Opinion
06-14417.
August 25, 2010.
HOWARD E. GREENBERG, ESQ., P.C., Attorney for Plaintiffs, Smithtown, New York.
CATALANO GALLARDO PETROPOULOS, Attorney for Defendants Ronald S. Koppelman, Esq. Blatt Koppleman, P.C., Jericho, New York.
Upon the following papers numbered 1 to 26 read on this motion pursuant to CPLR 3212, 3126 and 4102 ; Notice of Motion/ Order to Show Cause and supporting papers 1 — 17; Notice of Cross Motion and supporting papers__; Answering Affidavits and supporting papers 18-25: Replying Affidavits and supporting papers 26; Other ___; (and after hearing counsel in support and opposed to the motion) it is,
ORDERED that this motion by defendants Ronald S. Koppelman, Esq. and Blatt Koppelman, P.C., for summary judgment dismissing the complaint pursuant to CPLR 3212; for an order dismissing the complaint pursuant to CPLR 3126 for failure to comply with discovery demands; or in the alternative, permitting the defendants to serve and file a written demand for a jury trial, is determined as set forth below.
This action was commenced to recover damages allegedly sustained by the plaintiffs, TJS of New York, Inc. and Thomas Murray, as the result of their purchase of a bar business from 490 Habitat, Inc. whose principal shareholder was non-party Samuel Ripps (hereinafter Ripps). Specifically, the action was brought to recover the purchase price of the business and certain tax assessments that were levied against 490 Habitat, Inc., and Ripps, of which the plaintiffs were allegedly induced to assume. The plaintiffs allege that they had retained defendants Ronald S. Koppelman, Esq. and Blatt Koppelman, P.C. (hereinafter "the defendants"), to act as their attorney in connection with the aforementioned transaction. The complaint sets forth five causes of action against these defendants: legal malpractice, negligence, negligence misrepresentation, fraud, and contribution.
The defendants now move, inter alia, for summary judgment dismissing the plaintiffs' complaint in its entirety. In support of such motion, the defendants submit the deposition testimony of plaintiff Thomas Murray (hereinafter "Murray") wherein he explained that over the last 15 years, he used defendant Ronald S. Koppelman, Esq., (hereinafter "Koppelman") as an attorney to help incorporate two vending businesses, T.S. Vending Inc. and Tiger Vending Inc., as well as a bar business in the Bronx. Murray also alleged in pertinent part that he, Koppelman, and non-party John Navaretta (hereinafter "Navaretta"), also an attorney, had a mutual acquaintance who ran a bar in Smithtown called The Habitat. He testified to the effect that after the death of the acquaintance in June, 2002, he, Koppelman, and Navaretta met to discuss purchasing the Habitat from 490 Habitat Inc. and Ripps. Murray testified Koppelman's wife had been a previous owner of this bar and that prior to the meeting, he had spoken to Koppelman almost everyday concerning different issues regarding buying the bar. He stated that at the end of 2002 and in the beginning of 2003, he and Navaretta formed a corporation named TJS, for the purpose of buying this bar business. Murray alleged that Navaretta may have been a twenty percent owner, but before the bar ever opened and before the bar ever received its liquor license, he bought out Navaretta's interest. Murray further alleged that prior to buying out Navaretta's interest, he consulted with Koppelman.
In addition, Murray testified that although Navaretta had been one of his attorneys at the time he applied for a liquor license, Koppelman was also his attorney and Koppelman did all the paperwork. He alleged that at the point he signed the contract of sale, he was not even dealing with Navaretta, and he only saw the contract of sale with Koppelman. He testified in pertinent part that Koppelman told him that since he was also representing Ripps, solely for the purposes of paperwork, Koppelman could not be listed as his attorney. Murray insisted, however, that Koppelman was lead counsel and that he was the one who generated all of the documents. He stated that he was not concerned about Koppelman also representing Ripps, since he was paying Koppelman and had a long relationship with him. Murray stated that he did not have a written retainer agreement with Koppelman and that he usually paid Koppelman's bills with cash. Murray acknowledged that at the closing he signed a document, which stated that he had decided to proceed with the closing without an attorney and that he had been advised by Koppelman that he should be represented by an attorney. Murray alleged that Koppelman told him that he had to sign this paper because Koppelman had to do it legally. He stated, "But he [Koppelman] was my attorney. We both knew he was my attorney."
