Opinion
1538-02.
Decided January 5, 2005.
Randall J. Ezick, Esq., FEATHERSTONHAUGH, WILEY CLYNE, LLP, Albany, New York, Attorneys for Plaintiff.
James T. Potter, Esq., HINMAN STRAUB PC, Albany, New York, Attorneys for Defendants.
Defendants move this Court pursuant to CPLR 3212 for an order dismissing plaintiff's complaint and granting judgment on their first through seventh affirmative defenses. Alternatively, defendants seek an order declaring that any accounting of plaintiff's partnership interest shall exclude fees earned from a certain case, namely, fees generated from the State's litigation with the tobacco industry. In opposition, plaintiff cross-moves for partial summary judgment dismissing defendants' first, second, sixth and seventh affirmative defenses.
The background facts are as follows. Without benefit of a written agreement, in June 1995, the law firm of Thuillez, Ford, Gold Conolly, LLP filed Articles of Organization as a Registered Limited Liability Partnership pursuant to Partnership Law Article 8-B, § 121-1500(a). The law firm operated without incident until May 15, 1997, when plaintiff was appointed as the executive director for the State Insurance Fund [hereinafter SIF]. The parties disagree as to what function, if any, plaintiff served thereafter with the law firm. In any event, in June 1997, the law firm was selected to represent the State in its litigation against the tobacco industry. Thereafter, in July 1997, the law firm filed a Certificate of Amendment of Limited Liability Partnership registration in which the name of the firm was changed from Thuillez, Ford, Gold Conolly, LLP to Thuillez, Ford, Gold Johnson, LLP [hereinafter the law firm]. Ultimately, the law firm received a fee as a result of the tobacco litigation and, in April 2001, plaintiff contacted defendant Dale Thuillez regarding what his share of the fee would be. Upon defendants' refusal to split the fee with plaintiff, he commenced this action in March 2002, against the law firm and its individual partners.
In 2003, the name of the law firm was changed again to Thuillez, Ford, Gold, Johnson Bulter, LLP.
In his action, plaintiff seeks judicial dissolution of the law firm, an accounting of his interest in the law firm and judgment in the amount of his interest in the law firm. After issue was joined, the parties stipulated, and the Court ordered, that before discovery and trial shall proceed on all issues, discovery and trial shall be limited to three issues. The issue are (1) whether plaintiff is still a partner in the law firm; (2) if plaintiff is no longer a partner in the law firm, what was the effective date of his resignation; and (3) did plaintiff agree to accept $150,000 in full satisfaction of his interest in the law firm (Affidavit of Dale Thuillez ¶ 5[a-c]).
Defendants now move for summary judgment and argue that plaintiff is not entitled to an accounting because plaintiff resigned from the partnership in May 1997, and accepted as full payment for his interest the sum of $150,000. Defendants also seek a declaration that plaintiff is not entitled to any fees associates with the tobacco litigation. In opposition, plaintiff denies that he resigned from the firm and maintains that, although his participation in the law firm's activities was limited by his acceptance of a full-time position with SIF, he maintained his partnership status in the law firm. Plaintiff further argues that, as a result of his efforts, defendants received the contract with the State to be one of the law firms to represent the State in its lawsuit against the tobacco industry, which contract led to a multi-million dollar fee. Next, plaintiff states that portion of defendants' motion declaring that plaintiff is not entitled to any of the tobacco fee is beyond the scope of the Court's order limiting the issues. Finally, plaintiff contends that questions of fact exist as to all issues raised in the complaint and, thus, defendants' motion should be denied.
In addition, plaintiff cross-moves for partial summary judgment striking defendants' first, second, sixth and seventh affirmative defenses based on accord and satisfaction and other equitable defenses of estoppel and ratification. Plaintiff also contends that inasmuch as the alleged oral buy-out agreement was not memorialized by a writing, it violates the Statute of Frauds.
