Berkowitz v Fischbein, Badillo, Wagner & Harding

[*1] Berkowitz v Fischbein, Badillo, Wagner & Harding 2005 NY Slip Op 51398(U) [9 Misc 3d 1104(A)] Decided on July 6, 2005 Supreme Court, New York County Shafer, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 6, 2005
Supreme Court, New York County

Abraham Berkowitz, Plaintiff,

against

Fischbein, Badillo, Wagner & Harding, RICK, STEINER, SEGAL & FELL, P.C., f/k/a RICK STEINER, P.C., and JACK SEGAL, Defendants.



104359/02

Marilyn Shafer, J.

In this action, two of the defendants move for summary judgment to dismiss the amended complaint as against them (motion sequence number 006). For the following reasons, this motion is granted in part and denied in part.

BACKGROUND

The Parties

In May 1996, plaintiff Abraham Berkowitz (Berkowitz), non-party real estate developer Jack Lefkowitz (Lefkowitz), and non-party architect Joseph Lombardi (Lombardi), created a limited liability company called "27 North Moore Associates, LLC" (North Moore LLC) to function as a sponsor to acquire a building located at 27 North Moore Street in the State, City, and County of New York (the Building). See Notice of Motion, Exhibit D, at 2. Berkowitz, Lefkowitz, and Lombardi intended to renovate and develop the Building so that its apartments could be converted into residential condominium units, and sold. Id. The three retained the defendant law firm Fischbein, Badillo, Wagner & Harding (FBW&H) to represent North Moore LLC. Id. FBW&H thereafter drafted an offering plan for the Building's conversion, which was submitted to the New York State Attorney General (the AG) on September 29, 1997, and declared effective as of November 12, 1998. Id. This offering plan contained a certification that stated that it was tendered by "the sponsor and the principals of the sponsor of the condominium"; i.e., by North Moore LLC, and by Berkowitz, Lefkowitz, and Lombardi. Id.

At some point, a rift developed between Berkowitz, Lefkowitz, and Lombardi, and Berkowitz decided to end his involvement with North Moore LLC. Id. Berkowitz retained defendant Jack Segal (Segal), a partner at the co-defendant law firm Rick, Steiner, Segal & Fell, P.C. f/k/a Rick Steiner, P.C. (RSS&F), to represent him in connection with his sale of his interest in North Moore LLC to Lefkowitz. Id. FBW&H represented Lefkowitz in connection with this transaction (the Buyout Agreement). Id. Pursuant to the terms of the Buyout Agreement, Berkowitz sold his 40% interest in North Moore LLC to Lefkowitz for $4.8 million, and terminated his association with North Moore LLC, effective as of April 26, 1999. Id. Contemporaneously with his signing of the Buyout Agreement, and incorporated into the terms thereof, Berkowitz also signed a general release that discharged Lefkowitz and his agents from liability in all actions or claims for any disputes arising out of matters related to North Moore LLC's business dealings. Id. at 3. Also during this time, condominium units in the newly renovated Building were being sold to members of the public. Defendants Segal and RSS&F have presented records that show that 29 of the Building's 57 residential units were sold prior to the effective date of Berkowitz's departure from North Moore LLC. Id., Exhibit C.

Prior Proceedings

In January of 2001, the AG commenced an action against North Moore LLC for violation of General Business Law Article 23-A (the Martin Act), that alleged that North Moore LLC had committed fraud in connection with the construction of the Building's condominium units, and [*2]had made material omissions in the offering plan concerning the Building's physical condition.[FN1] Id. at 3. Berkowitz was named as a defendant in that action, as well as in another action that was commenced at approximately the same time by the Building's Board of Managers.[FN2] Id. After the court consolidated these two actions, Berkowitz signed a stipulation, so-ordered on February 6, 2002, that settled all of the claims against him for $304,000.00. Id.

