Sette v Appleby
Annotate this CaseDecided on June 23, 2005
Civil Court of the City of New York, New York County
JULIA SETTE, Plaintiff,
against
LESLY J. APPLEBY, JAIME STEVENSON, MARIAN CLAYTON and GMAC FINANCIAL SERVICES, Defendants.
146TSN2001
Eileen A. Rakower, J.
Pursuant to the Decision and Order of this Court dated March 31, 2005, the parties appeared before this Court on May 2, 2005 for a hearing on the issue of whether Michael Flomenhaft, one of plaintiff Julia Sette's prior attorneys retained to represent her in the instant action, wrongfully converted funds and coerced her to take out a high interest loan for disbursements for her case and for her personal expenses. The Court heard testimony from Julia Sette and Michael Flomenhaft. At the conclusion of the testimony, the Court provided the parties an opportunity to submit briefs. To date, no briefs have been submitted. The Court makes the following findings of fact and conclusions of law:
The above framed issue was transferred to this Court pursuant to CPLR §325(d), by a decision of the Hon. Rosalyn Richter dated July 28, 2004. Justice Richter limited this Court's inquiry to whether Ms. Settee was entitled to "the inordinately high amount of interest she has incurred on that portion of the loan which paid her personal expenses," which Ms. Settee estimated to be $8,000.00. Thus the hearing and damages claimed was limited accordingly.
Ms. Sette entered into a retainer agreement with Michael Flomenhaft to represent her in a personal injury case. The action was bifurcated, and Mr. Flomenhaft obtained a verdict in Ms. Sette's favor in the liability portion of the action. Some time after that verdict and during the preparation for the damages phase of the trial, Ms. Sette approached Mr. Flomenhaft about a loan. Ms. Sette [*2]testified that she was greatly concerned about her personal expenses and that she had mortgage payments to make.
Mr. Flomenhaft testified that he had learned of the availability of a new kind of high interest/no collateral loan and discussed its terms with Ms. Sette. Mr. Flomenhaft described the loan as a "no recourse loan." By its terms, plaintiff would be issued a line of credit, and checks would issue as she requested them. The lender gambled that Ms. Sette would receive a damages verdict. If she received a damages verdict in her favor, a high interest repayment calculation would be triggered. If Ms. Sette received no money as a result of her personal injury action, she would not be liable for repayment of the loan. The lender requested extensive information about her pending personal injury case, and based on its assessment of the likelihood of a damages award, it approved the loan for Ms. Sette.
Mr. Flomenhaft testified that sizable disbursements had accrued in Ms. Sette's case, and he asked Ms. Sette that she use part of the loan for those expenses. Ms. Sette agreed, and requested that he put in writing apart from the signed lender agreement, "that [Mr. Flomenhaft] will pay interest (over 12%) on the case expenses." (MF3 in Evid.) Ms. Sette took $8000 for her personal use and $22,000 for Mr. Flomenhaft. In the event there was no award, both Mr. Flomenhaft and Ms. Sette benefitted. Ms. Sette, who was ultimately responsible for the disbursements, satisfied her obligation while passing any risk onto the lender. Mr. Flomenhaft benefitted in that he no longer had to look to his financially unstable client for reimbursement.
Shortly thereafter, Ms. Sette retained other counsel and the damages portion of her action was heard before this Court. A jury awarded Ms. Sette a verdict in the amount of $1,500,000. Almost immediately after the damages verdict, Mr. Flomenhaft repaid that portion of the loan that covered his disbursements with interest. He then sought reimbursement for those disbursements with interest from the award proceeds.
Ms. Sette, never repaid the $8000 plus interest that she was advanced for her personal expenses despite having received in hand nearly $1,000,000. Instead, she allowed such amounts to continue to accrue interest pending the outcome of this matter. Ms. Sette testified that she made no effort to repay the loan because she disputed whether the loan should ever have been undertaken. Ms. Sette did not [*3]dispute the fact that Mr. Flomenhaft had paid back that amount of the loan taken for his advanced disbursements with all interest.
The Court finds Ms. Sette to have made a thoughtful decision regarding the subject loan. Despite her claims that she is some how diminished by the effects of her accident, this Court listened to her communicate perfectly regarding its terms and manage complex calculations regarding its compounding interest. Her extensive email communications with Mr. Flomenhaft further demonstrate the amount of thought, time and consideration that she expended in this deal. Ms. Sette also negotiated the terms of the loan, as evidenced by a paragraph she disputed that was subsequently deleted upon her signing of the loan agreement. She even negotiated her own terms with Mr. Flomenhaft regarding repayment of that portion of the loan that covered case expenses he advanced.
The Court also finds that Ms. Sette was not at all vulnerable to Mr. Flomenhaft, as she would have this Court believe. She actively participated in her trial strategy, as shown by the extensive and numerous emails she sent to Mr. Flomenhaft during his representation.
Finally the Court finds that Ms. Sette was fully aware of what she was doing and the benefits and relatively minor risks of this loan. Ms. Sette does not dispute that she did not repay her portion of the loan despite her ability to do so, and instead allowed it to compound to the sum she sues for here.
Thus, the Court concludes that Ms. Sette's claim that Mr. Flomenhaft coerced her into taking the subject loan is not credible and is unfounded.
Ms. Sette's claim is dismissed. This constitutes the decision and order of the Court.
Dated: June 23, 2005
________________________
Eileen A. Rakower
J.C.C.
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