Initially, the Court determines that the law firm was formed pursuant to Partnership Law Article 8-B, Registered Limited Liability Partnerships § 121-1500(a) [Affidavit of Henry Neal Conolly dated September 30, 2004, exhibit A]. As such, contrary to plaintiff's contention, the provisions of Partnership Law Article 8A concerning withdrawal and refiling do not apply. Further, pursuant to Partnership Law § 121-1500(d), if a new entity is a successor partnership, the requirements for refiling due to dissolution or withdrawal of a partner are not required. The new entity is a successor partnership if a "majority of the total interests in the current profits of such successor partnership * * * are held by partners of the predecessor partnership * * * that was a registered limited liability partnership who were partners of such predecessor partnership immediately prior to the dissolution of such predecessor partnership". As these circumstances are presented here, defendants were not required to make any further filings. Moreover, given that the Partnership Law likewise applies to limited partnerships, except as inconsistent with governing statutes for limited partnerships, provisions of the Partnership Law concerning termination, dissolution, winding up and accounting are applicable to the present circumstances ( see, Partnership Law, § 10).
In that regard, Partnership Law § 60 states that "the dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business". Further, section 62 (I) (b) provides that, without violating the agreement, dissolution occurs "by the express will of any partner when no definite term or particular undertaking is specified". The express will enunciated in this section is demonstrated by the withdrawing partner's manifestation of "an unequivocal intention to dissolve the partnership" ( Alessi v. Brozzetti, 228 AD2d 917, 918, [1996]). Thus, the question presented herein is whether the statements made by plaintiff, under oath at his deposition and in his ethics disclosure, and in other writings, stating that he resigned from the law firm on May 15, 1997, constitute an express unequivocal withdrawal amounting to a dissolution as defined in Partnership Law §§ 60, 62.
In support of their contention that plaintiff resigned, defendants submit affidavits of the remaining partners wherein each affiant states that the plaintiff had advised the affiant that he was leaving the firm to take on a full-time position with the SIF, a position which plaintiff assumed on May 15, 1997. More importantly, the record also includes plaintiff's Annual Statement of Financial Disclosure filed with the New York State Ethics Commission for the years plaintiff was employed with the SIF. These Disclosures, made under oath, specifically state that plaintiff resigned from the firm on May 15, 1997. Defendants also submitted letters sent by plaintiff to clients of the firm advising them of his resignation, as well as plaintiff's résumé submitted in connection with a CLE program given by the New York State Bar Association (Affidavit of Dale Thuillez dated September 14, 2004, exhibits F-G; Affidavit of James T. Potter dated September 14, 2004 exhibits B, D-H; examinations before trial of Henry Neil Conolly, p. 10; Daniel Ford p. 51; Dale Thuillez, p. 14, 30, 33; Scott Johnson, p. 58-59). In his résumé, plaintiff states his relationship with the law firm was during the period 1988-1997 (Affidavit of James T. Potter dated September 14, 2004; exhibit B). When asked about this exhibit at his deposition, plaintiff stated the exhibit "[speaks] for itself" ( id., exhibit A, p. 108).
Of particular significance of plaintiff's awareness of his resignation is the letter written by him to The Bennett Funding Group, Inc. on July 8, 1997, after he left the firm and took on his full-time position with the SIF (Affidavit of Dale M. Thuillez dated September 14, 2004; exhibit G). The letter states that plaintiff was winding up his affairs at the law firm. Of particular note, plaintiff wrote the letter on the law firm's new letterhead formed by the remaining partners and signed it "of counsel". The term "of counsel" is a phrase of art used in the legal profession meaning, as relevant here, "a lawyer who is affiliated with a law firm, though not as a member, partner, or associate" ( Black's Law Dictionary, Seventh Edition). This acknowledgment by plaintiff of his role in the firm is a manifestation at the time of the execution of the letter that he was no longer a partner. Likewise, plaintiff's submissions, that he continued to perform work at defendants' office, establish that his participation in the law firm's activities was not of long duration or representative of a working partner (Affidavit of Henry Neil Conolly dated September 30, 2004, exhibit E). The nature of these activities are all consistent with the fact that plaintiff had resigned and was winding up affairs for the law firm.
