Weinstock et al v. Handler et al

G:\Handler\Weinstock\Reconsideration Decision v6.wpd
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re: Chapter 7
EMMERICH HANDLER,
a/k/a ISAAC HANDLER and Case No. 00-14960-CEC
RITA HANDLER
a/k/a/ RIFKA HANDLER
Debtors.
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ISRAEL WEINSTOCK,
Plaintiff,
-against- Adv. Pro. No. 04-01174-CEC
EMMERICH HANDLER, JACK WALKER,
KAMINETZER YESHIVA OF JERUSALEM,
and DAVID J. DOYAGA, as Trustee of the
Estate of Emmerich and Rita Handler,
Defendants.
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DECISION ON MOTION FOR RECONSIDERATION
APPEARANCES:
Israel Weinstock
140-06 Rockaway Beach Blvd
Belle Harbor, New York 11694
Plaintiff
Wayne M. Greenwald, Esq.
99 Park Avenue
Suite 800
New York, New York 10016
Attorney for Jack Walker
Gary F. Herbst, Esq.
LaMonica Herbst and Maniscalco
3305 Jerusalem Avenue
Wantagh, New York 11793
Attorneys for the Chapter 7 Trustee
Emmerich Handler, Esq.
Rita Handler
1537 50th Street
Brooklyn, New York 11219
Debtors
CARLA E. CRAIG, United States Bankruptcy Judge
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This matter comes before the Court on the motion of plaintiff, Israel Weinstock,
seeking reconsideration pursuant to Rule 9023 of the Federal Rules of Bankruptcy Procedure
("Rules") of the judgment dismissing this adversary proceeding entered on March 18, 2005. The
judgment is based upon a Decision entered on February 14, 2005. For the reasons set forth
below, reconsideration is granted and the judgment is vacated to the extent set forth herein.
Standard Under Rule 9023
Rule 9023 incorporates by reference Fed. R. Civ. P. 59(e), which provides that a
motion to alter or amend a judgment may be filed no later than 10 days after entry of judgment.
Wight v. BankAmerica Corp., 219 F.3d 79, 84 (2d Cir. 2000). In order to be successful, a
motion to alter or amend a judgment must show that the court "overlooked 'matters or controlling
decisions' which, had they been considered, might reasonably have altered the result reached by
the court." Cioce v. County of Westchester, 2005 U.S. App. LEXIS 6587 (2d Cir. 2005), quoting
Key Mechanical Inc. v. BDC 56 LLC (In re BDC 56 LLC), 330 F.3d 111, 123 (2d Cir. 2003);
Adams v. United States, 686 F. Supp. 417, 418 (S.D.N.Y. 1988), citing Bozsi Limited
Partnership v. Lynott, 676 F. Supp. 505, 509 (S.D.N.Y. 1987); Caleb & Co. v. E. I. Du Pont de
Nemours & Co., 624 F. Supp. 747 (S.D.N.Y. 1985); New York Guardian Mortgagee Corp. v.
Cleland, 473 F. Supp. 409, 421 (S.D.N.Y. 1979); United States v. Int'l Business Machines Corp.,
79 F.R.D. 412, 414 (S.D.N.Y. 1978); see also Park South Tenants Corp. v. 200 Central Park
South Associates, L.P., 754 F. Supp 352, 354 (S.D.N.Y. 1991), aff'd, 941 F.2d 112 (2d Cir.
1991). Such a motion may not be used to relitigate matters previously determined or to raise a
new legal theory or to present evidence that could have been presented prior to the entry of
judgment. Ryan v. Sullivan, Hill, Lewin, Rez, Engel & Labazzo, 2005 U.S. Dist. LEXIS 2122
(D. Conn., 2005), quoting Schonberger v. Serchuk, 742 F. Supp. 108, 119 (S.D.N.Y. 1990)
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(motions made pursuant to Rule 59(e) must adhere to stringent standards to prevent "wasteful
repetition of arguments already briefed, considered and decided"); In re Williams, 188 B.R. 721,
725 (Bankr. D. R.I. 1995) (Rule 59(e) may not be used to rehash arguments already rejected by
court or for refuting court's prior decision); Diebitz v. Arreola, 834 F. Supp 298, 302 (D. Wis.
