United Sta tes Court o f Appea

ls 1 For the S econd Cir cuit 2 August Term, 2002 3 (Argued: November 7, 2002 Decide d: April 3, 2003 4 Errata Filed: April 24, 2003) 5 Docket No. 02-7230 6 AMBASE CORPORATION, A Delawa re Corporation, 7 8 Plaintiff -Appella nt, 9

-v.- 10 CITY I

NVESTING COMPANY L IQUI DATING TRUST, 11 as successor to City I nvesting Company, a 12 dissolved

Delawa re Corporation, JOH

N J. QUI RK, Truste e of City 13 Inve sting Comp any Liqui dating T

rust, and MARIO N SCHARFF ENBERGE R, 14 Executrix of the Estate of George T. Scharffenbe rger, 15 EBEN W. PY

NE, I ndividual ly a

nd as Tru stee of the City 16 Inve st in g Co mp any Li qui dat in g Tr ust , LES TER J. MAN TELL, 17 Indiv

idually and as Tr ustee of the City Inve sting Comp any

Liqui dating T

rust, 18 Defendants-Appellees

. 19

Before: WALKER, Chief Judge , and OAKES and MINER, Circuit Judges

. 20 21 Appeal from judgment entered in the United States District Court for the Southern 22 District of New York (Stanton, J .), dismissing on the pleadings plaintiff-appellant’s action for 23 indemnification of legal expenses and deny ing plaintiff-appellant leave to amend its complaint 24 upon findi

ng that b oth the ca

uses of a ction ple aded in the origi

nal compl aint and t

hose plea ded in 25 the proposed amended complaint were either time bar red under New York’s statute of limitations 26 or failed to state claims upon which relief could be g ranted. 27 Affirmed. 282 MARK R. KRAVITZ, Wiggin & Dana LL P, New Haven, 1 CT (Victor A. Bolden, Wiggin & Dana , LL P, New Haven, 2 CT, Philip Ha lpern, Co llier, Ha

lpern, N ewberg , Nolletti & 3 Bock, LL P, White Plains, NY, on the briefs), for 4 Plaintiff-Appellant

. 5 PAUL M. DODYK, Cravath, Swaine & Moore, New York, 6 NY, for Defendants-Appellees

. 73

MINER, Circu it J udge : 1 This is an appeal from a final judgment entered in the U nited States District Court for the 2 Southern District of New York (Stanton, J .), dismissing on the pleadings a diversity action 3 brought by pla

intiff-appellant AmBase Corporation (“AmBa se”) against defendants-a ppellees for 4 indemnification of legal expenses incurred in a tax dispute with the I nternal Revenue Service 5 (“IRS”). This dispute concer ned certain tax liabilities that allegedly were assumed by

the 6 predecessor corporation of defe ndant-appellee City I

nvesting Company L

iquidating Trust (the 7 “Trust” ). The Di strict Cou rt dismisse d the comp laint upon a finding that the express con

tractua l 8 indemnification claim pleaded therein failed to state a claim upon which r elief could be granted 9 and that t

he restit ution, unju st enrich

ment, impli ed contr

act, and breach of fiduc iary

duty claims 10 were time barred by New York’s statute of limitations. The District Court further denied 11 AmBase

leave to amend its c omplaint be cause the breac h of contr act and breach o f third-p arty 12 benefic iary

contrac t claims Am

Base so ught to a dd in its ame

nded comp laint wer

e also time 13 barred. 14 This is AmBase’s second bite at the litigation apple, its first bite having be en taken in an 15 action filed in the Delaware Chancery Court, see AmBase Corp. v. City I nv. Co. Liquidating 16 Trust , CA No. 18207-NC (Del. Ch.) (“Delaware Ac tion”), which was dismissed as time barred 17 by Delawa

re’s shorter statute of limitations. For the reasons that follow, we conc lude that 18 AmBase’s claims are barre d as a matter of law by the doctrine of res judicata. Accordingly, we 19 affirm the judgment of the District Court without reaching the merits of whether AmBase’s 20 various claims either fail to state a claim upon which relief ca n be granted or are time bar red. 211 For the sake of simplicity , we refer to this entity as “AmBase.” 1 4 BACKGROUND 1 I. The Parties 2 City I

nvesting Company (“ City”) was a publicly -held Delaware holding company that 3 was dissolved and liquidated in 1985. Before its dissolution and liquidation, City was the 4 hold ing com pany for a m ulti natio nal co nglom erate w ith s ubsi diari es in t he man ufactu ring, 5 housing, and insurance industries. AmBase Corp. v. Comm’r , 81 T.C.M. (CCH) 1657, 1657 6 (2001). One of City ’s wholly -owned s ubsidiar ies was the Home Gr

oup, I nc., whic h chang ed its 7 name to AmBase in 1989. 1 AmBase owned se veral op erating

subsidiar ies, inclu ding the Home 8 Insurance Company , and in the mid 1980s held assets in excess of $5 billion. AmBase , 81 9 T.C.M. at 1658. 10 In 1985, as part of its dissolution and liquidation, City c onsummated a transaction 11 pursuant

to which it

distribute d out its ass ets and lia bilities. T

he rele vant deta il of this 12 transaction was that City distributed the outstanding shares of AmBase to City ’s common 13 stockholders. At the same time, the Trust was formed to, “among othe r things, assume all of the 14 claims, li abilities , and obligations” o f City that wer e “not otherwise provided f or.” The Trust 15 was initially funded with assets having an aggreg ate estimated value of approximately $200 16 million. City ’s share holders were the

