Noel F. Caraccio, PLLC v Thomas

[*1] Noel F. Caraccio, PLLC v Thomas 2010 NY Slip Op 52094(U) [29 Misc 3d 1230(A)] Decided on December 6, 2010 Rye City Ct Latwin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 6, 2010
Rye City Ct

Noel F. Caraccio, PLLC, Plaintiff,

against

Suse J. Thomas, Defendant.



CV 255-10



Plaintiff by Noel F. Caraccio, Esq,

Defendant by Arnold S. Kronick, Esq.

Joseph L. Latwin, J.

This is an action by a law firm seeking attorneys' fees based upon breach of a retainer agreement and on an account stated in connection with representation of the defendant in a real estate transaction. The defendant moves to dismiss the action based upon: (1) failure to comply with the fee dispute resolution program set forth in 22 NYCRR 137.1(a) and 137.11; (2) non-occurrence of a condition precedent, to wit, the closing of the property; & (3) lack of personal jurisdiction. In addition, upon the Court's own motion, the issue of subject matter jurisdiction was raised.

For the purposes of this motion only, the Court will accept the following facts:

Plaintiff is a law firm with its offices in the Town of Mamaroneck, New York. Plaintiff has no office for the transaction of business within the City of Rye. Defendant resides in the Town of Mamaroneck. Plaintiff represented defendant in a real estate transaction that had not closed at the time the action was commenced. The retainer agreement states that the "fee will be payable at closing . . . However, if the transaction exceeds three (3) months in length, you will be billed monthly for the work to that date." The retainer was dated May 3, 2010. The $7,094.50 bill from plaintiff to defendant was rendered August 20, 2010 - over three months [*2]after the retainer letter. The action was filed September 22, 2010. No notice of the right to arbitrate was sent by plaintiff to defendant.

Based upon these facts, the Court inquired as to the basis for subject matter jurisdiction since neither party resides or has a place of business within the Court's jurisdiction and it does not appear that the transaction took place within the City of Rye.

Subject Matter Jurisdiction

Subject matter jurisdiction is the competence of the court to adjudicate a certain kind of case. City Courts are constitutional courts. New York Constitution article VI, § 17. The New York Constitution grants City Courts subject matter jurisdiction as "prescribed the legislature but not in any respect greater than the jurisdiction of the district court . . ." New York Constitution article VI, § 17(a). Under New York Constitution article VI, § 16, district courts have jurisdiction not greater than the courts for the city of New York however in actions and proceedings for the recovery of money, actions for the recovery of chattels and actions and proceedings for the foreclosure of mechanics liens and liens on personal property, the amount sought to be recovered or the value of the property shall not exceed fifteen thousand dollars exclusive of interest and costs. The maximum jurisdictional amount was increased from $6,000 to $15,000 by Constitutional Amendment adopted at the general election held in 1983. See, Payne v. Genato, 2010 NY Slip Op 52086(U) [Rye City Ct 2010].

In 1964, pursuant to article VI, § 17(b) of the New York State Constitution, the Legislature adopted the Uniform City Court Act ("UCCA") to regulate the City Courts, and establish uniform jurisdiction, practice and procedure. Laws of 1964, ch 497. The Legislature granted City Courts jurisdiction in certain actions for money damages. UCCA § 202. UCCA § 202 provides "[t]he court shall have jurisdiction of actions and proceedings for the recovery of money, actions and proceedings for the recovery of chattels and actions and proceedings for the foreclosure of liens on personal property where the amount sought to be recovered or the value of the property does not exceed fifteen thousand dollars exclusive of interest and costs." This action seeks money damages within the jurisdictional limit of the City Court. [*3]

In actions for money under UCCA § 202, in addition to the jurisdictional amount limit, the City Courts have a residence requirement.[FN1] That residence requirement is not deemed jurisdictional and may be waived by a party, but, despite the waiver, may subject a case to dismissal on the court's initiative. UCCA § 213(d). See also Casden v. Broadlake Corp., 47 Misc 2d 847, 263 NYS2d 345 [New Rochelle City Ct 1965] (lack of residence may be waived) and Downes v. Cirelli, 52 Misc 2d 637, 276 NYS2d 542 [Yonkers City Ct 1967] (dismissal lies within court's discretion even where parties submit to the court's jurisdiction). Here, the defendant does not reside within the City of Rye. Neither party has a place for the regular transaction of business nor has a regular employment within the City of Rye. Plaintiff asserts that it is deemed a resident of the City of Rye under UCCA 213(b) since, as a professional limited liability company, it regularly transacts business in the City of Rye by virtue of representing clients and having meetings within the City. See, Rock Wool Insulation Co. v. Puma, 48 Misc 2d 193, 264 NYS2d 638 [App Term 2nd Dept 1965] (plaintiff corporation with no office and which did not regularly transacting business within city means no jurisdiction).

