Cooke-Zwiebach v Oziel

[*1] Cooke-Zwiebach v Oziel 2011 NY Slip Op 52194(U) Decided on December 2, 2011 Supreme Court, New York County Rakower, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 2, 2011
Supreme Court, New York County

Peter Cooke-Zwiebach, ROBERT COOKE-ZWIEBACH, LIZACOOKE-ZWIEBACH, and JUDITH ZWIEBACH, Plaintiffs,

against

Robert I. Oziel, BERNARD H. VOGEL, and SEAVEY, VOGEL & OZIEL d/b/a SEAVEY VOGEL & OZIEL, LLP, Defendants.



104181/06



Hubbell & Associates P.C. for Plaintiffs

David S. Hammer, Esq. for Defendant Vogel

Eileen A. Rakower, J.

Plaintiffs bring this action against defendants Robert I. Oziel, Bernard H. Vogel, and the law firm of Seavey, Vogel & Oziel ("SVO"), alleging that defendant attorneys Oziel and Vogel "failed to safeguard and/or stole client funds entrusted to their firm." Plaintiffs assert causes of action for fraud, conversion, negligence, breach of fiduciary duty, unjust enrichment, constructive trust, breach of contract, and violation of the New York State Judiciary Law.

According to Plaintiffs' Second Amended Verified Complaint, Oziel was a friend and attorney for plaintiff Judith Zwiebach and her late husband Melvyn Zwiebach since approximately 1972. Melvyn died on October 4, 1991 and, under his will, Judith was the executrix and sole beneficiary of his estate. Judith engaged SVO's predecessor, the law firm of Seavey, Fingerit, Vogel Oziel & Skoller ("SFVOS") to probate Melvyn's will. On or around December 26, 1991, Judith engaged SFVOS pursuant to a written retainer agreement to represent her husband's estate in a wrongful death action. In or around January 1992, SFVOS commenced a wrongful [*2]death action against Hachiro Nakamura, M.D. and Hofstra Health Dome in Supreme Court, Queens County.

Plaintiffs allege that in or around November 1994, Vogel negotiated with several law firms and ultimately executed a written agreement whereby the wrongful death action was referred to the law firm of Finz & Finz. On or around November 10, 1994, Vogel executed a written forwarding fee agreement with Finz & Finz which provided that if Finz & Finz was granted a fee of 1/3 of the recovery, SFVOS would receive 40% of that third; if Finz & Finz received a lesser fee based on a sliding scale, SFVOS would receive 35%. Plaintiffs allege that Vogel did not disclose this "clandestine forwarding fee arrangement" to Judith. They further allege that, after the transfer, Vogel "corresponded and communicated with Finz and Finz to oversee and supervise the prosecution of the litigation, and to protect his forwarding fee."

In or around 1998, SFVOS became SVO. Vogel and Oziel were the only two lawyers at the new firm. Plaintiffs allege that, although they attempted to have the firm registered as a limited liability partnership, they failed to do so as a result of failing "to conform to necessary filing requirements." Plaintiffs further allege that in or around November 1997, Vogel and Oziel entered into a written partnership agreement whereby Oziel agreed to submit all bills and deposits to Vogel, and further agreed not to draw from the escrow account without the prior consent of Vogel. Plaintiffs allege that Vogel "had knowledge that ... Oziel previously engaged in multiple improprieties regarding client funds entrusted to the firm," and "was uniquely positioned to put an end to any misconduct by ... Oziel ...."

In late 1999, the wrongful death action was settled for the sum of $2,010,000.00. On or around November 18, 1999, the Nassau County Surrogate issued a decree granting the parties leave to compromise and settle the case for the sum of $2,010,000.00. Out of the settlement, the Surrogate ordered that Judith and her three children each receive $398,627.86 after payment of legal fees and disbursements. Plaintiffs state that, rather than have the settlement checks forwarded directly to Plaintiffs, SVO had the checks sent to the firm itself. SVO maintained an escrow account at Chase Bank named "Seavey, Vogel & Oziel Escrow Account."

Plaintiffs state that on or around January 21, 2000, SVO received and deposited into the escrow account $1,472,666.68 in settlement funds from Dr. Nakamura's liability carrier (which consisted of four checks, payable to Judith and her children, [*3]each in the amount of $368,166.67). Also on or around January 21, 2000, Vogel received a check in the amount of $115,603.69 as a forwarding fee from Finz & Finz.