benefic iaries of

the Trust and rec eived ow

nership u nits in 17 it. Between 1985 and 1990, the Trust distributed over $280 million in cash and assets to the 18 fo rm er st oc kh ol de rs of Ci ty. 19 Certain directors and officers of City (“Trustee Defendants”) occ upied certain fiduciary 202 Scharffenberger die d after the notice of appeal in this case was f iled. By Or

der dated 1 May 13, 2002, this Court substituted John J. Quirk as a Trustee and Marion Scharffe nberger, 2 executrix of the Estate of George Sharffenbe rger, as defendants. 3 5 positions with both AmBase and the Trust. Defendant-appellee Ge orge Scharffenberger 2 was a 1 Trustee of the Trust since its creation and served a s Chairman of the Board of Directors of 2 AmBase from prior to 1985 until January 1993, and as AmBase’s Chief Executive Officer f rom 3 March 19 90 until Ma y 19 91. Defe

ndant-a ppellee Eben Py ne has be en a Tru stee of the Trust 4 since its creation and was a member of the AmB ase Board from prior to 1985 until January 1993. 5 And defendant-appellee L ester Mantell has served as a Trustee of the Trust since its creation, had 6 been a senior City of ficer before the AmBase

spin-off, and served in several office r positions 7 (including Treasurer and Chief F inancial Officer) at AmBase from prior to 1985 until December 8 1996. While at AmBase, Mantell (a tax attorney ) had significant responsibility for AmBase’s tax 9 matters. 10 II. The Assig nment of Ce

rtain Liabilities

From City

to AmBas e 11 Pursuant to an August 1985 Assignment Agree ment, AmBase assumed certain liabilities 12 of City

in conside

ration for City ’s pay

ment of $1 78,767,00 0 and the u nwinding of cert ain debit s 13 and credits relating to intercorporate transactions. Among those liabilities were City ’s 14 obl iga ti ons for fed era l i nco me t ax es a s t he c om mo n pa ren t o f Ci ty’s cor por ate aff il iat es. In 15 addition, AmBase assumed certain other liabilities and obligations of City, provided that 16 AmBase

would be only

seconda rily liable for the pay

ment of tho se liabili

ties. 17 Shortly

after the Assig

nment Ag reemen t was exec

uted, City and the T

rustees entere d into 18 a Trust Agreement. AmBase was not a party

to the Trust Agreement. Among other thing s, the 19 Trust Agreement provided that the Trustees we re to “assume all the claims, liabilities, and 203 Sections 8 71(a)( 1) and 88 1(a)(1 ) of the I nternal Revenue Code (the

“Code”) “gene rally 1 impose a tax of 30 percent on amounts received as interest from sourc es within the United States 2 by nonresident alien individuals and f oreign corporations.” AmBase , 81 T.C.M. (CCH) at 1661. 3 “Pay

ers of su ch inter est are gener ally require d under se ctions 144 1 and 1442[of the Code ] to 4 deduct and withhold therefrom an amount equal to the tax imposed by sections 871 and 881 [of 5 the Code], and in the event that they fa il do so so they are liable f or those withholding taxes 6 under section 1461 [of the Code].” Id

. 7 6 obligations (including unascertained or conting ent liabilities in expenses) of [City]” listed on 1 Schedule

I of t he Trust A

greement. Sche dule I

listed among the li abilities assumed “ any

cost, 2 expense or liability associated with any claim asserted against City with respect to any

act or 3 omission attributable to its operations or affairs which has not been discharg ed in full or 4 adequa

tely provided for.” I n addition , Schedul e I in

cluded, as a liabili

ty o f the Tru st, the co sts 5 and liabilities incurred in the defense of any litigation arising after September 25, 1985, in which 6 Ci ty Inv est in g wa s a d efe nda nt . Ta x l iab il it ies wer e no t ex pre ss ly me nt io ned in Sch edu le I. 7 III. Tax Dispute 8 During

the latte r half of the 1970s, City

sought a ccess to the Eurob ond marke

t to obtain 9 long-term financing at a fixed rate of interest and to reduce the amount of indebtedness it had 10 borrowed from its American bankers under a revolving credit ag reement. AmBase , 81 T.C.M. 11 (CCH) at 1658. At this time, “[t]he practice in the Eurobond market was for issuers of securities 12 to provide indemnification for withholding taxes to foreign investors.” Id

. 3 Without such 13 indemnification, “[f]oreign investors would not have purchased Eurobond oblig ations . . . 14 because the imposition of withholding taxes would decrease their [rate of] return on the 15 Eurobond obligations.” Id