Thus, in light of plaintiff's statements and actions to the effect that he resigned from the law firm on May 15, 1997, as well as the other documentary evidence supporting his resignation, plaintiff's assertion in opposition to defendants' motion that he did not resign gives the appearance of a "feigned factual issue", which the Court finds insufficient to defeat defendants' prima facie showing on this issue ( see, Prunty v. Keltie's Bum Steer, 163 AD2d 595, 596). As such, the Court determines that defendants are entitled to summary judgment on the issue that plaintiff resigned from the law firm on May 15, 1997. Moreover, plaintiff's resignation from the law firm caused a dissolution of of Thuillez, Ford, Gold Conolly, LLP, as of the date of his resignation, and the partnership continued only for purposes of winding up the affairs of the partnership (Partnership Law §§ 60-61; 62[i][b]; Harshman v. Pantaleoni, 294 AD2d 687. Accordingly, plaintiff's status was that of a partner participating in the winding up activities of the partnership (Partnership Law § 60) ( Carola v. Grogan, 102 AD2d 934; Bogen v. Alston, 33 Misc 2d 313; Bayer v. Bayer, 215 App Div 454; Patrikes v. J.C.H. Serv. Station, 180 Misc 917, affd 180 Misc 927).
Ordinarily, absent an agreement to the contrary, a partner is entitled to an accounting of his or her interest in a partnership upon the dissolution of the partnership ( see, Partnership Law § 74 Arrants v. Dell Angelo, 73 AD2d 633). Said accounting shall also include the value of contingency fee cases in accordance with the Partnership Law ( Liddle, Robinson Shoemaker v. Paul T. Shoemaker, 309 AD2d 688, 692); Shaudell v. Katz, 217 AD2d 472; Liddle, Robinson Shoemaker v. Paul T. Shoemaker, 304 AD2d 436, 441). Here, defendants contend that plaintiff agreed to accept $150,000.00 in full satisfaction of his interest. Plaintiff counters that no agreement was entered between the parties as to the value of his partnership interest. Moreover, plaintiff argues, in any event, even if the Court finds that an agreement did exist, such an agreement would violate General Obligation Law 5-701 (a)(1), [Statute of Frauds] because the agreement, if any, provided for plaintiff to be paid over a period of three years.
Partnership Law § 74. Accrual of actions The right to an account of his interest shall accrue to any partner, or his legal representative, as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of agreement to the contrary.
The record contains the deposition testimony and affidavits of of Dale Thuillez. He testifies that he negotiated a buyout with plaintiff, which he had previously presented to the remaining partners for approval. Thuillez recounts that plaintiff accepted a buyout scenario similar to what the law firm offered a previous partner who retired. In plaintiff's instance, a payment of $150,000 over three years, or sooner if the law firm could (Affidavit of Dale Thuillez dated September 14, 2004 ¶ 14; Affidavit of Dale Thuillez dated October 8, 2004, ¶ 20-21; Examination Before Trial of Dale Thuillez 7, 33, 40-41). The record also contains the testimony of remaining partners that they approved the payment arrangement to plaintiff (Examinations Before Trial of Scott Johnson 64, 68-69; Donald Ford 56, 58; Affidavit of Donald Ford dated October 8, 2004, ¶ 9). Based on these and other submissions, the Court determines that a question of fact exists as to whether a buyout agreement was entered between the parties. As for the Statute of Frauds defense, assuming that an agreement was entered, the Court holds that the agreement as espoused by defendants does not violate the Statute and is enforceable if found by the fact finder to have been entered.
Section 5-701(a)(1) of the General Obligations Law states that an agreement is void if not in writing and signed by the party to be charged, if the agreement by its terms cannot be performed within one year from its making. The purpose of the statute, "to prevent fraud in the proving of certain legal transactions particularly susceptible to deception, mistakes and perjury", was recently acknowledged by the Court of Appeals as applicable to an oral modification of a law partnership agreement defining a partner's retirement benefits ( see, Sheehy v. Clifford Chance Rogers Wells LLP, ___ NY3d ___ [Oct. 26, 2004], quoting DN Boening Inc v. Kirsch Beverages, Inc., 63 NY2d 449, 453). The test stated by the Court to remove an oral agreement from the statute was that "both parties must be able to complete their performance of the contract within 1 year" ( id.). In determining what factors bear on the issue of completion within one year, the understanding of the parties as the period of time for performance is not the controlling factor, if it was contemplated by the parties that the agreement can be terminated as a matter of right by either of the parties upon a contingency which may or may not happen in a year ( North Shore Bottling v. Schmidt Sons, 22 NY2d 171, 177).
