Pires v Frota Oceanica Brasileira, S.A.
Annotate this CaseDecided on January 14, 2005
Supreme Court, New York County
S.M. Pires and VIRGINIA PIRES, his wife, Plaintiff,
against
Frota Oceanica Brasileira, S.A., BOARD OF TRUSTEES OF GALVESTON WHARVES d/b/a PORT of GALVESTON & CITY OF GALVESTON d/b/a PORT OF GALVESTON, Defendants. S.M. PIRES and SAUL RUDES, Plaintiffs, KENNETH HELLER, Defendant KENNETH HELLER, Third-party Defendant, SUSAN HARMON, Third-party Defendant.
S.M. PIRES and SAUL RUDES, Plaintiffs, -against-
against
KENNETH HELLER, Defendant
23829/76
Karen S. Smith, J.
Motion sequence 38 under Index No. 23829/76 and Motion sequence 01 under Index No.: 114298/04 are consolidated for disposition in this decision and order.
Motion sequence 38: Saul Rudes' motion, brought in the action S.M. Pires v Frota Oceanica Brasileira, Index No. 23829/76 ("underlying action"), seeks an order directing Kenneth Heller to deposit attorneys' fees in the amount of $4,176,539.54 into an interest bearing account at a New York City bank in the names Kenneth Heller and Saul Rudes which amount cannot be withdrawn without court order and for an order determining the amount of counsel fees to which Saul Rudes is entitled due to his status as co-counsel to Mr Heller in this maintenance [*2]and cure action.
Kenneth Heller cross-moves for an order dismissing the motion. Mr Heller argues that Mr Rudes waived his right to legal fees on the record before Referee Julius Birnbaum and has failed to produce evidence that he is entitled to attorneys' fees. Mr Heller has produced an affirmation from Julius Birnbaum stating that Mr Rudes waived his right to a charging lien with prejudice. Mr Heller also argues, inter alia, that the claim for attorney's fees is barred by laches, that the $4,176,539.54 was a voluntary advance from Mr Pires for unpaid legal fees, and that he had an agreement with Mr Pires which called for repayment of that amount upon the final determination of attorneys' fees. Mr Heller does not address the merits of the motion or the claims that he fraudulently induced Mr Rudes to waive the charging lien by claiming that the money he received was going directly to Mr Pires. This motion was originally returnable on September 8, 2004. On September 23, 2004, Justice Richard Lowe reassigned the action to a non-commercial part. The action and motion were assigned to Justice Edward Lehner who recused himself and then to Justice Shirley Kornreich who recused herself. Thereafter, the action motion were reassigned to this Court.
This action has a long procedural history. On June 27, 1997, The Appellate Division, First Department in Pires v Frota Oceanica Brasileira et al, 240 AD2d 323 [1st Dept 1997]), inter alia, remanded the action to the trial court for an award of attorney's fees. On November 27, 2001,[FN1] the Appellate Division, First Department, reversed the trial court's award of attorney's fees in the amount of $5.4 million dollars, plus interest, to plaintiff's counsel and vacated the judgment and remanded the matter to determine the amount of counsel fees for which plaintiffs were obligated to counsel. The Court directed judgment in favor of plaintiffs, payable by defendant directly to plaintiffs "and not to counsel" the amount of counsel fees charged to plaintiffs and "presumably already paid."(288 AD2d 126,127 [1st Dept 2001]). On May 4, 2004, the issue of attorneys' fees in the underlying action was again addressed in a decision of the Appellate Division, First Department., 7 AD3d 270 [1st Dept 2004]). The Court denied plaintiff's appeal of Justice Herman Cahn's referral of the issue of attorney's fees to a referee stating that the amount of fees owed by plaintiff to his then counsel Kenneth Heller could not be determined without a fact finding process. (Id at 271). The Court noted that plaintiff failed to include a copy of the retainer agreement in the record on appeal. Thus, at present, the issue of the amount of attorneys' fees is awaiting an order referring the matter to a referee.