Further, Murray testified that around the date of closing, Koppelman told him that Ripps was being audited by New York State, and when he asked Koppelman how bad the audit would be, Koppleman responded that he thought it would be between $30,000.00 to $40,000.00. Murray also alleged that he spoke to defendant Stephan Zyrd (hereinafter "Zyrd"), who was the accountant for The Habitat, and that Zyrd agreed with Koppelman that the tax liability would be around $30,000.00 to $40,000.00. Murray acknowledged that at the closing he signed a document assuming, among other things, all the debt of 490 Habitat Inc. He maintained, however, that he thought he was assuming a debt between $30,000.00 to $40,000.00 in sales tax, and $2,000.00 in bulk sales tax. Murray testified that in fact, the tax liability assessed against the Habitat and Ripps was approximately one million dollars. Additionally, Murray testified that after the closing, he and Koppelman would talk on the phone every couple of days concerning a construction lien against the bar and an insurance claim. Finally, when asked at the deposition whether he had any reason to believe that prior to the closing Koppelman was aware that the tax liability might exceed $30,000.00 to $40,000.00, Murray answered, "No." When Murray was asked if Koppelman lied to him, he answered, "Not knowingly."
In further support of their motion for summary judgment, defendants submit the affidavit of Koppelman, who alleges that in January, 2003, he and his law firm were retained by Ripps to represent Ripps and his corporation with the sale of their Smithtown bar. He asserts that he had represented Murray on one prior occasion in the 1990's when Murray purchased stock of a corporation which owned a bar in the Bronx, but from that time until January, 2003, he did not represent Murray in any matters. Koppelman alleges that although Murray claims that he represented Murray with regard to a vending business, his recollection is that he formed the corporation at the request of another individual, and that he had no knowledge that Murray had any interest in that corporation. Koppelman further alleges that as to the bar being sold by his client, Murray was represented by Navaretta. He points out that Navaretta's name appears on the contract of sale, and alleges that he sent copies of the executed contract to Navaretta. Koppelman states that after the contract of sale was signed, he spoke to Navaretta on a few occasions to facilitate an application for a liquor license, and that such application was filed by Navaretta.
Koppelman also alleges that several weeks after the liquor license applications was filed, Murray called him and advised him that he and Navaretta had a falling out, and Navaretta was no longer his attorney. Koppelman asserts that he informed Murray that he would need to get another attorney so that they could proceed to closing. He claims that Murray then told him that he was not going to use anyone else. Koppelman alleges that he explained to Murray that he could not represent both Murray and the seller. Koppelman alleges that he told Murray that if he insisted on proceeding without an attorney, he was going to prepare a document, which Murray would sign before closing, in which Murray would acknowledge that he was advised that he should retain an attorney. Koppelman states that Murray did sign such acknowledgment on the day before the closing, and provides the court with a copy of the acknowledgment. In addition, Koppelman alleges that he represented only the seller with regard to the sale. He claims that he had no fee arrangement or retainer agreement with the plaintiffs, and that he did not perform any services gratuitously for the plaintiffs. Koppelman maintains that there simply was no attorney-client relationship between him and the plaintiffs with regard to the sale of the Smithtown bar. Lastly, Koppelman alleges that there is no merit to the claims of fraud against him, and that he did not make any false representations to the plaintiffs regarding any aspect of the sale.
The defendants assert that based upon the submitted proof, it is evident that they did not represent the plaintiffs in the underlying transaction, that there was no attorney-client relationship between the plaintiffs and defendants, and that without such a relationship, plaintiff cannot maintain an action for malpractice. The defendants also argue that the plaintiffs' second, third, fourth, and fifth causes of action, alleging negligence, fraud, and contribution, are duplicative of the legal malpractice action and must be dismissed. The defendants further claim, aside from the duplicative nature of the fraud claim, plaintiffs cannot maintain the fraud claim because there was no fraudulent intent on the part of the moving defendants.
