Bolton v Weil, Gotshal & Manges LLP

[*1] Bolton v Weil, Gotshal & Manges LLP 2005 NY Slip Op 51410(U) [9 Misc 3d 1105(A)] Decided on July 13, 2005 Supreme Court, New York County Madden, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 13, 2005
Supreme Court, New York County

Michael Bolton and MR. BOLTON'S MUSIC, INC., Plaintiffs,

against

Weil, Gotshal & Manges LLP and ROBERT G. SUGARMAN, Defendants. WEIL, GOTSHAL & MANGES LLP and ROBERT G. SUGARMAN, EPSTEIN, LEVINSOHN, BODINE, HURWITZ & WEINSTEIN, LLP and ROBERT J. EPSTEIN, Third-party Defendants.



602341/03

Joan A. Madden, J.

This third-party action for contribution arises out of a consolidated breach of fiduciary duty action commenced by Michael Bolton (Bolton), and Mr. Bolton's Music, Inc. (Mr. Bolton's Music), his personal services company, against Weil, Gotshal & Manges LLP (Weil Gotshal) and Weil Gotshal partner Robert Sugarman (Sugarman), arising out of Weil Gotshal's representation of Bolton, a musician and songwriter, in connection with a claim for copyright infringement involving a song he co-wrote with Andrew Goldmark. In its third-party complaint, Weil Gotshal sets forth a claim for contribution against third-party defendants Epstein, Levinsohn, Bodine, Hurwitz & Weinstein, LLP (Epstein Levinsohn) and Robert J. Epstein (Epstein), Bolton's personal lawyers. Weil Gotshal alleges that, if it is found to be liable in damages to Bolton and Mr. Bolton's Music, then Epstein and Epstein Levinsohn are liable to Weil Gotshal, because their conduct caused or contributed to plaintiffs' damages.

For the reasons set forth below, the motion to dismiss the third-party complaint is denied.

BACKGROUND

In their complaints in the consolidated action, plaintiffs allege that Weil Gotshal and Sugarman breached their fiduciary duties to Bolton as a result of a conflict of interest while [*2]representing him, Mr. Bolton's Music, Warner-Chappell Music Limited, Bolton's music publishing company (Warner-Chappell), and Sony Music Entertainment, Inc., Bolton's record company (Sony Music), in a copyright infringement action brought by Three Boys Music, Inc. in 1994 (the Three Boys Music action). The plaintiffs in the Three Boys Music action contended that Bolton's 1991 hit "Love is a Wonderful Thing," which Bolton co-authored with Goldmark, infringed on the copyright of a song of the same title written by the Isley Brothers in 1964. The Three Boys Music action resulted in a jury verdict against the defendants, which was upheld on appeal.

Plaintiffs further allege in the consolidated action that Bolton was not aware of his indemnity obligations to Warner Chappell and Sony Music, did not know that TIG Insurance Company, Warner Chappell's insurer (TIG), intended to assert its subrogration rights against him, and did not knowingly consent to joint representation in light of divergent interests giving rise to a conflict of interest among the defendants (Third-Party Complaint, ¶ 14). Plaintiffs also allege that Weil Gotshal failed to assert an insurance coverage claim on their behalf (id., ¶ 15). Specifically, Bolton alleges that Weil Gotshal's handling of his defense was tainted by the fact that it was being paid by TIG, whose sole agenda was pushing the case to trial, because obtaining an adverse judgment was the only way it could fully recover from Bolton under an indemnity agreement (Complaint, ¶ 9). Bolton also alleges that, because settlement was not in TIG's interests, Weil Gotshal took steps to purposely undermine his ability to settle the Three Boys Music action, including failing to advise him of several settlement opportunities (id., ¶¶ 9, 53-62, 70-76). Bolton asserts that, as a result of Weil Gotshal's alleged conflict of interest, he was unable to settle the Three Boys Music action (id., ¶¶ 52-83).

