Audio Unlimited E. Meadow, Inc. v Perry

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Audio Unlimited E. Meadow, Inc. v Perry 2013 NY Slip Op 33565(U) March 15, 2013 Sup Ct, New York County Docket Number: 154887/2012 Judge: Eileen A. Rakower Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 03/18/2013 1] INDEX NO. 154887/2012 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/18/2013 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY ¢ HON. EILEEN A. RAKOWER PART PRESENT: Index Number: 154887/2012 AUDIO UNLIMITED OF EAST i,5 INDEX N O . - - - - MOTION DATE _ _ __ vs PERRY, ESQ, STUART MOTION SEQ. NO. - - - Sequence Number: 001 DISMISS \ .. The following papers, numbered 1 to _ _ , were read on this motion t o / f o r - - - - - - - - - - : - - - - Notice of Motion/Order to Show Cause - Affidavits - Exhibits Answering Affidavits - Exhibits----------------- Replying Affidavits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ I No{s).,_ __ _ __ / I No(s). _d. _____ I No{s). -3~--- Upon the foregoing papers, it is ordered that this motion is w (J j:: ti) :::> ...., ~ c w -. r: .~- . .. : a: a: w . i.' '· , ¢ ~·>/(''''ii"'"' ~~.~~-:,i~;~; C-Kt7fi~ .-·:.~~·· - ¢ ~ii.j,.,:._;,,·~.,-.:,:y :r~·J u. , . . . . 11 I w a: .. > ~ -z ...J ...J :::> 0 u. ti) t; ~ w a: ~ w (!) z 3: a: - ti) - 0 w < (J ...J ..J u. ti) 0 - ::i:: z w 0 1- j:: a: 0 0 :Ii: u.. Dated: 1. CHECK ONE: ........................................................ ¢............ 2. CHECK AS APPROPRIATE: .. ¢........................ MOTION IS: . ~CASE DISPOSED HON. EILEEN d·N~Q'AffF>BsmoN 0 GRANTED 0DENi£rr-···-{]GRANTED IN PART 0 ... ...... 0 SETILE ORDER 0 SUBMIT ORDER ·-~.,.. 3. CHECK IF APPROPRIATE: ................................................ ODO NOT POST 0 FIDUCIARY APPOINTMENT ~ 0 OTHER ,,...,. REFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 15 ------------------------------------------------------------------)( AUDIO UNLIMITED EAST MEADOW, INC., AND ERNIE SCHAFFER, Plaintiffs,. - against - Index No.:154887/2012 Decision and Order Motion Seq: 001 STUART PERRY, ESQ., Defendant. -------------------------------------------------------------------)( HON. EILEEN A. RAKOWER, J.S.C.: This is a legal malpractice action commenced by plaintiffs Audio Unlimited of East Meadow, Inc. and Ernie Schaffer (collectively, "Plaintiffs"), against defendant Stuart Perry, Esq. ("Defendant"). Defendant now moves for an Order, pursuant to CPLR321 l(a)(l) and (a)(7), dismissing Plaintiffs' Verified Complaint in its entirety. Plaintiffs oppose. Plaintiffs, in their opposition papers, request "permission to serve and file" a proposed Amended Complaint; however, .they have not filed a cross motion requesting the same. Furthermore, to the extent that P~aintiffs may have been permitted to file and amended Complaint without leave, Plaintiffs did not do so. Thus, this Court will only review the motion as it relates to the Plaintiffs' Verified Complaint filed on July 25, 2012. In the Verified Complaint, Plaintiffs allege that Defendant drafted a Purchase and Sale Agreement ("Sale Agreement"), dated May 21, 2009, and a Promissory Note, dated August 18, 2009, in connection with a commercial transaction between Plaintiffs and Planet V erte, LLC. Plaintiffs allege that, "The Sale Agreement and Promissory Note were prepared by SP [Defendant] in a negligent manner that deviated from good and accepted practice and contained numerous material defects that utterly failed to protect Plaintiffs [sic] interest in the Sale Tran'saction." [* 3] Plaintiffs allege the following "material defects" in the Sale Agreement: (1) sale price of Plaintiffs' total assets was stated as $1.2 million, instead of$1.5 million; (2) payments made pursuant to the "earn out" provision in the Sale Agreement were not guaranteed; (3) the earn out provision failed to provide Plaintiffs with the ability to audit the books and records of Planet Verte to determine ifthe earn out payments were properly calculated; (4) the Sale Agreement does not contain a provision that allows Plaintiffs to audit the books and records to determine if revenues of Planet Verte were been accurately represented to Plaintiffs; ( 5) the Sale Agreement does not contain any remedies for Plaintiffs upon the default of Planet Verte including: (a) a confession of judgment held in escrow; (b) stock certificates held in escrow; (c) a reassignment of business lease upon default; (d) Plaintiffs [sic] corporate telephone number held in escrow; and (e) liquidated Damages provision; and (6) the Sale Agreement compels arbitration between Plaintiffs and Planet Verte in the event of any dispute concerning the Sale Transaction. Plaintiffs allege the following "material defects" in the Promissory Note: ( 1) no acceleration clause in the event of a default; (2) interest on the Promissory Note is a simple interest rate, instead of the compound interest rate that Plaintiffs requested to be included in the Promissory Note; (3) contains a nominal penalty (5o/o) of any payment then due in the event of a default; (4) contains a lengthy