Opinion
Nos. 00 CIV. 5469 (RCC), 02 CIV. 7251 (RCC).
August 20, 2004
OPINION AND ORDER
The above-captioned malpractice cases have been consolidated for trial, which is scheduled to commence on March 21, 2005. Defendant Stephen Wright's motion for summary judgment is before the Court. Generally, the Court finds the motion is premature because discovery is not complete. In denying the motion, the Court provides its reasoning in hopes it will assist the parties in their efforts to prepare these cases for trial
I. Background
In September 1992, seaman Matthew Horan filed suit in New York state court against his employer, Ocean Ships, Inc., the Plaintiff herein ("Ocean Ships" or "Plaintiff"), seeking compensation for injuries he sustained onboard a ship off the British coast. Ocean Ships is a Delaware corporation with its principal place of business in Houston, Texas. Accordingly, Ocean Ships moved to dismiss the New York state complaint for lack of personal jurisdiction. In response, Matthew Horan's attorneys attempted to preserve his claims by filing suit in Harris County, Texas on August 2, 1995.
On the eve of trial, the New York state court denied Ocean Ships' motion to dismiss. On March 7, 1996 a New York state jury returned a verdict in Horan's favor and awarded him $1,071,165 in damages. On May 10, 1996, the trial court published its order denying Ocean Ships' motion to dismiss for lack of personal jurisdiction ("May 10 order"). In March 1996, Ocean Ships retained attorney Thomas Stiles ("Stiles") of Stiles Wright, P.C. ("the P.C."). The parties dispute Stiles' mandate — whether it was to appeal the trial court's adverse decision on the personal jurisdiction question or the entire judgment against Ocean Ships. Regardless, the parties agree that Stiles filed a notice of appeal of the May 10 order in June 1996, but did not perfect the appeal. Thereafter, in February 1997, the Appellate Division dismissed the appeal and later held that the failure to perfect that appeal was an adjudication of the jurisdiction question on the merits.
In July 2000, after Ocean Ships satisfied the state court judgment, it sued both Stiles and his firm, Stiles Wright, P.C., in this Court, claiming legal malpractice for failure to timely perfect its appeal, breach of the contract to perform professional services, and negligence ("the Stiles action"). In April 2002, this Court granted Ocean Ships' motion for summary judgment on the malpractice claim. After finding that the Appellate Division would have dismissed the case for lack of personal jurisdiction over Ocean Ships, the Court awarded Plaintiff Ocean Ships $1,778.980.24. See April 3, 2002 Order at Duncan Decl. Ex. L. Because the Court awarded Ocean Ships its full amount of damages, it did not address the contract or negligence claims.
Stiles appealed this Court's judgment. During the appeal to the Second Circuit, Ocean Ships learned that the P.C. had disbanded and did not have sufficient liquid assets to fully bond this Court's judgment against it. Stiles August 15, 2002 Aff. ¶ 8-11, Duncan Decl. Ex. J. Accordingly, in September 2002, Ocean Ships filed a second suit in this Court, against the only other member of the P.C., Stephen Wright ("the Wright action"). Ocean Ships' Amended Complaint states three claims for relief. First, pursuant to New York BCL § 1505, Ocean Ships claims that as a shareholder, Wright is individually liable for malpractice by the P.C. Second, Ocean Ships alleges that Wright was negligent in his duty to ensure that Ocean Ships' appeal was perfected. Finally, Ocean Ships claims, based on the fact that Wright purchased a new home, that Wright fraudulently transferred P.C. funds to himself with the intent to make the corporation insolvent and judgment proof in contravention of New York Debtor Creditor Law §§ 273, 274 and 276. Wright Amended Complaint, Hughes Decl. Ex. B.
In December 2002 the Second Circuit vacated this Court's judgment and remanded the case for the fact finder to determine "whether Horan would have pursued his claim in Texas, and if so, what the outcome of that action would have been." Ocean Ships, Inc. v. Stiles, 315 F.3d 111, 120 (2d Cir. 2002). While the Second Circuit agreed with this Court's findings regarding breach of duty and proximate cause, it cautioned "if the Texas award cannot be determined without resorting to 'gross speculation on future events,' then Ocean Ships' malpractice claim fails as a matter of law." Id. Thus, on remand there is no guarantee that Plaintiff's malpractice claim will stand
Wright has not answered the Amended Complaint. Rather, relying on the discovery produced in the Stiles action, the P.C.'s billing records, and affidavits, Wright moved for summary judgment. Well after the motion had been fully briefed, Wright sent the Court a copy of the deposition transcript of W. Clarke Gormley, Director of Ocean Ships, Inc., apparently in support of its motion. Plaintiff had an opportunity to respond to that submission and the Court now considers the motion fully submitted.