On or around February 23, 2000, SVO received and deposited into the escrow account funds from Hofstra Health Dome's liability carrier in the sum of $121,844.80 (consisting of four checks, payable to Judith and her children, each in the amount of $30,461.20). Also on or around February 23, 2000, Vogel received a check in the sum of $24,369.02 from Finz & Finz as an additional forwarding fee.

Plaintiffs allege that prior to any disbursement of funds to Plaintiffs, the balance of the escrow account fell below the sum of the settlement monies entrusted to SVO.

Plaintiffs state that SVO distributed $265,000 to each of the four Plaintiffs, rather than the $398,627.86 as required by the compromise order. In or around March 2000, Judith was advised by Oziel that there were tax issues which required that SVO hold the remainder of the settlement proceeds until November 2003. Plaintiffs allege that they relied on Oziel's legal advice, and continued to be represented by SVO through early 2004 in the settling of Melvyn's estate.

In or around November 2003, Judith sought to have SVO release the remainder of the settlement proceeds. Oziel advised her that complications had arisen which prevented SVO from releasing the money to her and her children. Oziel further advised that he would consult with a tax attorney, and told Judith that she "should not discuss this with anyone."

However, Judith did consult with Mark Hochberg, Esq., a trusts and estates attorney. On or around May 14, 2004, after Hochberg had the opportunity to meet with Oziel and review relevant documents held by Oziel, Hochberg advised Judith that there were no plausible tax issues holding up the settlement proceeds. Accordingly, in or around the summer of 2004, Judith filed a disciplinary complaint with the Grievance Committee. Thereafter, SVO released and sent checks to the four Plaintiffs in the amount of $65,000 each. However, pursuant to the Surrogate Court decree, $274,511.67 in settlement funds deposited into the SVO escrow account remain due the Plaintiffs. [*4]

In addition, Plaintiffs allege that, in or around February 1999, SVO was engaged as Judith's attorney in the sale of her house. The closing took place on June 24, 1999. Oziel told Judith that SVO needed to withhold $75,000.00 from the proceeds of the sale and that the money would be placed in the firm's escrow account and applied toward payment of a settlement in an action in which she and Melvyn were defendants and Vogel was acting as her litigation counsel. Oziel represented to Judith that the $75,000 held in the escrow account would be paid to Richard Bisso as settlement of the action ("the Bisso action"). However, in or around 2006, Judith learned that the purported stipulation of settlement provided by Oziel was never filed with the court, the $75,000.00 was never paid to Bisso's attorney, and that the signature of Bisso's attorney had been forged. On July 9, 2007, the Hon. Stephen A. Bucaria of Supreme Court, Nassau County, ordered Oziel and Vogel to turn over the $75,000.00 held in escrow and sanctioned both Oziel and Vogel $15,000.00 for having submitted a forged settlement agreement. Judith states that, as a result, she has sustained "consequential damages including but not limited to attorneys' fees and now seeks the imposition of punitive damages as a result of this outrageous conduct."

Defendants Vogel and SVO now move for partial summary judgment, pursuant to CPLR §3212, dismissing Plaintiffs' fourth, fifth, and ninth causes of action. Plaintiffs' fourth cause of action seeks disgorgement of "any and all fees received in connection with the settlement of the wrongful death action, including but not limited to the clandestine forwarding fee of $139,972.71 and the wrongfully withheld settlement proceeds of $274,511.67." Plaintiffs' fifth cause of action seeks consequential damages, including attorneys fees, and punitive damages concerning the improperly withheld $75,000.00 from the Bisso action. Plaintiffs' ninth cause of action seeks damages, attorneys' fees, and treble damages based upon all of the alleged misconduct set forth in the complaint pursuant to Judiciary Law §487. In essence, Vogel seeks dismissal of all claims aside from the causes of action for the $274,511.67 of settlement monies which were never turned over to the Plaintiffs. While Vogel vigorously disputes these claims, he states that "these defenses can only be resolved on a full evidentiary record." Lastly, Vogel seeks dismissal as against "Seavey, Vogel & Oziel d/b/a Seavey Vogel & Oziel LLP" as Plaintiffs have already obtained a default judgment against SVO. Vogel and SVO submit an attorney's affirmation, an affidavit from Vogel, and a memorandum of law in support of their motion.

