Detrano v Akpinar

[*1] Detrano v Akpinar 2008 NY Slip Op 52396(U) [21 Misc 3d 1136(A)] Decided on November 24, 2008 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 24, 2008
Supreme Court, Nassau County

Frank Detrano, Rhandi Lopoccolo, and Todd Detrano, Plaintiffs,

against

Dr. Bulent Akpinar, a/k/a Bill Akpinar, Defendant.



4561-07



COUNSEL FOR PLAINTIFFS

Law Offices of Thomas F. Liotti

600 Old Country Road, Suite 530

Garden City, New York 11530

COUNSEL FOR DEFENDANT

Moore International Law Offices

45 Rockefeller Plaza, Suite 2000

New York, New York 10111

Leonard B. Austin, J.

Defendant, Dr. Bulent Akpinar a/k/a Bill Akpinar ("Akpinar"), moves by Order to Show Cause for an Order: (a) pursuant to CPLR 5015(a)(1) and (3) vacating and setting aside the judgment entered against Akpinar on August 3, 2007 and amended on November 21, 2007; (b) enjoining Plaintiffs, Frank DeTrano, Rhandi LoPiccolo and Todd DeTrano, from levying or otherwise collecting the judgment and from reporting the judgment to any and all credit agencies; (c) permitting Akpinar to serve and file his [*2]proposed answer; and (d) disqualifying Plaintiffs' counsel, Thomas F. Liotti, Esq. ("Liotti"), pursuant to NYCRR 1200.27(a)(1) and (2) and sealing the files of Liotti with respect to this lawsuit pending the determination of whether confidences and secrets of Akpinar, as Liotti's former client, have been preserved. A temporary restraining order was granted by the Hon. Stephen A. Bucaria restraining Plaintiffs from enforcing the judgment against Akpinar and from reporting it to any credit agencies.

Subsequent to Defendant's Order to Show Cause, Defendant substituted counsel. Defendant's new counsel, Scott Michael Moore, Esq. ("Moore"), filed a motion seeking to disqualify Liotti as Plaintiffs' attorney. Given that the motion made by Moore seeks relief sought in the outstanding Order to Show Cause, Moore has consented to withdraw his motion (Motion Sequence No. 6). The Court has advised him that his affidavit in support of Motion Sequence No. 6 will be considered in support of the pending motion now before this Court.

BACKGROUND

Akpinar met Plaintiff, Frank DeTrano ("Frank"), a private investigator, through one of Akpinar's patients. Thereafter, Akpinar hired Frank to assist him in collecting unpaid accounts receivable from Robert Plan Insurance Company ("Robert Plan").

Frank introduced Akpinar to Liotti and recommended that Liotti represent Akpinar with respect to the Robert Plan billables. Akpinar retained Liotti as counsel and Frank as a private investigator to assist Liotti with this matter.

In September 2002, Akpinar, through one of his companies, B & A Management, paid Liotti $10,000 for legal representation. In 2004, Liotti, on behalf of Akpinar, formed Angels Craniofacial Care, P.C. ("Angels"), a corporation of which Akpinar was the principal. Angels was formed to assist in the collection of fees due to Akpinar. Liotti's law office is listed as the address for Angels with respect to service of process with the New York Department of State, Division of Corporations. Akpinar paid Liotti by check, dated December 7, 2004, $7,500 for additional legal services.

In 2005, a complaint was filed against Akpinar with the New York State Department of Education, Office of Professional Discipline. Liotti represented Akpinar with respect to the complaint. Frank was retained to provide investigative services. In support of his papers, Akpinar includes a letter from Liotti to Mr. Joseph Richardson, Senior Investigator, for the State Education Department, Office of Professional Discipline, dated August 3, 2005, which identifies Liotti as Akpinar's representative with

regard to a complaint made by Robert Plan concerning the questionable use of diagnostic radiology.

Another complaint followed. Liotti represented Akpinar with respect to the second complaint with Frank providing similar investigative services. Another letter, dated November 7, 2005, was sent from Liotti, as representative of Akpinar, to the Education Department concerning the second complaint.

