United States District Court for the District of Columbia
February 6, 2004.
W.L. MENG, et al., Plaintiffs,
BERNARD SCHWARTZ, et al., Defendants
The opinion of the court was delivered by: ROYCE LAMBERTH, District Judge
Now before the Court are the defense motions to dismiss the
Plaintiffs' Amended Complaint.*fn1 Specifically before the Court are
Defendants Democratic National Committee (hereinafter "DNC"), DNC
Services Corporation (hereinafter "DNC Services"), Democratic Senatorial
Campaign Committee, Inc. (hereinafter "DSCC"), and Democratic
Congressional Campaign Committee, Inc's (hereinafter "DCCC") Motion To
Dismiss For Failure To State a Claim Upon Which Relief Can Be Granted;
Defendants Albert Gore, Jr., Samuel R. Berger, Alexis Herman, Harold
Ickes and Melissa Moss' Motion To Dismiss; Defendant John Huang's Motion
To Dismiss the Amended Complaint; Defendant Marvin Rosen's Motion To
Dismiss the Amended Complaint; Defendants William J. Clinton and Hillary
R. Clinton's Motion To Dismiss
the Amended Complaint; and defendant Bernard Schwartz's Motion to
Dismiss the Amended Complaint. Also before the Court are the Plaintiffs'
Oppositions To All Motions To Dismiss and the Defendants' Reply Memoranda
to the Plaintiffs' Oppositions.
Upon consideration of the foregoing motions, the applicable law, and
the record in this case, the Court will GRANT the Defendants' Motions to
Dismiss for the reasons stated herein.
The plaintiffs are shareholders of defendant Loral Space and
Communications, Ltd. (hereinafter "Loral Space"), and respectively reside
in Virginia and Maryland. The plaintiffs allege that defendant Bernard
Schwartz, Chairman of the Board and Chief Executive Officer of defendant
Loral Space, made unlawful campaign contributions to the Clinton
Administration and various democratic organizations in exchange for
favorable trade policies, and then sought and obtained reimbursement from
Loral Space for the amount of the unlawful contributions. The plaintiffs
maintain that this conduct gives rise to four causes of action, namely:
(1) breach of fiduciary duty; (2) negligence; (3) civil conspiracy; and
(4) unjust enrichment.
The plaintiffs first made allegations similar to those in the instant
complaint in a prior action filed on November 24, 1998 (hereinafter "Meng
I"). The Meng I complaint named over fifteen defendants, including Loral
Space, Loral Space CEO Bernard Schwartz, President Bill Clinton, Vice
President Al Gore, the Democratic National Committee, Hillary Rodham
Clinton, Harold Ickes, Melissa Moss, Alexis Herman, Marvin Rosen, Samuel
Berger, John Huang, the Democratic Senatorial Campaign Committee, the
Democratic Congressional Campaign Committee, several John and Jane Does,
and Terrence R. McAuliffe.
Based on the same conduct alleged in the instant complaint, the Meng I
invoked the Court's federal question jurisdiction, alleging a count
under the federal civil Racketeer Influenced Corrupt Organization statute
(hereinafter "RICO") and attaching four pendant state law claims of
breach of fiduciary duty, negligence, civil conspiracy, and unjust
enrichment. In response to the Meng I complaint, the defendants filed
motions to dismiss, essentially maintaining that even if the defendants
committed the alleged RICO violations, the plaintiffs could not prove,
under any set of facts, that those violations proximately caused their
On September 25, 2000, relying on the RICO statute requirements, the
Supreme Court's interpretation of the RICO causation standard in
Holmes v. Security Investor Protection Corp.*fn2 and the
Second Circuit's distillation of Holmes.*fn3 this Court
dismissed the plaintiffs' federal RICO count for failure to state a claim
pursuant to Rule 12(b)(6) upon finding that the defendants' alleged RICO
violations were not the proximate cause of the plaintiffs' alleged
injuries. See Meng v. Schwartz. 116 F. Supp.2d 92, 97 (D.D.C.
2000). The Court then dismissed the remaining supplemental claims for
lack of subject matter jurisdiction, without prejudice, pursuant to Fed.
R. Civ. P. 12(b)(1) and 28 U.S.C. § 1367(c). See id. See
also Meng v. Schwartz. 98-2589 (D.D.C. September 25, 2000)
On October 10, 2000, the plaintiffs moved, pursuant to Fed.R.Civ.P.