In the third-party complaint, Weil Gotshal alleges that Epstein and Epstein Levinsohn acted as Bolton's personal attorneys before, during, and after the time of the Three Boys Music action (Third Party Complaint, ¶ 16). Weil Gotshal further alleges that, in that capacity, Epstein and his law firm personally: (1) negotiated on Bolton's behalf a music publishing agreement with Warner Chappell containing express indemnification provisions, as well as a personal recording contract with Sony Music with similar indemnification provisions (id., ¶¶ 17, 19); (2) negotiated a letter agreement with Warner Chappell in which Bolton agreed to the application of the music publishing agreement, including its indemnity provisions, to him personally (¶¶ 17-18); (3) advised Bolton on insurance matters (id., ¶ 20); and (4) at Bolton's direction, and with knowledge of Bolton's indemnity obligations to Warner Chappell and Sony Music, negotiated an arrangement under which TIG would hire Weil Gotshal and Sugarman to represent Bolton, Warner Chappell and Sony Music at trial in the Three Boys Music action (id., ¶ 21).

In addition, the third-party complaint alleges that Epstein advised Bolton in connection with the Three Boys Music action (id., ¶ 22). For example, the third-party complaint alleges that, on November 9, 1993, Epstein received correspondence from TIG concerning Bolton and Mr. Bolton's Music's status as insureds under Warner Chappell's insurance policy, and received and responded to correspondence from TIG concerning its request that Bolton acknowledge his indemnity obligations to TIG following the April 1994 adverse verdict on liability in the Three Boys Music action (id., ¶ 22).

On this basis, the third-party complaint alleges that, to the extent that any damages [*3]are awarded to plaintiffs, Epstein and Epstein Levinsohn's conduct caused or contributed to those damages. As alleged in the third-party complaint, based on Bolton's allegations, this conduct included the failure: (1) to properly explain to Bolton his indemnity obligations, as well as the consequences of those obligations, in the context of the Three Boys Music action; (2) to properly advise Bolton regarding potential conflicts of interest among the defendants represented by Weil Gotshal as well as by TIG; (3) to timely assert that Bolton was the beneficiary under certain TIG insurance policies; (4) to clarify the terms and conditions pursuant to which TIG would provide Bolton a defense; and/or (5) to protect Bolton's individual interest's with respect to TIG's claims for indemnification (id., ¶ 23).

DISCUSSION

On a motion to dismiss, "the pleading is to be afforded a liberal construction," and "the facts as alleged in the complaint [are presumed] as true" (Leon v Martinez, 84 NY2d 83, 87 [1994]; see also Rovello v Orofino Realty Co., 40 NY2d 633 [1976]; Sheila C. v Povich, 11 AD3d 120 [1st Dept 2004]). In addition, the court must afford the plaintiff every favorable inference that may reasonably be drawn from the facts alleged in the complaint (Hoag v Chancellor, Inc., 246 AD2d 224 [1st Dept 1998]). Where a plaintiff may recover on the basis of a reasonable interpretation of the facts stated in his complaint, a motion to dismiss must be denied (Leon v Martinez, 84 NY2d 83, supra). Here, construing the third-party complaint in the generous matter to which it is entitled, it is clear that Weil Gotshal has stated a cause of action with respect to its contribution claim.