II. Discussion
A. Summary Judgment Standard
Summary judgment is appropriate when "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986) The Court's task, therefore, is not to "weigh the evidence and determine the truth of the matter, but [to] determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986). To defeat a motion for summary judgment, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts."Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
B. New York Business Corporation Law § 1505
Arguing that Wright participated in the P.C.'s representation of Ocean Ships, Plaintiff claims he is personally liable for this Court's judgment against the P.C. pursuant to New York's Business Corporation Law § 1505. Section 1505 states that "[e]ach shareholder, employee, or agent of a professional service corporation shall be personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or by any person under his direct supervision and control while rendering professional services on behalf of such corporation." McKinney's Business Corporation Law § 1505 (a). In New York, "members of a professional service corporation are not personally liable for the acts of other members of the corporation if they did not supervise those individuals or personally participate in the questioned actions with them." Krouner v. Koplovitz, 572 N.Y.S.2d 959 (App.Div. 3d Dep't 1991) (citing We're Assocs. Co. v. Cohen, Stracher Bloom, 65 N.Y.2d 148, 151 (1985)); see also Beltrone v. General Schuyler Co., 636 N.Y.S.2d 917, 918 (App Div. 3d Dep't 1996); Sucese v. Kirshch, 606 N.Y.S. 60, 62 (App Div. 3d Dep't 1993).
Plaintiff does not claim that Wright supervised Stiles. Rather, Plaintiff submits that Mr. Wright's liability stems from the professional services that he personally rendered to Ocean Ships. Wright argues he did not participate in the decision to not perfect the Horan appeal. Stiles affirms that Wright played no role in the decision to not perfect the appeal. He claims that he "was the only person at SW, P.C. involved in the decision to perfect the Initial Appeal [and that Wright] did not attend meetings or participate in discussions relating to the decision to not perfect the Initial Appeal." See Thomas E. Stiles April 2, 2003 Affidavit at ¶ 11, Hughes Decl. Ex. E; id. ("I did not advise Mr. Wright when I made the decision not to perfect the Initial Appeal."). Mr. Wright affirms the same — "the decision not to perfect the Initial Appeal was made by [Mr. Stiles] in or about October 1996." See Stephen X. Wright May 12, 2003 Affidavit at ¶ 12, Hughes Decl. Ex. G.
While the affidavits submitted by Stiles and Wright are rather self-serving on the subject of Wright's involvement, the P.C.'s bills support the contention that Stiles was the principal attorney on the Ocean Ships matter with Wright having a minimal role. The parties submit three bills for the Court's review. In total, the P.C. billed Plaintiff for 217.3 hours of attorney time. Wright is responsible for 14 of those hours, while Stiles is responsible for 203.3 of them. The April 22, 1996 bill covers the period from March 15, 1996 through April 19, 1996. The bill is not itemized but indicates the P.C. worked on "jurisdictional motions . . . and legal research relating to . . . personal jurisdiction . . . and necessary post-trial motions." See Apr. 22, 1996 bill, Hughes Decl. Ex. D. The bill for the period covering April 20, 1996 through March 6, 1997 — the time in which the appeal was not perfected — also is not itemized, but shows that Stiles spent 34 hours on the matter and Wright spent 2.8 hours on the matter. See March 7, 1997 bill, Hughes Decl. Ex. D. This bill's summary for services rendered includes discussions regarding the "jurisdictional motion strategy." Finally, the bill covering the period after the Appellate Division's affirmation, which is itemized, demonstrates Wright's minimal involvement consisted of relaying telephone messages and reviewing a reply brief. See Nov. 10, 1998 bill, Hughes Decl. Ex. D (charging Plaintiff for 118.5 hours of Stiles' time and 1.8 hours of Wright's time in the previous eight-month period).
During his deposition Stiles testified to Wright's negligible involvement in the Plaintiff's case. "Q. Did Steve Wright do any of the legal research for the Horan appeal? A. If he did, it wasn't much. It was really my doing. Q. Were you primarily responsible within your firm for the work that was done on theHoran appeal? A. Yes." Stiles Jan. 12, 2001 Dep. at 273, Hughes Decl. Ex. F; see also, Stiles Jan. 11, 2001 Dep. at 56, Hughes Decl. Ex. F (referring to the appellate brief as "my product"); id. at 59 (same). Additionally, Stiles testified that he knew he was not perfecting the appeal, because he had the view, albeit mistaken, that the appeal would be moot after the motion for reargument of the jurisdiction question was granted. Stiles Feb, 2, 2001 Dep. at 469; Stiles Jan, 12, 2001 Dep. at 399-400, Hughes Decl. Ex. F.
It is not clear at the summary judgment stage how much involvement is necessary for § 1505 liability to be appropriate. Thus, although the amount of time Mr. Wright spent on the Ocean Ships matter is relatively minimal, the Court finds there is a factual question as to whether his limited professional services contributed to the malpractice. See McCallen v. Sherwin, 2001 WL 1791514 at *4 (October 5, 2001) (denying doctor's motion for summary judgment where there was a factual issue as to whether two members of a professional corporation consulted with each other regarding the plaintiff's case); Jordan v. Lipsig, Sullivan, Mollen Liapakis, P.C., 1988 WL 31855, at *2 (S.D.N.Y. March 24, 1988) (denying individual defendant attorneys' motion for summary judgment in legal malpractice action where defendants' roles were admittedly minimal);Beltrone v. General Schuyler Co, 636 N.Y.S.2d 917, 918 (App. Div. 3d Dep't 1996) (denying motion to dismiss where defendant attorney was one of the two members whose names make up the corporate name and had at least some involvement in the matter — "we cannot say at the pleading stage, therefore, that plaintiff has no basis for a claim that [defendant] was sufficiently involved in the professional corporation's legal representation concerning the project to impose liability under 1505") cf. Sawh v. Schoen, 627 N.Y.S.2d 7 (May 23, 1995) (App Div. 1st Dep't) (granting summary judgment to physician who met weekly with other members of professional corporation to discuss patients' care, but never actually treated plaintiff). Summary judgment on this claim is denied.