59(e) and Fed.R.Civ.P. 60(b), to alter or amend the Court's judgment,
attempting to dismiss Terence R. McAuliffe in an effort to establish
diversity jurisdiction. On July 9, 2001, the Court denied the
Plaintiffs' 59(e) and 60(b) motions upon finding that the prior
judgment was neither incorrect nor unjust as required under the rules.
The Court also noted that despite the pragmatic arguments propounded by
the plaintiffs in support of their decision to file Rule 59(e) and
Rule 60(b) motions, the plaintiffs could have simply invoked the Court's
jurisdiction over its state law claims by omitting Terrence R. McAuliffe
from a newly filed complaint and otherwise properly pleading diversity
jurisdiction. See Meng v. Schwartz, 98-2589 (B.B.C. July 9,
2001) (Memorandum and Order). On September 10, 2001, the plaintiffs filed
the instant case against the same group of defendants, save Terry R.
McAuliffe, invoking the Court's diversity jurisdiction.
The plaintiffs also appealed Meng I, and the B.C. Circuit upheld the
decision in Meng I for substantially the same reasons given by this
Court. See Meng v. Schwartz, 48 Fed. Appx. 1, 2-3 (B.C. Cir.
2002). In upholding this Court's decision in Meng I, the B.C. Cir. agreed
that the plaintiffs failed to state a claim upon which relief could be
granted because they could not establish that the defendants' alleged
activities proximately caused their injuries. See Meng, 48 Fed.
Appx. at 2-3. In addition, the B.C. Cir. held that prior litigation
before a New York State court,*fn4 which fully and fairly litigated the
bonus payment issue, precluded relitigation of the bonus
payment/reimbursement issue in the plaintiffs' case. See id. On
November 21, 2002, the plaintiffs petitioned for a rehearing, which the
B.C. Cir. denied on December 23, 2002.
As just mentioned, on September 10, 2001,*fn5 the plaintiffs filed the
derivative action pursuant to Rule 23.1 for recovery by and on
behalf of Loral Space. With the exception of the federal RICO claim and
the naming of Terrence McAuliffe as a defendant, the instant action was
filed by the same plaintiffs, asserts the same facts, alleges the same
counts and names the same parties as in Meng I.
Specifically, the four counts alleged in the instant complaint are: (1)
breach of fiduciary duty as to defendant Schwartz; (2) negligence as to
defendant Schwartz; (3) unjust enrichment as to defendants DNC, DSCC, and
DCCC; and 4) civil conspiracy as to all of the defendants. In aggregate,
the defendants move to dismiss the instant action pursuant to
Rule 12(b)(1), maintaining that this Court does not have subject matter
jurisdiction over the instant action because the plaintiffs have failed
to establish complete diversity. The defendants also move to dismiss the
plaintiffs' action pursuant to Rule 12(b)(6), maintaining that: (1) res
judicata bars the action in its entirety; (2) collateral estoppel
precludes relitigation of each count alleged in the complaint; (3) the
counts alleged in the action are time-barred; and (4) the plaintiffs fail
to meet the requirements of Rule 23.1 certification.
I. Dismissal For Lack Of Subject Matter Jurisdiction
For the reasons stated below, the Court dismisses the plaintiffs'
action for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).
The plaintiffs assert that this Court has subject matter jurisdiction
over their claims pursuant to 28 U.S.C. § 1332, which permits federal
district courts to exercise jurisdiction over actions that lie in
diversity. See 28 U.S.C. § 1332. The defendants maintain
that the Court lacks subject matter jurisdiction because the plaintiffs
have failed to demonstrate complete diversity of
citizenship, and, therefore, move to dismiss the plaintiffs'
complaint for lack of subject matter jurisdiction.
Pursuant to Rule 12(b)(1), a district court should dismiss an action
for lack of subject matter jurisdiction when the facts and allegations
before the court belie the plaintiffs' averment that federal jurisdiction
exists. See Fed.R.Civ.P. 12(b)(1). In the case of an action
invoking a court's diversity jurisdiction under § 1332, it is the
invoking party's burden to show that: (1) complete diversity exists; and
(2) the claim in good faith exceeds $75,000. See Tavoulareas v.
Comnas. 720 F.2d 192, 195 (B.C. Cir. 1983.); Group
Hospitalization and Medical Services. Inc. v. Richardson.
