Siegel Consultants, Ltd. v Nokia, Inc.
Annotate this CaseDecided on April 28, 2011
Supreme Court, New York County
Siegel Consultants, Ltd., Plaintiff,
against
Nokia, Inc. and 5 LLC, Defendants. 5 LLC, Third-Party Plaintiff, FRIEDLAND REALTY, INC. and GENE MEER, Third-party Defendants.
603277/08
Counsel on the matter are Stephen A. Hoffman, Esq. of Callan Koster, Brady & Brennan LLP for defendant Nokia, Inc. and defendant/third-party plaintiff 5 LLC and Paul Frohman, Esq., of Alfieri, Frohman & Primoff, LLP for third-party defendants Friedland Realty and Gene Meer.
Eileen Bransten, J.
This action arises out of a dispute concerning a real estate broker's commission for the rental of the premises located at 5 East 57th Street, New York, New York. Defendant/third-party plaintiff 5 LLC is the owner of the premises. Plaintiff Siegel Consultants, Ltd., a real estate broker, alleges that it was instrumental in effectuating a lease agreement between 5 LLC and former defendant Nokia, Inc. ("Nokia"), and claims entitlement to a full commission. Third-party defendant Friedland Realty, Inc. ("Friedland") was 5 LLC's exclusive agent for the subject property. Former third-party defendant Gene Meer, Friedland's president, was the broker involved in the subject transaction.
Friedland moves, pursuant to CPLR 3211 (a) (1) and (a) (7), for an order dismissing the third-party amended complaint as against it, except as to that branch of the first cause of action alleging breach of the brokerage agreement at issue (the "Brokerage Agreement"). In the alternative to dismissing the ninth cause of action, Friedland moves, pursuant to CPLR 3024 (b), to strike the [*2]allegations contained in paragraphs 84, 88, 89, and 106 as scandalous, and paragraphs 85 and 90 through 103 as prejudicial. Friedland also moves, pursuant to 22 NYCRR 130-1.1, for an order imposing sanctions upon third-party plaintiff 5 LLC and its attorneys.
5 LCC cross-moves for an order disqualifying Paul Frohman, Esq. ("Frohman"), and the firm of Alfieri, Frohman & Primoff, LLP ("Frohman & Primoff"), Friedland's attorneys, from representing Friedland and/or former third-party defendant Meer in this action. 5 LLC bases its argument upon Frohman's and Frohman & Primoff's previous purported representation of 5 LLC. 5 LLC also seeks the imposition of sanctions against Frohman and Frohman & Primoff.
Friedland's motion to dismiss is granted. 5 LLC's cross motion to disqualify is denied. Both the motion and the cross motion for sanctions are denied.
1.Motion to Dismiss
The underlying facts are set forth in this court's decision and order dated August 9, 2010 (the "August 2010 Order"), and will be referred to herein only as necessary for clarification.
In the original third-party complaint, 5 LLC asserted eight causes of action — breach of contract; contribution; fraud; breach of the implied covenant of good faith and fair dealing; breach of loyalty; breach of fiduciary duty; unjust enrichment; and alter-ego liability. In the August 2010 Order, this court dismissed the first cause of action as to third-party defendant Meer, as well as the second through eighth causes of action against both third-party defendants. In addition, this court dismissed that portion of the first cause of action seeking damages for failure to pay plaintiff's commission, but retained the branch of the first cause of action alleging that Friedland's failure to hold harmless, defend and indemnify plaintiff constituted a breach of the Brokerage Agreement.
On September 13, 2010, 5 LLC served an amended third-party complaint. The amended third-party complaint repeats nearly identically the eight causes of action as contained in the original third-party complaint, with only minor word changes, as if no prior order and decision had been made. The amended pleading also contains a ninth cause of action seeking a declaratory judgment that Friedland "is obligated to defend and indemnify 5 LLC in the subject underlying action pursuant to the terms of the conditions of the brokerage agreement, dated January 10, 2005, as ratified by executing subsequent agreements, dated October 31, 2006 and April 14, 2008," and that Friedland "be directed to reimburse 5 LLC for all defense costs incurred by 5 LLC in the defense of the underlying action." Amended Third-Party Complaint, ¶ 69.
