Kroll Assoc., Inc. v Sands Bros. & Co., Ltd.
Annotate this CaseDecided on August 17, 2005
Supreme Court, New York County
Kroll Associates, Inc., Plaintiff,
against
Sands Brothers & Co., Ltd., LITTMAN KROOKS ROTH & BALL, P.C., d/b/a LITTMAN KROOKS & ROTH, P.C., and d/b/a LITTMAN KROOKS, L.L.P., and RICHARD A. ROTH, , Defendants.
117369/01
Edward H. Lehner, J.
The central legal issue raised on the motions by defendants Littman Krooks Roth & Ball, P.C. ("Littman Krooks") and Richard Roth[FN1] for summary judgment dismissing the claims asserted against them relates to the potential liability of a law firm for outside investigative services rendered in connection with litigation being handled by it. Currently the law guiding courts on this question differs depending on which side of the East River the case is pending.
In June 2000, Littman Krooks was representing defendant Sands Brothers & Co., Ltd. ("Sands") in litigation pending in Texas. On June 26, 2000, Roth, then a member of the Littman Krooks firm, approached plaintiff Kroll Associates, Inc. ("Kroll") to provide investigative services for Sands in connection with that litigation. As a result, the next day a meeting was held at the office of Littman Krooks attended by Roth and Brian Manoff (an attorney at Littman Krooks whose wife was stated to be a researcher at Kroll), and representatives of Sands and Kroll. Apparently a trial involving Sands was scheduled to take place on July 27, with a settlement conference scheduled for July 7.
After the meeting, Kroll sent a letter dated June 27, 2000 to Roth setting forth the terms of the relationship, and providing signature lines for Littman Krooks "by" Roth, and Sands "by" Steven Sands (the "retainer letter"). The retainer letter sets forth the various charges to be made by Kroll, and states that "you ," i.e., the addressee of the letter (Littman Krooks), agree to pay a $30,000 retainer and "will be billed on a monthly basis." The letter also provides that "Sands agrees it is liable for payment of our invoices." [*2]
Kroll states that, in light of the need for prompt action, it commenced its work without having received a signed copy of the retainer letter or the $30,000 retainer. The retainer letter was never signed by any of the parties. Kroll asserts that it periodically kept Roth and Sands personnel advised of the progress of its investigation. On July 6 it faxed its report to Roth, which contained a preamble stating: "This is a confidential document prepared solely for the private and exclusive use of personnel of Littman Krooks Roth & Ball." At the bottom of each page of the report were the words: "Privileged and Confidential Attorney Work Product." Kroll subsequently sent an invoice dated July 28, 2000 to Roth at Littman Krooks in the total amount of $56,002.12. In December, Roth advised Kroll that the law firm had a dispute with Sands over its legal fees and suggested that the invoice be sent to Sands.
When payment was not received, Kroll commenced this action in 2001, but only against Sands. By order of Justice Lebedeff dated September 23, 2003, plaintiff was granted leave to amend its complaint to add Littman Krooks and Roth as defendants.
Regarding Roth, who is no longer a member of Littman Krooks, he asserts there is no evidence that he agreed to be personally liable and the record as a whole supports that position. The retainer letter and invoice on which Kroll bases its claims are both addressed to Roth in his role as member of Littman Krooks, and the retainer letter was to be signed by Roth for Littman Krooks.
In any event, since Littman Krooks is sued as a professional corporation, pursuant to BCL §1505 (which renders a shareholder liable for misconduct "while rendering professional services") Roth is not liable for any business debts of the firm. See, We're Associates Company v. Cohen, Stracher & Bloom, P.C., 65 NY2d 148 (1985), where the court held that said section was properly interpreted "to preclude the imposition of personal shareholder liability in instances not involving the direct rendition of professional services ... (and the) general rule ... is that shareholders are not personally liable for corporate debts ... (and) there is no basis for extending the limited liability imposed by Business Corporation Law § 1505(a) to situations not unambiguously covered by that provision" (p. 151). See also, Tannenbaum v Reichenbaum & Silberstein, 226 AD2d 700 (2d Dept. 1996). Accordingly, the motion of Roth to dismiss the action as against him is granted.