946 F. Supp. 50, 52 (D.D.C. 1996) (citing Cameron v. Hodges.
127 U.S. 322 (1888)). The requisite jurisdictional amount must be met by each
plaintiff, and complete diversity must be established upon a showing that
each plaintiff has a different citizenship from each defendant. See
Owen Equipment & Erection Co. v. Kroger. 437 U.S. 365. 374
(1978). For the purposes of establishing complete diversity under
§ 1332, the citizenship of every party to the action must be
distinctly alleged and cannot be established presumptively or by mere
inference. See Charles A. Wright, Miller & Cooper, Federal
Practice and Procedure § 3605 (3d ed. 1984). Currently in dispute is
whether the plaintiffs have demonstrated complete diversity in
satisfaction of 28 U.S.C. § 1332.
In the instant case, this Court does not have subject matter
jurisdiction over the action because the plaintiffs have failed to show
complete diversity of citizenship. The complaint alleges that the
plaintiffs reside in Virginia and Maryland, while the named defendants
reside and/or have their principle place of business in New York,
Tennessee, California, Florida or Washington, B.C. The plaintiffs also
name unknown "John and Jane Does 1-10" as defendants,
but fatally fail to plead their places of citizenship. Nowhere in
the complaint do the plaintiffs make a distinct or affirmative statement
that establishes the citizenship of the John and Jane Does. Although, the
plaintiffs maintain in subsequent pleadings that the Court should infer
the diverse citizenship of the John and Jane Does because plaintiffs
would not name non-diverse John and Jane Does so as to destroy their own
basis of jurisdiction, this type of backdoor pleading is insufficient to
establish diversity because it would require the Court to draw the
precise type of inference that the rules of diversity under § 1332
The plaintiffs' contention that 28 U.S.C. § 1441, the removal
statute, some how saves the day is also unavailing. The plaintiffs
maintain that § 1441(a), which permits the citizenship of fictitious
defendants to be disregarded when assessing whether complete diversity
exists, applies to the instant case. However, the plaintiffs fail to note
that § 1441(a)'s permissive diversity standard only applies to cases
that have been removed from state court to federal court pursuant to
28 U.S.C. § 1441. See Howell v. Tribune Entertainment Co.,
106 F.3d 215, 218 (7th Cir. 1997) (holding that "because the existence of
diversity jurisdiction cannot be determined without knowledge of every
defendant's place of citizenship, `John Doe' defendants are not permitted
in federal diversity suits."). Prior to § 1441(a)'s amendment in
1988, it was common practice for plaintiffs to name fictitious defendants
in state court actions in order to destroy diversity and prevent
defendants from exercising their right to remove cases to federal court.
See Charles A. Wright, Miller & Cooper, 14 Federal Practice
& Procedure § 3642 (3d ed. 1998) (citing Judicial Improvements
and Access to Justice Act of 1988, Pub.L. 100-702 § 1016(a), 10
Stat. 4669 (1988)). As noted in Wright and Miller, "[t]he Judicial
Improvements and Access to Justice Act was limited to removal
jurisdiction, however, and it did not address the effect of the presence
Doe defendants on the original subject matter jurisdiction of
federal courts." Id. If Congress had intended for
§ 1441(a)'s type of permissive diversity standard to apply to cases
brought under § 1332, it could have expressly stated so in the 1988
amendments. However, Congress took no such action. Although this Court
can pontificate on why Congress did not take such action, perhaps because
the policy concerns underlying the § 1441(a) amendment are not at
issue in cases originally brought in federal court under § 1332, this
Court is powerless to extend § 1441(a)'s permissiveness to actions
brought under § 1332 and will deny the plaintiffs' request to do so.
Equally unavailing is the plaintiffs' argument that voluntary dismissal
at a later date of a John or Jane Doe who is found to be non-diverse
would cure the current jurisdictional defect. The plaintiffs cannot win
on this argument because diversity must exist at the time that the action
is commenced. See Richardson. 946 F. Supp. at 52 (citing
Freeport-McMoran, Inc. v. KN Energy. Inc., 498 U.S. 426, 428
(1991)). Moreover, the Court has no assurances that the plaintiffs would
be able to dismiss a non-diverse John or Jane Doe at a later date without
otherwise destroying the action because the plaintiffs' complaint fails
to aver whether the John and Jane Does are necessary and indispensable
parties to the suit. See Fed.R.Civ.P. 19(a)-(b). If the John
and Jane Does are not necessary parties to the suit, then their later
dismissal would not adversely impact the posture of the action. However,
if they are necessary parties, then their later dismissal would adversely
impact the preservation and perfection of the diversity claim and destroy
the action in any event. See Fed.R.Civ.P. 19(b). The
plaintiffs' total failure to address this issue, leaves the Court with no
basis on which to seriously entertain this point.