With respect to the Plaintiffs' claims surrounding the Bisso action, Vogel notes [*5]that the issue was litigated and resolved in the Bisso action itself, pursuant to the order of Judge Bucaria dated July 9, 2007. In that order, Judge Bucaria directed that Oziel turn over the $75,000.00 that was held in escrow, and further ordered that Oziel, Vogel and SVO pay, individually and jointly, a $15,000.00 monetary sanction for having submitted a forged settlement agreement to Judith. Vogel states that to seek additional damages concerning these proceeds constitutes impermissible "claim splitting."

As for Plaintiffs' claim that SVO received an undisclosed forwarding fee of $139,972 from Finz & Finz in connection with the settlement of the wrongful death action, Vogel claims that this sum constituted fair payment for legal services rendered by SFVOS in the wrongful death action.[FN1] Vogel notes that prior to this payment, SFVOS had not received any compensation for its representation of Melvyn Zwiebach's estate. Vogel further notes that when it was initially retained in 1991, Judith executed a retainer that granted SFVOS 1/3 of any recovery. Pursuant to the written agreement by which the wrongful death action was transferred to Finz & Finz, SFVOS was to receive 35% of attorneys' fees received by Finz & Finz, or 40% in the event that Finz & Finz was awarded attorneys' fees of 1/3 of any award or settlement. This agreement further provided that "all prior attorneys' liens, if any, will be satisfied."

As set forth in the November 18, 1999 decree of the Surrogate, out of the $2,010,000.00 settlement proceeds, Finz & Finz was to receive $391,218.67 in attorneys' fees, or approximately 19.5% of the settlement proceeds. Vogel states that SVO's referral fee of $139,972 came out of the attorneys' fees awarded to Finz & Finz pursuant to the written agreement between them, and accounted for only 7% of the net settlement. Accordingly, even assuming that SFVOS failed to disclose the division of fee agreement with Finz & Finz, this "technical violation" of the disciplinary rules is not actionable because Plaintiffs cannot establish that the fee sharing arrangement breached a fiduciary duty.

In addition to the foregoing, Vogel claims that a prior request for the forwarding fee paid to SVO was specifically denied by the Hon. Ira Gammerman at [*6]a prior inquest on September 22, 2008.[FN2]

Lastly, with respect to Plaintiffs' Judiciary Law §487 claim, Vogel asserts that this cause of action must be dismissed because the statute applies to alleged deceit made by an attorney during the course of a judicial proceeding, and no such conduct is shown by Vogel. To the contrary, any actionable deceit concerning the misappropriation of settlement proceeds is attributable solely to Oziel. Moreover, any Judicial Law §487 claim with respect to the Bisso action would be barred as impermissible "claim splitting." Moreover, Vogel asserts that, with respect to any allegations of deceit in the present action, the statute applies solely to conduct by an attorney acting in his or her capacity as an attorney, and not by a party to an action, even if he or she is an attorney.

Plaintiffs' submit an affidavit from Judith Zwiebach, an attorney's affirmation, a statement of facts, and a memorandum of law in opposition to Vogel and SVO's motion and in support of their cross-motion for summary judgment. With respect to the $139,972.00 forwarding fee, Plaintiffs claim that said fee must be disgorged because the fee splitting arrangement violated Disciplinary Rule 2-107 and, ipso facto, precluded the firm from recovering any fee. Plaintiffs further argue that Vogel assumed personal responsibility over the wrongful death action, which rendered him responsible for "making sure that at the end of the day his clients received their settlement proceeds."

As for Plaintiffs' claim under Judiciary Law §487, Plaintiffs assert that all of the misconduct alleged in the complaint is actionable under the statute. Moreover, Plaintiffs allege in their motion papers that Vogel has repeatedly perjured himself during the course of this action, including misrepresentations made as to his involvement in referring the wrongful death action to Finz & Finz, his continued involvement therein after the referral, and his purported representation of defendant Seavey, who was since been dropped from the action. [*7]

Turning to their cross-motion for summary judgment, Plaintiffs first argue that Vogel is liable for the monies wrongfully misappropriated by Oziel under the laws of partnership. Plaintiffs claim that Vogel cannot rely on the firm's purported LLP status to avoid personal liability because SVO failed to comply with the publication requirements to have the LLP registered as a legal entity in the state. Moreover, Plaintiffs assert that any LLP status was dissolved by proclamation in 2003.

In addition, even if SVO has LLP status, Plaintiffs contend that Vogel is liable for Oziel's acts under Partnership Law §26(c) because the partnership agreement provided that Vogel held a 68% interest in the firm, and because the agreement expressly provided that "[Oziel] shall submit all bills to [Vogel] & all deposits shall not draw from the escrow account without [Vogel's] consent." Plaintiffs further point to Vogel's deposition testimony, wherein he states that he added this provision because a prior escrow account at SFVOS was "short and I wanted to make sure that it wasn't caused by [Oziel]." Plaintiffs further allege that Vogel was the "managing partner" of the firm.