On September 14, 2010, Frohman, Friedland's attorney, faxed a letter to Stephen Hoffman, Esq., 5 LLC's attorney, asking him to withdraw the amended complaint on the grounds that the first through eighth causes of action violated this court's prior dismissal order, and that the ninth cause of action was duplicative of the first cause of action. See Frohman Aff., Ex. D.
By letter dated September 15, 2010, Hoffman refused to withdraw the previously dismissed claims. Although Hoffman conceded that the causes of action had been dismissed, he asserted that he had filed a notice of appeal from the prior order, and that the causes of action were therefore properly included in the amended complaint "lest there be any spurious claim that these causes of action were abandoned." See id., Ex. D-1.
Friedman's motion to dismiss the amended third-party complaint is granted. With respect to the first through eighth causes of action, the CPLR does not permit a party to replead causes of action that have already been dismissed through an amendment to the complaint. Indeed, 5 LLC cites no legal authority that would allow the filing of an amended complaint under those [*3]circumstances, merely stating that there is "nothing improper about this practice." Hoffman Aff., ¶ 24.
5 LLC's ninth cause of action for declaratory judgment must also be dismissed. The claim is entirely duplicative of 5 LLC's first cause of action. In the first cause of action, 5 LLC alleges that Friedland's "failure to hold harmless, defend and indemnify 5 LLC [in the underlying action] constitutes a breach of contract of the Brokerage Agreement, as ratified and supplemented by the April Agreement and October Agreement." Amended Third-Party Complaint, ¶ 26. Similarly, in the ninth cause of action, 5 LLC seeks a declaratory judgment that Friedland "is obligated to defend and indemnify 5 LLC in the subject underlying action pursuant to the terms of the conditions of the brokerage agreement," and that Friedland "be directed to reimburse 5 LLC for all defense costs incurred by 5 LLC in the defense of the underlying action." Id., ¶ 69.
Moreover, a declaratory judgment is not the proper remedy here. A declaratory judgment "is generally appropriate only where a conventional form of remedy is not available and a declaratory judgment will serve some practical and useful purpose," Automated Ticket Sys. v. Quinn, 90 AD2d 738, 739 (1st Dep't 1982), aff'd 58 NY2d 949 (1983) (internal quotation marks and citation omitted), such as "quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations." James v. Alderton Dock Yards, 256 NY 298, 305 (1931). Thus, "[a] cause of action for a declaratory judgment is unnecessary and inappropriate when the plaintiff has an adequate, alternative remedy in another form of action." Apple Records v. Capitol Records, 137 AD2d 50, 54 (1st Dep't 1988) (dismissing causes of action for declaratory judgment); see also Main Evaluations v. State of New York, 296 AD2d 852 (4th Dep't), appeal dismissed 98 NY2d 762 (2002); Artech Info. Sys. v. Tee, 280 AD2d 117 (1st Dep't 2001); BGW Dev. Corp. v. Mount Kisco Lodge No. 1552 of Benevolent and Protective Order of Elks of U.S. of Am., 247 AD2d 565 (2d Dep't), lv. denied 92 NY2d 813 (1998).
Here, 5 LLC is not seeking a declaration as to the relative rights of the parties with respect to the matter in controversy. Rather, 5 LLC seeks a declaration that Friedland is obligated to defend and indemnify 5 LLC in the underlying action. This is not the function of a declaratory judgment action. Moreover, 5 LLC clearly "has an adequate alternative remedy" — the almost identical first cause of action, in which 5 LLC asserts that Friedland's failure to defend and indemnify it in the underlying action constitutes a breach of contract. See Apple Records, 137 AD2d at 54; Main Evaluations, Inc., 296 AD2d at 853. Indeed, Hoffman admits that the only remaining issue in this action is whether Friedland "has fulfilled its obligation to defend and indemnify 5 LLC." Hoffman Aff., ¶ 34.