For these reasons, the Court finds that plaintiffs have failed to
demonstrate complete diversity as required by 28 U.S.C. § 1332,
thereby, failing to establish this Court's subject matter
jurisdiction over this action. The Court, therefore, will dismiss
this action for lack of subject matter jurisdiction pursuant to
II. Dismissal For Failure To State a Claim Upon Which Relief Can
Even if it were found that this Court has subject matter jurisdiction
over the plaintiffs' claims, all four counts of the action would still be
subject to dismissal pursuant to Rule 12(b)(6) for failure to state a
claim upon which relief can be granted.
Pursuant to Rule 12(b)(6), a district court should dismiss a complaint
for failure to state a claim when it is clear that no relief could be
granted under any set of facts that could be proved consistent with the
complaint's allegations. See Hishon v. King Spalding.
476 U.S. 69, 73 (1984): EEOC v. St. Francis Xavier Parochial Sch.,
117 F.3d 621, 624 (D.C. Cir. 1997). For the purposes of a Rule 12(b)(6)
motion, all well-pleaded allegations are presumed to be true, and all
doubts and inferences are resolved in the pleader's favor and drawn in
the light most favorable to the pleader. See Phillips v. Bureau of
Prisons. 591 F.2d 966, 968 (D.C. Cir. 1979). However, the court need
not accept bald or controverted statements as true. See Wiggins v.
Kitchens. 853 F. Supp. 505, 508 (D.D.C. 1994). Review of the
plaintiffs' complaint under this standard reveals that collateral
estoppel prevents the plaintiffs from demonstrating, under any set of
facts, elements necessary to the relief that they request.
1. Collateral Estoppel
In the instant case, the Court finds that the doctrine of collateral
estoppel bars relitigation of issues that are central to the viability of
the counts in the plaintiffs' complaint. As such, each of the counts
alleged in the complaint must be dismissed for failure to state a claim
upon which relief can be granted.
The defendants maintain that the plaintiffs' counts are barred because
issues requisite to the establishment of each claim have already been
litigated and adversely decided against the plaintiffs. Specifically, the
defendants maintain that: (1) the Court's Meng I decision, that
plaintiffs could not demonstrate that the defendants' alleged activities
proximately caused the plaintiffs' alleged harm, and applicable choice of
law rules preclude the plaintiffs' breach of fiduciary duty, negligence
and conspiracy claims; and (2) relitigation of the reimbursement issue
central to the plaintiffs' unjust enrichment claim is barred by prior
litigation before a New York State court.
The doctrine of collateral estoppel permits a new suit on the merits,
but precludes relitigation of issues that were conclusively determined in
a previous action. See GAF Corp. v. Keene, 818 F.2d 901, 911
(D.C. Cir. 1987). The application of collateral estoppel requires that:
(1) the issue has actually been litigated, that is contested by the
parties and determined by the court; (2) the issue must have been
necessary to the court's competent disposition of the case; and (3) the
relitigation bar in the second action not work an unfairness against the
party upon whom the preclusion is imposed. See Jack Faucett
Associates. Inc. v. American Telephone and Telegraph Co.et al.,
744 F.2d 118, 125 (D.C. Cir. 1984); United States v. TD.C. Mgmt.
Corp., 24 F.3d 292, 295 (D.C. Cir. 1994); Martin v.
Malhoyt, 830 F.2d 237, 264 (D.C. Cir. 1987); Paley,
20 F. Supp.2d 83, 88 (D.D.C. 1998).
At issue with regards to the breach of fiduciary duty, negligence, and
civil conspiracy claims is whether the Court's prior determination of
proximate cause bars relitigation of the proximate cause issue critical
to the disposition of all three of the aforementioned counts. Before
reaching whether collateral estoppel applies to issues that are critical
to the plaintiffs' counts, the
Court must determine the applicable substantive law by engaging in
a choice of law analysis as discussed below.
A federal court sitting in diversity must apply the choice of law rules
of the jurisdiction in which it sits. See Eli Lilly and Co. v. Home
Insurance Co., et al., 764 F.2d 876, 882 (D.C. Cir. 1985) (citing
Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496-97
(1941). The District of Columbia follows a modified "interest analysis"
approach to resolving choice of law issues. See Eli Lilly and
Co., 764 F.2d at 882. Pursuant to the choice of law rules of the
District of Columbia, a court must first determine whether there is a
conflict of laws between the relevant jurisdictions. See GEICO v.