In North Shore Bottling, plaintiff entered into an oral contract with defendant to distribute its beer in Queens County, defendant granted plaintiff exclusive wholesale distribution as long as it sold beer in New York's metropolitan area. Defendant breached the agreement, and pleaded that Statute of Frauds. The Court of Appeals stated:
To state this in slightly different fashion, the parties contemplated two possibilities a long-term distributorship in the plaintiff or a termination should the defendant decide to discontinue beer sales in the New York area. The first contingency is not, in the ordinary course, performable within a year, the second is. The existence of one of two contingencies performable within a year is sufficient to take the case out of the statute ( id. [emphases added]).
Here, the record states that defendants contemplated paying plaintiff his equitable distribution of $150,000, over a period of three years or sooner, if the cash situation changed. The fact that defendants reserved the right to pay plaintiff sooner constituted a preference which could be performed in one year and, thus, takes the case out of the purview of the statute ( see, id.; Martocci v. Greater NY Brewery, 301 NY 57, 62 [stating that "[i]f the terms of the contract had included an event which might end the contractual relationship of the parties within a year, defendant's possible liability beyond that time would not bring the contract within the statute"]). Further, if the right to pay sooner was part of the agreement, exercising this right would not constitute a breach of the agreement ( see, North Shore Bottling v. Schmidt Sons, supra, at 176, fn 2). As such, based on the circumstances presented here, the Court determines that if defendants establish at trial the agreement as herein espoused, such agreement would not be void due to the Statute of Frauds.
Alternatively, if the fact-finder determines that a contract for winding up plaintiff's interest in the law firm does not exist, plaintiff would be entitled to an accounting including any interest that may be allocated to him from any contingency fee due from work in progress (Partnership Law § 73; Liddle, Robinson Shoemaker v. Paul T. Shoemaker, 309 AD2d 688, 692). At this juncture, the Court determines that there is a sufficient factual issue with respect to whether the tobacco litigation was a work in progress. In making this determination, the Court notes that it was prior to plaintiff's resignation that defendants responded to the State's Request For a Proposal [hereinafter RFP] to take over the State's litigation against the tobacco companies. Although it was not until after plaintiff left in May 1997, that the law firm was interviewed for the litigation [Affidavit of Dale Thuillez dated September 14, 2004], the inquiry does not end here. All of the correspondence from the State to the law firm was to the law firm of Thuillez, Ford, Gold Conolly, LLP. Moreover, plaintiff avers that he interceded at least twice on behalf of the law firm, once to procure the RFP and then in preparation of the fee application in Spring 2000 (Affidavit of Henry Neil Conolly dated September 30, 2004, ¶ 24). Plaintiff's allegations are supported by ethics disclosure, wherein he reported that he was entitled to funds due to works in progress (Affidavit of James T. Potter dated September 14, 2004; exhibit D, ¶ 12). As such, the determination of whether these actions relative to the tobacco litigation, if established, are sufficient to arise to a work in progress must await resolution by the fact-finder.
Accordingly, defendants' motion for summary judgment is granted only to the extent that the Court determines that plaintiff resigned from the law firm Thuillez, Ford, Gold Conolly, LLP on May 15, 1997, this entity dissolved on this date, and plaintiff continued as a partner only for the purposes of winding up this partnership. All remaining relief is denied. This memorandum constitutes the Decision and Order of this Court. All papers including this Decision and Order are returned to defendants' attorney. The portion of the record containing plaintiff's ethical disclosures shall be sealed ( see, 19 NYCRR 937.1 et seq.). The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of this rule with regard to filing, entry and Notice of Entry.