. 16 During

this time, A

merican companie s looking

to raise m

oney in the Eur

obond mar

ket 17 often formed a wholly-owned subsidiary in the N etherlands Antilles, which would issue debt 184 In 1984, Congress prospec tively “repe aled the 30-percent withholding tax imposed by 1 Sections 8 71 and 881 [of the Code ] with resp ect to ce rtain inte rest paid on portfo lio debt, 2 referred to as ‘portfolio interest’.” AmBase , 81 T.C.M. (CCH) at 1661. For preexisting 3 obligations, such as those of City, “ special transitional relief [was provided] from withholding 4 (continued...) 7 securities in the Eurobond market that were gua ranteed by

the American parent corporation. Id

. 1 The Netherlands

Antilles su

bsidiary would the

n lend the Eurobond

offerin g proc eeds to the U.S. 2 parent or one its affiliates. Id . In certain circ umstances, the American parent company ’s 3 payment of intere st on its indebtedness to the Netherlands Antilles subsidiary would be exempt 4 from Ame

rican wi thholding taxes “by reason o f the app lication o f the U.S. -Nether lands I ncome 5 Tax Convention, as extended by protocol to the Netherlands A ntilles.” Id

. 6 In 1974, City formed a wholly- owned subsidiary in the Ne therlands Antilles. In 1977 and 7 1979, City rai sed $3 0 mil lion and $5 0 mil lion , resp ectiv ely, from the Eu robon d mark et thr ough 8 its Netherlands Antilles subsidiary. Id . at 1659. “The pa yme nt of principal an

d intere st on these 9 notes was unconditionally g uaranteed by

City.” Id . Furthermore, the notes provided that the 10 issuer would indemnify the holders w ith respect to any A

merican withholding taxes that might be 11 imposed. Id . City’s Netherlands Antilles subsidiary immediately lent the proce eds from the 12 Eurobond offering to City

. Id . In May 1984, the 1977 notes were repaid in full. Id . at 166 1. In 13 September 1985, City liquidated and dissolved its Netherlands Antilles subsidiary , and the 14 remaining debt on the 1979 notes was “upstreamed” to City. Id

. 15 In or about March 1986, the I RS issued a Revenue Agent’s Report to City contending that 16 City

had fail ed prope

rly to withhold

taxes durin

g tax y ears 197 9 and 1980

for the in terest 17 payments it made to the fore ign holders of the Eurobonds. The I RS claimed that this subsidiary 18 did not mee

t the req uiremen ts for exem

ption from United Sta

tes withho lding ta

xes. 4 The I

RS 194 (...continued)

taxes applicable to interest payme nts” for corporations that “met requirements based on the 1 ‘principles’ of certain previously revoked [IRS] revenue rulings . . . .” Id . Essentia lly, the IRS 2 allege d that City

had not me

t the req uiremen ts for tra nsitional r

elief tha t would ha

ve exempte d it 3 from the o

bligation to pay

withholdin

g taxes. 4

5 If it

had done so, the ru nning of further interest would hav e been c

ut off, a nd if it 1 ultimately

proved that the taxe s were not owed, A mBase would have

receiv ed inter

est to 2 compensate it for the loss of the time value of its money

. See Rev. Proc. 8 4-58, 1984 -2 C.B. 3 501; see also I.R.S. Announcement 86-108, 1986-45 I .R.B. 20. 4 8 later extended that claim to the period covering tax y ears 1981 through 1985. The amount of the 1 withholding at issue was almost $21 million. As of March 1986, the accrued interest on that sum 2 was about $10 million. 3 In 1986, AmBase did not pay the taxes alleged to have been owed. 5 Moreove r, AmBa se 4 did not demand that t he Trust p ay

the taxes a

lleged ly owing, nor did it demand that t he Trust 5 assume the defense against the I RS. On or about May 11, 1995, the I RS issued a Notice of 6 Deficiency

to AmBase, claiming entitlement to the funds that it alleged should have been 7 withheld. 8 On or about June 29, 1995, AmBase filed a petition with the United States Tax Court on 9 behalf of City contesting the alleged tax liability. By 1995, the accrued interest on the 10 withholding obligation of $21 million had risen to $61 million for a total liability of over $80 11 million. AmBase did not seek to bring the Trust into the case or to sue the Trust. A little over 12 three-and-a-half y ears then passed, during which time AmBa se did not claim that the Trust was 13 primaril

y r esponsibl e for the

withholdin

g taxes. 14 IV. Delaware Action 15 On August 14, 2000, AmBase filed a two-count complaint against the Trust and the 166 Eight months before the Delaware Ac tion was commenced, the Trust reported having 1 assets with an aggreg ate value of approximately $73 million, slightly more than half of the 2 po te nt ia l w it hh ol di ng ta x l ia bi li ty. 3 9 Trustee Defend ants for declar atory and injunc

tive reli ef in the

Delawa re Chanc ery

Court, 1 contending that the potential withholding tax obligation that it had been apprised of four teen 2 ye ars ear

lier was not its primary

responsi bility under the Assignme

nt Agre ement. Am

Base 3 sought a

prelimina

ry injunction

prevent ing the T rust from making d

istributions that wou

ld 4 endanger the Trust’s ability to pay the withholding tax liability , which had by then g rown to $141 5 million. 6 AmBase also soug ht the re covery

of $3.2 mil lion in leg al expense s and rel ated costs 6 th at i t h ad a ll ege dl y inc urr ed i n co nne cti on w it h t he IR S d is put e an d t he T ax Co urt li ti gat io n. In 7 particular, AmBase allege d that, when the IRS dispute arose during the 1980s, the Trustee 8 Defend

ants 9 apparently ta king the position that AmBase was primarily responsible for the 10 allege d withholdi ng oblig ation, ca

used AmB ase to ef

fective ly a ssume the

costs 11 and expenses of defending aga inst the alleged withholding obligation without 12 obtaining independent professional advice or g uidance concerning whether the 13 alleged withholding obligation was the primary obligation of Ambase, or the 14 Trust, as successor to [City]. Competent and independent profe ssional advisors 15 likely would have informe d management that the alleged w ithholding obligation 16 was an obligation for which the Trust [was] primarily liable. 17 Count I of the complaint in the Delaware Action sought an order “declaring that the 18 Trust, as successor to [City], is primarily liable for any

alleged withholding obligation that is the 19 subject o f the [Tax Cou rt litiga tion]” and

allege d that such liability was base d on “the T

rust 20 Agreement and the Assignment Ag reement.” In Count I

I, captioned “Restitution and I mplied 21 Contract,” AmBase alleged tha t the Trust had been “unjustly e nriched” by

