Kramer Levin Naftalis & Frankel LLP v Cooper

[*1] Kramer Levin Naftalis & Frankel LLP v Cooper 2006 NY Slip Op 50380(U) [11 Misc 3d 1064(A)] Decided on January 10, 2006 Supreme Court, New York County Heitler, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 10, 2006
Supreme Court, New York County

KRAMER LEVIN NAFTALIS & FRANKEL LLP, COHEN TAUBER SPIEVACK & WAGNER LLP, Plaintiffs,

against

KYLE COOPER, Defendant.



KYLE COOPER, Counterclaim Plaintiff, -against-

against

ARTHUR D. EMIL, Counterclaim Defendant.



101776/05

Sherry Klein Heitler, J.

Motion sequence numbers 002 and 003 are consolidated for disposition herein.

In motion sequence 002, plaintiff pro se Cohen Tauber Spievack & Wagner LLP ("Cohen Tauber") and counterclaim defendant Arthur D. Emil ("Emil") move, pursuant to C.P.L.R.

§ 3211(a)(5), for an order granting Emil's motion to dismiss the counterclaims brought by defendant/counterclaim plaintiff Kyle Cooper ("Cooper") in their entirety on the ground that the Statute of Limitations has run as to those claims. In motion sequence 003, Kramer Levin Naftalis & Frankel ("Kramer Levin") moves, on the same ground, for the same relief.

By an Operating Agreement dated January 31, 1997, Cooper, Peter Frankfurt ("Frankfurt") and Chip Houghton ("Houghton") formed a company, Imaginary Forces LLC, with the assistance of the law firm of Kramer Levin and Arthur Emil, who was then counsel to Kramer Levin. Cooper, Frankfurt and Houghton were named as the three Managers of Imaginary Forces; under the Agreement, any two of the Managers could vote a third Manager out of his position as Manager. In February 2003, Emil left Kramer Levin and joined Cohen Tauber, but continued to perform legal work in connection with Imaginary Forces. Additionally, in 2003, Frankfurt and Houghton exercised their option to vote Cooper out of his employment as a Manager of Imaginary Forces.

On or about December 24, 2003, Cooper brought a lawsuit captioned Kyle Cooper v. [*2]Chip Houghton et al., in the Superior Court of the State of California, County of Los Angeles, Case No. B.C. 308 354. That lawsuit asserted various causes of action against Houghton, Frankfurt, Imaginary Forces and "DOES 1 through 50", including breach of fiduciary duty, breach of implied contract, breach of oral contract, and interference with prospective economic advantage. The lawsuit also sought dissolution of Imaginary Forces, an accounting, and other injunctive relief. Thereafter, Cooper moved to amend his complaint to add Emil, Cohen Tauber and Kramer Levin as "Does" in the California lawsuit. By a decision dated May 26, 2005, the California court granted Kramer Levin's motion to quash the service of the summons and complaint upon Kramer Levin as a "Doe defendant," holding that

Cooper improperly named Kramer Levin as a Doe Defendant pursuant

to California Code of Civil Procedure § 474 in that Cooper had actual

knowledge of Kramer Levin and its alleged role in the events forming

the basis of the complaint prior to the filing of the original complaint

in December 2003. The Court's conclusion is based on the following

findings:

By no later than March 2003, Cooper's employment at

Imaginary Forces LLC ("Imaginary Forces") was terminated.

By no later than that date, Cooper knew all of the facts that

allegedly gave rise to his cause of action against Kramer Levin

for misrepresentation.

On June 10, 2003, Arthur Emil responded to Cooper's then-current counsel's May 14, 2003 letter, reiterating his position that he and Kramer Levin had never represented Cooper; at that time, Emil did not provide any signed conflict waiver. By no later than that date, Cooper knew all of the facts that allegedly gave rise to his causes of action against Kramer Levin for professional negligence and breach of fiduciary duty.

