Drain v Paragon Capital Mgt. Corp.

[*1] Drain v Paragon Capital Mgt. Corp. 2007 NY Slip Op 51438(U) [16 Misc 3d 1115(A)] Decided on July 3, 2007 Supreme Court, Suffolk County Pines, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 3, 2007
Supreme Court, Suffolk County

Elizabeth Drain, Steven Meyerowitz, Henri & Patricia Elzinga, Michelle & Jose Elzinga Diaz, Thomas & Karen Giardino, and Mr. Bargain Auto Parts, Inc., Suzanne Barnes and Susan MaGee, Plaintiffs,

against

Paragon Capital Management Corp., and Walter Wisniewski, Defendants.



22454-2006



Attorney for Plaintiffs

600 Lexington Avenue

9th Floor

New York, New York 10022

SEWARD & KISSEL LLP

Attorney for Defendants

One Battery Park Plaza

New York, New York 10004

Emily Pines, J.

Defendants, Paragon Capital Management Corp. ("Paragon") and Walter Wisniewski ("Wisniewski") move, by Notice of Motion (motion sequence number 005) for an Order pursuant to CPLR § 3211, dismissing the Plaintiffs' complaint, as well as for sanctions against the Defendants, under 22 NYCRR § 130-1.1(a) for bringing a frivolous action. Defendants claim that Plaintiffs' action is both time barred under any one of several legal theories and that, in any case, it fails to state a claim pursuant to CPLR § [*2]3211 (a) (7).

The gravamen of the Amended Complaint [FN1] is that four sets of investors entered into Investment Advisory Service Agreement(s) ("Agreements") with Paragon at various times during the mid to late 1990's , pursuant to which Paragon acted as the Plaintiffs' investment advisor. As set forth in the Amended Complaint, Plaintiff Elizabeth Drain entered into such Agreement in March, 1999 and terminated the Defendant in May 2002. Plaintiff Meyerowitz entered into his Agreement in 1997 and terminated Defendant in 2001. Thomas & Karen Giardino and Mr. Bargain Auto Parts, Inc. opened accounts under the Agreement in 1994 and terminated the parties' relationship in 2002. Patricia & Henri Elzinga opened Paragon accounts in 1993 and Michelle & Jose Elzinga opened Paragon accounts in 1997; these Agreements were terminated in 2002. Wisniewski, who signed all the Agreements, held himself out to the Plaintiffs as a certified financial planner. He is stated to be the President, Chairman and primary shareholder of Paragon. In essence, the Amended Complaint asserts claims against both Defendants for breach of the Agreement, for breach of fiduciary duty and for fraud.

Under the Agreement, Paragon was to receive a fee for its investment services consisting of a percent of the market value of the investment account.[FN2] Paragon had "(f)ull authority and sole discretion on (each) Client's behalf and at Client's risk, through such brokers as it may select to purchase, sell, repurchase, resell, convert or exchange securities for the Investment Account, all as Paragon seems advisable". Paragon was not required to consult with the various clients in advance of making such decision with a broker. The Agreement did contain some specific restrictions, such as limiting mutual fund investments to "no-load" mutual fund investment transactions, prohibiting any trades "on margin", "selling short" and "option trading". The separate Agreements also contained specific limits on the allocation of assets in equities , ranging from 65% for Elizabeth Drain to 95% for the other Plaintiffs.

The Plaintiffs have alleged that the Defendants engaged in the following acts: 1)they violated the asset allocation provisions of the Agreements between 1999 and termination ; 2) they failed to advise the Plaintiffs of Wisniewski's past securities industry disciplinary history as a NASD registered representative, including termination of employment for unauthorized trading and forging a customer's signature, as well as his suspension by NASD; 3) they refused to follow Plaintiffs' specific instructions in 2000, 2001 and 2002 to sell their investments and/or to sell their equity investments during the same period; and 4) they used misinformation and threats to avoid compliance with the [*3]specific directives of the Plaintiffs during the period from 2000 to termination of the Agreements.

As set forth in supplementary papers filed with the Court by agreement with counsel for both parties, the Plaintiffs filed six separate arbitration proceedings with the NASD between April and December, 2005 against Paragon, Wisniewski and non-party Charles Schwab . The specific filing dates are as follows: Steven Meyerwitz - April 22, 2005; Elizabeth Drain - May 25, 2005; Henri & Patricia Elzinga and Michelle & Jose Elzinga Diaz - September 15, 2005; and Thomas Giardino and Mr. Bargain Auto Parts, Inc. - December 30, 2005. These proceedings were ultimately consolidated by NASD into three proceedings.