AmBase’s expenditure 22 of the $3. 2 million in le gal expe nses asso ciated w

ith the Ta x Court litig ation and

that “eq uity 2310

impose[d] an

obligat ion on the T

rust to re pay [these] costs and expe

nses incu rred on [the Trust’ s] 1 beh alf

by Am Bas e,” whi ch w as “ ent it led to res ti tu ti on f rom th e Tr ust ” fo r th ese ex pen di tu res . In 2 September 2000, the Trust and the Trustees moved to dismiss the Delaware Ac tion on the 3 grounds that the causes of action alleg ed were time barred by the Delaware statute of limitations 4 and that the complaint failed to state claims upon which relief could be g ranted. 5 In a Decembe r 14, 2000 ruling from the bench (which was late r memorialized in an 6 unpublished order dated February 3, 2001), the Delaware Chancery Court dismissed the 7 Delaware Action with prejudice “solely on the ground that it [was] barred by the statute of 8 limitations

and the do ctrine o f lache s.” I n ruling from the b ench, the

Chancer y Co urt beg an its 9 analy

sis by describ ing the c laims alle ged by AmBase as essen tially say ing: “Th is primar y lia bility 10

was never

cont ract ually shift ed fr om [Cit y] to AmB ase. It never

was t here in the firs t plac e. We 11 shouldn’t be dealing with this. It is not within the scope of the agency that we took on.” Turning 12 to the question of the timeliness of the Delaware Action, the Chancer y Court stated: 13 Giving AmBase all of its due, the claim beg an to run at least as early as the notice 14 of deficiency , because if y ou don’t act on the notice of deficiency by challeng

ing 15 it, it is going to be reduced to a judgment. All along this has been a sum certain, 16 and in teres t has b een run ning. 17 The Chancery Court then turned to AmBase’s allegations that Delaware’s three-y ear 18 statute of limitations should have been equitably tolled bec ause the Trustee Defendants’ pre sence 19 on AmBase’s Board of Direc tors created a conflict of interest that preve nted the Board from 20 acting sooner. The court beg an its analysis with the facts pleaded in the complaint that there 21 were no Trustees remaining on AmB ase’s Board by the end of 1995 and that, by the end of 1996, 22 Trustee

Mantell st

opped se rving a s an offi cer of A

mBase. Theref

ore, by the end of

1996, “th is 2311

cloud that supposedly kept this corpora te entity from discover

ing a claim that was based on a 1 contract that was out there in the open” had bee n lifted. 2 The Chanc ery Court issue d an unpub lished wr itten dec ision date d Febru ary 7, 2001, in 3 which it denied AmBase’s motion for rearg ument and sought to expound further on its ruling 4 from the bench. After recapping the facts of the case, the court char acterized its prior discussion 5 of when A

mBase’ s claims a

ccrued as follow s: 6 In sum, Am[B]ase’s claims that the Trust [was] primarily responsible for the 7 potentia

l withholdi

ng tax lia bility , that it sho

uld be re quired to

set aside assets 8 sufficient to satisfy that liability, and that it and not Am[B]ase should bear the 9 cost of c ontesting the liabil ity were sur

ely ripe as o f 1995, if

not in 1986. These 10 claims could also have been explicitly fr amed as breaches of the Trust’s 11 obligations under the Assignment Agree ment; they are in f

act pled implicitly as 12 such now. 13 (footnotes omitted). 14 The court then turned to its earlier treatment of AmBase’s equitable tolling argument (i.e., 15 that the Trustee Defendants “fraudulently concealed the basis for Am[B]ase’s claims or that the 16 claims we

re inher ently undiscove

rable be fore al l of [the Tr ustee De fendant s had] depa rted [from] 17 Am[B]ase” ). The c ourt note d “how thi n” it had f

ound AmB ase’s e quitable tolling a rgumen t to 18 be based on the facts that (1) a majority of AmBase’s Board had alwa ys been compr

ised of 19 directors who we re not af filiated with the Tr

ust and who were a

ware of the Trust ee Def endants’ 20 affiliations with the Trust; and (2) the facts necessary to learn of AmBase’s potential liability for 21 the withholding taxes were contained in the Assignment Ag reement and the Code, neither of 22 which was “concealed.” Even thoug h the court had found AmBase’s equitable tolling a rgument 23 to be “weak,” it noted that, “in the end” it had not based its dismissal on a “holding that the 24 statute of limitations began to run before the last of the Trustee Defendants had left Am[B]ase,” 2512