With regard to a claim for contribution, CPLR 1401 provides that "two or more persons who are subject to liability for damages for the same personal injury, injury to property or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought." An action for contribution is predicated upon a third-party's breach of a duty owed to either the plaintiff or the defendant (see Sommer v Fed. Signal Corp., 79 NY2d 540 [1992]). To state a contribution claim, the "critical requirement" is an allegation that "the breach of duty by the contributing party ... had a part in causing or augmenting the injury for which contribution is sought" (Raquet v Braun, 90 NY2d 177, 183 [1997], quoting Nassau Roofing & Sheet Metal Co. v Facilities Dev. Corp., 71 NY2d 599, 603 [1988]; accord In re Adelphia Communications Corp., 322 BR 509 [SD NY 2005]; Duenas v North Harbor Co., 278 AD2d 193 [2d Dept 2000]; Di Marco v NYC Health & Hosps. Corp., 187 AD2d 479 [2d Dept 1992]; see also Tower Bldg. Restoration, Inc. v 20 East 9th St. Apt. Corp., 295 AD2d 229, 229 [1st Dept 2002] ["All that must be shown ... to set forth a viable claim for contribution is that both parties owed a duty to third-party plaintiff and that both contributed to third-party plaintiff's harm by breaching their respective duties"]). Moreover, "contribution is available whether or not the culpable parties are allegedly liable for the injury under the same or different theories, and the remedy may be invoked against concurrent, successive, independent, alternative and even intentional tortfeasors" (Raquet v Braun, 90 NY2d at 183 [internal citations and quotation marks omitted]).

Consistent with these general principles, New York courts have routinely recognized that an attorney defending a legal malpractice action may state a valid claim for contribution against another attorney alleged to have contributed to the injury for which the plaintiff client complains (see e.g. Schauer v Joyce, 54 NY2d 1 [1981] [reversing order [*4]dismissing third-party complaint for contribution against client's other attorney]; Patterson, Belknap, Webb & Tyler LLP v Bond St. Assocs. Ltd, 266 AD2d 125 [1st Dept 1999] [affirming denial of third-party defendant law firm's motion to dismiss contribution claim against it]; see also Butler v Primavera, 164 AD2d 794 [1st Dept 1990] [denying summary judgment on contribution claim on ground that third-party defendant failed to meet his burden of demonstrating that defendant/third-party plaintiff, a lawyer being sued by former clients for malpractice, did not have a viable claim for contribution against third-party defendant, who subsequently represented the client in the same matter]).

Thus, it is well-settled that an attorney sued for malpractice may bring a third-party complaint seeking indemnity or contribution against an attorney, whether retained subsequently, concurrently, or independently, whose negligence has contributed to or aggravated the plaintiff's damages (see Schauer v Joyce, 54 NY2d 1, supra; Herkrath v Gaffin & Mayo, P.C., 192 AD2d 487 [1st Dept 1983]; Hansen v Brognano, 137 AD2d 880 [3d Dept 1988]; Catania v Lippman, 98 AD2d 826 [3d Dept 1983]; Harleysville Worcester Ins. Co. v Hurwitz, 2005 WL 774166 [SD NY 2005]). For example, in Patterson, Belknap, Webb & Tyler LLP v Bond St. Assocs. Ltd, (266 AD2d 125, supra), the First Department held that allegations in a third-party complaint that "third-party defendant attorneys directed the legal handling of matters in which third-party plaintiff law firm represented defendants, and, accordingly, shared responsibility for any loss defendants may have incurred in those matters by reason of legal malpractice, sufficiently stated a cause of action for contribution" (id. at 125; see e.g. Schauer v Joyce, 54 NY2d at 6 [holding that allegation that another attorney "contributed to or aggravated [plaintiff's] injuries" sufficiently stated contribution claim]; La Porte v Mott, 227 AD2d 824 [3d Dept 1996] [attorney, who was defendant in legal malpractice action brought by former client claiming that attorney was negligent in executing and enforcing settlement in divorce action, stated valid third-party cause of action for contribution against law firm which subsequently represented client in former husband's bankruptcy proceeding, by claiming that law firm's negligence contributed to or augmented client's damages]; see also Herkrath v Gaffin & Mayo, P.C., 192 AD2d 487, 488 [1st Dept 1993] [denying summary judgment on contribution claim due to triable issues of fact concerning role of plaintiff's counsel in "causing or exacerbating plaintiff's damages in the underlying" action]).