On August 17, 2006, Plaintiffs filed the original Complaint in this action, alleging essentially identical facts to those asserted in the arbitrations. On December 20, 2006, Defendants moved before this Court for a permanent stay of arbitration against Paragon, Wisniewski and Charles Schwab, based at least in part on the ground that, by commencing an action, Plaintiffs had forfeited the right to continue to arbitrate. By Decision and Order dated January 12, 2007, the Court granted the stay as to all Defendants; denied Plaintiffs' cross-motion to compel; and denied the motion as to Charles Schwab, as that entity had not appeared as a party before the Court.

Defendants now argue that each of the Plaintiffs' remaining claims is barred by the applicable statute of limitations and for failure to state a proper cause of action. In response to the motion, Plaintiffs voluntarily withdrew, with prejudice, the following claims - 1) the cause of action for gross negligence; 2)the cause of action under the Investment Advisors Act; 3) the cause of action for breach of the covenant of good faith and fair dealing; and 4) the cause of action for punitive damages. In withdrawing the last cause of action, Plaintiffs stated that they still seek punitive damages as a remedy with the understanding that as such, it does not state a "cause of action" under New York law. In addition, Plaintiffs assert that their withdrawal of the other claims is not meant as a withdrawal the underlying facts asserted, which they state give rise to their causes of action for fraud and breach of fiduciary duty.

With regard to the remaining claims, Defendants argue that each should be measured from the varying dates of accrual to the time of commencement of the action in August 2006, and that, having commenced an action, the Plaintiffs have forfeited the tolling protection of CPLR § 204(b). Thus, Defendants allege that the breach of fiduciary duty claim , seeking money damages only, is governed by a three year statute and, therefore, extinguished at 2004 at the latest, in view of the Plaintiffs' allegations that such breaches occurred in the time period from 1999 to 2001/2002. With regard to the fraud claims, Defendants assert they accrued at the time of the contracts, since they appear to allege fraud in the inducement, and, therefore, they all expired between 1999 and 2003. While acknowledging that the Plaintiffs allege that they were not aware of Wisniewski's disciplinary history at the time the agreements were signed, Defendants argue that even [*4]under a "two years from discovery" rule, the fraud claim would have accrued by termination in 2002 , leaving three years before that action was commenced at the latest, since that was the last date that any of the Plaintiffs maintained any accounts with the Defendants. With regard to the Plaintiffs' claims for breach of contract, Defendants opine that Drain's claim based on exceeding authority in handling the accounts expired in 2005 based on dates of alleged breach starting in 1999. Further, Defendants argue that the Meyerowitz allegation discussing conduct in March 2000 would expire in March 2006; the Elzinga breaches allegedly occurring in 1998 to 2000 would expire in 2004; and the Giardino alleged breaches occurring around April 2000 would have expired in April 2006.

Defendants argue, further, that none of what are now remaining causes of action state a claim for which relief can be granted. With regard to the contract claim, Plaintiffs have neither set forth the specific contract provisions that have been violated nor can Plaintiffs succeed to the extent that their allegations center on failure to follow Plaintiffs' instructions, where the investment advisor is given broad discretionary authority and no specific requirement to follow oral advice of the client (citing, Trumbull Investment Ltd. v Wachovia Bank, N.A., 436 F.3d 443 ( 4th Cir. 2006). Defendants allege further that Plaintiffs fail again to set forth how Defendants breached their fiduciary duty, since their sole allegation in this regard concerns the discretion exercised by the Defendants in choosing how to invest the Plaintiffs' accounts. This discretion was provided to the Defendant Paragon in very broad language in the Investment Advisory Service Agreements and, indeed, all Agreements contained clauses setting forth both that the Plaintiffs understood the "risks involved with investing" and in most cases permitted 95% of the account to be invested in equities. Finally Defendants argue that the fraud claim must fail because it is either an attempt to morph a contract action into one for fraud, which is prohibited or because Plaintiffs cannot establish any link between the Defendant Wisniewski's "past history" and the alleged resulting damage herein.