i.e., in 1986 or 1995. (emphasis added). I nstead, the court held that the equitable tolling 1 argument lacked merit, assuming for the purposes of that holding that AmBase’s claims acc rued 2 as late as December 1996. 3 V. District C ourt Proc eeding s and Reso lution of the Tax Dispu te 4 In January 2001 (after the Delaware Chanc ery Court had dismissed the De laware Action 5 but while AmBase’s motion for reargume nt of that decision was pending), AmBase c ommenced 6 the actio

n giving rise to thi s appeal

by f iling a s ix-count c omplaint in the Distr ict Court a

gainst 7 the Trust and the Trustee Defendants. The fa ctual allegations in this complaint closely mirrored 8 those in the compla int filed i n the Dela

ware Ac tion. For example, in

Count I of the complaint, 9 AmBase

once ag ain soug

ht a decl aration

that the T

rust rather than A

mBase was primar

ily l iable 10 for the pay

ment of the disputed withholding taxes and accrued interest, alleging that the liabilities 11 AmBase assumed in the Assignment Agre ement did not include the obligation to pay the 12 withholding taxes, which accordingly fell among the other liabilities of City tha t were assumed 13 by the Trust. AmBa se also again sought a declar ation that it was entitled to reimbursement from 14 the Trust of the $3.2 million in legal expenses that AmBase had incurred in the Ta x Court 15 litigation. In addition to this declaratory relief, AmBase once ag ain sought injunctive relief 16 preventing the Trustees from winding up the T rust’s affairs or disbursing any Trust assets to the 17 beneficiaries of the Trust. And, in Count II of the complaint, AmBase once again allege d causes 18 of action sounding in restitution, unjust enrichment, and implied contract, seeking the r eturn of 19 the $3.2 million in legal expenses incurred in the Tax Court litigation. 207 AmBase has not pursued on appeal the District Court’s dismissal of its remaining 1 claims for fraudulent convey ance and professional neglig ence/malpractice that were a lleged, 2 respectively , in Counts V and VI of the complaint. 3 13

AmBase also alle ged two

additiona l causes of action that ar

e relev ant to this a

ppeal. 7 In 1 Count III

of the complaint, AmBase alleged that the Tr ustee Defendants breached the f iduciary 2 duties that they owed to AmB ase as a result of the conflicts of interest cre ated by their dua l 3 service

as Truste es of the

Trust and

office rs and dir ectors o f AmBas e. I

n partic ular, AmB ase 4 allege d that the

Trustee Defend ants bre ached their fiduc iary duties to A

mBase by: ( i) “impro

perly 5 attempting to impose upon AmBase a purported withholding tax obligation that was a nd 6 remain[ed] the lawful obligation of the Trust”; (ii) “failing or re fusing to obtain independent and 7 competent advice concerning the subje ct of whether the alleged withholding oblig ation was 8 properl

y the respon sibility

of the Tr ust”; (iii) “causin g AmBa se to incu

r substan tial expens es, 9 including attorney s’ fees, in attempting to eliminate or minimize the potential exposure relating 10 to the alleged withholding obligation”; (iv) “fa iling to properly infor

m new management of 11 AmBase that the withholding tax obligation was one that [was] properly borne, if at all, by the 12 Trust”; and (v) “causing the Trust to distribute hundreds of millions of dollars to [City ’s] former 13 stockhold

ers [i.e., the bene ficiari es of the Trust] whe

n they knew or, in the abs ence of gross 14 neg lige

nce should

have know n, tha t the T rust was pr

imar ily liabl e for the a lleg ed withhol ding [] 15 obligations.” 16 In addition to its breach of fiduciar y duty claim, AmBase also pleaded a cause of action 17 sounding in indemnification in Count IV of the complaint. I n particular, AmBase allege d, 18 pursuant

to the Assi gnment A

greement or the

Trust Ag reemen t, that it was entitled

to contra ctual 19 indemnification from the Trust for the legal expenses it incurred in the Ta x Court litigation. 208 New Yor k’s discovery

rule provides, in r

elevant part, tha t: 1 2 [W]here the time within which an action must be commenced is computed from 3 the time w hen facts were d

iscover ed or fr om the time

when fa cts could with 4 reasonable diligence have be en discovered, or from either of such times, the 5 action must be commenced within two ye ars after such actual or imputed 6 discovery or w ithin the period otherwise provided, computed from the time the 7 cause of action accrued, whiche ver is longer. 8 9 N.Y. C.P.L.R. 203(g) (McKinney 2002). 10 14

In F ebruar

y 20 01, the De fendant s moved, pu rsuant to Fed. R. Ci

v. P. 12(b) (6), to di smiss 1 AmBase’s complaint on the ground that, inter alia, the c auses of action pleaded therein were 2 barred by