Prior to the action and motion being assigned to this Court, plaintiff S.M. Pires and Saul Rudes commenced a related action Pires and Rudes v Heller, Index No. 114298/04, in which they assert claims against Kenneth Heller, Mr Pires' former lawyer and Mr Rudes' former co-counsel, for breach of contract, breach of fiduciary duty, conversion and fraud. Mr Pires is now represented by Susan Harmon, Mr Heller's former associate. Mr Heller has commenced a third-party action, Heller v Harmon, Index No. 59114/04, asserting claims for breach of contract and fraud against Ms. Harmon.
According to the verified complaint in Pires and Rudes v Heller, plaintiff S.M. Pires retained defendant Kenneth Heller to represent him in the an action commenced in 1976 against Frota Oceanica Brasileira, S.A. et al, for personal injuries Mr Pires sustained while employed as [*3]a seaman on Frota's ship. That action for maintenance and cure resulted in a judgment in Mr Pires' favor in a sum exceeding $4,000,000 plus interest. The complaint further avers that Mr Heller retained plaintiff Saul Rudes as appellate counsel to handle appeals resulting from the judgment and agreed that Mr Rudes' fee would be 10% of Heller's net fee in Mr Pires' personal injury action. After several appeals, the total judgment with interest awarded to Mr Pires was $8,329,720.65. Defendant Frota issued a check in that amount made payable to "Starkheiser Pires and Kenneth Heller and Saul Rudes, his attorneys."
The complaint further alleges that Mr Heller told Mr Rudes that the full judgment amount, including interest, i.e. $8,329,720.65 had to be paid to Mr Pires and no money could be deducted for attorneys' fees. According to the complaint, Mr Heller then told Mr Pires that the full judgment amount totaled $4,153,181 and paid him that amount which enabled Mr Heller to keep the remaining $4,176,539.54. The complaint states that in the underlying action there is a motion pending for attorneys' fees and it is possible that an additional sum will be awarded to Mr Pires against Frota.
Motion sequence 01: Plaintiffs S.M. Pires and plaintiff Saul Rudes move in Pires and Rudes v Heller (1) pursuant to CPLR § 6201(2), (3) and (5), for an order of attachment and an order directing the Sheriff of any county where defendant Kenneth Heller's assets can be found, to levy within his jurisdiction upon such assets and property in which Kenneth Heller has an interest, (2) concurrently, or in the alternative, for an order granting a preliminary injunction freezing the assets of defendant Kenneth Heller, until entry and collection of judgment, (3) for an order directing that any payments by Frota Oceanica Brasileira, S.A.'s insurance company should not be paid directly to plaintiff Pires and ten percent of any payment should be paid to plaintiff Saul Rudes in satisfaction of his claim for attorneys' fees as co-counsel to Kenneth Heller in the underlying action, (4) for an order directing Kenneth Heller to deposit $4,176, 539.54 in an interest bearing escrow account which funds may only be withdrawn by order of the Court, and (5) for an order, pursuant to CPLR § 602, consolidating the related action with the underlying action.
According to the supporting affidavit of Mr Pires', Mr Heller represented him in the personal injury action S.M. Pires v Frota Oceanica Brasileira, Index No. 23829/76. Mr Pires states that (1) Mr Heller showed him the June 24, 1997 Appellate Division decision which held that Mr Pires was entitled to a $4,000,000 damage award, (2) after further appeals, defendant Frota was ordered to pay that amount with interest which amount totaled $8,239,720.65 and that Mr Heller never informed him of this accrued additional interest and Mr Heller kept that amount for himself, (3) at the time that Mr Pires went to the bank with Mr Heller to receive the $4,000,000 amount, Mr Heller asked Mr Pires to sign blank sheets of paper and Mr Pires has no knowledge of the contents of those documents now, (4) after learning of the higher award, Mr Pires confronted Mr Heller who stated he took the other 50% as his fee, (5) Mr Pires protested to Mr Heller as he was never told of the higher award and never agreed to the 50% fee, (6) Mr Pires never signed a retainer agreement, (7) Mr Pires filed a complaint with the Disciplinary Committee of the Appellate Division, First Department, Mr Heller promised that he would pay the money back because the Court would award an additional $4,000,000 as attorneys' fees against defendant Frota's insurance company, (8) Mr Pires withdrew the complaint under duress as Mr Heller said he would not get the money back if Mr Heller was disbarred as Mr Pires had no [*4]other attorney at the time, (9) Mr Heller came to Brazil and Mr Pires signed an affidavit which he did not read and gave a deposition recorded on videotape, a copy of which Mr Pires does not have and which is invalid according to Brazilian law, (10) Mr Heller has told Mr Pires that he has no money to repay him and Mr Heller has previously told him that he keeps money in bank accounts in Switzerland, Leichtenstein and Germany, and (11) Mr Heller has threatened to leave the state and live in Brazil as Brazil has no extradition policy with the United States specifically for the purpose of defeating the collection of any judgment Mr Pires would obtain against him.