1993) (motion to alter or amend not designed to relitigate old matters); In re Dyke, 2004 WL
1171721, 102 (Bankr. D.N.H. 2004), citing 11 Wright, Miller & Kane, Federal Practice and
Procure: Civil § 2810.1 (2d ed.1995).
Weinstock alleges in this adversary proceeding that the determinations of the state
court in Walker v. Weinstock, 173 Misc. 2d 1; 658 N.Y.S.2d 167 (Sup. Ct. Kings Co. 1997),
aff'd 255 A.D.2d 508, 680 NYS2d 177 (2d Dep't 1998) were a result of collusion among several
judges, the Debtor, Walker, Kaminetzer Yeshiva of Jerusalem, and the law firm of Cleary,
Gottlieb, Steen & Hamilton ("Cleary"). In Walker v. Weinstock, the state court rejected
Weinstock's claim to be owner of 4200 Avenue K Realty Corp., and found that the purported
transfer by Walker (Weinstock's former client) to Weinstock of the stock of that corporation must
be set aside as unconscionable, and as the consequence of overreaching and undue influence by
Weinstock over his client, Walker. 658 N.Y.S.2d at 171. In affirming that judgment, the
Appellate Division held that
[t]he trial evidence amply supports the Supreme Court's
determination, inter alia, that the appellants Israel Weinstock and JB
Trading International, Ltd., had no interest in 4200 Avenue K Realty
Corporation or the property owned by that corporation. The terms
of, and the circumstances surrounding, the assignments through
which the appellants claim ownership rendered those assignments
void as the products of coercion and overreaching.
Walker v. Weinstock, 255 A.D.2d 508; 680 N.Y.S.2d 177.
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At the same time as it affirmed the trial court on the merits, the Appellate Division affirmed the
Supreme Court's denial of Weinstock's motion to vacate the judgment, holding :
Upon their motion to vacate the judgment, the appellants failed to
present either new evidence which, if introduced at trial, would have
produced a different result (see CPLR 5015[a][2]), or any evidence of
fraud on the part of the plaintiffs (see CPLR 5015[a][3]). Therefore,
the motion was properly denied.
Id.
Weinstock alleges that the Debtors and Cleary, in collusion with various state
court judges, worked to strip him of his interest in 4200 Avenue K Realty Corp., which
Weinstock claimed to have acquired from Walker, and that they arranged to have him disbarred
to prevent him from recovering that interest, and to cover their tracks. In Weinstock's disbarment
proceedings, the Appellate Division, Second Department found, among other things, that based
upon the facts found by the trial court in Walker v. Weinstock, Weinstock engaged in conduct
involving overreaching and coercion that adversely reflected upon his fitness to practice law. In
re Weinstock, 292 A.D.2d 1, 2-3; 740 N.Y.S.2d 128 (2d Dep't 2002). Weinstock seeks in this
adversary proceeding to have the state court judgment in Walker v. Weinstock set aside as void
under the due process clause of the Fourteenth Amendment, and seeks disgorgement from
defendants Walker and Handler of their "enhanced misbegotten gains traceable to the void
judgment." (Verified First Amended Complaint For Equitable Relief, p. 39.)
In the Decision entered February 14, 2005, Weinstock v. Handler (In re Handler),
321 B.R. 632 (Bankr. E.D.N.Y. 2005), this Court concluded that the Rooker-Feldman doctrine
requires dismissal of this adversary proceeding, because the claims asserted here can succeed
only if determinations of the Supreme Court, Kings County and Appellate Division, Second
Department in Walker v. Weinstock are incorrect. The reasoning behind that conclusion is
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discussed at length in the Decision, and will not be repeated here.
Weinstock contends on this motion that Griffith v. Bank of New York, 147 F.2d
899 (2d Cir. 1945), constitutes controlling law, which, if properly considered, would have
compelled a different outcome.
This Court disagrees. First of all, Griffith does not address the applicability of the
Rooker-Feldman doctrine at all. Indeed, Griffith predates by 38 years the Supreme Court's
decision in District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S. Ct. 1303, 75
L. Ed. 2d 206 (1983), and must be understood in light of the volume of case law developing the
Rooker-Feldman doctrine since that date.
