09-4308-cv
Sheldon v. Khanal
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New
York, on the 15th day of October, two thousand ten.
PRESENT: ROBERT D. SACK,
REENA RAGGI,
Circuit Judges,
JOHN G. KOELTL,
District Judge.*
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DAVE SHELDON, DARREN K. KEARNS,
Plaintiffs-Appellants,
v. No. 09-4308-cv
TARA KHANAL, ABU B. ATHAR, DAVID J.
MELO, personally and individually, NETWORK
MORTGAGE SERVICES, INC., SHAMS UDDIN,
personally and individually, OPTION ONE
MORTGAGE CORPORATION, WINZONE REALTY
INC., JULIE S.C. WONG, SWEENEY, GALLO,
REICH & BOLZ LLP, ROSEMARIE A. KLIE,
personally and individually, NEW YORK
COMMUNITY BANK, FORCHELLI, CURTO,
*
District Judge John G. Koeltl of the United States District Court for the Southern
District of New York, sitting by designation.
SCHWARTZ, MINEO, CARLINO & COHN,
JAMES CANTANNO, personally and individually,
Defendants-Appellees.**
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APPEARING FOR APPELLANTS: DARREN K. KEARNS, Esq., pro se, Overland
Park, Kansas (Dave Sheldon, pro se, Overland
Park, Kansas, on the brief).
APPEARING FOR APPELLEES: DANIEL FELBER, Esq., Hastings-on-Hudson,
New York, for Defendants-Appellees The Law
Firm of David J. Melo, Esq. and David J. Melo.
GREGG P. TABAKIN, Fein, Such, Kahn &
Shepard, P.C., Chestnut Ridge, New York, for
Defendant-Appellee Option One Mortgage
Corporation.
RASHEL M. MEHLMAN, Sweeney, Gallo,
Reich & Bolz, LLP, Rego Park, New York, pro se
and for Defendant-Appellee Rosemarie A. Klie.
James C. Ricca, of Counsel, (Kathryn Sammon
Burns, of Counsel, on the brief) Forchelli, Curto,
Deegan, Schwartz, Mineo, Cohn & Terrana, LLP,
Uniondale, New York, pro se and for Defendants-
Appellees New York Community Bank and James
Cantanno.
Bill Xian Feng Zou, Law Offices of Xian Feng
Zou, Flushing, New York, for Defendants-
Appellees Winzone Realty Inc. and Julie S.C.
Wong.
Appeal from the United States District Court for the Eastern District of New York
**
The Clerk of the Court is directed to amend the caption to read as shown above.
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(Kiyo A. Matsumoto, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court entered on October 2, 2009, is AFFIRMED
in part and VACATED in part and the action is REMANDED for further proceedings
consistent with this order. The motion of certain defendants for sanctions is DENIED.
Pro se plaintiffs Dave Sheldon and Darren K. Kearns assert numerous claims sounding
in breach of contract and tort arising out of their 2006 purchase of, and subsequent attempts
to sell, the property located at 148-18 Laburnum Avenue in Flushing, New York. Plaintiffs,
who were afforded an opportunity to amend their initial complaint to remedy certain pleading
defects, appeal from the district court’s dismissal of their amended complaint on grounds of
failure to state a claim, lack of subject matter jurisdiction, and res judicata and collateral
estoppel. In defending the challenged judgment, defendants New York Community Bank;
Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn; and James Cantanno (the “NYCB
defendants”) move for sanctions pursuant to Fed. R. App. P. 38. We assume the parties’
familiarity with the facts and record of prior proceedings, which we reference only as
necessary to explain our decision.
1. Plaintiffs’ Appeal
When reviewing dismissal of a complaint for lack of subject matter jurisdiction under
Fed. R. Civ. P. 12(b)(1) or for failure to state a claim under Fed. R. Civ. P. 12(b)(6), we
review factual findings for clear error and legal conclusions de novo, accepting all material
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facts alleged in the complaint as true and drawing all reasonable inferences in the plaintiffs’
favor. See Morrison v. Nat’l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008); Chambers
v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). A complaint must plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007). A claim will have facial plausibility “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). While the
pleadings of pro se litigants are generally construed liberally, see, e.g., Harris v. Mills, 572
F.3d 66, 72 (2d Cir. 2009), because plaintiff Kearns is an attorney, these plaintiffs “cannot
claim the special consideration which the courts customarily grant to pro se parties,” Holtz
v. Rockefeller & Co., Inc., 258 F.3d 62, 82 n.4 (2d Cir. 2001) (internal quotation marks
omitted). We review application of the doctrines of res judicata and collateral estoppel de
novo. See O’Connor v. Pierson, 568 F.3d 64, 69 (2d Cir. 2009); Chartier v. Marlin Mgmt.,
LLC, 202 F.3d 89, 93 (2d Cir. 2000). We may, in our discretion, “affirm the district court’s
judgment on any ground appearing in the record, even if the ground is different from the one
relied on by the district court.” Liberty Mut. Ins. Co. v. Hurlbut, 585 F.3d 639, 648 (2d Cir.
2009) (internal quotation marks omitted).