Thereafter, on March 1, 2002, Berkowitz commenced this action by serving a complaint that set forth causes of action for: 1) legal malpractice; 2) breach of contract; and 3) breach of fiduciary duty. Id. Berkowitz alleged that defendants were negligent in that they failed to file an amendment to North Moore LLC's offering plan that reflected that he had divested himself of his interest in the company effective as of April 26, 1999. Id. Berkowitz also alleged that he had specifically informed Segal that his reason for entering into the Buyout Agreement was that he had learned that Lefkowitz was committing fraud. Id. at 4. Finally, Berkowitz alleged that, but for the defendants' negligence in failing to ensure that all of his legal ties to North Moore LLC were effectively severed, he would not have been exposed to liability in the two actions commenced against North Moore LLC, or forced to pay the $304,000.00 settlement or the attendant legal fees and court costs. Id. In support of his final allegation, Berkowitz submitted a letter, dated February 13, 2003, from the Assistant Attorney General who had prosecuted the Martin Act claim against North Moore LLC, Oliver A. Rosengart (Rosengart), that indicated that: [Berkowitz] would not have been named [in the AG's suit] if an amendment to the offering plan for 27 North Moore Street Condominium had been submitted by the attorney for [Berkowitz] to the [AG's] Department of Law in April 1999, which was during the sales period when many units had not yet closed, and that amendment disclosed that [Berkowitz] was no longer a principal of the sponsor.

Id. Rather than answer, the defendants submitted separate motions to dismiss.

On February 5, 2003, this court rendered a decision that disposed of the defendants' dismissal motions (motion sequence numbers 001 and 002). Id., Exhibit D. The court's decision dismissed all of the claims against FBW&H, but granted leave to assert a new cause of action against it for fraud, and dismissed the breach of fiduciary duty claims against Segal and RSS&F, but upheld the other two causes of action. Id.

After entry of the court's decision, the parties engaged in disclosure. As part of this process, defendants contacted Rosengart and informed him that, contrary to his belief at the time that he wrote his February 13, 2003 letter, more than half of the Building's condominium units had been sold before April 26, 1999, when Berkowitz severed his relationship with North Moore LLC. See Notice of Motion, ¶ 4. As a result of this, Rosengart has now submitted an affirmation in which he states that: During the course of the underlying litigation and ensuing settlement negotiations [in the AG's action against North Moore LLC], I explained to [Berkowitz] that if he had in fact divested himself of his 40% interest in [North Moore LLC] when very few residential units had closed and an amendment to the Offering Plan had been filed at that time disclosing that he was no longer a principal, I would not have named him as a defendant in the underlying Complaint.However, I have subsequently been advised that at the time [Berkowitz] divested himself of his interest on April 28, 1999, more than half of the residential [*3]units had already closed. Consequently, [Berkowitz] would have been named as a defendant regardless of whether an amendment disclosing [Berkowitz]'s sale had been filed.

Id., Exhibit B, ¶¶ 4-5. After receiving this affirmation, Segal and RSS&F contacted Berkowitz and requested that he discontinue this action against them. See Notice of Motion, ¶ 10. After Berkowitz refused, Segal and RSS&F submitted the instant motion for summary judgment. Id., ¶ 11.

DISCUSSION

When seeking summary judgment, the moving party bears the burden of proving, by competent, admissible evidence, that no material and triable issues of fact exist. See e.g. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 (1985); Sokolow, Dunaud, Mercadier & Carreras LLP v Lacher, 299 AD2d 64 (1st Dept 2002). Once this showing has been made, the burden shifts to the party opposing the motion to produce evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action. See e.g. Zuckerman v City of New York, 49 NY2d 557 (1980); Pemberton v New York City Tr. Auth., 304 AD2d 340 (1st Dept 2003). Because it deprives the litigant of his or her day in court, summary judgment it is considered a drastic remedy which should be employed only when there is no doubt as to the absence of such triable issues. See e.g. Andre v Pomeroy, 35 NY2d 361 (1974); Pirrelli v Long Is. R.R., 226 AD2d 166 (1st Dept 1996). However, the court's reluctance to employ summary judgment "only serves to swell the trial calendar and deny litigants the right to prompt adjudication of their claims." See Blechman v I.J. Peiser's and Sons, Inc., 186 AD2d 50, 51 (1st Dept 1992), citing Andre v Pomeroy, 35 NY2d at 364 supra. "An attorney's affidavit is of no probative value on a summary judgment motion unless accompanied by documentary evidence which constitutes admissible proof." Adam v Cutner & Rathkopf, 238 AD2d 234, 239 (1st Dept 1997) (emphasis in original). Here, the court finds that, taken together, Rosengart's affirmation and defendants' condominium sales records constitute sufficient evidence to negate Berkowitz's malpractice claims against Segal and RSS&F.