In addition, the defendants argue that if they are not granted summary judgment, then this action should be dismissed pursuant to CPLR 3126 based upon the plaintiffs' failure to provide discovery and failure to comply with a stipulation requiring them to do so. The defendants contend that they had requested in a notice for discovery and inspection, documents reflecting payment of legal fees to Navaretta, copies of an agreement between Murray and Navaretta, and the plaintiffs' tax returns from relevant years. The defendants allege that on November 9, 2009, the plaintiffs signed a stipulation agreeing to provide the requested items, or if the items did not exist, an affidavit stating that they do not exist. The defendants argue that the plaintiffs' delay in providing this information cannot be explained or justified and thus this case should be dismissed.
Finally, the defendants request that, if the court does not grant them summary judgment, they be given leave to file a jury demand, notwithstanding the expiration of the time permitted to do so under CPLR 4102(a). The defendants allege that although the note of issue in this case was filed on December 3, 2009, they did not receive the note of issue until a copy was faxed to them on March 12, 2010. They allege that the plaintiffs originally mailed the note of issue to the wrong address. The defendants contend that although this service error appears to have been inadvertent, they were deprived of the opportunity to file a jury demand within the time allowed under CPLR 4102.
The plaintiffs oppose the defendants' motion for summary judgment, arguing that it is incontrovertible that these defendants represented the plaintiffs as their attorneys at multiple times prior, during, and after the subject transaction. In support of their opposition, the plaintiffs submit the deposition testimony of Koppelman wherein he acknowledged that in October of 2003 and in November of 2003, he was representing Murray on two matters. In addition, although at one point in the deposition Koppelman alleged that he did not remember Murray being involved in Tiger Vending Inc., which he helped incorporate, Koppelman later stated that he knew Murray had an interest in that business. Koppelman testified to the effect that his office drafted the contract with respect to the sale of Ripps' interest in the bar business to the plaintiffs, and Murray may have had some input into its terms and conditions. Koppleman alleged that he sent the contract of sale directly to Murray, and did not forward it to Navaretta. He maintained that this was done at Navaretta's request. Koppelman also alleged, in pertinent part, that since Navaretta asked for guidance on the liquor license application, he sent him a letter with suggestions and "copied" Murray on that letter, but he did not remember if he sent a copy his client. Koppelman stated that two days before the closing, he told Murray to get a lawyer if he was not going to use Navaretta, whereupon Murray responded, "I'm not going to use anybody else. I'm fine. I trust you." Koppelman alleged that he then told Murray he was going to have to sign a few documents before the closing, namely a document waiving counsel, and a document agreeing to assume all the debt. Koppelman stated that although he was aware of the tax audit before the contract of sale, no reference was made to the tax audit in the contract. Koppelman further alleged that when he did legal work for Murray, there was no retainer agreement or anything in writing.
Also in opposition, the plaintiffs submit the affidavit of Murray wherein he reiterates that Koppelman was representing him, and at no time was Navaretta representing his interest. He alleges that the only reason any of the documents contained Navaretta's name, was because Koppelman required it for purposes of the preparation of documents. Murray contends that he was induced into signing the assumption of tax liabilities, based upon Koppelman's information as to what the tax liabilities would be. He asserts that he was further induced to sign the assumption and further relied upon these incorrect misrepresentations, when Koppelman and Ripps orally agreed at the closing that Ripps would pay any taxes assessed above the $40,000.00 figure. Murray states that based upon his attorney-client relationship with Koppelman, he believed in the honesty, trustworthiness and propriety of the statements made to him.
The plaintiffs argue that based upon the evidence, questions of fact exists as to whether the defendants were acting as their attorneys, and a whether a claim for malpractice has been established. The plaintiffs also argue that even if their was no attorney-client relationship on the subject transaction, given Murray's long term attorney-client relationship with Koppelman for over 15 years, and given Koppelman's awareness that Murray would rely, and did rely on his representations concerning tax liabilities, sufficient grounds are established to provide a basis for negligent misrepresentation. The plaintiffs contend that based upon the parties' relationship, Koppelman had a duty to impart correct information and that it is irrelevant whether Koppelman had the intent to defraud them. In addition, the plaintiffs assert that the defendants' motion to strike the complaint pursuant to CPLR 3126 should be denied because they have complied with any and all outstanding discovery requests. The plaintiffs allege that they have served three separate responses to the defendants' three Supplemental Notices for Discovery and Inspection over a nine month period. The plaintiffs allege that they were in the process of obtaining their tax returns from their accountant during this period, and that they recently forwarded their personal returns to the defendants. The plaintiffs state that they will forward their corporate returns to defendants upon receipt.