Plaintiff's request for punitive damages must, according to Defendants, be denied, as the entire lawsuit is based on the parties' contractual relationship and involves no tort independent of the agreement or any need for protection against harm to the public, citing New York University v Continental Insurance Co , 87 NY2d 308, 662 N E 2d 763 (1995). With regard to Defendant Wisniewski, Defendants assert that no facts have been alleged that can give rise to a piercing of the corporate veil, as the contract involved was between Plaintiffs and Paragon, and there have been no facts alleged to justify disregard of the corporate form.

Plaintiffs state first that the tolling provisions of CPLR § 204(b) apply in this or in any case once there has been, as in this case, a demand for arbitration. Thus, Plaintiffs argue that the date for each applicable limitations period should be measured against the date in 2005 when all such arbitrations were commenced. With regard to the breach of fiduciary duty claims, those, Plaintiffs assert, accrued when Defendants misrepresented the conditions of the Plaintiffs' investments, and engaged in intimidation in the period [*5]from 2000 though 2002. In addition, as Plaintiffs allege that the breach of fiduciary duty claims are based on allegations of fraud, the six year rather than the alternative three year statute of limitations should be applied. Concerning the cause of action for fraud, Plaintiffs argue that they are protected by the "two years from discovery " rule, since Wisniewski deliberately concealed his disciplinary history and Plaintiffs first learned of it at the time of the arbitration against Charles Schwab. With regard to the other allegations of fraud concerning Wisniewski's misrepresentations as to placement of their investments and statements of intimidation to his clients, such were all made, according to Plaintiffs, within less than six years from the commencement of the arbitrations in 2005. The same argument is made concerning the breach of contact claims centering around the Defendants' alleged failure to follow the specific instructions of the Plaintiffs to sell their equity stocks in the period from 2000 trough 2002.

With regard to Defendants' arguments based on failure to state a claim, Plaintiffs state that the facts set forth must be both assumed as true and must be given a broad interpretation at this early stage of the proceedings. Accordingly, Defendants argue that the breach of contract cause of action is based on the Defendants' unauthorized failure to respond to the specific instructions of their clients, which discretion was not granted in the Agreements. With regard to fraud, Plaintiffs assert that the Amended Complaint sets forth causes of action for both fraud in the inducement based on Wisniewski's failure to disclose his prior disciplinary history and on the Defendants' misrepresentations and attempts at intimidation. Those same allegations, when combined with the discretion provided the Defendants gives rise to the claim, according to Plaintiffs, for breach of their fiduciary duty to their clients.

Plaintiffs also argue that their fraud claim, if successful, is based upon the kind of intentional behavior which would permit them to seek the remedy of punitive damages. With regard to Defendant Wisniewski, Plaintiffs assert that his fraudulent actions, constitute a tort committed against the Plaintiffs and give rise to personal liability, which is not entitled to the protection of a corporate veil.

FAILURE TO STATE A CLAIM

It is well settled that on a motion to dismiss for failure to state a cause of action, the allegations of the complaint must be accepted as true , and giving such allegations a liberal interpretation, the court must determine whether such facts fit any cognizable legal theory. Morales v Copy Right, Inc., 28 AD3d 440, 813 NYS2d 731 ( 2d Dep't 2006); Old Salem Dev't Group Ltd v Town of Fishkill, 301 AD2d 639, 754 NYS2d 333 ( 2d Dep't 2003). Accordingly, the court will construe the allegations of the Amended Complaint herein in the light most favorable to the Plaintiffs and will give them every possible favorable inference as required. see, Andre Strishak & Assoc, P.C. v Hewlett Packard Co, 300 AD2d 608, 752 NYS2d 400 (2d Dep't 2002). [*6]

After conceding the causes of action for gross negligence, those set forth under the 15 USC § 80b-1 ( the Investment Advisors Act), and for breach of the covenant of good faith and fair dealing (which are considered subsumed under any breach of contract claim), Plaintiffs herein allege three causes of action: those for fraud, for breach of contract and for breach of the Defendants' fiduciary duty.