Mr Pires has taken contradictory positions regarding his former attorney Kenneth Heller and the submissions on these motions reflect those differing positions. However, the explanations given, that he signed blank sheets of paper for Mr Heller and that Mr Heller told him that he would not see the money owed to him unless he withdrew his complaints, are plausible.
The affirmation of plaintiff Saul Rudes [FN2] avers that Mr Rudes has been co-counsel with Kenneth Heller in the Pires v Frota Oceanica Brasileira personal injury action since 1996, having been retained by Mr Heller to handle several post-judgment appeals. Mr Rudes states that (a) his status as an attorney of record was confirmed in a Supreme Court order dated July 29, 1999, (b) his fee agreement with Mr Heller in this action as well as other actions for which he was retained is that he would receive 10% of Mr Heller's net fee, and, thus, he has a 10% interest in the attorneys' fee against the judgment of $8,329,720.65, (c) Mr Heller committed a fraud against Mr Pires and Mr Rudes when Mr Heller took half of the full judgment amount, (d) Mr Heller duped Mr Rudes into waiving an attorneys' fee lien by falsely stating to Mr Rudes, and to the Court, that the $8,329,720 was to be paid directly to the client, Mr Pires and that attorneys' fees were to be awarded separately, (e) Mr Heller moved to have defendant Frota issue a new check without Mr Rudes name on it and as a result Frota issued a new check which was issued payable solely to Heller as attorney.
Mr Rudes argues in support of the motion that it is now necessary to seek an attachment against Mr Heller's assets to secure his fee as Mr Heller has recently been disbarred for thwarting the legal process in other matters, has taken his liquid assets out of this country, and has threatened to leave the country. According to Mr Rudes, plaintiffs have met all the requirements for an order of attachment.
Plaintiff Pires' attorney, Susan Harmon, who had been Mr Heller's associate, states in her affirmation in support of the motion that (1) she became Mr Pires' attorney on July 27, 2004, when Mr Heller was disbarred, (2) that she was unaware until September 2004 that Mr Heller had taken more than four million dollars of Mr Pires' award for consequential damages telling Mr Pires that it was a loan, (3) it is plaintiff Pires' position that Mr Heller owes him $4,176,539.54 plus interest from November 22, 1999, (4) to her knowledge Mr Heller has been conveying property, mortgaging property and transferring property into shell corporations to avoid creditors, (5) Mr Heller is planning to go to Brazil to set up a real estate business.
My Heller's cross-motion again fails to seek affirmative relief but merely seeks a dismissal of the motion. Mr Heller argues that because the order to show cause failed to include [*5]an undertaking, the motion should be denied. Mr Heller again argues unpersuasively that this Court is without maritime jurisdiction to hear this case. Mr Heller argues that the petition for an attachment should be dismissed on the ground that plaintiffs have failed to carry their burden of complying with the requirements of CPLR §§ 6201 and 6226. Defendant Heller argues that the relief sought is identical to the relief sought in motion sequence 038.
Civil Practice Law and Rules § 6201(3) provides, in pertinent part: An order of attachment may be granted in any action . . . where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants, when:3. the defendant, with intent to defraud [its] creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."