(Emphasis supplied).[FN1] By a decision dated July 1, 2005, the same court granted Emil and Cohen [*3]Tauber's motion to quash the service of the summons and complaint on the same grounds, finding that

After Mr. Emil responded to Plaintiff's then current counsel's May

14, 2003 letter stating that neither he or[sic] his firm had ever

represented Plaintiff or any of the individual organizers of the

entity, but rather represented the entity itself, such response

served to put Plaintiff and anybody else on notice of the time

which to name Mr. Emil and Cohen Tauber as defendants

in a lawsuit claiming, among other things, professional

negligence and breach of fiduciary duty.

(Emphasis supplied). Kramer Levin, Emil and Cohen Tauber (collectively, "the Law Firms") assert that the California court's factual findings in these decisions namely, that Cooper had knowledge of the facts underlying his counterclaims against these parties no later than June 2003 should have preclusive effect in this litigation, such that this court should find that the Statute of Limitations on Cooper's counterclaims began to run in June 2003. Further, they argue, New York's borrowing statute,' C.P.L.R. § 202,[FN2] requires that Cooper's counterclaims satisfy both the Statute of Limitations in New York and in California.

To this extent, the litigants appear to agree. However, Cooper claims that California would apply a four-year Statute of Limitations to his counterclaims, whereas the Law Firms argue that a one-year Statute of Limitations would apply under California law. (That the three-year Statute of Limitations applicable in New York, see C.P.L.R. § 214[6], would not preclude Cooper's counterclaims is not in dispute here.)

The California court's factual findings with regard to the date upon which Cooper's claims against the Law Firms began to accrue collaterally estop this court from finding otherwise in this proceeding. See Ryan v. New York Telephone Co., 62 NY2d 494, 500 (1984). "The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same." Id. (internal citation omitted) (emphasis supplied). Particularly where, as here, [*4]the factual finding at issue was "vigorously contested," and Cooper had "a full and fair opportunity" to litigate the issue in the California court, see Buechel v. Bain, 97 NY2d 295, 305-06 (2001), cert. denied, 535 U.S. 1096, 122 S. Ct. 2293, 152 L. Ed. 2d 1051 (2002),

the invocation of collateral estoppel to foreclose relitigation of the issue in this court is appropriate. Thus, California's one-year Statute of Limitations for legal malpractice claims, see California Code of Civil Procedure § 340.6, began to run as of June 2003, and Cooper's legal malpractice counterclaims in this action are untimely because they do not satisfy California's Statute of Limitations for legal malpractice actions, as required by New York's borrowing statute,' C.P.L.R. § 202.

The court finds unpersuasive Cooper's distinction between his legal malpractice and breach of fiduciary duty counterclaims for Statute of Limitations purposes. Cooper argues that California's catch-all Statute of Limitations of four years, see California Code of Civil Procedure § 343, applies to his breach of fiduciary claims against the Law Firms. However, Cooper does not allege any fiduciary duty owed to him by the Law Firms other than that embodied in the attorney-client relationship. Thus, the breach of fiduciary duty counterclaims are necessarily dependent upon the existence of facts establishing an attorney-client relationship between Cooper and the Law Firms.

California Code of Civil Procedure § 340.6 provides: An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission or four years from the date of the wrongful act or omission, whichever occurs first. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: (1) The plaintiff has not sustained actual injury; (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred; (3) The attorney willfully conceals the facts constituting the wrongful act or omission when such facts are known to the attorney, except that this subdivision shall toll only the four-year limitation; and (4) The plaintiff is under a legal or physical disability which restricts the plaintiff's ability to commence legal action. (b) In an action based upon an instrument in writing, the effective date of which depends upon some act or event of the future, the period of limitations provided for by this section shall commence to run upon the occurrence of such act or event.

The California courts have construed this Statute of Limitations to exempt only fraud claims [*5]from the general requirement that claims against attorneys, whether based on their acts or omissions, be brought within one year of the date from which the plaintiff has learned of, or should have learned of, the alleged malfeasance. See, e.g., Stoll v. Superior Court, 12 Cal. Rptr. 2d 354, 356 (Ct. App. 1992). The Court of Appeal of California, First Appellate District, explicitly rejected the argument proffered by Cooper here, namely, that California's four-year catch-all Statute of Limitations should apply to breach of fiduciary duty claims brought against attorneys:

In this case, however, the trial court essentially engrafted a second limitation on the one-year period for malpractice which happens to involve a breach of fiduciary duty. Because such a breach is ungoverned by a specific statutory limitations period, the trial court concluded that the four-year "catch-all" limitations period applied. In our view, this disregards the intent of the Legislature and, because much attorney malpractice may be considered a fiduciary breach, reinstates a lengthy limitations period and thus increases the very insurance costs the Legislature sought to decrease.