Fetisoff, 958 F.2d 1137, 1141 (D.C. Cir. 1992). Upon finding such a
conflict, a court should apply the law of the jurisdiction that has the
"more substantial interest. See Eli Lilly and Co., 764 F.2d at
Applying the modified "interest analysis" approach, the Court finds
that there is a conflict of law between D.C., the jurisdiction in which
the action was brought, and Bermuda, Loral Space's place of
incorporation. D.C.'s common law proximate cause standard allows for a
foreseeability finding that requires less of a causal link than the
proximate cause standard under Bermudian common law. The lesser standard
of proximate cause in D.C. would lessen the plaintiffs' causation burden,
rendering the causation issue unlitigated and the Court's prior proximate
cause finding inapplicable. Because the outcome of the plaintiffs' action
would be different under D.C. law than under Bermudian law, a true
conflict of laws exists, and the Court must now determine which
jurisdiction has the "more substantial interest" in having its laws
a. Breach of Fiduciary Duty and Negligence
Because the Plaintiffs' breach of fiduciary duty and negligence claims
deal substantially with matters of corporate governance and the internal
organizational affairs, the Court finds that Bermuda, as the place of
incorporation has, the "more substantial interest" in having its laws
applied. See Corwin v. Bresler, 741 F.2d 410, 414 n. 4 (D.C.
Cir. 1984) ("In cases involving issues of corporate governance and
internal corporate matters, D.C. applies the law of the place of
incorporation."). As alleged in the complaint, the purported breach of
fiduciary duty and negligence occurred between Loral Space CEO Bernard
Schwartz and the shareholders of the Bermuda corporation, and involved
funds illegally procured by Bernard Schwartz for a purpose and in a
manner that allegedly injured Loral Space shareholders. However, as to
these claims specifically, the only connection that D.C. has is
tangential because the Clinton administration and democratic
organizations alleged to have participated in the illegal quid pro quo
scheme simply work in and/or reside in D.C. area. Because the crux of the
breach of fiduciary duty and negligence claims deal with issues of
corporate governance and internal accountability, there is no policy of
D.C. that would be vindicated by application of its laws. However, denial
of Bermudian law in this instance would assuredly prevent vindication of
its corporate laws in circumstances where those very laws are being
violated. Therefore, the Court finds that Bermudian law applies to the
plaintiffs' claims of breach of fiduciary duty and negligence.
Applying the law of Bermuda, the Court consequently finds that
collateral estoppel precludes the plaintiffs' breach of fiduciary duty
and negligence claims because the issue of proximate cause central to
both claims has already been fully and fairly litigated and resolved
adversely to the plaintiffs. As averred by the defendants and
uncontroverted by the plaintiffs,
Bermudian proximate cause law is substantively and substantially
similar to U.S. common law tort standards. In the United States, common
law tort standards of proximate cause are substantively and substantially
similar to the proximate cause standard under RICO.*fn6 As such, failure
to demonstrate proximate cause under RICO will result in the failure to
demonstrate proximate cause under common law tort claims, see
Service Employees International Union Health and Welfare Fund, et al, v.
Phillip Morris Inc., 249 F.3d 1068, 1076 n. 6 (D.C. Cir. 2001),
because "[t]he RICO proximate cause requirement is identical to the same
requirement at common law. . . ." See Aramony v. United Way of
America. 1998 WL 205331, *5 (S.D.N.Y. 1998).
This symmetry of law has been acknowledged by the Supreme Court, as
well as several circuit courts. See Holmes v. Securities Investor
Protection Corp., 503 U.S. 258, 268-69 (1992)
(finding that the RICO standard of causation incorporates common
law standards of proximate cause); Aramony, 1998 WL at *7
(stating that "[i]t is not surprising that RICO and proximate cause
analyses are the same, as the former was intended to replicate the
latter."); Association of Washington Public Hospital District v.
Phillip Morris Inc., 241 F.3d 696, 707 (9th Cir. 2001) (holding that
"[t]he proximate cause test for federal antitrust and RICO standing is
the common law proximate cause test."); Laborers Local 17 v. Philip
Morris, Inc., 191 F.3d 229, 234 (2d Cir. 1999) ("To determine in a
given case whether proximate cause is present [for purposes of RICO
claims], common law principles are applied."); Oregon Laborers,
185 F.3d at 968 ("[F]or the same reasons that proximate cause did not
exist for plaintiffs' RICO and antitrust claims, proximate cause is
lacking for their fraud claim"); Steamfitters Local Union No. 420
Welfare Fund v. Philip Morris. Inc., 171 F.3d 912, 934-35 (3d Cir.