Vogel and SVO submit an attorney's affirmation, an affidavit from Vogel, and a memorandum of law in further support of their application for summary judgment, and in opposition to Plaintiffs' cross-motion. Responding to Plaintiffs' summary judgment motion, Vogel advances several defenses. First, Vogel claims that the issue of the settlement proceeds "was settled 12 years ago, when the Zwiebachs executed a written stipulation ... authorizing Oziel to withhold $270,000 from distribution for services previously performed by the Law Firm," which is submitted as an exhibit. Vogel claims that between approximately 1986 and 2000, SFVOS, and subsequently SVO, "provided the Zwiebachs with legal services," based upon Oziel's friendship with Melvyn and Judith Zwiebach. Judith testified in her deposition that she initially paid the firm a $750 monthly retainer, but eventually told Oziel that they were having financial problems and could not longer afford to pay for legal services. Although she testified that Oziel told her that "he and [the] firm would continue to represent [the Zwiebachs] at no charge," Vogel attacks this testimony as "highly unreasonable," and posits that "[t]he far more sensible explanation is that no bills were sent because Ms. Zwiebach had made it clear that she would make no payments until her financial position improved."

Vogel states that, after the wrongful death settlement was executed, the Zwiebach's financial position improved dramatically, and accordingly, the Zwiebachs [*8]executed the stipulation with Oziel, wherein Plaintiffs represented that "there remains outstanding legal fees in the amount of $270,000.00 for the services performed by [SVO]." Vogel contends that, prior to that point, "the Zwiebach's never paid the Law Firm a fee."

In addition, Vogel claims that, regardless of any impropriety on the part of Oziel, he is not personally liable for Oziel's acts because SVO was in fact a duly registered LLP. Vogel provides copies SVO's registration documents, Department of State records indicating the filing of said documents on December 3, 1997, and evidence of publication as required by Partnership Law §121-1500. Vogel does concede that SVO was dissolved by proclamation on June 25, 2003, after the firm failed to file the required five-year statement with the Department of State pursuant to Partnership Law §121-1500(g). However, Vogel states that SVO cured its default by filing the five-year statement, paying applicable fees, and filing a "certificate of consent" with the Department of State. Accordingly, pursuant to §121-1500(g), the revocation of LLP status was rendered a nullity, and SVO was given LLP status retroactive to the proclamation of dissolution.

Vogel states that he had no notice of any alleged improprieties on the part of Oziel at the time he entered into the partnership agreement with him. He states that, at SFVOS, which had a staff of approximately 40 people, "the bookkeeper ... informed the partners that the escrow amount was short.'" This occurred in the early 1980s. Vogel claims that he inserted the provision about requiring Oziel to submit bills and deposits to him, and to only withdraw escrow funds with his consent, "solely as a matter of caution." Further, Vogel categorically denies that he had "full management responsibility" at SVO, as alleged by Plaintiffs, and notes that the partnership agreement between him and Oziel does not designate him as having a managerial or supervisory position over Oziel.

The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law. That party must produce sufficient evidence in admissible form to eliminate any material issue of fact from the case. Where the proponent makes such a showing, the burden shifts to the party opposing the motion to demonstrate by admissible evidence that a factual issue remains requiring the trier of fact to determine the issue. The affirmation of counsel alone is not sufficient to satisfy this requirement. ( Zuckerman v. City of New York, 49 NY2d 557 [1980]). In addition, bald, conclusory allegations, even if believable, [*9]are not enough. (Ehrlich v. American Moninger Greenhouse Mfg. Corp., 26 NY2d 255 [1970]). ( Edison Stone Corp. v. 42nd Street Development Corp.,145 AD2d 249, 251-252 [1st Dept. 1989]). "[I]f it is reasonable to disagree about the material facts or about what may be inferred from undisputed facts, summary judgment may not be granted. Moreover, in deciding whether there is a material triable issue of fact, the facts must be viewed in the light most favorable to the nonmoving party'" (Ferluckaj v. Goldman Sachs & Co., 2009 NY Slip Op 2483 [2009]).

Turning first to the $139,972.00 forwarding fee, Disciplinary Rule 2-107 (22 NYCRR §1200.12), which was in effect at all times relevant hereto, provides that

A.A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of the lawyer's law firm, unless:

1.The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.