Here, the allegations of the third-party complaint plainly state a cause of action for contribution. First, the third-party complaint alleges that Epstein and his firm, as Bolton's personal attorneys, advised him prior to and throughout the Three Boys Music action, including, in particular, on indemnity and insurance issues (Third-Party Complaint, ¶¶ 16-22). Second, the third-party complaint alleges that Bolton and Mr. Bolton's Music have sued Weil Gotshal and Sugarman for allegedly inadequately representing their interests in the Three Boys Music action, including, in particular, with respect to insurance and indemnity issues (id., ¶¶ 13-15). Third, the third-party complaint alleges that, in the event that Weil Gotshal and Sugarman are found to be liable on plaintiffs' claims for damages, "third party defendants' conduct caused or contributed to any such damages" (id., ¶ 23). Weil Gotshal has thus asserted a claim that Epstein and his firm, as independent, concurrent tortfeasors, have contributed to or aggravated Bolton's injuries. This is clearly the type of claim encompassed by CPLR 1401 (see Schauer v Joyce, 54 NY2d 1, supra), and thus, the motion to dismiss the third-party complaint is denied. [*5]

None of third-party defendants' arguments change this conclusion. First, third-party defendants argue, without citing any relevant cases, that they had no duty to discover or prevent Weil Gotshal's alleged breaches of its own fiduciary duties to Bolton, because Weil Gotshal's duty to Bolton to avoid conflicts of interest during its representation of Bolton in the Three Boys Music action was a non-delegable duty. This argument, however, completely misses the mark. Rather, the relevant inquiry is whether third-party defendants "had a part in causing or augmenting the injury for which contribution is sought" (Raquet v Braun, 90 NY2d at 183). It is irrelevant whether they may have done so by abetting Weil Gotshal's own alleged breach of duty, or as an "independent" tortfeasor (see id.). In this regard, Weil Gotshal has alleged that Epstein and his firm caused or exacerbated Bolton's claimed damages by failing to explain his indemnity obligations, by pressing for a specific arrangement for the defense of the Three Boys Music action without clarifying the conditions and ramifications of that arrangement, by failing to assert a claim for insurance coverage under certain TIG policies, and by negligently responding to TIG's claims for indemnification (Third-Party Complaint, ¶ 23). These allegations clearly state a cause of action for contribution.

Third-party defendants also seek dismissal by isolating a single aspect of Bolton's claims against Weil Gotshal that concerns settlement of the underlying action, and then asserting that their alleged duties to Bolton "had nothing to do with Bolton's alleged damages" (Third-Party Defs. Mem. at 11). Specifically, third-party defendants maintain that they cannot be held liable for Bolton's failure to settle the Three Boys Music action because Weil Gotshal deliberately withheld details of the settlement discussions from Bolton out of a "hidden motive to continue generating fees," and thus "unilateral[ly]" caused Bolton's damages (id., at 11, 13).

Contrary to third-party defendants' arguments, however, this provides no basis for dismissing the third-party complaint. Bolton's theories of recovery are irrelevant in determining the sufficiency of third-party complaint because "contribution is available 'whether or not the culpable parties are allegedly liable for the injury under the same or different theories" (Raquet v Braun, 90 NY2d at 183, quoting Nassau Roofing & Sheet Metal Co. v Facilities Dev. Corp., 71 NY2d at 603; see also Board of Educ. of Hudson City School Dist. v Sargent, Webster, Crenshaw & Folley, 71 NY2d 21 [1987]).

Moreover, even if Bolton's own allegations were relevant, there are clearly many other aspects to Bolton's breach of fiduciary cause of action than just the claim that Weil Gotshal misrepresented to Bolton the plaintiffs' settlement position in the Three Boys Music action. For instance, Bolton alleges that Weil Gotshal and Sugarman breached their fiduciary duties to him based on Weil Gotshal's conflicted representation, the financial consequences of his indemnity obligations, and his claim to coverage under certain insurance policies. In turn, Weil Gotshal alleges that third-party defendants caused or contributed to the allegedly resulting injuries.