For the above reasons, 5 LLC's ninth cause of action for a declaratory judgment must be dismissed. In light of this determination, it is unnecessary to reach Friedland's alternative argument that certain paragraphs contained in the ninth cause of action be stricken as scandalous and prejudicial.
Friedland's motion to dismiss is granted.
2.Cross Motion for Disqualification
5 LLC seeks disqualification of Friedland's attorneys on the ground that "Paul [*4]Frohman, Esq. has not only purported to represent both the third-party plaintiff, 5 LLC and the third-party defendant, Friedland, but has advocated for both of these entities at the same time." Aff. of Stephen A. Hoffman, Esq., ¶ 3.
In support of his motion for disqualification, Hoffman alleges that, on January 5, 2009, counsel for 5 LLC sent a tender letter to Friedland and Meer, demanding that Friedland defend, indemnify and hold harmless 5 LLC, pursuant to the Brokerage Agreement. Id., ¶ 8. Hoffman also alleges that, during two meetings held on January 12 and 15, 2009, Frohman stated that Friedland would not defend, indemnify and hold 5 LLC harmless in the underlying action unless 5 LLC agreed to earmark a $300,000 indemnity payment which Nokia paid to 5 LLC for Friedland's benefit. Id., ¶¶ 9-11. Hoffman contends that he informed Frohman that he could not adequately represent 5 LLC until the issue of indemnification was resolved, and that, because Frohman's loyalty lay with Friedland and Meer, basic tents of conflict law prohibited him from representing 5 LLC's interests in this matter. Id., ¶ 12. Accordingly, Frohman was advised by 5 LLC to refrain from interposing an answer or taking any action on behalf of 5 LLC until the issues surrounding Friedland's contractual obligations were resolved. Id., ¶ 15. Hoffman contends that, nevertheless, Frohman served an unauthorized answer on behalf of 5 LLC. Id., ¶ 16.
Frohman paints a different view of the factual scenario. Frohman alleges that, during a meeting on January 13, 2009, it was agreed that, with respect to the underlying action, his firm would appear for and represent 5 LLC, and that Hoffman's firm would appear for and represent Nokia, 5 LLC's co-defendant. Frohman Opp Aff., ¶ 3. As a result, on January 22, 2009, pursuant to his letter of engagement with Friedland, and in compliance with Friedland's obligation to defend, Frohman served an answer for 5 LLC. Id., ¶ 7. Frohman alleges that he then received a phone call from Hoffman, berating him for serving an Answer without having resolved the indemnification issue, and informing him that 5 LLC was Hoffman's client in the underlying action. Id.
Frohman alleges that, although he offered to sign a stipulation of substitution of attorneys, Hoffman refused. Frohman contends that Hoffman declared that Frohman never had the authority from the outset to be 5 LLC's attorney, and Hoffman insisted that Frohman withdraw the answer. Id., ¶ 8. Frohman then sent a letter to Robert Olshever, the attorney who represented 5 LLC in the underlying lease transaction, confirming that Friedland agreed to defend the action and hold 5 LLC harmless in accordance with the brokerage agreement. Id. According to Frohman, Hoffman rejected that letter, and refused to allow him to act as 5 LLC's attorney and to defend the action. Id.
On March 2, 2009, 5 LLC served an order to show cause requesting, among other things, an order declaring Frohman's answer a nullity. On May, 27, 2009, this court issued an order declaring Frohman's answer a nullity.
Hoffman contends that his motion for disqualification should be granted, because during the period when Frohman served an unauthorized answer on behalf of 5 LLC, until this court declared the answer a nullity, "Frohman advocated on behalf of his long-standing [*5]client, Friedland, to the detriment of 5 LLC." Hoffman Aff., ¶ 20, and thus, "Frohman has represented both the third-party plaintiff (5 LLC) and the third-party defendant (Friedland), in violation of the Rules of Professional Conduct." Id., ¶ 21 (emphasis in original).