In 2006, Akpinar noticed a substantial reduction in receipts of physician's fees. The administration of the collection of these receipts were the responsibility of another employee of Akpinar, Plaintiff Rhandi LoPiccolo ("Rhandi"), Frank's daughter. Akpinar's questioning about the receipts resulted in threats against Akpinar, his family and [*3]business by Frank, along with a demand by Frank for one-half of the Robert Plan receivables. After this occurred, Akpinar severed his relationship with Frank. Rhandi and Plaintiff Todd DeTrano ("Todd"), Frank's son, never returned to work for Akpinar.

Thereafter, Liotti, on behalf of the Plaintiffs, commenced this action against Akpinar alleging that Akpinar offered Frank a fee if Frank would rebuild and manage the billing and repair aspects of his business while Akpinar would manage the medical practice. Frank alleged that he spent $6,000 in out of pocket expenses relating to repairing the truck for Akpinar's mobile medical unit and the x-ray machine. Rhandi was to manage scheduling and billing. For that, she was to earn $500 per week. Todd was hired to manage maintenance of the mobile unit for which he would be compensated a $25,000 flat fee. Akpinar employed Dr. Rosu and several assistants to work in the mobile unit. Akpinar and Dr. Rosu were paid by Angels and the assistants were paid by FED, Inc., "a corporation started by (Frank) as manager of the mobile unit business". Akpinar authorized the transfer of money from Angels to FED, Inc. Rhandi and Todd allege that they were never paid for their work. However, they also allege that "(i)n August 2006, Akpinar ceased all payments to plaintiffs" indicating that some sort of payment had been made up to that point. Plaintiffs maintain that they performed work, labor and services and charged Akpinar reasonable fees pursuant to their "agreement". As a result, Todd alleges damages in the amount of $25,000, Rhandi in the amount of $78,000 (156 weeks at $500 per week) and Frank for $197,000.

Plaintiffs assert the following causes of action: (1) breach of contract; (2) quantum meruit; and (3) unjust enrichment.

Upon receipt of the lawsuit commenced by Liotti on behalf of Frank, Rhandi and Todd, Akpinar advised his then counsel, Robert DelGrosso, Esq. ("DelGrosso"), to attempt to resolve the matter as he could not believe that his former investigator was suing him using his former attorney. Rather than causing damage to Liotti and Plaintiffs, Akpinar wished to resolve the matter amicably. DelGrosso spoke with Drummond Smith, Esq. ("Smith"), an associate of Liotti's, to set up a meeting to resolve this matter and also raised the issue of Liotti's conflict. Smith advised that he would relay the message to Liotti. DelGrosso faxed a letter to Liotti on May 7, 2007 at 5:30 p.m. referencing an unreturned voicemail message from the previous week. In that letter, DelGrosso asked for a conference with Liotti "prior to any further submissions".

In response, Liotti filed a motion for a default judgment against Akpinar on June 13, 2007. No response to the motion was submitted to the Court and a default judgment in favor of the Plaintiffs was granted and entered with the Clerk in the amount of $404,060.

Akpinar maintains that he never received a copy of the default judgment motion and did not learn of the motion until after judgment was granted. Francoise Perny, Akpinar's office manager, provided an affidavit that he did not receive Plaintiffs' motion for default judgment despite Plaintiffs' affidavit of service indicating that the motion was mailed to Akpinar at 61-10 Marathon Parkway, Douglaston, New York.

Had he known of the default judgment motion, Akpinar states that he would have advised DelGrosso to interpose an answer on his behalf and not attempt further mediation with Plaintiffs. Akpinar maintains that he has a meritorious defense to Plaintiffs' suit in that there is no contract between Akpinar and the Plaintiffs, he was not [*4]unjustly enriched by Plaintiffs' services and that Plaintiffs were compensated by Akpinar for any services provided to him. In the proposed answer annexed to the Order to Show Cause, Akpinar raises the following affirmative defenses: (1) failure to state a cause of action; (2) statute of frauds; (3) the alleged agreement does not satisfy the elements required to establish a contract; (4) the complaint does not allege that Rhandi and Todd agreed to the alleged agreement; (5) the alleged agreement is void by statute as it constitutes illegal "splitting of fees" between a physician and non-medical persons; (6) Rhandi's recovery is barred by unclean hands in that she transferred $128,894.59 to an account not known to Defendant; and (7) the pleadings are defective pursuant to 22 NYCRR 130-1.1-a. Akpinar also seeks to have Liotti disqualified as Plaintiffs' counsel given Liotti's representation of Akpinar in matters involved in this lawsuit.