The defendants' motion for summary judgment dismissing the plaintiffs' first cause of action for legal malpractice is denied. To make a prima facie showing on a summary judgment motion, an attorney in a legal malpractice action must submit admissible evidence that the plaintiff cannot prove at least one of the required elements of the legal malpractice claim ( Terio v Spodek , 63 AD3d 719, 880 NYS2d 679). One such element that a plaintiff must prove in order to recover damages for legal malpractice, is the existence of an attorney-client relationship ( Wei Cheng Chang v Pi , 288 AD2d 378, 733 NYS2d 471, lv denied 99 NY2d 501, 752 NYS2d 588). Since an attorney-client relationship does not require the existence of a formal retainer agreement, a court must look to the words and actions of the parties in order to determine the existence of such a relationship ( Moran v Hurst , 32 AD3d 909, 822 NYS2d 564). "The unilateral belief of a plaintiff alone does not confer upon him or her the status of a client" ( Wei Cheng Chang v Pi , 288 AD2d at 380, supra; Volpe v Canfield , 237 AD2d 282, 654 NYS2d 160, lv denied 90 NY2d 802, 660 NYS2d 712).
Here, more than a mere unilateral belief has been offered, raising questions of fact as to whether an attorney-client relationship existed between the plaintiffs and the defendants during the sale of the subject bar business ( see McLenithan v McLenithan , 273 AD2d 757, 710 NYS2d 674). While Koppelman claims that he only represented Ripps and that Navaretta represented the plaintiffs, the submissions demonstrate: that Koppelman was involved with the plaintiffs' application for a liquor license; that Murray had input into the terms and conditions of the contract which Koppelman drafted; and that Koppelman mailed the contract of sale directly to Murray, and never forwarded it to his alleged attorney. Moreover, despite the attorney waiver and Navaretta's name being on some of the written documents, there is a question of fact as to whether Koppelman, either affirmatively or impliedly, led the plaintiffs to believe that he was acting on their behalf ( cf. C.K. Industries Corp. v C.M. Industries Corp. , 213 AD2d 846, 623 NYS2d 410).
In addition, the defendants' motion for summary judgment dismissing the plaintiffs' third cause of action for negligent misrepresentation is denied. In order for a plaintiff to recover on a claim of negligent misrepresentation, "there must be a showing that there was either actual privity of contract between the parties or a relationship so close as to approach that of privity" ( Prudential Ins. Co. v Dewey , Ballantine, Bushby, Palmer Wood , 80 NY2d 377, 382; 590 NYS2d 831, 833). Generally, there are three requirements that must be met to impose liability for negligent misrepresentation: "(1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance by a known party on the statement in furtherance of that purpose; and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance" ( Prudential Ins. Co. , 80 NY2d at 384). Thus, "If a special relationship exists, the other side has a duty to impart correct information; if that information, however, is incorrect and one side reasonably relies on it, a claim of negligent representation will lie" ( Solondz v Barash, 225 AD2d 996, 998; 639 NYS2d 561, 564). Whether the nature of the relationship between parties is such that a plaintiff's reliance on a negligent misrepresentation is justified, generally raises an issue of fact ( see Caprer v Nussbaum , 36 AD3d 176, 825 NYS2d 55).
In this case, Murray's affidavit and deposition testimony assert: that he had a long term relationship with Koppelman; that Koppelman had acted as his attorney in the past; that Koppelman was knowledgeable about this particular business, as his wife had been a previous owner; that he spoke to Koppelman on a daily basis regarding buying the business; that he had direct oral communication with Koppelman concerning the tax audit; that Koppelman knew that he was relying on audit information when he signed the assumption of debt; and that he did rely on Koppelman's information. Accordingly, there is an issue of fact as to whether the relationship between the plaintiffs and the defendants was so close as to approach that of privity.
