Bank of India v. Trendi Sportswear, Inc., 239 F. 3d 428 - Court of Appeals, 2nd Circuit 2000

Defendant-third-party-plaintiff-appellant Trendi Sportswear, Inc. ( Trendi ) and third-party-defendant-fourth-party-plaintiff-appellant Indu-Craft, Inc. ( Indu-Craft ) appeal from a final judgment entered on March 30, 2000, including an order granting summary judgment entered on September 14, 1998, in the United States District Court for the Southern District of New York (Martin, J.) in favor of fourth-party-defendant-appellee Bank of Baroda ( Baroda ) and dismissing Indu-Craft\u27s fourth-party complaint with prejudice.[1] This litigation involves the interrelationship of two separate lawsuits, the first of which was commenced in 1987. Indu Craft sued Baroda in the 1987 action to recover damages incurred as a result of Baroda\u27s misconduct in regard to a contractual arrangement that provided for Baroda to extend credit to Indu Craft for use in its business of importing clothing. In 1989, the Bank of India ( BOI ) commenced an action against Trendi to recover for nonpayment on loans extended to Trendi. Subsequently, Trendi brought a third-party action against Indu Craft for indemnification, lost profits, and loss of business reputation stemming from Indu Craft\u27s breach of its contract to supply Trendi with garments to sell in the United States. This breach allegedly caused Trendi to default on its financial obligations to BOI. Shortly thereafter, Indu Craft brought a fourth-party action against Baroda for indemnification. In that action, Indu Craft sought to pass on to Baroda any liability it might have to Trendi occasioned by the misconduct of Baroda that formed the basis for Indu Craft\u27s 1987 suit. Indu Craft then moved to join Trendi or consolidate its fourth-party action with its 1987 lawsuit against Baroda, but the motion was denied. Indu Craft eventually obtained a judgment against Baroda in the 1987 suit; in the 1989 action (this case), BOI was granted summary judgment against Trendi; and Trendi obtained judgment against Indu Craft in bankruptcy court. Ultimately, Baroda was granted summary judgment dismissing Indu Craft\u27s claims in the fourth-party action on the grounds that that action was barred by the doctrine of res judicata. The district court found that Indu Craft\u27s indemnification claims, asserted in its fourth-party cause of action, could have been, but were not, pursued in its 1987 action against Baroda. Specifically, the district court determined that Indu Craft\u27s indemnification claims were based on the same transaction that gave rise to the 1987 action, and that Indu Craft\u27s fourth-party action accordingly was barred. For the reasons that follow, we vacate the judgment of the district court in part and remand for further proceedings consistent with this opinion