1999) ("The same principles that lead us to conclude that plaintiffs'
antitrust and RICO claims were properly dismissed lead to the inevitable
conclusion that their state law claims must also fail. . . . Just as we
have found the link between defendants' alleged fraud-providing false
information regarding the safety of their products-and plaintiffs'
alleged injuries too attenuated to support a RICO claim, we also find the
link too remote to support a common-law fraud claim."); Allegheny
Gen. Hosp. v. Philip Morris. Inc., 228 F.3d 429, 445-46 (3d Cir.
2000) (quoting Steamfitters, 171 F.3d at 934, for the
proposition that the same proximate cause determination that leads to
dismissal of a plaintiff's similarly results in dismissal of state law
claims based on lack of proximate cause).
Here, the plaintiffs are precluded from attempting to relitigate the
issue in the instant action because the proximate cause issue was
litigated and determined in Meng I. Because the Court's prior
determination was adverse to the plaintiffs and applies in this case, the
cannot establish their breach of fiduciary duty and negligence
claims. The Court, therefore, dismisses the plaintiffs' breach of
fiduciary duty and negligence claims pursuant to Rule 12(b)(6) for
failure to state a claim.
b. Plaintiffs' Civil Conspiracy Claim
The doctrine of collateral estoppel also bars relitigation of the
proximate cause issue central to the civil conspiracy count, thereby
requiring its dismissal. Additionally, the plaintiffs civil conspiracy
count fails because there is no independent cause for conspiracy under
Applying the same choice of law analysis utilized earlier, the Court
finds that it must apply D.C.'s substantive law to the plaintiffs' civil
conspiracy claim, because, as to this claim, B.C. has the "more
substantial interest." In relation to the civil conspiracy count, the
majority of the illegal activities alleged are beyond internal corporate
affairs and encompass a broader spectrum of D.C.-based participants whose
activities would have taken place almost exclusively in the B.C. area.
Because there is an identity between the issue of proximate cause
applicable under the civil conspiracy count and that already disposed of
in Meng I, the proximate cause disposition in Meng I also disposes of the
conspiracy claim in this case. Additionally, because there is no
independent cause of action for civil conspiracy under B.C. law,
dismissal of the plaintiffs' breach of fiduciary duty and negligence
claims also disposes of any underlying tort to which the civil conspiracy
claim could have attached, necessitating its dismissal. See Hall v.
Clinton. 285 F.3d 74, 82 (B.C. Cir. 2002) (holding that civil
conspiracy is not actionable on its own and cannot stand as an isolated
cause of action).
c. Plaintiffs' Unjust Enrichment Claims
Relitigation of the reimbursement issue necessary to prove the
enrichment claim is precluded by a prior shareholder derivative
action before a New York State court, in which the issue was litigated
and decided. The crux of plaintiffs' unjust enrichment claim in the
instant case is the same as the claim that they unsuccessfully litigated
before a New York State court in a prior shareholders derivative action,
that Loral Space made a bonus payment to Bernard Schwartz to reimburse
him for unlawful campaign contributions to the detriment of individual
shareholders and the corporation at large. In that prior action, the New
York court held that the plaintiffs lacked standing to challenge,
directly or indirectly, the bonus payment that they claim acted as
reimbursement for Bernard Schwartz' illegal campaign contributions
because the bonus payment at issue was made by Loral Corporation, not
Loral Space. See Silverman v. Schwartz. No. 102623/96, slip op.
*3 (N.Y.Sup.Ct. Mar. 4, 1997), aff'd, 248 A.D.2d 332,
670 N.Y.S.2d 95 (App.Div. 1998). Because this issue has already been litigated
and decided against the plaintiffs, they are collaterally estopped from
attempting to relitigate this issue in the instant action. Because
application of the New York court's holding prevents the plaintiffs from
establishing their unjust enrichment claim, the Court must also dismiss
this count for failure to state a claim upon which relief can be granted
pursuant to Rule
III. Other Grounds For Dismissal Offered By the Defendants
Although the Court finds that the particular grounds discussed below
lack merit, and, therefore, are not part of its decision to dismiss the
plaintiffs' action, in the interest of comprehensive review of the merits
of the plaintiffs' complaint and the defendants' motions, the Court will
address these other asserted grounds.
