30 Carmine LLC v Jay Arthur Goldberg, P.C.
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30 Carmine LLC v Jay Arthur Goldberg, P.C. 2010 NY Slip Op 34121(U) December 2, 2010 Supreme Court, New York County Docket Number: 116990/2009 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE 0 COUNTY OF NEW YORK: PART 61 ,----1----X 30 CARMINE LLC a/k/a DEAN ROSS, 74 HESTER ST. LLC a/k/a DEAN ROSS, 171 MULB RRY LLC a/k/a DEAN ROSS and 109 ELDRIDGE LC a/k/a DEAN ROSS, DECISION AND ORDER Index No. 116990/2009 -againstJAY ARTHUR GOLDBERG, P.C. a/k/a AY ARTHUR GOLDBERG, P.C., ESQ. a/kl LAW OFFICES OF JAY ARTHUR GOLDBE G, P.C., ant ·---·------------------- ------X O. PETER SHERWOOD, J.: This is an action for declaratory reli and to recover damages for alleged overpayments for legal services rendered by defendant for certiorari work. Before the court is plaintiffs' motion for an order: (1) pursuant to CPLR § 3211 (a) (l) and (7) dismissing all counterclaims asserted against Dean Ross individually; (2) purs t to CPLR § 3024 (b) striking defendant's answer for improperly referring to an arbitration which is subject to de novo review; (3) alternatively, striking from the answer all references to the prio arbitration; and (4) pursuant to 22 NYCRR 130-1.1 awarding plaintiffs sanctions against defen , t for frivolous conduct. Defendant opposes the motion and cross moves to compel plaintiffs to repl to its counterclaims within seven (7) days of the order and setting the matter down for an immedi e trial. ackground The controversy between the partie emanates from a dispute as to legal fees claimed by defendant Jay Arthur Goldberg, P.C. a/k/a J y Arthur Goldberg, P.C., Esq. a/k/a Law Offices of Jay Arthur Goldberg, P.C. ("Goldberg" or "de ndant") to be owing from plaintiffs 30 Carmine LLC a/k/a Dean Ross, 174 Hester St., LLC a/k/a ean Ross, 171 Mulberry LLC a/k/a Dean Ross and 109 Eldridge LLC a/k/a Dean Ross (collectiv y "plaintiffs"). The facts underlying the dispute are derived from the verified complaint. In arch and April 2007, Goldberg was retained by the plaintiffs, each of which is a limited lia lity company ("LLC"), pursuant to written retainer agreements (the "Retainer Agreement"), w h were signed in each instance by Dean Ross ("Ross''), [* 2] an attorney, as member of such LLCs (Affi avit of Dean Ross in Support of Motion [Ross Aff.], Ex. "J", Ver. Compl. ,r,r 6-9). Goldberg w retained for the purpose of performing tax certiorari work in an effort to reduce the valuation of e respective plaintiffs' property for certain specified tax years. Each of the Retainer Agreements · rovided that fee disputes under $50,000.00 would be submitted to binding arbitration pursuant to Part 137 of the New York Rules of the Chief Administrator (22 NYCRR). After Got berg performed services pursuant to the Retainer Agreements, a dispute arose as to the amo · t of legal fees owed to Goldberg. Pursuant to the provision in the Retainer Agreements, the p ies submitted the fee dispute to arbitration. A three- member arbitration panel made awards in fa or of Goldberg against each of the plaintiffs and Ross, individually, in the aggregate sum of$35,69 .25. The arbitration awards were mailed to plaintiffs, Ross and defendant on or about November , 2009. Plaintiffs then timely commenced t · s plenary action by filing a summons with notice on December 3, 2009, seeking de novo review fthe fee dispute as permitted by section 137.8 of the Rules of the Chief Administrator. The Notic stated that the action was for a declaration "as to what, if anything, Plaintiffs owe Defendant in co ection with tax certiorari work allegedly performed by Defendant to reduce real estate taxes for 2008/2009 tax year" and also for a declaration and monetary relief "for overpayment of legal ees in connection with tax certiorari work allegedly performed by Defendant for plaintiff 30 C ine LLC to reduce real estate taxes for the 2007/2008 tax year". Pursuant to defendant's demand, n or about April 26, 2010, plaintiffs served a verified complaint seeking essentially the same reli as was indicated in the Notice. Issue was joined by service ofGoldb rg's verified answer in which it admits that it provided tax certiorari legal services to plaintiffs p · suant to written retainer agreements it drafted with information provided by Ross, it achieved si