. On July 10, 1984, Entre Computer Centers, Inc. ("Entre"), a franchisor of retail computer stores brought suit against the Goels and their corporation Computomat, Inc. ("Computomat") in the United States District Court for the District of Virginia alleging violation of the franchise agreement controlling the Goels' operation, through Computomat, of a Entre retail outlet located in New Jersey. The action, Entre Computer Centers, Inc. v. Anant Goel, et al., was subsequently transferred to this district (Civil Action No. 84-2699; Goel I) and assigned to the Honorable Dickinson R. Debevoise.

 On September 19, 1984, Entre moved for a preliminary injunction terminating the Goels' franchise and enforcing certain contractual obligations including a covenant not to compete. On October 11, 1984, Judge Debevoise found, after an evidentiary hearing, that the Goels had continuously perpetrated a major fraud upon Entre consisting of the "maintenance of a double set of reporting and accounting records designed to conceal from plaintiff the full amount of sales effected by defendants and thus avoid paying 8 percent franchise fees and the 1 percent advertising fund assessment." Transcript of Proceedings, August 15, 1986, Appended to Defendants Heller and Edgette's Memorandum in Support of Motion to Dismiss, at 9. On October 12, 1984, the Goels answered and asserted numerous affirmative defenses and counterclaims including fraud and other common law torts, civil RICO, various contract claims, Robinson-Patman claims, Sherman Act claims, and Clayton Act claims.

 What followed after Judge Debevoise granted the motion for a preliminary injunction was, in his own words, "a series of extraordinary" events. On October 22, 1984, Judge Debevoise entered an order effecting his findings at the preliminary injunction hearing. The order prohibited the Goels, in keeping with the franchise agreement, from engaging, either directly or indirectly, in the sale of computer products within the geographical limitations found in the franchise agreement. Included in the injunction were provisions for the sale of the franchisee's inventory to Entre and a joint inventory to be conducted at the time possession of the franchise premises was turned over to Entre.

 Instead of compliance with the court's order, the Goels engaged in numerous and serious acts calculated to both defy and deceive Judge Debevoise. On October 24, apparently under the cover of darkness, Goel and his agents loaded two tractor-trailers full of computer equipment from the Entre store and moved them to a warehouse in Wyckoff, New Jersey. On October 25, Judge Debevoise, after having heard of the violation of the preliminary injunction, issued an order restricting any further movement of the goods. In the presence of Mr. Goel, his counsel at the time assured the court that the order would be complied with. Despite these assurances, on that very day and the next day, Goel participated in three separate shipments of goods from the Wyckoff warehouse. Judge Debevoise would later find these shipments to be in contempt of his orders. Transcript at 11.

 As if active defiance of my brother's orders restricting the movement of goods were not enough, Goel then set out to contravene the twin pillar of Judge Debevoise's disposition of the injunction motion; namely, the enforcement of the restrictive covenant against competition. Sometime between October 11 and October 25, Goel ordered sales invoices imprinted with the name "Corporate Micros." This company, designed to be run out of the Wyckoff location, amounted essentially to a partnership between Goel and a Mr. Robert Utter, the man who controlled the Wyckoff location. Transcript at 13. On October 31, 1984 Utter and Goel met with counsel to incorporate their new venture and later in the day opened bank accounts with each as signatories. Deposits were soon made, some by Zarina Goel, representing sales to former customers of Goel's Entre store and on November 5, 1984 Goel wrote a check on the Corporate Micros account to pay the rent on the Wyckoff warehouse.

 While the Court recognizes that doing something wrong is one thing and lying about it is another, it is clear that Goel did not lack the temerity to do either. On November 7, 1984, at a contempt hearing just two days after paying Corporate Micros's rent, the following colloquy occurred between counsel, Goel and Judge Debevoise:

 
Q. Mr. Goel are you currently engaged in buying or selling [computer equipment]?
 
A. I'm trying to work for a company so I can make a living.
 
Q. What is the name of the company? I'm sorry.
 
A. I said I'm trying to work for a company. I'm seeking employment.
 
Q. You're seeking employment?
 
A. That is correct.
 
Q. Do you currently at this time have any employees of your own?
 
A. I still have four of my employees from [Entre]. They're still on my payroll. And I still pay their salary. Yes.
 
Q. What do they do to earn their salary?
 
A. Nothing yet.
 
A. That is correct. I have certain amount of loyalty to these people. They have displayed loyalty. They have a right to make a living. You put me out of business. That's fine. But I will not let them on the street. I will pay them as I'm willing and capable.
 
THE COURT: Mr. Goel, let's limit your answers to the questions.
 
THE WITNESS: I'm sorry, sir. I'm sorry.
 
* * * *
 
Q. Is [David Bombard] soliciting sales in your behalf?
 
A. Why would he do that?
 
THE COURT: Answer the question.
 
THE WITNESS: No. He's not.
 
Q. Are you familiar with a company called Corporate Micros?
 
A. Yes, I am.
 
Q. All right. What is it?
 
A. It's a corporation that I'm trying to ...

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