In response to Akpinar's order to show cause, Plaintiffs argue that Akpinar did not answer within the statutory twenty days and although DelGrosso called Smith before the default was granted, no formal notice of appearance was given and to date, no notice of appearance has been provided and no request to extend Akpinar's time to answer was requested. Smith maintains that he could not enter into settlement negotiations with DelGrosso since DelGrosso did not "appear" on behalf of Akpinar. Plaintiffs further maintain that Akpinar has failed to offer an excuse for his default or a meritorious defense.

With respect to the motion to disqualify, Smith notes that Liotti has no files regarding Akpinar and that Liotti's only representation of Akpinar "came in a merely advisory fashion." He maintains that "no legal representation was provided with respect to this underlying claim and, therefore, no conflict exists." He opines that Christopher Zeh, Esq., formerly of Liotti's law office, undertook the representation of Akpinar after leaving the employ of Liotti and that any files that may have existed, may be in Mr. Zeh's possession.

In Liotti's affidavit, he argues that Akpinar is making "false and defamatory statements" against him and DelGrosso is "masquerading behind a purported conflict" in an attempt to excuse Defendant's neglect in not timely interposing an answer. Although Liotti acknowledges that DelGrosso may have called his office, he states that this does not explain DelGrosso's failure to file a notice of appearance or request an extension of time to file an answer.

With respect to the disqualification component of the Order to Show Cause, Liotti asserts that he did not represent Akpinar or Frank in the creation of Angels. Liotti states, "(i)n fact, I told both of them... not to be involved in it". Liotti acknowledges representing Akpinar in an investigation concerning medical misconduct.

Annexed to his supplemental reply affirmation, Liotti attached a copy of a decision by Justice Jeffrey Brown, of this Court, issued in the matter entitled Vollkommer v. Vollkommer, Index No. 200355/08, in which Justice Brown denied a motion to disqualify Liotti as counsel in that suit. One of the defendants, Patricia Vollkommer, was a former employee of Frank and girlfriend of Akpinar. Patricia Vollkommer and Akpinar both moved to disqualify Liotti as counsel for the plaintiff-husband, Robert Vollkommer, based upon Liotti's representation of Akpinar with respect to debt collection and other suits and Patricia Vollkommer's consultation with Liotti regarding the possibility of divorce. Liotti denied that Patricia Vollkommer was ever a [*5]client of his or an employee despite her connection to Frank. In his affirmation opposing the Vollkommer action motion, Liotti acknowledged representing Akpinar in the collection of medical insurance claims and with respect to investigations by the State into claims of malpractice although Liotti notes that Akpinar "terminated my legal services without cause." Justice Brown found that "(w)hile the record reveals that Mr. Liotti handled the incorporation of Akpinar's professional corporation, and matters involving collection of monies due to him with respect to his business [FN1], Defendant has failed to demonstrate that this former representation was substantially adverse or related to the current representation." (Brown Decision, p. 6). The Court went on further to note that, "the collections matters that Defendant Akpinar refers to are substantially unrelated to the instant action." (Id. at p. 7).

DISCUSSION

A.Vacate Default Judgment

CPLR 5015 (a) provides that a party may be relieved of a judgment or order rendered against it upon motion based upon a number of grounds. CPLR 5015(a)(1) allows for vacatur of the prior judgment on the basis of excusable default while CPLR 5015(a)(3) requires proof of fraud, misrepresentation or other misconduct of an adverse party.

A party moving to vacate a default pursuant to CPLR 5015(a)(1) must establish an excusable default and a meritorious defense. Garcia v. Pepe, 42 AD3d 427 (2nd Dept. 2007).

