Opinion
Index No.: 156293/2018
07-19-2019
YT MADISON, LLC, Plaintiff, v. SUKENIK, SEGAL & GRAFF, P.C., JEHOSHUA GRAFF, and JEFFREY GRAFF, Defendants.
NYSCEF DOC. NO. 33
DECISION AND ORDER
Motion Sequence No.: 001
O. PETER SHERWOOD, J. :
As this is a motion to dismiss, the facts are taken from the complaint and assumed true.
Plaintiff YT Madison, LLC ("Plaintiff") seeks damages arising out of Defendants law firm Sukenik, Segal & Graff, P.C. ("SSG") and two individuals' ("Defendants") preparation of an amended operating agreement (the "Amended Operating Agreement") in connection with a condominium project in New York City.(the"Project"). Plaintiff is the managing member of Madison 33 Partners, LLC (the "Company"), which is the sole member of Madison 33 Owner LLC, the owner and sponsor of the Project. The Amended Operating Agreement is between Plaintiff and the other members of the Company, including in particular an affiliate of the original seller of the Project, 172 Madison NP Member, LLC ("NP Member").
In the complaint, plaintiff asserts three causes of action for legal malpractice, breach of fiduciary duty and unjust enrichment. Each cause of action is based on Plaintiff's allegation that Defendants negligently permitted the inclusion of a clause in the distribution of "Net Proceeds" section of the Amended Operating Agreement that incorrectly increases from $32 million to $46 million the amount of an agreed-upon cap on total distribution of Net Proceeds to NP Member. Under the original Operating Agreement, distributions of Net Proceeds in excess of $32 million that would otherwise be payable to NP Member are payable to plaintiff. In paragraph 68 of the complaint, Plaintiff alleges that defendants' negligence in the drafting of the Amended Operating Agreement caused over $14 million in damages. Plaintiff also demands that Defendants reimburse it for all of the legal fees it has paid in connection with the transaction as additional compensation for the damages caused by the allegedly negligent draftsmanship.
On this motion Defendant moves pursuant to CPLR 3211(a)(1), (4) and (7), to dismiss the Complaint on grounds that the complaint is premature because it is based entirely on speculation that plaintiff will suffer damages in the future if the Project ever generates sufficient profits to exceed the $32 million cap on distributions to NP Member. Defendants assert and plaintiffs do not dispute that in order for that to happen, the Company must generate enough money from the Project to (i) first pay off the mortgage loans in the original principal amount of $164.3 million and all other debts of the Company, and (ii) then make distributions of "Net Proceeds" to the members of the Company that , in the case of NP Member, exceed the agreed-upon cap of $32 million, and Plaintiff also must lose a pending action in the Delaware Chancery Court to reform the allegedly negligent language in the Amended Operating Agreement.
As of the commencement of this action, the mortgage loans had not been paid off, no Net Proceeds had been distributed to the members of the Company, and the reformation action in the Delaware Chancery Court was still pending. According to the most recent public filings made by Plaintiff, at least 45% of the condominium units in the project have not been sold and are sitting vacant. As a result, Plaintiff has not suffered - - and may never suffer- - any damages because of the negligence attributed to Defendants.
On a motion to dismiss under CPLR 3211 (a)(1) based on a defense grounded in documentary evidence, the documentary evidence must be authentic, unambiguous and undeniable. CPLR 321 (a)(1); Fountanetta v Doe, 73 AD 3d 78 (2d Dept 2010). "To succeed on a motion under CPLR 3211 (a)(1), a defendant must show that the documentary evidence upon which the motion is predicated resolves all factual issues as a matter of law and definitively dispose of the plaintiff's claim." Ozdemir v Caithness Corp., 285 AD 2d 961, 963 (2d Dept 2001), leave to appeal denied 97 NY 2d 605. Put differently, "[w]here evidentiary materials are considered in support of a motion under CPLR § 3211 [], the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one and, unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate." Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD 3d 790, 793 (2d Dept 2015) (affirming denial of motion to dismiss malpractice claim) (internal quotation marks, citation omitted).
On a motion to dismiss a complaint under 3211 (a)(7), all allegations must be deemed true, the plaintiff must be given every favorable inference and intendment, and the complaint must be construed in the light most favorable to plaintiffs. Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD 3d 172, 174 (1st Dept 2004); see also, Widlitz v Douglas Elliman, LLC, 55 Misc. 3d 1214 (A) (Sup Ct NY Cty 2017) (denying motion to dismiss claim for legal malpractice). The court determines only whether the facts as alleged fit within any cognizable legal theory. Leon v Martinez, 84 NY 2d 83, 87-88 (1994).
In an action to recover for legal malpractice, Plaintiff must plead and prove that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that "the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages." Gallet, Dreyer and Berkey, LLP v Basile, 141 AD 3d 405, 406 (1st Dept 2016) (internal citation omitted). In this case it is undisputed that whether or not Plaintiff will sustain any damages as a result of the alleged malpractice is unknown able at this time. Although damages in a legal malpractice case may include "litigation expenses incurred in an attempt to avoid, minimize or reduce the damage caused by the attorney's wrongful conduct." Rudolf v Shayne Dachs, Stanisci, Corker & Sauer, 8 NY 3d 438, 443 (2007) (internal citation omitted), such potential damage cannot save plaintiff's claim here because the damages that allegedly were proximately caused by the alleged malpractice are unknown.
The motion must be granted because the malpractice claim is premature (see Pudalov v Brogan, 103 Misc 2d 887, 992, 427 NYS 2d 345, 348 [Sup. Ct., Nassau Cty 1980] [dismissing malpractice counterclaim as premature where underlying personal injury action had not yet been reached for trial]; and Hallman v Kantor, 22 Misc 3d 1122[A]. 880 NYS 2d 224 [Sup Ct. Nassau Cty 2009] [holding that, as there had been no determination issued by the Surrogate imposing liability against plaintiff, no injury could be shown]).
The first cause of action shall be dismissed without prejudice to renew should the Project yield Net Proceeds in excess of $32 million payable to NP Member.
Defendant also seek to dismiss Plaintiff's second (breach of fiduciary duty) and third (unjust enrichment) causes of action as duplicative of the legal malpractice cause of action (see Bernard v Proskauer Rose, LP. 87 AD 3d 412, 416 [1st Dept 2011]. Because plaintiff has not responded to this branch of the motion, the second and third causes of action shall be dismissed as abandoned.
Plaintiff's cross-motion to bifurcate and for leave to replead is denied as moot, the court having dismissed the entire complaint with leave to renew or replead.
It is hereby
ORDERED that the motion to dismiss of Defendants GRANTED and the complaint is hereby DISMISSED in its entirety with leave to renew or replead without costs.
This constitutes the decision and order of the court.
DATED: July 19, 2019
ENTER,
/s/ _________
O. PETER SHERWOOD J.S.C.