Plaintiffs submit that the district court erred in: (1) dismissing the majority of their
claims for failure to state a claim; (2) dismissing their breach of contract claim against
defendants David J. Melo and The Law Firm of David J. Melo, Esq. (the “Melo defendants”)
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for failure to meet the amount-in-controversy requirement of 28 U.S.C. § 1332(a); and (3)
dismissing their claims against certain other defendants as barred by the doctrines of res
judicata and collateral estoppel.
a. Res Judicata and Collateral Estoppel
Plaintiffs assert that in dismissing certain of their claims on res judicata and collateral
estoppel grounds the district court relied, in part, on a New York state court judgment that
has since been reversed. See Khanal v. Sheldon, 74 A.D.3d 894, 904 N.Y.S.2d 453 (2d
Dep’t 2010). Clearly, the district court could not have anticipated this development.
Nevertheless, because “[a] judgment vacated or set aside has no preclusive effect,” Stone v.
Williams, 970 F.2d 1043, 1054 (2d Cir. 1992), we are compelled to reverse the district
court’s dismissal insofar as its preclusion determination rested on this judgment.
b. Failure to State a Claim
Upon independent review of the record, we conclude for substantially the reasons
stated in the district court’s thorough and well-reasoned opinion that plaintiffs’ claims against
all defendants except Tara Khanal, the prospective purchaser of the property in question,
were properly dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim.
Contrary to plaintiffs’ argument, the district court did not improperly require them to adduce
evidence in support of their claims at the pleading stage; rather, the district court carefully
and correctly applied the plausibility requirement of Twombly and Iqbal, as well as other
applicable legal standards, in analyzing plaintiffs’ allegations and theories and finding them
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insufficient to state a claim. Because we conclude that the claims against defendants other
than Khanal were properly dismissed on this ground, we need not reach plaintiffs’ arguments
concerning the district court’s alternative reasons for dismissing their claims against these
defendants.
With respect to the Melo defendants, who acted as defendant Khanal’s legal
representatives in the contemplated real estate transaction, we note that the district court did
not consider whether plaintiffs stated a breach of contract claim, ordering dismissal for lack
of subject matter jurisdiction based on failure to meet the amount-in-controversy requirement
of 28 U.S.C. § 1332(a). We easily conclude that plaintiffs failed to state a claim for breach
of contract against the Melo defendants, as it is not alleged that they were party to any
contract with plaintiffs. Accordingly, we need not address plaintiffs’ challenge to the district
court’s amount-in-controversy analysis.
While defendant Khanal moved to dismiss the claims against her only on collateral
estoppel and res judicata grounds, and not for failure to state a claim, see Def. Tara Khanal’s
Mot. to Dismiss, Sheldon v. Khanal, No. 08-cv-3676, Docket Entry No. 134 (E.D.N.Y. Apr.
28, 2008), we conclude, for substantially the same reasons stated by the district court in
granting Rule 12(b)(6) relief to other defendants, that the dismissal of plaintiffs’ claims
against Khanal can be affirmed on this alternate ground, with the sole exception of that for
breach of contract. See Fitzgerald v. First E. Seventh St. Tenants Corp., 221 F.3d 362, 364
(2d Cir. 2000) (recognizing district courts’ inherent power to dismiss meritless claims); cf.
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Pillay v. INS, 45 F.3d 14, 17 (2d Cir. 1995) (recognizing this court’s inherent power to
dismiss meritless appeals). We do not ourselves conclude that plaintiffs have adequately
pleaded such a contract claim, and we doubt the likelihood of the plaintiffs’ ultimate success
on this claim. We note simply that the allegations as to Khanal on this claim are sufficiently
distinct from those pertaining to other defendants that we decline to address, in the first
instance and in the absence of a motion by Khanal pursuant to Fed. R. Civ. P. 12(b)(6), the
sufficiency of this pleading. Accordingly, we vacate the dismissal of plaintiffs’ breach of
contract claim against Khanal, and we remand to the district court for further proceedings
consistent with this order.
We have considered plaintiffs’ remaining arguments on appeal and conclude that they
are without merit.
2. NYCB Defendants’ Motion for Sanctions
The NYCB defendants urge us to impose sanctions against plaintiffs pursuant to Fed.
R. App. P. 38, which provides that “[i]f a court of appeals determines that an appeal is
frivolous, it may, after a separately filed motion or notice from the court and reasonable
opportunity to respond, award just damages and single or double costs to the appellee.” We
have generally imposed Rule 38 sanctions only in cases of blatant frivolity, bad faith, or
repetitive filing. See, e.g., In re 60 E. 80th St. Equities, Inc., 218 F.3d 109, 119-20 (2d Cir.
2000) (imposing sanctions because appeal was taken in bad faith and appellant had
repeatedly raised frivolous arguments in other federal courts); Moore v. Time, Inc., 180 F.3d
463, 463-64 (2d Cir. 1999) (imposing sanctions where appellant had previously brought
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several frivolous appeals). Plaintiffs’ conduct during the course of this litigation has been,
on the whole, highly troubling, and their institution of a new suit in Kansas during the
pendency of this appeal is particularly questionable. Nonetheless, we cannot say that
plaintiffs’ conduct in the course of the current appeal has yet reached the sanctionable level.
The motion to impose sanctions therefore is denied.
Accordingly, the judgment of the district court is hereby VACATED insofar as the
breach of contract claim against Khanal was dismissed and the action is REMANDED for
further proceedings consistent with this order as to that claim. The judgment is AFFIRMED
in all other respects, and the motion for sanctions is DENIED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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