New York has a strong public policy of having cases resolved on their merits, especially where there has been no evidence of contumacious behavior and no demonstrated prejudice. See, Perez v. Travco Ins., Co., 44 A.D.738 (2nd Dept. 2007); Scarlett v. McCarthy, 2 AD3d 623 (2nd Dept. 2003); Delgado v. City of New York, 245 AD2d 123 (1st Dept. 1997); and Walter v. Rockland Armor & Metal Corp., 140 AD2d 335 (2nd Dept. 1988).

The court has inherent discretion to relieve a party from a default. Rukeyser v. Richardson, 43 AD3d 815 (2nd Dept. 2007).

Akpinar's default is not intentional. He retained counsel, who contacted Plaintiffs' counsel in an attempt to resolve the matter prior to Plaintiffs seeking a default judgment. Rather than discussing resolution, Plaintiffs' counsel filed a motion for default without the courtesy of informing DelGrosso that same was being filed or stating that they would not discuss settlement until a notice of appearance was served.

Plaintiffs have neither argued nor established the existence of prejudice should [*6]the default be vacated.

Akpinar has demonstrated the existence of a meritorious defense in that no such "contract" may have even existed between the parties and if same did exist, it would be

void by statute prohibiting the splitting fees between a physician with a non-physician and pursuant to the Statute of Frauds [FN2]. In fact, no written contract with regard to any of the alleged business relationships between the parties has been proffered.

In such circumstances, this Court should exercise its discretion to permit the matter to be decided on its merits. See, Ray Realty Fulton, Inc. v. Lee, 7 AD3d 772 (2nd Dept. 2004).

Furthermore, there is a question of whether Plaintiffs even have a valid cause of action and should have obtained a default judgment in the first instance. The second paragraph of the complaint notes that Akpinar is the majority owner of Long Island Craniofacial Care and Angels, suggesting that there are minority owners in these corporations. Thereafter, in the fourth paragraph, Plaintiffs allege that Akpinar agreed to "invest up-front $800,000 for the business, if (Frank) would manage it. Akpinar only put up $150,000. The subsequent incoming monies received from billing patients and insurance companies were used to finance the business." This allegation appears to assert that Frank would not have to invest money into the corporation since his contribution would be sweat equity.

The mobile unit business is alleged to have begun in November 2003. Plaintiffs allege that they ceased receiving payments in August 2006. By the time the complaint was filed in March 2007, Frank alleges that he is owed $197,000 for services rendered which included "providing private investigatory services and rebuilding and managing the business and facilities aspects of the mobile business in exchange for the defendant paying the retainer for those services, providing the start up capital for the rebuilding of the business and tendering a fee." (Complaint ¶14). Once again, Plaintiffs suggest that

they, or at least, Frank "invested" in the corporation and is owed fees based upon his investment.

Given Plaintiffs' allegations, it appears that the Plaintiffs' causes of action are, in part, based upon an agreement to illegally split fees between a physician and non-medical personnel in violation of New York State anti-fee splitting statutes. See, Education Law §§ 6509-a, 6530 and 6531. As such, Akpinar has a valid defense to Plaintiffs' causes of action which, if proven, would bar recovery.

In light of Defendant's motion to vacate the default judgment being granted pursuant to CPLR 5015(a)(1), it is not necessary to address Defendant's request to vacate pursuant to CPLR 5015(a)(3).

B.Disqualification of Counsel

The Code of Professional Conduct provides a guide for attorneys regarding their professional conduct. However, when raised in litigation, the Code of Professional Conduct cannot be considered as statutory or decisional law. Rather, the Code of Professional Conduct provides guidance to the Court. S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 69 [*7]NY2d 437 (1987).

The right of a party to be represented by the attorney of one's choosing is a valuable right. An attorney should not be disqualified unless there is a clear showing that disqualification is required. Id. See also, Eisenstadt v. Eisenstadt, 282 AD2d 570 (2nd Dept. 2001).