The defendants' motion for summary judgment dismissing the plaintiffs' fourth cause of action for fraud is granted. To establish a prima facie case of fraud, there must be evidence demonstrating a representation of material fact, falsity, scienter, reliance and injury ( see Apollo H. V.A.C. Corp. v Halpern Construction, Inc. , 55 AD3d 855, 867 NYS2d 115). Here, the defendants established their prima facie entitlement to judgment as a matter of law through Murray's deposition testimony, wherein he alleged that he did not think that Koppelman knowingly lied to him. In opposition to the defendants' prima facie showing, the plaintiffs have failed to raise a triable issue of fact with respect to scienter ( JAF Partners, Inc. v Rondout Savings Bank , 72 AD3d 898, 898 NYS2d 496). Therefore, this cause of action is dismissed.
The defendants' motion for summary judgment dismissing the plaintiffs' fifth cause of action for contribution is also granted. Where, as in this case, the underlying claim seeks purely economic damages, a claim for contribution is not available (CPLR 1401; Children's Corner Learning Center v A. Miranda Contracting Corp. , 64 AD3d 318, 879 NYS2d 418).
The verified complaint labels two causes of action as the "fourth cause of action." It is clear that the cause of action for contribution, is actually "the fifth cause of action."
Additionally, the defendants' motion for summary judgment dismissing the plaintiffs' second cause of action for negligence is granted. This cause of action is redundant, since the allegations contained therein are essentially the same as those relating to the plaintiffs' third cause of action for negligent misrepresentation, but with less specificity ( see Haythe Curley v Harkins , 214 AD2d 361, 625 NYS2d 154).
Accordingly, the defendants' motion for summary judgment is granted only to the extent that the plaintiffs' second, fourth, and fifth causes of action are dismissed.
Furthermore, that portion of the defendants' motion dismissing the complaint pursuant to CPLR 3126 for failure to comply with discovery demands is denied. "It is well settled that actions should be resolved on their own merits whenever possible, and that the drastic remedy of striking a pleading is inappropriate absent a clear showing that the failure to comply with the discovery demands was willful and contumacious" ( Jenkins v City of New York , 13 AD3d 342, 788 NYS2d 117, 118). In this case, there has been no showing that the plaintiffs' conduct has been willful and contumacious. However, except for the personal tax returns which have been provided to the defendants, the plaintiffs responses to discovery demands concerning the buy-out agreement between Murray and Navaretta, receipts for legal services from Navaretta, and the corporate tax returns, have been inadequate. The stipulation signed by the parties dated November 9, 2009, provides that if the plaintiffs are unable to produce these documents, the plaintiffs will provide an affidavit to that effect. Therefore, the plaintiffs are directed to provide the defendants with the requested documents or an affidavit by a party with personal knowledge stating that they are unable to produce such documents, within thirty days of a service of this order with notice of entry.
Lastly, as to that portion of the defendants' motion requesting permission to file a late jury demand, the court notes that CPLR 4102(a) requires that a jury demand must be filed within fifteen days after service of a note of issue which does not contain a demand for a jury trial. However, CPLR 4102(e) also provides that, a "court may relieve a party from the effect of failing to comply with this section if no undue prejudice to the rights of another party would result." In view of the absence of prejudice to the plaintiffs, the fact that this delay was caused by the plaintiffs' failure to properly serve the defendants with the note of issue, the fact that the defendants had no intention of waiving a jury trial, and the defendants' prompt application to be relieved of their default, the defendants' motion to file a jury demand is granted ( see A.S.L. Enterprises, Inc. v Venus Laboratories, Inc. , 264 AD2d 372, 694 NYS2d 686).
The defendants are directed to serve upon the plaintiffs a written demand for a trial by jury within 10 days after the entry of this order. The defendants are also directed to serve upon the Calendar Clerk of this Court the aforesaid demand with proof of service upon the all parties, together with a copy of this order and the fee prescribed by CPLR 8020 (c) (2), within 30 days after entry of this order. Upon receipt of such service, the Clerk shall calendar this action as one requiring a trial by jury.