1. Statute of Limitations
Contrary to the defendant's contention, the plaintiffs' action is not
time-barred because actions dismissed pursuant to the federal
supplemental jurisdiction statute, 28 U.S.C. § 1367(d), will not be
barred by a statute of limitations because of time lost in federal court.
The statute expressly tolls the statute of limitations while the claim is
pending and provides a period of at least 30 days, more if allowed by
state law, after dismissal in which the claim may be refiled in a court
of competent jurisdiction.
Here, the statute of limitations began running in 1996. The plaintiffs
filed their first action within the statute of limitations for the
actions alleged in the complaint on November 24, 1998. This Court issued
its Meng I decision on September 25, 2000, dismissing the federal RICO
claim pursuant to Rule 12(b)(6) and dismissing the plaintiffs'
supplemental claims pursuant to 12(b)(1). On October 10, 2000, the
plaintiffs filed motions to reconsider which the Court denied on July 9,
2001. The instant action was filed on August 8, 2001, exactly 30 days
later and within the additional time allotted under the supplemental
jurisdiction statute. The plaintiffs' action, therefore, survives the
statute of limitations.
2. Res Judicata
Here, the defendants maintain that the Court's decision in Meng I, to
dismiss the plaintiffs' federal RICO claim and to decline the exercise of
supplemental jurisdiction over the plaintiffs' pendant state law claims,
raises the res judicata bar against the plaintiffs' instant complaint.
The defendants further maintain that the plaintiffs' action is barred by
this Court's denial of the plaintiffs' Rule 59(e) and Rule 60(b) motions,
the plaintiffs' failure to appeal the Court's denial of these motions,
and the plaintiffs' failure to invoke the Court's diversity jurisdiction
in the first instance. The plaintiffs counter that res judicata is
none of the Court's prior decisions regarding the plaintiffs'
supplemental claims were decisions on the merits to which the res
judicata bar properly attaches.
Pursuant to the doctrine of res judicata, a final judgment on the
merits precludes a party from relitigating claims that were or could have
been raised in the initial action. See Alien v. McCurry,
449 U.S. 90, 94 (1980); Appalachian Power Co. et al. v. Environmental
Protection Agency, 251 F.3d 1026, 1034 (D.C. Cir. 2001); NRD.C.
v. Thomas. 838 F.2d 1224, 1252 (D.C. Cir. 1988). Application of the
res judicata doctrine requires: (1) an identity of parties (actual or in
privity); (2) a judgment rendered by a court of competent jurisdiction;
(3) a final judgment on the merits; and (4) an identity of the cause of
action in both suits. See Paley v. estate of Ogus,
20 F. Supp.2d 83, 87 (D.C.C. 1998). While dismissal for lack of subject
matter jurisdiction pursuant to Rule 12(b)(1) does have preclusive effect
on the particular jurisdictional basis upon which the case was dismissed,
it is not a decision on the merits, and as such does not preclude the
party from refiling the claims in a court of competent jurisdiction or
in the same court upon proper jurisdictional grounds. See Kasap v.
Folger Nolan Fleming & Douglas. 166 F.3d 1243, 1248 (D.C. Cir.
1999) (holding that dismissal for lack of subject matter jurisdiction is
binding upon the jurisdictional issue litigated, but is not a decision on
the merits "and therefore has no res judicata effect on subsequent
attempts to bring suit in a federal court of competent jurisdiction.");
Prakash v. American University, 727 F.2d 1174, 1182 (D.C. Cir.
1984) (holding that "[a] dismissal for lack of subject matter
jurisdiction . . . is not a decision on the merits and consequently does
not have res judicata effect. A litigant whose action is dismissed for
lack of diversity, therefore, may refile the action in an appropriate
forum."). See also Wright & Arthur R. Miller, 5A Federal
Practice and Procedure § 1350, at 255 (2d ed. 1990).
Here, res judicata does not apply to the instant action because the
Court's Meng I decision to decline the exercise of supplemental
jurisdiction over the plaintiffs' pendant claims and the Court's
dismissal of the plaintiffs' 59(e) and 60(b) motions were not
"decision[s] on the merits" to which the res judicata bar would apply.
In Meng I, this Court dismissed the plaintiffs' federal RICO count for
failure to state a claim upon which relief could be granted, an act
constituting a "decision on the merits." Having dismissed the plaintiffs'
only independent basis of federal jurisdiction, the Court then declined
to exercise supplemental jurisdiction over the plaintiffs' pendant state
law claims, and dismissed them for lack of subject matter jurisdiction.