New York’s six-yea

r statute of limitations. The gravamen of the Defe ndants’ motion 3 was that AmBase’s claims accrued in 1986 – the da te when the IRS issued its Revenue Ag ent’s 4 Report – a

nd that the

Delawa re Chanc ery

Court’s de cision in the Delaware Action colla terally 5 estopped

AmBase from cla iming otherwise. Thus, the Defend ants arg ued, AmB ase’s c laims 6 were time barred some time in 1992. Alternatively, the Defendants argued that, if AmB ase’s 7 claims accrued as late as Dece mber 1996 (when the last of the Trustee Defe ndants departed from 8 AmBase), under New York’s “ discovery rule ,” 8 AmBase had only two additional years f

rom 9 1996 in which to file suit, so its claims were time barred after 1998. 10 While the District Court action was pending, on May 23, 2001, the Tax Court resolved 11 the dispute between AmBase and the I RS in favor of AmBase, holding that neither City nor 12 AmBase was liable for the withholding taxes on the interest pay ments made to the foreign bond 13 holders. See AmBase , 8 1 T .C .M . ( CC H) at 16 70 . T he IRS di d n ot ap pe al . C on se qu en tl y, 14 because the Tax Court held in favor of AmBase and the re was no longer any

liability for the 15 withholding taxes, AmBase’s only remaining claim before the District Court was for the $3.2 1615

mi ll io n i n l eg al ex pe ns es , w hi ch it al le ge d t ha t t he Tr us t s ho ul d p ay. 1 Following its victory in the Ta x Court, AmBase sought leave in October 2001 to amend 2 its complaint to include two additional causes of action – one for breach of contract and one for 3 breach of a contract to which AmB ase was a third-party beneficiary . In the breach of contract 4 claim, AmBase alleged that the Trust bre ached the Assignment Agree ment by: (i) “desig

nating 5 AmBase

as [City ’s] age

nt for pur poses of t he [tax disput

e with the IRS] an d refusi ng to 6 acknowl edge the primar y lia bility theref or”; (ii) “transf erring the [tax dispu

te with the

IRS] to 7 AmBase”; and (iii) “failing to be primar ily liable for the pay

ment, discharge and performanc e of 8 the obligations associated with the [tax dispute with the IRS] and the costs and expenses of the 9 [Tax Court litigation] and otherwise failing to live up to the terms and conditions of the 10 Assignment Agreement.” I n the third-party be

neficiary claim, AmBase alleged that it was an 11 intended third-party be neficiary of the Trust Agreement between City and the Trust and that the 12 Trust bre ached the Trust Agreement by failing to “compe

nsate AmB ase for

its costs, e

xpenses, 13 and legal fees associated with [the Tax Court litigation].” The District Court decided to defe r 14 consideration of AmBase’s request for le ave to amend its complaint until after it had addressed 15 the Defe

ndants’ motion to dism

iss the ori ginal c omplaint. 16 In an unpublished opinion and order date d January 11, 2002, the District Court gr anted 17 the Defendants’ motion to dismiss. As an initial matter, the District Court rejected the 18 Defendants’ collateral estoppel arg ument, finding that the Delaware Chancer y Court had not 19 specified that AmBase’s claims accr ued in 1986. According to the District Court, all that was 20 needed to support the Chancery Court’s decision that those claims were time barred under the 21 Delaware three-y ear statute of limitations was that the claims accrued no later than A ugust 14, 2216

1997, i.e., three ye ars before the commencement of the De laware Action. In pa rticular, the 1 District Court reasoned that no finding had been made by the Chancery

Court other than that “the 2 claims were barred because they acc rued at some earlier time and nothing supported a tolling of 3 the [Delaware] statute of limitations beyond 1996, which was over three y ears before AmBase” 4 commenced the Delaware Action. The District Court then dismissed as a matter of law the 5 restitution, unjust e nrichme nt, implied

contract, and bre ach of f

iduciar y du ty c laims as be ing time 6 barred. The District Court agree d with the Defendants’ argument that these c laims accrued either 7 in 1986 (in

which ca se they

were time barre d six years la ter in 199 2) or in 19 96 (in whic h case 8 they were

time barred two years later in 1998). The District Court next dismissed AmBase’s 9

con tra ctu al i nde mn it y cla im for fai li ng t o st ate a cl aim upo n wh ich rel ief cou ld be g ran ted . In 10 reaching this conclusion, the District Court interpreted the Assig nment Agreement as not 11 providing for indemnification as a matter of law. 12 Six days later, the District Court entered fina l judgment dismissing all of AmBase’s 13 claims. On January 25, 2002, A

mBase moved, pursuant to F ed. R. Civ. P . 59(e) a nd 60(b), to 14 alter or amend the judgment and ag ain requested leave to amend its complaint to include the 15 breach of contract and third-par ty beneficia

ry contra ct claims referenced above. The District 16 Court denied AmBase’s motion by a memorandum endorsement dated Februa ry 14, 2002, stating 17 that the proposed amendments to AmBase’s complaint would be “futile bec ause they would do 18 nothing to alter the date of accrual unde r the six year statute of limitations . . . which applies 19 equally

to action s upon an e

xpress or a

n implied c ontract

ual oblig ation or li ability .” This time ly 20 appeal followed. 2117 DISCUSSION 1 I. Standard of Review 2 A complai nt should not be dismiss ed pursua nt to Fed. R. Civ. P. 12(

b)(6) f or failur e to 3 state a claim upon which relief can be g ranted “‘unless it appears bey ond doubt that the plaintiff 4 can prove no set of facts in support of his claim which would entitle him to relief.’” Cooper v. 5 Parsky , 140 F .3d 43 3, 440 (2d Ci r. 199 8) (qu otin g Conley v. Gibson , 355 U.S. 41, 45-46 (1957)). 6 A court’s task “in ruling on a Rule 12(b)(6) motion ‘is merely to assess the legal feasibility of the 7 complaint, not to assay the weig ht of the evidence which might be offer ed in support thereof.’” 8 Cooper , 140 F .3d at 440 (q uoti ng Ryder Ener gy D istribution Corp. v. Merrill Ly nch 9 Commodities Inc. , 748 F.2d 774, 779 (2d Cir. 1984)). Furthermore, a cour t must “accept as true 10 all factual allegations in the complaint.” Cooper , 140 F.3d at 440. F inally , “we ar

e entitle d to 11 affirm . . . on any ground for which there is support in the recor d, even if not adopted” by the 12 District Court. Adirondack Transit Lines, I nc. v. United Transp. Union, Loca l 1582 , 305 F.3d 13 82, 88 (2d