To state a cause of action for fraud, a Plaintiff must allege misrepresentation of a material fact by Defendant, knowledge by Defendant of the falsity of such representation when made, justifiable reliance by the Plaintiff and resulting injury. Kaufman v Cohen 307 AD2d 113, 760 NYS2d 157 ( 1st Dep't 2003); see Monaco v New York Univ. Med. Ctr., 213 AD2d 167, 623 NYS2d 566, lv. denied, 86 NY2d 882, 635 NYS2d 944, 659 NE2d 767 (1995). However, it should be noted, that where the Defendant has a duty to disclose significant information, a fraud cause of action may also be predicated on an omission or concealment rather than upon a direct representation. Kaufman at 119, 165. Viewing the claims set forth in the Amended Complaint in the most liberal light, the Plaintiffs have alleged a cause of action for fraud. According to Plaintiffs, they gave the Defendants large amounts of their savings, provided such Defendants with great discretionary authority to invest such funds for the Plaintiffs, and Paragon failed to inform the Plaintiffs that Wisniewski (the corporate Defendant's chief executive officer, principal and the person with whom the Plaintiffs had ongoing contact), had been suspended from the NASD for forgery of account documents; and had been terminated from employment in the securities industry in 1989. Such allegations, when viewed in the context of the other allegations in the Amended Complaint, including assertions that Wisniewski actually threatened the Plaintiffs when they attempted to instruct him to sell certain of their holdings, are sufficient under New York law to state a cause of action for fraud.

A cause of action for breach of a fiduciary duty under New York law, falls somewhere between the tort concept embodied in the claim for fraud and the contract principles applied in the claim for breach of the parties' Agreement. To state a valid cause of action, the plaintiff must generally state that a fiduciary relationship existed between the parties and that the defendant breached the relationship. Dimsey v Bank of N.Y., 14 Misc 3d 1205(A), 831 2d 359 ( Sup Ct N Y Co 2006 ). Where the broker is granted broad discretion in the investment account, the broker becomes the fiduciary of the customer. Id.; see also, Lowenbrraun v L F Rothschild, 685 F Supp 336, 343 (SDNY 1988). What creates the fiduciary duty is the disparity of power, which causes the claimant to place reliance on the expertise and the broad authority of the other party. New York State Judicial Institute, Commercial Division Update Program ("Breach of Fiduciary Duty", Prof. Helen Scott). In the case at bar, Plaintiffs assert that Paragon and Wisniewski, using the broad discretion given them to purchase and sell investments as set forth in the Agreement, failed and refused to follow their specific directions to sell certain securities, made misrepresentations concerning the placement of their investments as well as concerning the market and made threats when Plaintiffs tried to minimize their losses. Taken as a whole, the Plaintiffs state a cause of action for [*7]breach of the Defendants' fiduciary duty.

A breach of contract claim must be predicated on the existence of an agreement; the performance by the Plaintiff, the breach by the Defendant and resulting damages. See, Yatter v William Morris Agency, Inc, 256 AD2d 260, 682 NYS2d 198 ( 1st Dep't 1998). While the Defendants argue that they were granted broad discretion to trade Plaintiffs' investments via the Agreement and that they cannot be held responsible for a downturn in the market, the Amended Complaint makes far broader allegations. The pleadings, the Agreement itself and the Plaintiffs' arguments in opposition to the Defendants' motion to dismiss set forth an alleged pattern of conduct, which alleges violations of specific provisions of the Agreement, such as provisions setting forth a floor of when to liquidate holdings, and those limiting the percentage of holdings to be invested in equities. In addition, unlike the agreements described in Trumball Investments v Wachovia Bank, 436 F 3d 443 ( 4th Cir 2006), there was no provision in the Agreements in this case that allowed the Defendants to ignore the specific oral requests of the Plaintiffs. Thus, Plaintiffs have also stated, as part of their breach of contract claim that the Defendants failed to follow their specific instructions, resulting in large losses. The Plaintiffs state a cause of action for breach of contract.

STATUTE OF LIMITATIONS

CPLR 204 (b)

At issue in this case is the construction of the tolling provisions of CPLR § 204(b), which suspends the running of the statute of limitations for those parties, who erroneously seek arbitration as the means of adjudicating a legal dispute. Defendants assert that it is inapplicable unless a party both commences a special proceeding under CPLR Article 75 and awaits the outcome of the demand. The statute provides that :

"Where it shall have been determined that a party is not obligated to submit a claim to arbitration, the time which elapsed between the demand for arbitration and the final determination that there is no obligation to arbitrate is not a part of the time within which an action upon such claim must be commenced. . . ."