While the "transacts business" phrase within UCCA §213(b) appears to have the same meaning as that in the long-arm jurisdictional statute, CPLR § 302(a)(1) ("transacts any business") that interpretation is strained since the phrase in CPLR § 302(a)(1) usually refers to the acts of a defendant over whom jurisdiction is sought as opposed to the situation here, where the plaintiff is asserting its own conduct in conferring jurisdiction. Further analogies fail since they concern the ability of New York to exercise jurisdiction over foreign entities, not the availability of domestic entities to voluntarily choose where to litigate in New York. The constitutional underpinnings of one state exercising jurisdiction over a non-resident entity diminish where the question involves which New York court a New York entity chooses to litigate.

To determine the existence of jurisdiction pursuant to CPLR § 302(a)(1), courts evaluate (1) whether the defendant transacts any business in New York, [*4]and, if so, (2) whether the plaintiff's causes of action arise from defendant's business transactions in the state. See Deutsche Bank Sec., Inc. v. Montana Bd. of Invs., 7 NY3d 65, 71, 818 NYS2d 164 [2006]. Courts look to the "totality of the defendant's activities within the forum" to determine whether a defendant has "transact[ed] business in such a way that it constitutes "purposeful activity" satisfying the first part of the test. Best Van Lines, Inc. v. Walker, 490 F3d at 246 [2d Cir 2007] (citing Sterling Nat'l Bank & Trust Co. of NY v. Fidelity Mortgage Investors, 510 F2d 870, 873 [2d Cir 1975]). Of course, the constitutional underpinnings of the second portion of this test (whether the cause of action arises from the acts in the jurisdiction) in exercising long arm jurisdiction over a non-resident do not translate when it is the plaintiff who is choosing to subject itself to jurisdiction of a court. McKee Electric Co. v. Rauland-Borg Corp., 20 NY2d 377, 283 NYS2d 34 [1967] (is there need to purposely avail oneself of the privileges of the jurisdiction when the plaintiff purposely avails itself of the privileges simply by invoking the Court's jurisdiction?).

Applying the CPLR § 301 standard of "doing business" to determine a corporation's presence for jurisdictional purposes is equally faulty. Under that test, a foreign business entity is doing business in New York if it is present in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Tauza v. Susquehanna Coal Co., 220 NY2d 259, 267 [1919]. However, that test's focus is upon the foreign corporation's contacts with the local jurisdiction, not the foreign entity's choice of a local forum. Furthermore, this language is not what the Legislature has required in the statutory language of UCCA § 213(b). "Doing business" implies a greater affinity than "transacting business"

Since a party need not plead the basis for jurisdiction or submit the basis for jurisdiction absent a motion to dismiss, the plaintiff has not proffered an evidentiary basis upon which the Court may determine whether or not it has "transacted business" in Rye.

Service of process

Defendant claims that no copy of the process was personally given to her or a neighbor nor was anything left or affixed to her door. The affidavit of service of the summons and complaint filed with the Court asserts service by delivery and [*5]mail pursuant to CPLR § 308 by delivery to defendant, who refused to open her door, and then affixation to the door followed by a mailing to defendant's last known residence.

The process server's affidavit constitutes prima facie evidence of proper service pursuant to CPLR § 308(2). Scarano v. Scarano, 63 AD3d 716, 880 NYS2d 682 [2nd Dept, 2009].

To warrant a traverse hearing when the process server's affidavit contains the elements of proper service, the rebutting affidavit must specifically contradict something contained in the process server's affidavit. Simonds v. Grobman, 277 AD2d 369, 716 NYS2d 692 [2nd Dept, 2000]: & 650 Fifth Avenue Co. v. Travers Jewelers Corp., 29 Misc 3d 1215(A), Slip Copy, 2010 WL 4187936 (Table) [Civ Ct New York County, 2010]. The defendant's affidavit specifically denies that any papers were affixed to her door. Accordingly, a traverse hearing is required.

Accordingly, the Court will hold a traverse hearing in this matter. At the traverse hearing, the burden of proving jurisdiction is upon plaintiff, the party who asserts it. Lamarr v. Klein, 35 AD2d 248, 250, 315 NYS2d 695, 696 (1st Dept 1970) aff'd 30 NY2d 757, 333 NYS2d 421 (1972); see also: Saratoga Harness Racing Association, Inc. v. Moss, 26 AD2d 486, 275 NYS2d 888 (3rd Dept 1966), aff'd 20 NY2d 733, 283 NYS2d 55 (1967); Carte v. Parkoff, 152 AD2d 615, 543 NYS2d 718 (2nd Dept 1989); Zipperman v. Frontier Hotel of Las Vegas, 50 AD2d 581, 374 NYS2d 697 (2nd Dept 1975).