Griffith is based upon an analysis of principles of res judicata and the facts of that
case differ significantly from those presented here. Griffith was a diversity action by an heir
against a bank which had served as testamentary trustee, seeking an accounting and damages.
The bank raised the defense of res judicata, relying on two state court orders: (1) a consent
judgment of Supreme Court, New York County settling the bank's account as trustee, and (2) a
Surrogate's Court order dismissing a petition seeking resettlement of this account by reason of
claimed duress by the defendant in the procurement of the consent judgment. Res judicata did
not prevent collateral attack on the consent judgment on grounds of alleged duress, the Second
Circuit held, because " . . . the very duress by which the release or consent is obtained also
prevents the coerced party from challenging before or at trial the statements or conduct of its
adversary. Thus in the original action the issue of duress never is before the court." Id. at 902.
The Second Circuit also found that the Surrogate's Court's order dismissing the heir's petition for
resettlement of the account did not constitute res judicata preventing collateral attack on the
consent judgment because the Surrogate's "opinion does show clearly that decision is not on the
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merits, but is only because relief was sought in the wrong court." Id. at 903.
Here, the decision that Weinstock seeks to attack in federal court – the final
judgment of Supreme Court, Kings County in Walker v. Weinstock – was plainly on the merits,
and was affirmed on the merits by the Appellate Division, Second Department. Moreover, the
trial court's denial of Weinstock's motion to vacate the judgment pursuant to CPLR 5015(a)(2)
(which provides for relief from a judgment on the grounds of newly-discovered evidence which,
if introduced at trial, would probably have produced a different result), and CPLR 5015(a)(3)
(which provides for relief from a judgment on the grounds of fraud, misrepresentation or other
misconduct of an adverse party) was also affirmed; in that decision, the Appellate Division found
that there was no "evidence of fraud on the part of the plaintiffs." Walker v. Weinstock, 255
A.D. at 508.
Moreover, although the application of Rooker-Feldman and res judicata often
produce similar outcomes, there is a distinction between the doctrines that is fatal to Weinstock's
efforts to invoke Griffith as authority for maintaining this action. This distinction is illustrated in
Smith v. Weinberg, 994 F. Supp. 418 (E.D.N.Y. 1998). There, the plaintiff asserted a claim for
conversion, alleging that the defendants wrongfully obtained a default judgment of foreclosure in
state court by means of deceit and fraud. The Court rejected the defendant's argument that the
plaintiffs' claims were barred by the doctrine of res judicata based on the foreclosure judgment,
noting that under New York law, the doctrine of res judicata does not bar a collateral attack on a
judgment that was procured by fraud. Id. at 421. However, on a subsequent motion for summary
judgment, the Court dismissed plaintiffs' claims based on the Rooker-Feldman doctrine, holding
that "[t]he fact that the plaintiff alleges that the state court judgment was procured by fraud does
not remove his claims from the ambit of Rooker-Feldman." Id. at 424. "As the Supreme Court
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noted in Rooker, even if the judgment was wrongly procured, it is, nevertheless, an effective and
conclusive adjudication until modified or reversed in the appropriate State appellate or collateral
proceeding." Id.
Other courts have also found that Rooker-Feldman applies even when there are
allegations that the state court proceedings were tainted by fraud. In Levitin v. Hamburger, 932
F. Supp. 508, 513 (S.D.N.Y. 1996), aff'd, 107 F.3d 3 (2d Cir. 1997), for example, the plaintiff
claimed that defendants colluded to conduct a sale of his partnership interest without his
knowledge and committed other violations of due process, including bribing the referee. The
court found that these claims, which amounted to a request that the District Court review the
judgment rendered in the state proceeding and readjudicate his claims, were barred by Rooker-
Feldman. Accord, Zipper v. Todd, 197 U.S. Dist. LEXIS 4770, 1997 WL 181044 * at 1-3
(S.D.N.Y. 1997) (finding that Rooker-Feldman prohibited a federal challenge to a state court
order of liquidation, holding that "plaintiffs' allegations of fraud . . . are unavailing").