2.The division is in proportion to the services performed by each lawyer or, by a writing given the client, each lawyer assumes joint responsibility for the representation.

3.The total fee of the lawyers does not exceed reasonable compensation for all legal services they rendered the client.

DR 2-107 is generally intended to address referral situations, where the referring lawyer collects a fee without performing work for the client, to prevent lawyers from surprising clients by having a lawyer outside the firm do the work,' as a client has an unfettered right to hire or fire its attorney, as well as to know who is working on its case (Simon, New York Code of Professional Responsibility Annotated, at 404 [2007 ed] [Simon]). The provision is also intended to protect a client against unreasonable fees (DR 2-107[A][3]).

(Lapidus & Assocs. v. Reiver and Dencorp Invs., 2008 NY Slip Op 30893U, *9 [Sup. Ct., NY County 2008]). "Client knowledge of a joint representation agreement between lawyers is the sine qua non of its ethical validity, as well as proof that an attorney who claims part of a legal fee must have shared, to some significant degree, the legal work entailed" (Excelsior 57th Corp. v. Lerner, 160 AD2d 407, 408 [1st [*10]Dept. 1990]) (citing Carter v Katz, Shandell, Katz & Erasmous, 120 Misc 2d 1009; DR 2-107; Oberman v Reilly, 66 AD2d 686, lv dismissed 48 NY2d 654; A. Stanley Proner, P. C. v Julien & Schlesinger, 134 AD2d 182, 184). "A client is simply to be made aware that another attorney is jointly or independently representing his or her interests at no additional expense to her therefor. Any further elaboration or specificity regarding the exact arrangement between the collaborating attorneys is not ethically mandated by [DR 2-107]" (Lapidus & Assocs. at *10) (quoting Carter).

Here, Plaintiffs' claim for disgorgement of the referral fee must be dismissed because, although the specific allocation of fees was not made known to her, Judith was undisputedly aware of the representation of her by both firms. Judith signed retainers with both firms — first with SFVOS, and then with Finz & Finz. Each retainer provided for a contingency fee of 1/3 of any recovery in the wrongful death action. Moreover, letters submitted into evidence by Plaintiffs confirm that Judith was in communication with both firms as to the status of the wrongful death action. It is further undisputed that SFVOS did render legal services in connection with the wrongful death action over a substantial period of time, and that Plaintiffs incurred no additional expense as a result of the referral. Under these facts, disgorgement of the referral fee would effect a forfeiture, disfavored in the courts, and would allow Plaintiffs "to use public policy as a sword for personal gain rather than a shield for the public good" (Benjamin v. Koeppel, 85 NY2d 549, 553 [1995]).

With respect to Plaintiffs' fifth cause of action, which seeks damages in connection with SVO's improper withholding of $75,000.00 in connection with the Bisso action, said cause of action must be dismissed. As noted by Vogel, the matter was previously litigated in the Bisso action itself, wherein Justice Bucaria ordered that SVO return the $75,000.00 to Judith, and further sanctioned SVO, Vogel and Oziel, individually and jointly, in the amount of $15,000.00. Plaintiffs' seeking of further damages in connection with Oziel's malfeasance in the Bisso action in this action constitutes impermissible claim-splitting (see Sannon-Stamm Assoc., Inc. v Keefe, Bruyette & Woods, Inc., 2009 NY Slip Op 9722 [1st Dept. 2009]).

Turning to Plaintiffs' Judiciary Law §487 claim, that statute provides:

An attorney or counselor who: 1. Is guilty of any deceit or collusion, or consents to any deceit or collusion, with [*11]intent to deceive the court or any party; or, 2. Wilfully delays his client's suit with a view to his own gain; or, wilfully receives any money or allowance for or on account of any money which he has not laid out, or becomes answerable for, Is guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action.

The court finds that Plaintiffs' Judiciary Law §487 claims must be dismissed against Vogel as to the wrongful withholding of the settlement proceeds in the wrongful death action. All of the allegations of deceit concerning the status of the settlement proceeds pertain to Oziel, and not Vogel (see Liebert v. Gelbwaks, 234 AD2d 164 [1st Dept. 1996]) (jury verdict awarding treble damages under §487 set aside where attorney, though properly found to have breached his fiduciary duty, was not shown to have actually participated in the willful receipt of the subject funds).