The party seeking to disqualify counsel has the burden of establishing that there is a conflict of interest. An attorney will not be disqualified unless there is a clear showing that disqualification is warranted. Horn v. Municipal Information Services, Inc., 282 AD2d 712 (2nd Dept. 2001); and Olmoz v. Town of Fishkill, 258 AD2d 447 (2nd Dept. 1999).

22 NYCRR 1200.27(a), also known as DR 5-108(a), states:(a) Except as provided in section 1200.45(b) of this Part with respect to current or former government lawyers, a lawyer who has represented a client in a matter shall not, without the consent of the former client after full disclosure: (1) Thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client. (2) Use any confidences or secrets of the former client except as permitted by section 1200.19(c) of this Part, or when the confidence or secret has become generally known.

Based on this rule and on case law, an attorney has been barred from representing a party in an action where one of the opposing parties is the lawyer's former client. Tekni-Plex, Inc. v. Meyner and Landis, 89 NY2d 123 (1996); and Greene v. Greene, 47 NY2d 447 (1979). The rationale is that an attorney has a continuing duty to a former client not to reveal confidences learned in the course of the professional relationship. Kassis v. Teacher's Ins. and Annuity Assn., 93 NY2d 611 (1999); and Greene v. Greene, supra. It ensures that a lawyer remains loyal to his or her clients and also avoids the appearance of impropriety. Kassis v. Teacher's Ins. and Annuity Assn., supra. It also fosters an open dialogue between attorney and client, necessary for effective representation, insofar as it frees the client of any apprehension that matters disclosed will be used against him or her in subsequent litigation. Jamaica Public Service Co. Ltd. v. AIU Ins. Co., 92 NY2d 631 (1998); and Tekni-Plex, Inc. v. Meyner and Landis, supra.

Attorneys have a fiduciary duty of loyalty and confidentiality to their clients. Id.; and Solow v. Grace & Co., 83 NY2d 303 (1994). An attorney may not place himself or herself in a position where a conflict of interest may affect or appear to affect his or her obligations to the client. Matter of Kelly, 23 NY2d 368 (1968).

A party seeking disqualification of former counsel, pursuant to 22 NYCRR 1200.27(a)(2), due to the current representation of an adverse party, bears the burden of establishing (1) that there was a prior attorney-client relationship between the moving party and opposing counsel; (2) that the matter before the court and the matter involving past representation are substantially related; and (3) that the interest of the present client and prior client are materially adverse. Falk v. Chittenden, 11 NY3d 73 (2008). [*8]See also, Jamaica Public Service Co. Ltd. v. AIU Ins. Co., supra; Tekni-Plex, Inc. v. Meyner and Landis, supra; and Solow v. W .R. Grace & Co., supra.

Once movant satisfies all three prongs of the aforementioned test, disqualification must be granted insofar as an irrebuttable presumption of disqualification arises. Falk v. Chittenden, supra.

Disqualification of former counsel can also be obtained pursuant to 22 NYCRR 1220.27(a)(2) on grounds that prior counsel in the course of representing an adverse party can and will disclose secrets and confidences obtained by virtue of the prior professional relationship. Jamaica Public Service Co. Ltd. v. AIU Ins. Co., supra; and Greene v. Greene, supra. Disqualification pursuant to this section does not require movant to establish that confidential information will be disclosed during the course of litigation. Instead, movant must show that disclosure is reasonably probable. Id. Given public policy favoring a party's right to freely choose his or her counsel and disfavoring disqualification motions for tactical purposes, a party seeking disqualification must do more than simply aver that prior counsel had access to confidences and secrets. Id. That is, the proponent of disqualification must, at a minimum, provide the court with facts sufficient to determine whether there is a reasonable probability that 22 NYCRR 1220.27(a)(2) shall be violated. Jamaica Public Service Co. Ltd. v. AIU Ins. Co., supra. In deciding whether a conflict requiring disqualification exists, the court must consider whether the lawyer or firm has previously represented the party or entity which is seeking to disqualify that attorney and or the attorney has obtained in the course of that representation confidential information which would be disclosed or could be used against the former client in the current litigation. See, Wissler v. Ashkinazy, 299 AD2d 352 (2nd Dept. 2002); Ogilvie v. McDonald's Corp., 294 AD2d 550 (2nd Dept. 2002); and Sirianni v. Tomlinson, 133 AD2d 391 (2nd Dept. 1987). See gen'lly, Tekni-Plex, Inc, v. Meyner and Landis, supra.