The same result must be reached here. Weinstock seeks to have the judgment of
the state court in Walker v. Weinstock set aside. This is the paradigm of the type of case which
must be dismissed under Rooker-Feldman, which, as the Supreme Court recently explained,
applies to "cases brought by state-court losers complaining of injuries caused by state-court
judgments rendered before the District Court proceedings commenced and inviting District Court
review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Industries Corp.,
125 S. Ct. 1517, 1521-1522; 161 L.Ed.2d 454 (2005).
This is not the first time Weinstock has brought suit in federal court based upon
the allegations made in this adversary proceeding. In Weinstock v. Huttner et al., CV-03-741,
Weinstock sued the judges of the Supreme Court, Kings County and Appellate Division, Second
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Department who had decided against him in Walker v. Weinstock (and who had also been
members of the judicial panel in his disbarment proceedings), as well as two Grievance
Committee staff members, seeking (among other things) declaratory judgments that these state
court proceedings had violated his Constitutional rights. This action was dismissed sua sponte
by the District Court. Among the grounds for dismissal was the District Court's conclusion that
the Rooker-Feldman doctrine deprived the court of subject matter jurisdiction to hear the claims,
which were inextricably intertwined with the state court disbarment proceedings. (Memorandum
Order dated April 7, 2003 (Trager, J.).)
Leber-Krebs, Inc. v. Capitol Records, 779 F.2d 895 (2d Cir. 1985), also cited by
Weinstock as controlling authority overlooked by this Court, has even less applicability to this
case. Leber-Krebs does not implicate the Rooker-Feldman doctrine, as it does not involve an
attempt to challenge a prior state court determination in federal court. Rather, Leber-Krebs deals
with a federal court challenge to a judgment previously obtained in federal court, and is based
upon, among other things, the application of Fed. R. Civ. P. 60(b).
Weinstock also contends that because this is a non-core proceeding, this Court
should not have dismissed the complaint, but rather should have issued a report and
recommendation to the District Court pursuant to Bankruptcy Rule 9033. Although it may be
noted that this method of proceeding had no substantive impact on Weinstock's rights, given that
a judgment dismissing the complaint, like proposed findings and conclusions under Rule 9033, is
subject to de novo review, it is appropriate to vacate the judgment, and to incorporate this Court's
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prior decision and this decision in a report and recommendation to the District Court, which is
being issued herewith.
Dated: Brooklyn, New York
May 17, 2005
/s/ Carla E. Craig
CARLA E. CRAIG
United States Bankruptcy Judge
Case 1-04-01174-cec Doc 42 Filed 05/17/05 Entered 05/17/05 15:06:50

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------x
In re: Chapter 7
EMMERICH HANDLER,
a/k/a ISAAC HANDLER and Case No. 00-14960-CEC
RITA HANDLER
a/k/a/ RIFKA HANDLER
Debtors.
----------------------------------------------------------x
ISRAEL WEINSTOCK,
Plaintiff,
-against- Adv. Pro. No. 04-01174-CEC
EMMERICH HANDLER, JACK WALKER,
KAMINETZER YESHIVA OF JERUSALEM,
and DAVID J. DOYAGA, as Trustee of the
Estate of Emmerich and Rita Handler,
Defendants.
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MAILING CERTIFICATE
I, Vivian Greene, Judicial Assistant to the Honorable Carla E. Craig, hereby
affirm that on May 17, 2005 a copy of an Order was delivered to the parties named below by
United States Postal Service first class mail, telecommunication, facsimile or any other delivery
method, as follows:
Israel Weinstock
140-06 R ockaway Beach B lvd
Belle Harbor, New York 11694
Plaintiff
Wayne M. Greenwald, Esq.
99 Park A venue
Suite 800
New York, New York 10016
Attorney for Jack Walker
Gary F. Herbst, Esq.
LaMonica Herbst and Maniscalco
3305 Je rusalem Avenue
Wantagh, New York 11793
Case 1-04-01174-cec Doc 42 Filed 05/17/05 Entered 05/17/05 15:06:50

Attorneys for the Chapter 7 Trustee Emmerich Handler, Esq.
Rita Handler
1537 50th Street
Brooklyn, New York 11219
Debtors
Dated: Brooklyn, NY
May 17, 2005
/s/ Vivian Greene
Vivian Greene
Case 1-04-01174-cec Doc 42 Filed 05/17/05 Entered 05/17/05 15:06:50