UC Solutions, LLC v. Shapiro
- Naomi Buchwald
- 1:24-cv-01450
- U.S. District Court · Southern District of New York
- 8
In UC Solutions v. Shapiro, Judge Buchwald ruled the ongoing arbitration barred the RICO case and ordered the case closed.
The three plaintiffs’ federal RICO action was closed after the court determined that the claims arose from the same transactions as GP Trading Partners, LLC’s ongoing arbitration and could have been asserted there; the defendants’ other pleading arguments were not addressed.
What happened
UC Solutions, LLC, GP Trading Partners, LLC, and Protective Apparel, LLP sued Saadia Shapiro and other defendants under the Racketeer Influenced and Corrupt Organizations Act, saying they paid $3,035,846 for medical-grade gloves that were never delivered. The case was transferred from the Western District of New York to the Southern District of New York after the first court found venue improper.
The plaintiffs’ claims involved the same commercial transactions as an ongoing arbitration brought by GP Trading Partners. The defendants argued that the federal case was improper because the claims could have been brought in that arbitration. The plaintiffs acknowledged that the claims arose from the same transactions and did not dispute that the arbitration agreements were broad enough to cover the claims.
Judge Naomi Reice Buchwald held that the plaintiffs could not split their claims between the arbitration and a separate federal lawsuit. She found it unnecessary to decide whether the RICO complaint was adequately pleaded and directed the Clerk of Court to close the pending motions and the case.
The detailed version
- UC Solutions, LLC v. Shapiro · No. 1:24-cv-01450
- Naomi Buchwald
- Mar. 13, 2024
Background
UC Solutions, LLC; GP Trading Partners, LLC; and Protective Apparel, LLP sued Saadia Shapiro, Vadim Leybel, Boris Leybel, Cast Group, LLC, Paz Global Ventures, LLC, Cast Capital Lending Corp., BMV Equities, LLC, Prosperitas Capital, LLC, Eric Pereman, Shapiro & Associates Attorneys at Law, PLLC, and Rebound Holdings, LLC. The complaint asserted claims under the Racketeer Influenced and Corrupt Organizations Act, known as RICO, based on contracts for the purchase of medical-grade gloves during the COVID-19 pandemic. Plaintiffs alleged that they paid $3,035,846 but never received the gloves.
The case was originally filed in the Western District of New York. All appearing defendants filed motions seeking dismissal based on improper venue, an ongoing arbitration in California, and failure to state a RICO claim. On February 12, 2024, Judge Lawrence J. Vilardo granted the motions based on improper venue and transferred the case to the Southern District of New York. Judge Buchwald then considered the remaining motions.
Related Arbitration and State-Court Proceedings
GP Trading Partners, LLC filed the arbitration demand on September 9, 2021, against Saadia Shapiro, Paz Global Ventures, LLC, and Cast Group, LLC. Plaintiffs acknowledged that the RICO claims arose from “the same commercial transactions and disputes” involved in the arbitration. The arbitration demand did not include a RICO claim or a request for RICO’s treble damages.
The opinion also described related state-court proceedings. Courts in those proceedings declined to move or stay the arbitration, finding that the parties had a valid arbitration agreement and were actively participating in the arbitration. The opinion noted that Shapiro and Paz appealed one of those state-court decisions on February 20, 2024.
Court’s Reasoning
The court applied the rule against splitting a cause of action. That rule generally requires a party to present in one proceeding all claims and legal theories arising from the same transaction when the party had a full opportunity to do so. The court explained that this rule, also known as claim preclusion or res judicata, applies to arbitration proceedings as well as court cases.
Plaintiffs’ counsel conceded that the RICO claims were generally arbitrable and did not dispute that the relevant arbitration clauses were broad enough to cover them. Plaintiffs also gave no basis for their assertion that the facts in the federal case were beyond those involved in the contract dispute underlying the arbitration, and they gave no reason the RICO claims could not have been included in the arbitration demand.
The court therefore concluded that plaintiffs were precluded from bringing the separate federal action. The court stated that plaintiffs could raise the issue of adding the RICO claim after the arbitration ended through a motion under 9 U.S.C. § 16(a). It did not decide whether the complaint adequately pleaded a RICO claim.
Disposition
The opinion states that the arbitration issue was dispositive, that the improper-venue issue had already been resolved by Judge Vilardo, and that the sufficiency of the RICO pleading did not need to be addressed. Judge Buchwald stated that the opinion resolved all open motions and directed the Clerk of Court to close the specified pending motions and close the case.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.