In this matter, Akpinar has established, and Liotti conceded, that a prior attorney-client relationship existed between the two. With respect to the subject matter of the litigation, it appears to be related to Liotti's former representation of Akpinar in that it relates to the creation of Angels and the collection of fees for medical services rendered. It also appears to involve billables collected from the Robert Plan, the insurance carrier which filed a grievance against Akpinar defended by Liotti on behalf of Akpinar. Finally, the third prong is met due to the fact that it is apparent that the interests of Liotti's current clients, all three Plaintiffs, and Akpinar, as Defendant, are adverse.

Consequently, disqualification of Liotti is appropriate pursuant to 22 NYCRR 1200.27(a)(1). Thus, it is not necessary to determine if disqualification under 22 NYCRR 1200.27(a)(2) is appropriate.

C.Sealing of Liotti's Files



22 NYCRR §1200.19, also known as DR 4-101, pertains to the preservation of [*9]confidences and secrets of a client. This rule states the following: (a) Confidence refers to information protected by the attorney-client privilege under applicable law, and secret refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client. (b) Except when permitted under section 1200.19(c) of this Part, a lawyer shall not knowingly:

(1) reveal a confidence or secret of a client; (2) use a confidence or secret of a client to the disadvantage of the client; and (3) use a confidence or secret of a client for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.

***

(d) A lawyer shall exercise reasonable care to prevent hisor her employees, associates, and others whose servicesare utilized by the lawyer from disclosing or usingconfidences or secrets of a client, except that a lawyer mayreveal the information allowed by subdivision (c) of thissection through an employee.

In transferring the file to new counsel for Plaintiffs, Liotti should ensure that he is in compliance with the mandates of 22 NYCRR 1200.19 so that no secrets or confidences gained through his prior representation of Akpinar are disclosed to Plaintiffs herein.

Accordingly, it is,

ORDERED, that Defendant's motion to vacate the default judgment entered on August 3, 2007 and amended on November 21, 2007 and to enjoin enforcement of said judgment and reporting of same to any credit agencies is granted; and it is further,

ORDERED, that Defendant's motion to disqualify the Law Firm of Thomas F. Liotti, Esq. from representing Plaintiffs herein and to enjoin the Law Firm of Thomas F. Liotti, Esq. from disclosing the contents of any of Defendant's files or information learned in the course of his representation of Defendant is granted; and it is further,

ORDERED, that this action is stayed until the next conference of this matter to be held on January 16, 2009 at 9:30 a.m. at which time incoming counsel for Plaintiffs and counsel for Defendant shall report on the status of this matter and to conduct a preliminary conference.

This constitutes the decision and Order of the Court. [*10]

Dated: Mineola, NY____________________________November 24, 2008Hon. Leonard B. Austin, J.S.C. Footnotes

Footnote 1:Such representations to Justice Brown seem to contradict Liotti's claims here with regard to the legal services he provided on behalf of Akpinar. Since Justice Brown accepted Liotti's representations in Vollkommer, Liotti is judicially estopped from denying the nature of his representation of Akpinar here. See, Environmental Concern, Inc. v. Larchwood Construction Corp., 101 AD2d 591, 594 (2nd Dept. 1984), where the Appellate Division held that the doctrine of judicial estoppel is invoked to prevent a party from adopting contrary positions in different proceedings because the courts cannot tolerate a party playing "fast and loose with the courts." See also, Mc Caffrey v. Schaffer, 251 AD2d 300 (2nd Dept. 1998); and Ford Motor Credit Co. v. Colonial Funding Corp., 215 AD2d 434 (2nd Dept. 1995). This principle is no less applicable to the facts presented herein.

Footnote 2:See affirmative defenses raised in Akpinar's proposed answer.