22 NYCRR 137

Defendant claims the plaintiff failed to comply with the fee dispute resolution program set forth in 22 NYCRR 137. Part 137 of the Rules of the Chief Administrator of the Courts provides for a Fee Dispute Resolution Program. A mandatory Arbitration Procedure is set forth therein for all representations that commenced on or after January 1, 2002, and is applicable "to all attorneys admitted to the bar of the State of New York who undertake to represent a client in any civil matter." Pursuant to 22 NYCRR 137.2(a), "[I]n the event of a fee dispute between attorney and client, whether or not the attorney already has received some or all of the fee in dispute, the client may seek to resolve the dispute by arbitration under this Part." The plaintiff claims there is no fee dispute since the defendant [*6]never disagreed with the amount billed and was discharged before the defendant was billed. Furthermore, defendant never sought arbitration.

In order to seek arbitration where the attorney and client cannot agree as to the attorney's fee, the attorney shall forward a written notice to the client, entitled Notice of Client's Right to Arbitrate, by certified mail or by personal service in the approved form. 22 NYCRR 137.6(A)(1). There is no proof that plaintiff served the written notice required by the Rule. If service of a notice is required, its service is a condition precedent to commencement of an action. Herrick v. Lyon, 7 AD3d 571, 777 NYS2d 141 [2nd Dept 2004].

The question becomes when an "attorney and client cannot agree as to the attorney's fee" implicating the Part 137 procedures. The plaintiff claims there is no disagreement concerning the fees since the defendant never objected to the bill.

There is a disagreement between the First Department and the Second Department as to whether the Part 137 obligates an attorney to send a notice offering arbitration in the absence of any fee disagreement with a client. Compare Paikin v. Tsirelman, 266 AD2d 166, 699 NYS2d 32 [1st Dept 1999] with Scordio v. Scordio, 270 AD2d 328, 705 NYS2d 58 [2nd Dept 2000] (applying Part 136, the predecessor rule to Part 137, dealing with domestic relations cases). In Messenger v. Deem, 26 Misc 3d 808, 893 NYS2d 434 [Sup Ct Westchester County 2009], like here, the attorney claimed notice need not be provided to a client who never disputed the reasonableness of an attorney's legal fees, no notice pursuant to Rule 137 was sent, and the client simply did not pay what was due, the Court questioned the continuing validity of Scordio. It cited cases that followed Scordio. e.g., Helene Greenberg Law Offices v. Disanto, 5 Misc 3d 130(A), 798 NYS2d 710 [App Term, 9th and 10th Jud Dists 2004]("should the trial court determine that defendant did not actually dispute the reasonableness of the fees, notice of the right to arbitrate is not required"), and cases that declined to follow Scordio, e.g., Wexler & Burkhart, LLP. v. Grant, supra . Wexler argues Part 137 applied to all matters, except for eight specific instances/conditions, none of which excludes "compliance where a client does not object to the bill, but simply does not pay it", thus "[u]nder the well-established statutory construction doctrine of expressio unius est exclusio alterius, where exceptions are created as to certain matters, inclusion of such exceptions should be considered to deny the existence of others not mentioned ..." Wexler & Burkhart, LLP. v. Grant, 12 Misc 3d 1162(A), 819 [*7]NYS2d 214 [Sup Ct Nassau County 2006].

The denial of the cause of action clearly shows a disagreement as to any fee being due. This alone should be considered a fee disagreement under Part 137 triggering the notice requirements.

Therefore, should the Court determine that it has jurisdiction, this action will be stayed pending the arbitration of matter pursuant to Part 137 or the defendant's waiver of the right to arbitrate, specifically or by the passage of time after the giving of notice.

Condition Precendent

Te Court will defer ruling on the motion to dismiss for failure of the condition precedent — the closing — to occur until after the Court determines its possessing subject matter and personal jurisdiction and the determination of any arbitration under 22 NYCRR Part 137.

Accordingly, it is

ORDERED that the defendant's motion to dismiss for lack of personal jurisdiction is granted to the extent of ordering a traverse hearing to be held on January 24, 2011 at 1030 a.m., and it is further,

ORDERED that the Court's motion to dismiss for lack of subject matter jurisdiction is held in abeyance pending the traverse hearing at which plaintiff may offer evidence concerning its transacting business in the City of Rye, and it is further

ORDERED that the defendant's motion to dismiss for failure to comply with the provisions of 22 NYCRR 137 is denied pending determination of this Court's jurisdiction, and it is further

ORDERED that the defendant's motion to dismiss due to the non-occurrence of a condition precedent, to wit, the closing of the property is held in abeyance pending the Court determining whether its possesses subject matter and personal jurisdiction and the determination of any arbitration under 22 NYCRR Part 137.

December 6, 2010_________________________

Joseph L. Latwin

Rye City Court Judge Footnotes

Footnote 1: UCCA 213 says, in relevant part "(a) In an action described in § 202, either a plaintiff or a defendant must: 1. be a resident of the city . . .; or 2. have a regular employment within the city; or 3. have a place for the regular transaction of business within the city. (b) A corporation, association or partnership shall, for the purposes of this section, be deemed a resident of the city if it has an office or agency or regularly transacts business in the city.