In order to obtain an order of attachment, the moving party has the burden of demonstrating, through affidavit or other written evidence, that a valid cause of action for a money judgment exists, that it will probably succeed on the merits, that it has satisfied one of the statutorily-enumerated grounds of CPLR 6201, and the need for such an order (See, CPLR § 6212 [a]). Where the plaintiff seeks an order of attachment pursuant to CPLR § 6201 (3), "fraudulent intent must be proven, not simply alleged or inferred, and the facts relied upon to prove it must be fully set forth in the moving affidavits." (Abacus Fed. Sav. Bank v. Lim, 8 AD3d 12, 13 [1st Dept 2004]; Benedict v Browne, 289 AD2d 433 [2d Dept 2001]). The property in question may be that of the plaintiff which the defendant has taken wrongfully. (Arzu v. Arzu, 190 AD2d 87, 91 [1st Dept 1993]. Plaintiff must also show a probability of success on the merits of their claims. (Shisgal v. Brown, 3 AD3d 434 [1st Dept 2004]).
Mr Heller's changing and contradictory explanations for why he took more than four million dollars from his client Mr Pires without telling him, give credence to plaintiffs' claims that defendant fraudulently converted half of plaintiff Pires' judgment award and induced Mr Rudes to waive his charging lien and remove his name from defendant's check. Mr Heller's actions, the sworn statements submitted in support of the motions, the sudden appearance of a retainer agreement, and Mr Heller's failure to deny the material facts in both motions including that he has secreted the funds he wrongfully took from Pires in bank accounts in Europe, demonstrate that Mr Heller acted with an intent to defraud plaintiffs.
Mr Heller uses his cross-motions to launch ad hominem attacks on the other parties, the Supreme Court New York County Law Department, several Supreme Court and Appellate Division judges. His statement that plaintiffs have failed to demonstrate that he has made attempts to conceal assets ignores the sworn statements of Mr Pires and Ms Harmon that Mr Heller said that he was transferring assets out of the jurisdiction and relocating to Brazil.
Plaintiffs have demonstrated a likelihood of success on the merits on their claims for breach of a fiduciary duty, breach of contract, conversion and fraud, and Mr Heller has yet to raise a viable defense. Plaintiff Pires has demonstrated that he would likely prevail on his claim for conversion and Mr Rudes has demonstrated that he will likely prevail on his claim for breach of contract and fraud. [*6]Accordingly, the requirements for an attachment have been met.
For the reasons above stated, Motion sequence 038 and Motion sequence 01 are granted as follows:
ORDERED that plaintiffs' motion for an order of attachment is granted, and it is further
ORDERED that the amount to be secured by this order of attachment, inclusive of probable interest, costs and Sheriff's fees and expenses, shall be $ 4,176,539.54, and it is further
ORDERED that the plaintiff's undertaking be and the same is hereby fixed in the sum of $100,000 conditioned that the plaintiff shall pay to the defendant an amount not exceeding $5,000 for legal costs and damages which may be sustained by reason of the attachment, and up to and not exceeding $2,500 to the Sheriff for allowable fees, if the defendant recovers judgment or if it is decided that the plaintiff is not entitled to an attachment of the property of the defendant, and it is further
ORDERED that the Sheriff of the City of New York, or the Sheriff of any County of the State of New York, attach property of defendant, Kenneth Heller, within his or her jurisdiction, by levy upon any interest of the defendant, Kenneth Heller, in personal property, or upon any debt owed to the defendant, and upon any interest of the defendant in real property within his or her jurisdiction, as will satisfy the aforesaid sum of $4,176,539.54, and that he or she hold and safely keep all such property and debts paid, delivered, transferred, or assigned to him or her or taken into his or her custody, for the purpose of securing and satisfying any judgment recovered by the plaintiff herein, costs, disbursements and reasonable Sheriff's fees, and that the Sheriff proceed herein in the manner and make his return within the time prescribed by law; and it is further
ORDERED that the issue of attorney's fees is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR § 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further
ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR § 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further
ORDERED that a copy of this order with notice of entry shall be served on the Clerk of the Judicial Support Office to arrange a date for the reference to a Special Referee; and it is further
ORDERED that the motions are denied in all other respects; and it is further
ORDERED that the cross-motions are denied. Dated: January 14, 2005ENTER:
J.S.C.
Footnotes
Footnote 1:The appearance for plaintiffs-respondents listed on the decision is Saul Rudes.
Footnote 2:As a party to the action, Mr Rudes' statement should have submitted in affidavit form. CPLR § 2106.
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