A party seeking disqualification of its adversary's lawyer has the burden of proving: "(1) the existence of a prior attorney-client relationship between the moving party and opposing counsel, (2) that the matters involved in both representations are substantially related, and (3) that the interests of the present client and former client are materially adverse." Pellegrino v. Oppenheimer & Co., Inc., 49 AD3d 94, 98 (1st Dep't 2008); Jamaica Pub. Serv. Co. v. AIU Ins. Co., 92 NY2d 631 (1998). "Only where the movant satisfies all three inquiries does the irrebutable presumption of disqualification arise." Tekni-Plex, Inc. v. Meyner & Landis, 89 NY2d 123, 132 (1996). 5 LLC has not met its burden with respect to any of these elements.
An attorney-client relationship "arises only when one contacts an attorney in his capacity as such for the purpose of obtaining legal advice or services." Matter of Priest v. Hennessy, 51 NY2d 62, 68-69 (1980). "Formality is not essential to create a legal services contract. Therefore, it is necessary to look to the words and actions of the parties to ascertain if an attorney-client relationship was formed'" Talansky v. Schulman, 2 AD3d 355, 358 (1st Dep't 2003) (citation omitted); see also Wei Cheng Chang v. Pi, 288 AD2d 378 (2d Dep't 2001), lv. denied 99 NY2d 501 (2002); McLenithan v. McLenithan, 273 AD2d 757 (3d Dep't 2000).
"[M]ore than mere generalized assertions' are required to justify disqualification." Waehner v. Northwest Bay Partners, Ltd., 30 AD3d 799, 800 (3d Dep't 2006) (citation omitted).
Frohman argues that there was never an attorney-client relationship between him and 5 LLC, and that 5 LLC never imparted confidential or secret information to him. In support of this argument, Frohman alleges that, after the January 13, 2009 meeting, in reliance on the understanding regarding 5 LLC's defense, he obtained a written letter from Friedland, the indemnitor, in which it employed his firm to defend 5 LCC at its sole expense. Id., ¶ 4. He further alleges that he never requested nor obtained any letter of engagement from 5 LLC. Id.
Frohman also asserts that, prior to the January 15, 2009 meeting, he never met or spoke with anyone from 5 LLC. Frohman Aff., ¶ 3. At the January 15th meeting, he met Ben Duell ("Duell"), a principal of 5 LLC, for the first time. Id., ¶ 5. That occasion was the only time he ever met or spoke with Duell or anyone else from 5 LLC. Id. According to Frohman, Duell participated in the meeting, but stated only that he had never met or spoken with the plaintiff in the underlying action, and that he did not have an agreement with plaintiff to pay any commissions. Id. Thus, Frohman alleges, "[n]othing he said at the open meeting constituted confidential or secret information." Id. Frohman further alleges that "at no time did I or any other member of my law firm ever obtain any confidential or secret information from 5 LLC regarding either the underlying lease transaction which gave rise to [*6]this action or regarding this action itself." Id. Frohman asserts that all of the information that he needed to initiate 5 LLC's defense was obtained from Meer, the procuring broker associated with Friedland. Id.
Moreover, in his affidavit in support of 5 LLC's motion to declare the answer filed by Frohman a nullity, Duell, on behalf of 5 LLC, averred that "I never gave Mr. Frohman any authority to serve said Answer ... I never gave Mr. Frohman or his firm authority to act as 5 LLC's counsel." Duell Aff., ¶ 5. Thus, in Duell's own words, an attorney-client relationship never arose between Frohman and 5 LLC. Indeed, Frohman's letter of engagement was only with Friedland.
The facts presented here, including Duell's affidavit on behalf of 5 LLC, support the conclusion that 5 LLC was never Frohman's client. 5 LLC presents only conclusory claims that an attorney-client relationship existed between the parties. In the absence of that relationship, "the irrebutable presumption of disqualification does not arise," and the cross motion must be denied. Gordon v. Skyline Aviation, Inc., 9/29/10 NYLJ (Sup Ct, NY County, Kapnick, J) (denying motion for disqualification on ground that no attorney-client relationship existed).