nificant reductions in the assessed values of plaintiffs' properties for the 2008/2009 tax year and fo the 2007/2008 tax year, and it states that it was owed the aggregate sum of$36,902.25 (Ross Af Ex. "K", Ver. Ans., ,r 8). Goldberg otherwise denies many of the material allegations of the verifi d complaint, interposes as affirmative defenses that the action is barred by the doctrines of res judi ata, collateral estoppel and !aches and counterclaims against plaintiffs and Ross, individually, to cover as against the plaintiffs and Ross the aggregate 2 [* 3] sum of $36,902.25 for legal services rend , d, with interest from May 6, 2008, upon theories of breach of contract, quantum meruit, and ac Soon after this plenary action was commenced, by petition filed December 17, 2009, defendant commenced a proceeding to con 30 Carmine LLC, 174 Hester St. LLC, 171 the arbitration award (Jay Arthur Goldberg, P. C. v . /berry LLC, 109 Eldridge LLC and Dean Ross, Index No. 117674/2009) (the "Confirmation Ac 'on"). The Confirmation Action was dismissed by decision and judgment entered March 24, 2 10 (Stallman, Michael D., J.), on the ground that the subject retainer agreements did not explicitl provide that the clients were waiving their right to de novo review of the arbitration award (Jay Ar ur Goldberg, P. C. v 30 Carmine LLC, 27 Misc3d 680 [Sup Ct, N.Y. Co. 2010]). Justice Stal an denied Goldberg's request to consolidate the Confirmation Action with this plenary actio stating that "[b]ecause respondents are entitled to de novo review; the arbitral awards have no binding effect on the plenary action" (id. at 683). Defendant's appeal from the decision and· dgment in the Confirmation Action is now pending before the Appellate Division, First Dep ent (see Affidavit of Dean Ross in Support of Motion [Ross Aff.], Ex. "K", Verified Answer, ,r 2 Plaintiffs now move, inter alia, pu uant to CPLR § 3211 (a) (1) and (7) to dismiss the counterclaims as against Ross in his indivi capacity. In support of the motion, Ross, who is a member of each of the plaintiff LLCs and ppearing as plaintiffs' counsel, submits his personal affidavit in which he avers on the basis of d umentary evidence, namely the Retainer Agreements, that he did not retain Goldberg in his indi idual capacity to perform legal services on behalf of plaintiffs nor was any of the legal work pro ·ded for him in his individual capacity, but rather such work was performed solely for the plaintiff In opposition, defendant submits his attorney's affirmation which claims that the counterclaims are properly stated against R ss individually as Ross "has blurred the lines between himself as an individual and his real estate ntities." Accepting as true the facts pleaded b defendant and according defendant the benefit ofevery favorable inference to be drawn from those acts (see EBC Iv Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; Guggenheimer v Ginzburg, 43 Y2d 268,275 [1977]), defendant has failed to state a cause of action as against Ross individual . Here, there is no dispute that each of the named plaintiffs is a limited liability company. It is well settled that pursuant to section 609 (a) of the [* 4] Limited Liability Company Law, membe and managers of a limited liability company are statutorily exempt from individual liability ti r the obligations or liabilities of such company, unless the "veil" of the limited liability company i pierced (see Retropolis, Inc. v 14th St. Development LLC, 17 AD3d 209,210 [1 st Dept 2005]; I/ins v E-Magine, 291 AD2d 350,351, Iv denied 98 NY2d 605 [20021). A party seeking to pierc a corporate (or limited liability) veil "bear[s] a heavy burden of showing that the corporation was ominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences ... Evidence of domination al ne does not suffice without an additional showing that it led to inequity, fraud or malfeasance ... " TNS Holdings, Inc. v MKI Securities Corp., 92 NY2d 335, 339 [1998]; see Matter of Morris v Ne York State Dept. of Taxation and Finance, 82 NY2d 35 [1993]; Collins, 291 AD2d at 351). In the case at bar, defendant has all ed no facts in support of his counterclaims that may serve as a predicate for Ross' individual Iia ility. Goldberg does not claim that it was retained by Ross individually, that Ross signed the re iner agreements in his individual