C. Negligence
Plaintiff also claims that Wright was negligent in failing to ensure the appeal of the May 10 order was perfected. Wright Amended Complaint at ¶¶ 25-29, Hughes Decl. Ex. B. The Court construes this negligence claim as one for malpractice. To prevail in a legal malpractice action under New York law, a plaintiff must establish that the attorney "failed to exercise that degree of care, skill and diligence commonly possessed by an ordinary member of the legal community," that the negligence was the proximate cause of the plaintiff's actual damages and that, but for the attorney's negligence, the plaintiff would have succeeded in the underlying action. Carney v. Philippone, 332 F.3d 163, 167 (2d Cir. 2003).
Ocean Ships submits, based on one line of Mr. Stiles' deposition, that since both Stiles and Wright were responsible for checking the New York Law Journal for notices of appeals, and Wright did not perfect the Ocean Ships appeal on his own, or urge Stiles to do so, he was negligent and liable for malpractice. "Q: Is it a practice in your office to have the law journal checked for matters in which your firm is involved? A. Yes, I do it and Steve does it." Stiles Feb. 2, 2001 Dep. at 466, Duncan Decl. Ex. C. This testimony does not make the most compelling basis for a negligence claim. First, the testimony is ambiguous as to whether Wright and Stiles were jointly responsible for reviewing the Law Journal or whether they each reviewed it for their own cases. More important though, here Stiles claims that he knowingly failed to perfect the appeal. Thus, the question of notice is likely of minimal significance. Nonetheless, the facts presented here remain inadequate to support a grant of summary judgment in favor of Wright.
To succeed in a summary judgment motion, the defendant must present admissible evidence that the plaintiff is unable to prove at least one of the elements of malpractice. Carney, 332 F.3d at 167; Tabner v. Drake, 2004 WL 1516176, at *3 (App.Div. 3rd Dep't July 8, 2004) (explaining the moving party has to "demonstrate the absence of any negligence on their part i.e., show that they exercised the 'reasonable skill and knowledge commonly possessed by a member of the legal profession' — or demonstrate that any negligence on their part was not the cause of any actual or ascertainable damage") (internal citations omitted). While Ocean Ships' evidence to date may not prove adequately compelling to a trier of fact, Wright's argument that he had no responsibility in the Horan action fails to mandate summary judgment for him at this point in the litigation. Where, as here, the record is "absent [of] professional or expert opinion describing the standards of professional care and skill . . . and [an] indicati[ion] whether such standards have been breached on the facts presented," summary judgment is inappropriate. Tabner, 2004 WL 1516176, at *3.
D. Fraudulent Conveyance
Finally, Ocean Ships claims Wright fraudulently transferred funds from the P.C. to himself in violation of New York Debtor and Creditor Law §§ 273, 274 and 276. McKinney's Debtor and Creditor Law. Plaintiff bases this claim on the fact that Wright purchased a home in Rye, New York in October 2000, three months after the commencement of the Stiles action. Wright Amended Complaint ¶¶ 16; 31-33, Hughes Decl. Ex. B.
Sections 273 and 274 prohibit conveyances that render a party insolvent or with unreasonably small capital, respectively. These transactions are deemed fraudulent without regard to the transferor's actual intent. Section 276 prohibits transfers made with the intent to defraud and the requisite mental state must be plead with particularity. Fed.R.Civ.P. 9(b); Atlanta Shipping Corp. v. Chemical Bank, 818 F.2d 240, 251 (2d Cir. 1987);Intuition Consolidated Group, Inc. v. Dick Davis Publishing Co, 2004 WL 594651, at *3 (S.D.N.Y. March 25, 2004). To prevail on these claims, Ocean Ships must prove by clear and convincing evidence that there was a conveyance. For § 276, the transfer must have been made with actual intent to defraud. Cadle Company v. Newhouse, 2002 WL 1888716, *6 (S.D.N.Y. Aug. 16, 2002). For the §§ 273 and 274 claims, the transfer must have been made without consideration and have rendered the transferor insolvent or without sufficient liquid assets. Id. at *6.
Wright's purchase of a home is, at best, only a single piece of very circumstantial evidence of a conveyance from the P.C. to Wright. Wright insisted on making this motion before discovery began. Since discovery is likely to yield more conclusive evidence on this point, the Court denies summary judgment on this claim pending completion of discovery.
III. Conclusion
For the forgoing reasons, Defendant Wright's motion is denied. The parties are to complete discovery within 90 days of the date of this order and appear for a status conference on December 3, 2004 in Courtroom 14C.
So ordered.