Res judicata only attaches to decisions on the merits. See
Prakash, 727 F.2d at 1182. Although the Court's decision to decline
the exercise of supplemental jurisdiction over plaintiffs' state law
claims precludes relitigation of that particular jurisdictional issue, it
was not a "decision on the merits," and, therefore, does not preclude the
re-institution of those claims in an action based on diversity. See
Kasap, 166 F.3d at 1248 (dismissal for lack of subject matter
jurisdiction is not a decision on the merits).
The defendants' contention that the Court's denial of the plaintiffs'
Rule 59(e) and Rule 60(b) motions preclude the plaintiffs'
diversity-based action is also incorrect. Rule 59(e) and Rule 60(b)
motions to alter or amend are only properly used to request
"reconsideration of matters properly encompassed in a decision on the
merits." Lentomyynti Oy v. Medivac Inc., 997 F.2d 364, 366
(8th Cir. 1993) (quoting White v. New Hampshire Dept. Of Employment
Security, 455 U.S. 445, 451 (1982)). Such motions may not be used
to reconsider matters that were "wholly collateral" to the court's
decision on the merits, and motions used for such an improper purpose
must be denied. See Lentomyynti, 997 F.2d. at 366. Moreover, a
on the collateral nature of the issue presented for
reconsideration, is collateral in and of itself, and denial of a motion
for reconsideration on such a basis will not act as a bar to the
substantive decisions on the merits that still have yet to be litigated.
Here, the Court's only decision on the merits in Meng I was the
dismissal of the federal RICO claim. As previously discussed, the Court's
decision not to exercise supplemental jurisdiction over the plaintiffs'
pendant state law claims was not a decision on the merits, and, as such,
was wholly collateral to the Court's decision on the merits. Therefore,
the plaintiffs' attempt to use motions for reconsideration to vest the
Court with diversity jurisdiction was improper because the issue of
diversity jurisdiction was collateral to the court's substantive decision
in Meng I, and denial was, therefore, required. However, because the
motions improperly requested consideration of the collateral issue of
diversity, the Court's denial, itself, was collateral, and, as such, does
not preclude plaintiffs from re-instituting their action for resolution
of the claims that have not yet been litigated. For these reasons, the
Court finds that the plaintiff's action is not barred by res judicata.
3. Rule 23.1 Certification
Having found that all four of the plaintiffs' counts are precluded by
prior litigation, as discussed above, the Court further finds that it
need not reach the issue of whether plaintiffs' certification under
Rule 23.1 is proper.
For the aforementioned reasons, the Court finds that plaintiffs have
failed to demonstrate that complete diversity exists, thereby failing to
demonstrate that this Court has subject matter jurisdiction over this
action. The Court, therefore, will dismiss this action as to all named
defendants, except defendant Loral Space, pursuant to
Rule 12(b)(1). This Court also finds that, even if it had subject matter
jurisdiction over this case, issues central to each of the plaintiffs'
four counts have already been litigated and adversely decided against the
plaintiffs in prior litigation, thereby precluding relitigation of those
issues under the doctrine of collateral estoppel and requiring dismissal
of all four claims pursuant to Rule 12(b)(6).
A separate order shall issue this date.
ORDER Consistent with the Memorandum Opinion released this
date, it is hereby
ORDERED, that the motion to dismiss filed by defendant Bernard Schwartz
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant John Huang
/ be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Marvin Rosen
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant William
Jefferson Clinton  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Hillary Rodham
Clinton  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Democratic
National Committee  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Democratic
Campaign Committee Inc.  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Democratic
Congressional Campaign Committee Inc.  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant DNC Services
Corporation  be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Albert Gore, Jr.
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Harold Ickes
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Melissa Moss
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Alexis Herman
 be GRANTED,
ORDERED, that the motion to dismiss filed by defendant Samuel Berger
 be GRANTED.
ORDERED, that this action is dismissed as to all defendants except
Loral Space and Communications, Ltd.
Upon consideration of the notice of bankruptcy of defendant Loral Space
and Communications, Ltd., all proceedings herein as to Loral are STAYED
as required by the Bankruptcy Code, 11 U.S.C. § 362(a).
All other defendants having been dismissed, this action is hereby
terminated on the active dockets of this court, subject to reopening upon
notice by either plaintiffs or Loral within 30 (thirty) days of the
termination of the grounds for the automatic stay as to Loral.