Cir. 2002) . In p articula

r, we ca n affirm the dismiss al of a c omplaint f or failur e to state 14 a claim based on the affirmative defense of res judicata if “all relevant facts are shown by the 15 court's own records,” of which we can take judicial notice. Day v. Moscow , 955 F.2d 807, 811 16 (2d Cir. 1992). 17 II. Res Judicat a 18 Where there is a final state court judgment, a fe deral court looks to that state’s rules of res 19 judicata to determine the preclusive effect of that judgment. Town of D eerfie ld, N.Y. v . FCC , 20 992 F.2d 420, 429 (2d Cir. 1993) (citing 28 U.S.C. § 1738). Thus, to determine the preclusive 21 effect of the judgment in the Delawa re Action, we must look to the Delaware courts’ rules of res 229 Although on March 8, 2001, AmBase appea led the Chancery

Court’s decision to the 1 Delaware Supreme Court, AmBase voluntarily dismissed its appeal two weeks later, see AmBase 2 Corp. v. Cit

y I nv. Co. Liquidating

Trust , No. 106,2001 (Del.) (Docket Entry Nos. 4-6). 3 18 judicata. In Delawa

re, a claim is barred by

res judicata if: (1) the court that adjudicated the prior 1 action had jurisdiction to do so; (2) the parties to the subsequent action are the same a s (or privies 2 to those in

) the prior action ; (3) the c auses of action in both case s are the

same or the subsequ

ent 3 action a

rises fr om the same

transaction that f

ormed the basis of the prior a

ction; (4) the merit s in 4 the prior action were decided adver sely to the contentions of the plaintiff; and ( 5) the prior action 5 was final. Maldonado v. Flynn , 417 A.2d 378, 381 (Del. Ch. 1980). Here, four of these five 6 elements need not detain us long. The Chancery Court plainly had subject matter a nd personal 7 jurisdiction to adjudicate the Delaware Action. The parties to the D elaware Action were the 8 same as the partie s to the ca se at bar . The dismi ssal of the Delawa re Action was adv erse to 9 AmBase and was a dismissal on the merits. See Loving v. Pirelli Cable Corp. , 11 F. Supp. 2d 10 480, 491-92 (D. Del. 1998) (dismissal of action by a Delaware court as time barre d by the 11 Delaware statute of limitations is a dismissal on the merits for res judicata purposes), aff’d me m. , 12 178 F.3d 1 279 (3d Cir . 1999); Williamson v. Columbia Gas & Elec. Corp. , 91 F. Supp. 874, 880 13 (D. Del.) (same), aff’d , 186 F.2d 464 (3d Cir . 1950); Townsend v. Chasanov , No. 129, 1995, 14 1995 Del. LEXI S 367 (Oct. 11, 1995) (same). Finally , the judgment dismissing AmBase’s 15 claims in t

he Dela ware Ac tion was f inal. 9 16 The only element to which we must devote further attention concerns whether the causes 17 of action were the same in both case s or whether the in stant action arise s from the same 18 transaction that f ormed the basis of the Delaware Action. This “ transactional vie

w” of cla im 19 preclusion was succinctly explained by the Delawa re Chancery

Court in Maldonado : 2019

In earlier times the doctrine of res judicata could be invoked only to bar the 1 relitigation of the same cause of action alr eady litiga

ted and determined. . . . The 2 modern transactional view of the doctrine of res judica ta, however, does not 3 require that the claim subsequently asserted be based on [the] same cause of 4 action to be barred, but permits the doctrine to be invoked to bar litiga tion 5 between the same parties if the claims in the later litiga tion arose from the same 6 transaction that formed the basis of the prior adjudication. . . . The dete rmination, 7 therefore, whether the doctrine sha ll be invoked is now based on the underly ing 8 transaction and not on the substantive legal theories or ty pes of relief which are 9 sought. Under the modern rule, ordinarily , a transaction gives rise to only one 10 cla im reg ard les s of th e nu mb er o f wa ys th at t he c lai m m ay be ass ert ed.