The defendants correctly note that, in order to make out a claim of legal malpractice, the proponent must present "proof of the attorney's negligence, a showing that the negligence was the proximate cause of the plaintiff's loss or injury, and evidence of actual damages." Pellegrino v File, 291 AD2d 60, 63 (1st Dept 2002). The proximate cause element, in particular, requires "evidence that 'but for' defendants' alleged negligence plaintiff would have achieved a more favorable result ... [otherwise], plaintiff's claim fails." See Wexler v Shea & Gould, 211 AD2d 450, 451 (1st Dept 1995). Here, the defendants argue that, because of Rosengart's affirmation and the Building's condominium sales records, Berkowitz cannot show that he would not have incurred damages in the form of settlement and litigation costs "but for" the defendants' failure to file an amendment to the Building's offering plan. See Memorandum of Law in Support of Motion, at 5. The court agrees. Rosengart's affirmation makes it clear that the AG would have considered leaving Berkowitz out of the Martin Act prosecution only if Berkowitz had divested himself of his interest in North Moore LLC before "very few residential units had closed." See Notice of Motion, Exhibit B, ¶ 4. Rosengart's affirmation also makes it clear that, had the AG known that a substantial number of the residential units been sold at the time of Berkowitz's divestiture, "[Berkowitz] would have been named as a defendant regardless of whether an amendment disclosing [Berkowitz]'s sale had been filed." Id., ¶ 5. The Building's condominium sales records show that a majority of the Building's residential units (29) had, indeed, been sold at the time of Berkowitz's divestiture. Thus, it would have made no difference to the AG whether or not Berkowitz had caused his attorneys to file an amendment to the Building's offering plan, and Berkowitz would have had to incur litigation and settlement costs in connection with his involvement in North Moore LLC in any event.