The Plaintiffs herein filed demands for arbitration on various dates in 2005, as set forth above. While they neither commenced a proceeding under CPLR § 75 nor waited for the Court's decision in January, 2007 for a determination as to whether arbitration was the proper vehicle for their claims, such is not a factor, in this Court's view, for application of the statutory tolling provisions. In Francese v Enlarged City School District of Troy, 95 NY2d 59, 710 NYS2d 315, 731 NE2d 1123 ( 2000) the Plaintiff never commenced an Article 75 proceeding; but, rather, made a cross motion to compel arbitration in opposition to the Defendants' motion to stay arbitration. The Court of Appeals applied the tolling provisions of the statute. Id at 62, 316, 1124. Whether the [*8]tolling provisions of CPLR§ 204 (b) extend to January, 2007 or merely to the Plaintiffs' commencement of the action in August, 2006 is, quite frankly, irrelevant in this case. By virtue of demanding arbitration in 2005, the dates of the demands, rather than the latter dates, are those to be considered for purpose of determining the timeliness of the Plaintiffs' three remaining causes of action. The purpose of the tolling statute, as set forth by the Court of Appeals, is to encourage the use of arbitration and not to have its broad purpose frustrated by narrow, limited interpretation. Id. at 64, 317, 1125.

FRAUD

CPLR § 213(8) provides, in pertinent part, that a cause of action for fraud must be commenced within six years from the date of the alleged act or within two years from the date the plaintiff discovered the fraud or could, with due diligence, have discovered it. see, Kaufman v Cohen at 122, 167. Plaintiffs assert in their Amended Complaint that the Defendants concealed Wisniewski's disciplinary record and indeed failed to follow SEC regulations requiring disclosure on "Form ADV" when Paragon entered into the Agreement with Plaintiffs. Plaintiffs allege further, in opposition to the motion to dismiss, that they first learned of Wisniewski's past during the arbitration proceedings with non-party Charles Schwab. Plaintiffs also allege that Defendants made misrepresentations and threats regarding their accounts in the period from 2000 through termination in 2002. Even adapting the Defendants' argument that ADV form disclosure requirements expire after ten years, each and every Agreement, that was entered into at the time such disclosure requirement was allegedly violated, fell within such ten year period. For purposes of a motion to dismiss, taking as true, Plaintiffs' assertions that they had no reasonable manner of discovering such fraud in the inducement especially when accompanied by its concealment on publicly filed documents, Plaintiffs commenced their actions (in 2005) both within six years of the alleged threats and misrepresentations and alternatively within two years of discovering the alleged concealment. Accordingly, Plaintiffs' action for fraud is not barred by the statute of limitations.

BREACH OF FIDUCIARY DUTY

New York law does not provide a single limitations period for a breach of fiduciary duty claim; but, rather, bases such determination on the substantive remedy sought. Thus, where the relief sought is equitable in nature, a six year limitations period applies, CPLR§ 213 (1); and where the suit seeks monetary damages only, a three year statute of limitations is applicable. CPLR§ 214(4); Loengard v Santa Fe Industries, 709 NY2d 262, 519 NYS2d 801, 514 NE2d 113 (1987); see, Kaufman v Cohen, at 118, 164.

Plaintiffs' assertions of breach of fiduciary duty in this case are centered around conduct described as misrepresentations, threats and failure to follow explicit instructions in or around the period from 1999 through specific dates in 2002. Plaintiffs seek only [*9]monetary damages in their Amended Complaint for Defendants' alleged breach of fiduciary duty and are, therefore, covered by the three year limitations period. Granting the Plaintiffs a liberal reading of the Amended Complaint, only Plaintiffs Henri & Patricia Elzinga (March and May, 2002) and Michelle & Jose Elzinga Diaz Elzinga (July/August 2002) make allegations concerning such misrepresentations and threats in 2002. Yet , even these allegations are more than three years prior to the Demands for Arbitration in those two cases, which were filed on September 15, 2005. With regard to the other Plaintiffs, the allegations concerning the claimed breach of fiduciary duty allegedly occurred in 1999 through 2001. Accordingly, such claims are barred by the applicable statute of limitations and are therefore dismissed.

BREACH OF CONTRACT

A breach of contract claim accrues on the date of the acts that give rise to the litigation. Yatter v William Morris Agency, 256 AD2d 260682 NYS2d 198 ( 1st Dep't 1988). The action must be commenced within six years from the date of accrual. CPLR § 213 (2). As set forth above, Plaintiffs allege breaches, not, as Defendants assert, from the date of entering the agreements, but from periods commencing in 1999 and lasting through 2002. With regard to each Plaintiff, there are allegations that Defendants failed to follow specific instructions with regard to their accounts in the years between 2000 and 2002. Under any reading of the Amended Complaint, these claims were asserted well within the six year statute of limitations since they were alleged in the arbitration demands in 2005. See, Santamaria v Kelly, 280 AD2d 536, 729 NYS2d 182 ( 2d Dep't 2001).