Id. at 357. Thus, the court found that:

the statute of limitations within which a client must commence an action against an attorney on a claim for legal malpractice or breach of a fiduciary duty is identical. Unless tolled, a claim based on either theory falls within the statutory term wrongful act or omission' and must be commenced within one year after the client discovers, or with reasonable diligence should have discovered, the facts constituting the act or omission . . . .

Id. at 354. See also Quintilliani v. Mannerino, 72 Cal. Rptr. 2d 359, 368 (Ct. App. 1998).

Cooper's argument, that the Law Firms' deliberate concealment of their allegedly wrongful acts tolled the one-year Statute of Limitations, such that he was entitled to four years, rather than one, to file his action, is incorrect. California Code of Civil Procedure § 340.6 provides only that the time to file such claims may be tolled for as long as four years if the acts remain concealed. See, e.g., Hallstrom v. Feldman, 2003 Cal. App. Unpub.7235, *1, *34-35 (Ct. App. 2003).

Thus, the court finds that Cooper's counterclaims are time-barred and subject to dismissal. As amendment of the claims would not cure the Statute of Limitations defect at issue here, Cooper's request for leave to amend his pleadings is denied.

Accordingly, it is hereby

ORDERED that the motion of plaintiff pro se Cohen Tauber Spievack & Wagner LLP and counterclaim defendant Arthur D. Emil (motion sequence number 002), brought pursuant to C.P.L.R § 3211(a)(5), for an order granting Emil's motion to dismiss the counterclaims brought by defendant/counterclaim plaintiff Kyle Cooper ("Cooper") in their entirety on the ground that the Statute of Limitations has run as to those claims, is granted and Cooper's counterclaims are dismissed; and it is further

ORDERED that the motion of Kramer Levin Naftalis & Frankel (motion sequence [*6]number 002), brought pursuant to C.P.L.R § 3211(a)(5), for an order granting Emil's motion to dismiss the counterclaims brought by defendant/counterclaim plaintiff Kyle Cooper ("Cooper") in their entirety on the ground that the Statute of Limitations has run as to those claims, is granted and Cooper's counterclaims are dismissed; and it is further

ORDERED that counsel for the parties shall appear for a conference at 9:30 a.m. on February 10, 2005 at Room 438, 60 Centre Street, New York, New York 10007.

This shall constitute the decision and order of the court.

DATED: January 10, 2006

SHERRY KLEIN HEITLER

J.S.C. Footnotes

Footnote 1: California Code of Civil Procedure § 474 provides: "Fictitious names. When the plaintiff is ignorant of the name of a defendant, he must state that fact in the complaint, or the affidavit if the action is commenced by affidavit, and such defendant may be designated in any pleading or proceeding by any name, and when his true name is discovered, the pleading or proceeding must be amended accordingly; provided, that no default or default judgment shall be entered against a defendant so designated, unless it appears that the copy of the summons or other process, or, if there be no summons or process, the copy of the first pleading or notice served upon such defendant bore on the face thereof a notice stating in substance: "To the person served: You are hereby served in the within action (or proceedings) as (or on behalf of) the person sued under the fictitious name of (designating it)." The certificate or affidavit of service must state the fictitious name under which such defendant was served and the fact that notice of identity was given by endorsement upon the document served as required by this section. The foregoing requirements for entry of a default or default judgment shall be applicable only as to fictitious names designated pursuant to this section and not in the event the plaintiff has sued the defendant by an erroneous name and shall not be applicable to entry of a default or default judgment based upon service, in the manner otherwise provided by law, of an amended pleading, process or notice designating defendant by his true name."

Footnote 2: C.P.L.R. § 202 provides: "Cause of action accruing without the state. An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.