Similarly, and as noted above, Plaintiffs cannot assert a Judiciary Law §487claim with respect to the Bisso action, as that matter has been fully litigated before Judge Bucaria.

However, the court finds that Plaintiffs have a viable cause of action under Judiciary Law §487 with respect to Vogel's prior representation that he represented Seavey in this action. Although Vogel purported to represent Seavey at some point in this litigation, he later testified that Seavey was wholly unaware of the litigation. In addition, Seavey testified that at no point did he authorize Vogel to act as attorney on his behalf. Although liability under §487 cannot attach to Vogel for alleged deceits in this action which he made as a party to this action (see Crown Assocs. v. Zot, LLC, 2011 NY Slip Op 3020, *2 [2nd Dept. 2011]) (the mere fact that a wrongdoer is an attorney is insufficient to impose liability [under §487]), a misrepresentation that he was acting as an attorney for Seavey without his knowledge or consent was clearly a misrepresentation made in Vogel's capacity as an attorney. Judith claims in her affidavit that this misrepresentation has resulted in "thousands of dollars in legal fees." This is sufficient to raise an issue of fact at trial as to whether and to what extent Plaintiffs suffered damages as a result (see Izko Sportswear Co. v. Flaum, 20 AD3d 392 [2nd Dept. 2005]).

Turning now to Plaintiffs' motion for summary judgment on the issue of the misappropriated $274,511.67 of settlement proceeds, the court finds that issues of fact preclude summary judgment for Plaintiffs. As a preliminary matter, Vogel has demonstrated that SVO was a limited liability partnership at all relevant times herein. As noted previously, Vogel provides documentation evidencing SVO's registration as a limited liability partnership; and although SVO was dissolved by proclamation in 2003, SVO's failure to file the requisite five-year statement was cured, and SVO was retroactively restored to LLP status under the Partnership Law. Accordingly, the court's analysis is governed by Partnership Law §26(c)(i), which provides:

each partner, employee or agent of a partnership which is a registered limited liability partnership shall be personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or her or by any person under his or her direct supervision and control while rendering professional services on behalf of such registered limited liability partnership.

Here, there are issues of fact as to whether (1) Vogel's failure to discover and/or thwart Oziel's misappropriation of funds was the product of negligence; or (2) that Oziel acted under Vogel's direct supervision and control.

Although the partnership agreement provided that Oziel was not to withdraw from the firm's escrow account without Vogel's consent, Vogel testified Oziel was "a signatory and had the right to withdraw." Thus, Oziel was not physically prevented from withdrawing from the account without Vogel's consent, although to do so would constitute a violation of the partnership agreement between Vogel and Oziel. Nor do the wording and provisions partnership agreement between the two establish, as a matter of law, that Vogel had supervisory control over Oziel. Rather, the agreement merely provides for a greater allocation of the profits and losses to Vogel, and Vogel testified at his deposition that he and Oziel were both "managing members" of SVO. Further, Plaintiffs fail to adduce evidence in support of their claim that Vogel was on notice of prior impropriety on the part of Oziel concerning clients' funds at the prior firm, and Vogel testified that, although there was a shortfall at the prior firm, it could not be attributed to a particular person. In short, a jury could reasonably conclude that, as a 68% shareholder of SVO who was apparently concerned about the firm's escrow account based upon prior experience, Vogel either knew, or reasonably should have known of Oziel's malfeasance; however, such a conclusion is not required as a [*12]matter of law.

Lastly, the court notes that there is no dispute that Plaintiffs have already obtained a default judgment against SVO.

Wherefore it is hereby

ORDERED that Vogel's motion for partial summary judgment is granted and Plaintiffs' fourth, fifth and ninth causes of action are dismissed; and it is further

ORDERED that Plaintiffs' cross-motion for summary judgment is denied.

This constitutes the decision and order of the court. All other relief requested is denied.

DATED: December 2, 2011___________________________________

EILEEN A. RAKOWER, J.S.C. Footnotes

Footnote 1:The court notes that Vogel assumes the truth of this allegation for purposes of this motion without admitting same.

Footnote 2:By order dated August 21, 2008, the Hon. Walter B. Tolub struck the answer of all defendants for failure to comply with their discovery obligations, and set the matter down for inquest on damages. By order dated May 4, 2010 the First Department reversed Justice Tolub's order striking defendants' answers as to Seavey and Vogel, as well as JHO Gammerman's judgment, which was entered on October 16, 2008 after the inquest (see Cooke-Zwiebach v. Oziel, 2010 NY Slip Op 3780).