Nonetheless, Berkowitz claims that there is an issue of fact, arising from an alleged "inconsistency" or "conflict" between Rosengart's February 13, 2003 letter and his deposition testimony, that precludes summary judgment herein. See Sena Affirmation in Opposition, ¶ 32. [*4]Berkowitz specifically argues that, in the letter, Rosengart stated that Berkowitz would not have been prosecuted: 1) if an amendment to the offering plan had been filed, and 2) if "many units had not yet closed" at the time of his divestiture (emphasis added). Id, ¶¶ 12-26. Berkowitz then notes that 33 of the Building's condominium units were unsold at the time of his divestiture, and yet, in his deposition testimony, Rosengart stated that 33 unsold units would constitute "many." Id. The defendants reply that Berkowitz is mischaracterizing Rosengart's statements, and that Rosengart has always maintained the position that he would not have named Berkowitz in the Martin Act lawsuit if Berkowitz had completed his divestiture at a time when only a small number of the Building's condominium units had been sold. See Reply Memorandum in Support of Motion, at 5-9. After reviewing Rosengart's deposition testimony and the supporting exhibits, the court agrees with the defendants. Rosengart initially sent Berkowitz a letter that stated that he would not have been sued if he had divested at a time "when very few residential units had closed." See Anesh Reply Affirmation, Exhibit A, at 30-31. Berkowitz then contacted Rosengart and requested that he make several changes to the language used in the letter, including a revised statement that he would not have been sued if he had divested at a time "when many units had not yet closed." Id. at 38. In his deposition, Rosengart stated that he agreed to the change because he felt that the second wording was a "roughly equivalent phrase" to the one he initially used, and that his "intention was that it [i.e., the second wording] would not be substantively different [i.e., from the first]." Id. at 93, 96. He also reiterated several times that he did not know, when he initially spoke to Berkowitz, exactly how many condominium units had been sold, but that Berkowitz and/or his counsel had led him to believe that it was a small number. Id. at 59, 62, 74-76, 90, 96. Finally, Rosengart repeated on thirteen occasions that, had he known that 29 condominium units had actually been sold before Berkowitz divested, he would unquestionably have included Berkowitz in the Martin Act lawsuit. Id. at 46, 55-56, 63, 65, 70, 76, 78-79, 81, 88, 90, 91, 98, 99. After reviewing all of Rosengart's testimony, the only reasonable conclusion is that, although Rosengart may have considered 33[FN3] unsold condominium units to constitute "many," he did not consider that 29 unsold condominium units was so insignificant a number as to warrant leaving Berkowitz out of the Martin Act lawsuit. It is, therefore, clear that Berkowitz's alleged "inconsistency" is a purely semantic construct, and completely devoid of any legally significant substance. It is also clear that Berkowitz himself created the "inconsistency" by first requesting that Rosengart the change the wording of the second draft letter, and then having his counsel exploit that change in wording at Rosengart's deposition.[FN4] This behavior can only be regarded as duplicitous. At several points in that deposition, Rosengart expressed regret that he had agreed to substitute the term "many" for "very few" because it was too "vague," and susceptible of multiple interpretations. Id. at 56-57, 64, 67, 71, 77-78, 82-83, 92, 96. The court agrees that these regrets are well founded. However, they provide no justification for elevating Berkowitz's linguistic sleight-of-hand to the same level as a triable issue of fact that is fit to present to a jury. Therefore, the court rejects Berkowitz's argument. As a result, the court also finds that defendants have demonstrated that Berkowitz [*5]cannot prove the "but for" component of the proximate cause element of his legal malpractice claim against defendants. Accordingly, the court finds that Segal and RSS&F's summary judgment motion should be granted with respect to Berkowitz's cause of action for legal malpractice

Although the defendants' motion seeks summary judgment dismissing the entire amended complaint against them, neither their moving papers nor their reply papers set forth any argument as to why the court should dismiss Berkowitz's third cause of action, which asserts breach of contract. Accordingly, the court declines to do so, and denies so much of the defendants' motion as requests this relief.

DECISION

ACCORDINGLY, for the foregoing reasons, it is hereby

ORDERED that the motion, pursuant to CPLR 3212, of defendants Rick, Steiner, Segal & Fell, P.C. f/k/a Rick Steiner, P.C., and Jack Segal, is granted solely to the extent that the cause of action for legal malpractice that is asserted against those defendants in the amended complaint is hereby dismissed, but is, in all other respects, denied; and it is further

ORDERED that the balance of this action shall continue.

Dated: New York, New York

July 6, 2005ENTER

______________________

Hon. Marilyn Shafer, J.S.C. Footnotes

Footnote 1:The Attorney General's action was entitled State of New York v 27 North Moore Associates, LLC, Sup. Ct. NY County, Index Number 400215/01.

Footnote 2:The Board of Managers' action was entitled The Board of Managers of 27 North Moore Street Condominium v 27 North Moore Associates, LLC, Sup. Ct. NY County, Index Number 100460/00.

Footnote 3:The court notes that the defendants' condominium sales records indicate that the Building contains only 57 residential condominium units, 29 of which had been sold at the time of Berkowitz's divestiture. Berkowitz's assertion that there were actually a total of 62 units is explained by the facts that one additional residential unit was evidently set aside at no cost for Lombardi's ex-wife, and that there are also five commercial condominium units in the Building. Id. at 85. Those commercial units had not been sold at the time of Berkowitz's divestiture, and later became the subject of settlement discussions in the Martin Act lawsuit.

Footnote 4:The court notes that, not only was Berkowitz present at Rosengart's deposition, but that he also asked a number of the deposition questions himself, evidently in a very belligerent manner. Id. at 70-79, 79-84, 85-90, 91-92, 92-93, 94-100.