In addition, it is clear that the matters at issue are not related. Counsel will only be disqualified "where the party seeking that relief meets his burden by establishing a substantial relationship between the issues in the [present] litigation and the subject matter of the prior representation." Matter of Prudential Sec. v. Wyser-Pratte, 187 AD2d 306, 307 (1st Dep't 1992); Lightning Park v. Wise Lerman & Katz, 197 AD2d 52 (1st Dep't 1994). Here, 5 LLC has not met that burden, and the motion for disqualification is denied on this ground as well.
In order to meet the substantial relationship test, the issues in the present litigation must be "identical to" or "essentially the same as" those in the prior case before disqualification will be granted. Lighting Park, Inc., 197 AD2d at 55. However, the dispute between plaintiff and 5 LLC in the main action is not the same as the dispute between 5 LLC and Friedland in the third-party action. In the former, plaintiff claims a commission as the procuring broker of the lease agreement. In that regard, there is no dispute between 5 LLC and Friedland, as they both agree that plaintiff was not the procuring broker, and that plaintiff should not recover any commission. In contrast, the sole issue in the third-party action is Friedland's obligation to defend the main action and to save 5 LLC harmless, which does not concern or affect plaintiff's entitlement to a commission.
5 LLC's failure to demonstrate any substantial relationship between Frohman's current representation of Friedland, and its brief prior representation of 5 LLC, without more, warrants denial of its disqualification motion. See Jamaica Pub. Serv. Co., 92 NY2d at 637 ("There being no evidence of a substantial relationship between (the attorney's) past and current representation, on that ground alone no violation of DR 5-108 (A) (1) was demonstrated").
Finally, the interests of the parties are not materially adverse. With respect to the main [*7]action, they share the identical interest — both 5 LLC and Friedland contend that Friedland was the sole procuring broker, and that plaintiff had nothing to do with the lease transaction. Indeed, in the answer to the complaint in the main action, 5 LLC denied each allegation in which plaintiff claimed to be entitled to recover a commission, and Hoffman concedes that "5 LLC and Nokia deny that plaintiff was the procuring cause of the lease at issue." Hoffman Aff., ¶ 7. Thus, both 5 LLC and Friedland share a common interest in defeating plaintiff's claim for a commission.
Accordingly, the cross motion for disqualification is denied.
3.Motion and Cross Motion for Sanctions
Friedland seeks the imposition of sanctions on the ground that 5 LLC engaged in misconduct by re-alleging dismissed claims in the amended complaint. 5 LCC cross-moves for the imposition of sanctions against Frohman and Frohman & Primoff based upon their brief prior representation of 5 LLC. Both the motion and the cross motion for sanctions are denied. The imposition of sanctions is not appropriate here, as neither party's arguments in support of their respective positions are completely without merit. See Benishai v Benishai, ___ AD3d ___, 2011 WL 1237053 (1st Dep't 2011); L & M Bus Corp. v. New York City Dep't of Educ., ___ AD3d ___, 2011 WL 1237577 (1st Dep't 2011).
Order on following page.
Accordingly, it is hereby
ORDERED that the motion of third-party defendant Friedland Realty, Inc. to dismiss the amended third-party complaint is granted to the extent that the branch of the first cause of action seeking damages for breach of contract for failure to pay the plaintiff's commission, as well as the second, third, fourth, fifth, sixth, seventh, eighth and ninth causes of action, are severed; and it is further
ORDERED the cross motion of third-party plaintiff 5 LLC for disqualification is denied; and it is further
ORDERED that the motion of third-party defendant Friedland Realty, Inc. for the imposition of sanctions is denied; and it is further
ORDERED that the cross motion of third-party plaintiff 5 LLC for the imposition of sanctions is denied.
Dated: New York, New York
April 28, 2011 [*8]
ENTER:
Hon. Eileen Bransten, J.S.C.
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