. . . In 11 deciding

whether res judic ata will b ar [a] suit, [the plaint iff’s cl aims] must 12 theref

ore be a naly zed in the li ght of the transa ction [that

] he challe

nges; a nd, if 13 [the plaintiff’s] complaint [in the previous action] and his complaint [in the 14 subseque

nt action] assert di ffere

nt substan

tive theories concerning

but one cl aim 15 arising from but one transaction, the doctrine of re s judicata may prohibit a sec ond 16 adjudication. 17 417 A.2d at 381-82 (citations omitted). Here, “transaction” re fers to a “common nucleus of 18 operative facts.” Schnell v. Porta Sys. Corp. , CA No. 12,948, 1994 Del. Ch. LEXI S 47, at *11 19 (Apr. 12, 19 94) (ci ting Moldonado ); see also Restatement (Sec ond) of Judg ments § 24 cmt. b 20 (1982). In other words, “ if the pleadings framing the issues in the first ac tion would have 21 permitted the raising of the issue sought to be raised in the se cond action, and if the facts were 22 known, or

could have been k

nown to the

plaintiff in the sec ond action at the time of the f irst 23 action,” then the claims in the second action are pre cluded. Ezzes v. Ackerman , 234 A.2d 444, 24 445-46 (D el. 1967) . This rule against claim spl itting “i s based on the belie f that it is f

airer to 25 require a plaintiff to present in one action all of his theories of r ecovery relating to a transaction, 26 and all of the evidence relating to those theor ies, than to permit him to prosecute overlapping or 27 repetitive actions in different courts or at differe nt times.” Moldonado , 417 A.2d at 382. 28 Theref

ore, whe n “a plai ntiff has had a ful l, free

and untra mmelled op

portunity to prese nt his 29 facts, b

ut has neg

lected to present some of them or has

failed to assert c laims [that] should in 3020

fairness have been asserted, he w ill ordinarily be prec luded by the doctrine of res judicata from 1 subsequently pressing his omitted claim in a subsequent action.” Id . (internal quotation marks 2 omitted). 3 Turning to the causes of action pleaded he re, we initially note that the c auses of action, 4 facts alleged, and relief soug ht in Counts I and II

of the original complaint (declaratory relief, 5 injunctive relief, restitution, implied contract, and unjust enrichment) are virtually the same as 6 those pleaded in Counts I and I I of the complaint in the Delawa re Action. These claims are thus 7 precluded. 8 With respect to the two additional claims pleaded here that were not pleade d in the 9 Delaware Action (breach of fiduciary duty

and express contractual indemnification), they too are 10 precluded because, although they are different substantive theories from those pleade d in the 11 Delaware Action, they concern but one claim arising from but one common nucle us of operative 12 facts. F or example , the alle gations underly ing the breach o f fiducia

ry duty claim ess entially

state 13 that the Trustee Defendants could not serve as both Trustee s of the Trust and officers/directors of 14 AmBase because they suffered from a conflict of interest. This conflict of interest allegation was 15 encompassed in the issue framed in the Delaware Action: whether the Trust or the Trustee 16 Defendants improperly failed to assume City’s withholding tax liabilities. I n fact, this conflict of 17 interest was litigated and decided by the Delaware Chancery

Court when it rejected AmBase’s 18 equitabl e tolling

argume nt on the g

rounds tha

t (1) the T

rustee D efenda

nts compr ised a minority 19 of the AmB ase Boa rd and the refore were unable to influence the position taken by

AmBase with 20 regard to the tax pay ments and (2) all the relevant information necessary for the disinterested 21 directors (who made up a majority of AmBase’s Board) to deter mine whether AmBase was 2210 On appea l, AmBas e chara

cterizes its indemni fication

claim as b oth an expr

ess 1 indemnification claim and an implied indemnification claim. While we are skeptical about 2 whether

the compl aint can

be read to include

an implied

indemnifi cation c laim, such a claim 3 would, in any event, be precluded for the same reasons that we f ind the express indemnification 4 claim is precluded: it arises out of the same common nucleus of facts that wa s the subject of the 5 Delaware Action. 6 21 require d to pay

the disput

ed taxes was availa

ble to all. 1 With respe ct to the c ontract ual indem nificati on claim, that too a rose out o f the same 2

common nuc leus of f acts tha t gave r ise to the c laims plea

ded in the Delawa re Action and also 3 sought reimbursement of the litigation expenses incurred in the Tax Court litigation. 4 Specific ally , the comp laint in the Delawa re Action alleg ed that “ [p]ursuant t o the Trust 5 Agreement and the Assignment Ag reement, the alleged withholding obliga tion is the primary 6 responsibility of the Trust.” I ndeed, the Chancery

Court said of the claims pleaded in the 7 Delaware Action that they “could also have been explicitly f ramed as breaches of the Trust’s 8 obligations under the Assignment Agree ment” and were “in fact pled implicitly as such.” 10 9 Turning to the claims pleaded in AmBase’s propose d amended complaint, it cannot be 10 gainsa

id that the breach of contr act and breach o f third-p arty benefic iary

contract claims a

lso 11 arose out of the same common nucleus of facts as the c laims alleged in the Delaware Action. 12 Each of these claims could have been broug ht in the Delaware Action because they sought 13 reimburs ement of the Tax Cour

t litigat ion expense s pursuan

t to agr eements that wer e relied on in 14 the Delaware Action. 15 Accordingly , we conclude that the claims brought in the District Court were ba rred by the 16 doctrine of res judicata either because they were

the same claims brought in the Delaware Action 17 or because they

arose from the same common nucleus of facts as the claims in the Delaware 1822

Action. Because we are a ffirming on this alternative basis, we decline to rea ch the question of 1 whether

the Distr ict Court properly

dismissed A

mBase’ s indemnif

ication c laim for f

ailing to 2 state a claim upon which relief could be gr anted and its remaining claims as time barred under 3 New Yor

k’s statut e of limita

tions. 4 CONCLUSION 5 For the foregoing r easons, the judgment of the District Court is affirmed. 6