PUNITIVE DAMAGES

Plaintiffs concede in their papers in opposition to the motion to dismiss that punitive damages do not constitute a separate cause of action; however, they assert that they are entitled to the same based on the allegations set forth in their fraud and breach of fiduciary duty causes of action. As the breach of fiduciary duty claims have been dismissed on statute of limitations grounds, the Court will consider whether Plaintiffs' fraud claims are sufficient to permit them to seek punitive damages at this pleading stge of the litigation.

Unlike compensatory damages, which seek to make the injured party whole, punitive damages are designed to punish the tortfeasor and to deter both the defendant and others from engaging in the same conduct in the future. see, Krohn v New York City Police Dept., 2 NY3d 329 (2004). They are permitted when the alleged conduct is more than intentional and evinces a criminal indifference to civil obligations. see, Ross v Louise Wise Servs., Inc., 8 NY3d 478, 2007 WL 1294566 (May 3, 2007). While both Plaintiffs' and Defendants' counsel center their arguments around the ability [*10]to seek punitive damages where the parties' relationship is grounded in contract, they both, in the Court's opinion, miss the point. An essential part of the Plaintiffs' pleading alleges that the Defendants handled the savings of the Plaintiffs, held Wisniewski out as an Investment Advisor, failed to inform the plaintiffs that he had been disciplined for fraudulent acts with regard to other clients, and failed to comply with the mandatory reporting provisions on SEC Uniform Application for Investment Advisor Registration (Form ADV., item 11). In addition, Plaintiffs allege that Wisniewski actually threatened them when they made requests to sell specific investments. Those allegations, if proven, give rise to the remedy of punitive damages both because they can be construed to constitute acts that are oppressive and outrageous. Id. Acts of concealment of mandatory reporting and of intimidation by a party with a disproportionate power over another are precisely the kind of acts that society seeks to deter, not only in relation to a particular claimant but to society at large.

CLAIMS AGAINST WISNIEWSKI

The protection of the corporate form will not lightly be disregarded in New York, except to prevent fraud or illegality or to achieve equity. see, Morris v State Department of Taxation and Finance, 82 NY2d 135, 603 NYS2d 807, 623 NE2d 1157 (1993). In view of the Court's determination that Plaintiffs state a cause of action for fraud, based in large part on the actions of Wisniewski as an individual, such allegations state a claim without need to discuss the doctrine of veil piercing. With regard to the breach of contract action, in its broadest sense, the allegations that Wisniewski utilized his power as chief officer , director and major shareholder of Paragon to ignore the Plaintiffs' specific instructions and to violate promises, while pursuing a course of intimidation is sufficient at the pleading stage to allow the claim against Wisniewski to continue. see, Morris, supra .

CONCLUSION

For all of the foregoing reasons, the Plaintiffs' causes of action for gross negligence, for violation of the Investors Advisor Act, for breach of a covenant of good faith and for punitive damages are dismissed as consented to by Plaintiffs' counsel. Plaintiffs' cause of action for breach of fiduciary duty is dismissed for failure to commence within the three year statute of limitations. Defendants' motion to dismiss the fraud and breach of contract causes of action is denied. Plaintiffs have set forth sufficient allegations, at the early stages of this litigation to pursue these claims against Walter Wisniewski as an individual and to seek punitive damages. In view of the above, Defendants' application for sanctions is denied.

The parties are directed to appear in this Part for a conference to schedule discovery on August 29, 2007 at 9:30 a.m. This constitutes the DECISION and ORDER [*11]of the Court. Footnotes

Footnote 1: Plaintiffs filed with the Court an Amended Complaint (in a timely manner) that was not properly served on Defendant's counsel. However, for purposes of this motion, as per the Court's discussion with the counsel for both parties, the Court has given Defendants the opportunity to address any issues raised by the amendments and will , therefore, permit the amendment to the complaint to be made since no discovery has commenced and will address the Amended Complaint as the pleading at issue.

Footnote 2: The fee varied from .75% to 1 and 7/8% in the different agreements