capacity, or that Goldberg believed that it was being retaine by Ross individually. Nor does the record show that Ross dominated the plaintiffLLCs and used uch domination to commit a fraud or other tortious act. Ross simply cannot be held liable for the aintiffs' obligations by mere virtue of his status as a member of the respective plaintiffs LLCs. ccordingly, the counterclaims must be dismissed to the extent that they are asserted against Ross in his individual capacity. Plaintiffs also move pursuant to CP R § 3024 (b) to strike defendant's verified answer for improperly referring to the arbitration whi his subject to de novo review in this proceeding or, alternatively, striking all references to the bitration contained in the verified answer. Plaintiffs contend that defendant's references to the 'or arbitration and award are irrelevant to this action, are highly prejudicial and have "irretriev bly tainted" this action (Ross Aff. ~1 12, 18-22). Moreover, they contend that because such re rences are incorporated into the majority ofthe answer making the excising of prejudicial matter e emely difficult, the entire answer should be stricken. Defendant contends that he raised th issue of the arbitration and award in his answer in order to preserve his rights with respect to his pe ing appeal in the Confirmation Action. On this basis, 4 [* 5] defendant maintains that such references ar appropriate and neither its answer nor such references in its answer should be stricken. CPLR § 3024 (b) provides that "[a] may move to strike any scandalous or prejudicial matter unnecessarily inserted into a pleadi ." ..In reviewing a motion pursuant to CPLR 3024 (b) the inquiry is whether the purportedly scan ous or prejudicial allegations are relevant to a cause of action" (Soumayah v Minne/Ii, 41 AD3d 3 0, 392 [1 st Dept 2007], appeal withdrawn 9 NY3d 989 [2007]). Where allegations are relevant to a ause of action, they will not be stricken (see New York City Health & Hosps. Corp. v St. Barnabas mmunity Health Plan, 22 AD3d 391 (1 st Dept 2005]). Of significance to this inquiry are th Part 137 rules and procedures governing fee resolution disputes. Absent an agreement to the con , a party aggrieved by the award in a Part 137 fee dispute arbitration may seek a de novo revie of the dispute by commencing an action on the merits oftbe fee dispute within 30 days after the ar .itration award has been mailed (22 NYCRR § 137.8). Thus, arbitration awards under Part 13 7 are t necessarily or automatically binding upon the parties (see Eisman Levine Lehrhaupt& Kakoyian is, P.C. v Torino Jewelers, Ltd, 44AD3d 581,584 [1 st Dept 2007 [dissenting opinion McGuire, J.] : Such de novo review is of the fee dispute itself rather than a review of the arbitration or of the . bitration award and, as such, it proceeds as if the arbitration never occurred. In this respect, i differs from a CPLR Article 75 proceeding to confirm, vacate or modify an arbitrator's award and · ch procedures as are relevant to such proceedings are inapplicable to the Part 13 7 fee dispute proc · ure or arbitration awards entered in such disputes (see generally Sachs v Zito, 28 Misc3d 567,571 Sup Ct, Orange Co., 2010]). Moreover, section 137.8 (c) specifically provides that "(a]rbitrators . hall not be called as witnesses [in a de novo review action] nor shall the arbitration award be 'tted in evidence at the trial de novo". The key to determining the relevanc of matter inserted into a pleading is generally whether such matter would be admissible in eviden . at trial (see generally Siegel, Practice Commentaries, McKinney's Cons Laws ofN. Y., Book 7B, PLR C:3024:4, at 52-53 ). The case of Landa v Dratch (45 AD3d 646 [2d Dept 2007]), relied upo by plaintiffs, appears to be on all fours with the instant action. In Landa, the plaintiff sought de ovo review of the merits of a legal fee dispute. The Appellate Division, Second Department he . that since the arbitration award was inadmissible as evidence at the trial de novo, it could not e attached as an exhibit to the defendant's answer or 5 [* 6] otherwise referred to in the defendant's ple · g. The branch ofplaintiff's motion as sought to strike such material from defendant's answer asp ~udicial and unnecessary was, therefore, granted. Goldberg attempts to distinguish La a from the facts of the instant