With respect to the claim against the law firm, it relies on the principle long ago enunciated in Bonynge v. Field, 81 NY 159 (1880), that "when a person contracts as the agent of another, and the fact of his agency is known to the person with whom he contracts, the principal alone, and not the agent is responsible." [*3]However, the First Department held in Urban Court Reporting, Inc. v. Davis, 158 AD2d 401 (1990), that "contrary authority notwithstanding" (citing Bonynge v. Field, supra): "... we think an attorney who, on his client's behalf, obtains goods or services in connection with litigation should be held personally liable unless the attorney expressly disclaims such responsibility ... (as it) seems to us to be more equitable to hold the attorney liable in the absence of his express indication to the contrary, since the attorney may avoid liability by the simple expedient of indicating to the reporting service or other provider of services that the client and not the attorney is liable for the obligations incurred." (p. 402).
That position was reiterated in a case involving a fee for accounting services [Rosenberg Selsman Rosenzweig & Company, LLP v. Slutsker, 278 AD2d 145 (1st Dept. 2000)]. The latter case was cited by the First Department in Toby Feldman Incorporated v. Agins Dolgin Siegel & Bernstein, 278 AD2d 185 (2000), in denying leave to the defendant law firm to appeal from a decision of the Appellate Term (NYLJ, May 9, 2000, p. 26, c. 1), which had affirmed a judgment holding the firm liable for stenographic services in light of the absence of an express disclaimer to the stenographer of personal responsibility.
A contrary rule has prevailed in the Second Department. The leading case is Sullivan v. Greene & Zinner, P. C., 283 AD2d 420 (2001), where in an action by a court reporter against a law firm, the court wrote that "it is well settled that an attorney is only an agent for his or her client, and thus is not responsible for the court reporter's fee, unless the attorney assumed that responsibility" (citing Bonynge v. Field, supra). This holding has been followed in several Appellate Term decisions in the Second Department. See, Mantell v. Samuelson, 2004 WL 1587555; Beizer v. Golub, 2003 WL 21436328; Rizzo v. Maturro, 2002 WL 31957662; Appeal Press & Service Co., Inc. v. Denby, 2001 WL 1807732; Diversified Corporate Services, Inc. v. Zucker, NYLJ, July 19, 2001, p. 19, c. 2.
Thus, from the above authorities, in the First Department the rule is that an attorney is liable to litigation service providers unless responsibility is expressly disclaimed, whereas in the Second Department the attorney is liable only if responsibility is assumed.
Coming to the case at bar, the court observes that while the retainer letter was never signed by any of the parties, it has been held that absent a statutory requirement of a writing (which does not exist here), "an unsigned contract may be enforced, provided there is objective evidence establishing that the parties [*4]intended to be bound" [Flores v. The Lower East Side Service Center, Inc., 4 NY3d 363, 369 (2005)]. Here the retainer letter, which apparently was never objected to by Littman Krooks, could properly be interpreted to have intended to create liability on both i) the law firm to whom it was addressed and thus the "you" referred to in the body thereof as the party to make payment, as well as ii) Sands, with respect to which there was set forth a specific obligation for payment. Factually, the meeting of June 27 at Littman Krooks, at which Kroll was retained, was attended by lawyers from the firm as well as a representative of Sands; status reports on the investigation were given to both Sands and the law firm; and the report of June 6 was sent only to the law firm labeled "attorney work product." Based on the foregoing, the court finds that Littman Krooks has not established that it expressly disclaimed an obligation to pay for the services to be rendered by Kroll in connection with the litigation the firm was handling for Sands, and hence is not entitled to the relief requested..
In conclusion, the motion for summary judgment by Littman Krooks is denied, and the motion of Roth is granted dismissing the action as against him and the Clerk shall enter judgment accordingly, severing the remaining action.
This decision constitutes the order of the court.
Dated: August 17, 2005_____________
J.S.C.
Footnotes
Footnote 1:Although the notice of motion submitted on behalf of Roth states the motion is made pursuant to CPLR 3211 (a)(5), it is clear that the parties treated the motion as one for summary judgment.
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