Specifically, Bolton alleges that Weil Gotshal and Sugarman had a conflict of interest because they agreed to represent him and his corporate co-defendants jointly, despite his obligations to indemnify them in the event of settlement or an adverse judgment. In turn, Weil Gotshal alleges that Epstein, with the knowledge that Bolton signed indemnity agreements containing indemnity provisions, "negotiated an arrangement under which Weil Gotshal and Robert Sugarman would be retained to represent Michael Bolton, Warner Chappell and Sony Music at trial in the Three Boys Music action and TIG would pay Weil Gotshal's fees" (Third-[*6]Party Complaint, ¶ 21). Accordingly, it is alleged that if anyone failed "to properly explain to Michael Bolton his indemnity obligations and the consequences of those obligations in the context of the Three Boys Music action," it was third-party defendants, who thereby caused or contributed to plaintiffs' claimed damages (id., ¶ 23).

In addition, Bolton has alleged that Weil Gotshal and Sugarman failed to assert an insurance coverage claim to TIG on behalf of Bolton and Mr. Bolton's Music, Inc. Weil Gotshal, in turn, alleges that Epstein and his firm "advised Michael Bolton on insurance matters," (id., ¶ 20), but failed "to timely assert that Michael Bolton was the beneficiary under certain TIG insurance policies as alleged by plaintiffs' and failed " to clarify the terms and conditions on which TIG would provide Michael Bolton a defense"(id., ¶ 23). Following the April 1994 adverse verdict on liability in the Three Boys Music action, Epstein received and responded to correspondence from TIG concerning its requests that Bolton acknowledge his indemnity obligations to TIG (id., ¶ 22). Weil Gotshal alleges that those acts caused or contributed to Bolton's claimed injury because third-party defendants failed "to adequately protect Michael Bolton's individual interests with respect to TIG's claims for indemnification as alleged by plaintiffs" (id., ¶ 23).

Thus, contrary to third-party defendants' contentions, the third-party complaint clearly alleges that third-party defendants' actions caused or contributed to Bolton's injury.

Although third-party defendants cite Toto v McMahan, Brafman, Morgan & Co. (1997 WL 458764 [SD NY 1997]) for the proposition that they did not breach any duty owed to Bolton that caused or contributed to Bolton's damages, this case does nothing to advance their position. In Toto, the court dismissed a third-party claim for contribution brought by the defendant partnership against certain investment advisors who had counseled plaintiffs in connection with the allegedly fraudulent investments offered by the partnership. Toto did not involve a claim for legal malpractice, and neither the defendants nor the third-party defendants were attorneys. The Court merely held, under the specific facts of that case, that the defendants, who had allegedly committed intentional fraud and intentional breach of fiduciary duty, could not state a contribution claim, because they did not allege in their third-party complaint that the investment advisors either knew of, or participated in, the fraud in any respect, or otherwise allege that the advisors were liable under any other theory (id.). Here, in contrast, Weil Gotshal has clearly alleged that, insofar as it is held liable to Bolton for damages arising out its representation in the Three Boys Music action, then Epstein and his firm are liable in contribution, because their own actions or inactions caused or contributed to those damages.

Finally, third-party defendants argue that an attorney may only bring a contribution claim against another attorney where the third-party defendant attorney subsequently represented the client in the same matter. To the contrary, a contribution claim clearly lies against an independent tortfeasor who has separately breached his or her own duty to the plaintiff, as long as that breach of duty aggravates the same damages of the plaintiff (see Raquet v Braun, 90 NY2d at 183 [internal citations and quotation marks omitted] [contribution "may be invoked against concurrent, successive, independent, alternative and even intentional tortfeasors"]).

Accordingly, Weil Gotshal's allegations are sufficient state a claim for contribution. [*7]

The Court has considered the remaining arguments, and finds them to be without merit.

CONCLUSION

In view of the above, it is

ORDERED THAT the motion to dismiss by third-party defendants Epstein, Levinsohn, Bodine, Hurwitz & Weinstein, LLP and Robert J. Epstein is denied.

Dated: July 13, 2005

_______________________

J.S.C.