matter by claiming that in Landa the defendant did not oppose pl 'ntiff's application for de novo review, did not seek confirmation of the arbitration award and n appeal was pending in a parallel action. In addition, Goldberg asserts that the defendant therei improperly asserted that the court was bound by the arbitration award. In contrast, Goldberg ntends that the arbitration is raised here simply to preclude plaintiffs from arguing that the a ·peal in the Confirmation Action is moot due to the pendency of this action. Defendant's argum · ts are unpersuasive particularly as they do not address the issue of the admissibility of the challeng arbitration is relevant in this action. material at trial or demonstrate how reference to the · · gly, all references to the arbitration in defendant's answer must be stricken. Plaintiffs' remaining issue conce the imposition of sanctions against defendant for allegedly engaging in frivolous litigation as fined in 22 NYCRR 130-1.1. Such sanctions are only appropriate when a party or attorney has ab ed the judicial process by engaging in wholly frivolous litigation (see Drummond v Drummond, 30 AD2d 450, 451 [2d Dept 2003 ], Iv denied 1 NY3d 504 (2003}; Levy v Carol Mgt. Corp., 260 AD2d 27, 34 (1 st Dept 19991). Plaintiffs have not shown that defendant abused the judicial process or : the arguments raised are completely without merit in law. Accordingly, the court denies plainti 'request for sanctions. Defendant's application in its cross otion that this matter be set down for an immediate trial is granted to the extent that the matter will set down for a pre-trial conference at which the nature and extent of appropriate discovery will b considered. The primary purpose of the Part 137 fee dispute resolution procedures, as noted by former ChiefJudge of the New York Court of Appeals Judith Kaye at the time the program was es blished, is to provide a "fair and speedy alternative to litigation" of attorney-client fee disputes ( rgus v Marianetti, 1 Misc3d 1003 [A] (City Ct., City ofRochester 2005], quoting "The State ofJ · iciary 2002,", January 14, 2002). In recognition of this purpose, the provision for a trial de novo of e dispute should be interpreted in the same manner as in other circumstances where a trial de novo ·s available, namely, that the demand for a trial de novo is the equivalent of a note of issue and, ce filed, places all claims on the trial calendar (see 6 [* 7] Brooklyn Caledonian Hosp. v Cintron, 147 "sc2d 498,499 [Civ. Ct., Kings Co. 1990]; Alllison vState Painting& Decorating Co., Inc., 141 isc2d 797, 798 [Civ. Ct., N.Y. Co. 19881). The fact that the trial de novo under Part 137 is obtai ed by commencing an action rather than by serving a demand does not then permit the parties to gage in extensive discovezy in advance of the actual trial. To hold otherwise would frustrate th . objectives and intent of the Fee Dispute Resolution Program to promote the expeditious resoluf n offee disputes with attorneys. Based upon the foregoing discussio it is ORDERED that the branch of plaint ffs' motion to dismiss the counterclaims as against the individual plaintiff is granted and the coun rclaims are hereby dismissed as against Dean Ross, individually; and it is further ORDERED that the branch of pl · tiffs' motion pursuant to CPLR § 3024 (b) to strike defendant's answer or, alternatively, to s · · all references to the prior arbitration is granted, the answer is stricken, and defendant is granted eave to serve a new answer within fifteen (15) days of entzy of this order, which answer shall con no references to the prior arbitration; and it is further ORDERED that plaintiffs shall repl to the counterclaims, if any, in the new answer within seven (7) days of service of the new answer :and it is further ORDERED that the branch of plain :ffs' motion as seeks an imposition of sanctions against defendant is denied; and it is further ORDERED that defendant's cross otion to set this matter down for an immediate trial de novo is granted to th~ extent that counsel for the parties are directed to appear for a pre-trial conference in Part 61, at 60 Centre Street, . om 341, on January 19, 2011, at 2:30 p.m. The foregoing constitutes the decisi DATED: 17--~bo I 7 ENTER, '[).?.~ 0. PETER SHERWOOD J.S.C.
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