period of time, i.e. 60 days before Plaintiffs are permitted to declare a default; and (5) no protection in the event that Planet V erte sells the total business assets to a third party. On or about December 11, 2011, Planet Verte allegedly defaulted on both the Sale Agreement and Promissory Note, by failing to make the agreed upon payments to Plaintiffs. Plaintiffs allege, "Due to that negligent manner in which the Sale Agreement and Promissory Note were drafted by SP [Defendant], Plaintiffs had no legal claims and/or protections against Planet Verte for their default pursuant to the Sale Agreement and Promissory Note." Defendant alleges that Plaintiffs have failed to set forth allegations sufficient to allege that Defendant was the "but for" proximate cause of Plaintiffs' alleged damages. Defendants contend that they cannot "properly plead these elements because they have made no attempt to enforce the subject agreements against the breached pai1ies and have [sic] cannot conclusively allege that the Sale Agreement and Promissory Note are unenforceable to create a nexus between Attorney Perry's 2 [* 4] conduct and Plaintiffs' damages." On a motion to dismiss pursuant to CPLR §3211(a)(7), the pleading is to be afforded a liberal construction and the plaintiff accorded the benefit of every possible inference. (See, Leon v. Martinez, 84 NY2d 83, 614 NYS2d 972, 638 NE2d 511 [ 1994]). In determining whether dismissal is warranted for failure to state a cause of action, the court must "accept the facts alleged as true ... and determine simply whether the facts alleged fit within any cognizable legal theory." (People ex rel. Spitzer v. Sturm, Ruger & Co., Inc., 309 AD2d 91 [1st Dept. 2003]) (internal citations omitted) (see CPLR §3211 [a][7]). Deficiencies in the Complaint may be remedied by affidavits submitted by the parties. (Amaro v. Gani Realty Corp., 60 N.Y. 2d 491 [2009]). "However, factual allegations that do not state a cause of action, that consist of bare legal conclusions, or that are inherently incredible or clearly contradicted by documentary evidence are not entitled to such consideration." Skillgames, L.L. C. v. Brody, 1 A.D. 3d 247, 250 (1st Dept 2003) (citations omitted). Further, when the defendant seeks to dismiss the Complaint based upon documentary evidence pursuant to CPLR §3 211 (a )(1 ), "the court may grant dismissal when documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." (Beal Sav. Bank v. Sommer, 8 NY3d 318, 324 [2007]) (internal citations omitted). "An action for legal malpractice requires proof of three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiffs losses; and (3) proof of actual damages." See Brooks v. Lewin, 800 N.Y.S. 2d 695 [1st Dept 2005], lv denied 6 N.Y. 3d 713 [2006]) (citation omitted). Speculative damages or conclusory claims of damage cannot be a basis for legal malpractice. See Russo v. Feder, et. al., 301A.D.2d63, 67 [1 51 Dept2002]). "In order to establish proximate cause, a plaintiff must demonstrate that but for the attorney's negligence, [the plaintiffJ would have prevailed in the underlying matter or would not have sustained any ascertainable damages." (Id.) (citation omitted). "The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent." Leder v. Spiegel, 31A.D.3d 266, 288 [1st Dept 2006], aff'd 9 N.Y. 3d 836 [2007], cert. denied sub nom, Spiegel v. Rowland, 522 U.S. 1257 [2008[). Even affording .Plaintiffs every possible inference, the Verified Complaint fails 3 [* 5] to allege facts that show that, but for Defendant's alleged negligence in the drafting of the Sale Agreement and Promissory Note, Plaintiffs would have prevailed in any underlying matter or would not have sustained any ascertainable damages. Here, based on the Verified Complaint, the alleged damages sustained by Plaintiffs were caused by Planet Verte, who defaulted on the Sale Agreement and Promissory Note. See paragraph 9 of the Verified Complaint. Plaintiffs do not plead that but for Defendant's negligence, Planet Verte would not have defaulted. Rather, they contend as a result of the "material defects" and "due to that negligent manner in which the Sale Agreement and Promissory Note were drafted by SP [Defendant], Plaintiffs had no legal claims and/or protections against Planet Verte for their default pursuant to the Sale Agreement and Promissory Note." However, the Sale Agreement and Promissory Note contain certain terms in the event of default and afford Plaintiffs certain protections in the event of default. See paragraph 21.4, Remedies Upon Breach of Attempted Breach. For example, the Purchase and Sale Agreement provides, "Notwithstanding anything else in this Agreement, the website, as specifically noted on Exhibit C, will continue to be owned by the Seller IN ITS CORPORATE OR INDIVIDUAL CAPACITY OR THROUGH A THIRD PARTY until the Note is fully paid and/or satisfied." Yet, Plaintiffs do not plead, or otherwise dispute in their opposition papers, that they did not seek to enforce the Purchase and Sale Agreement and Promissory Note as against the defaulting party, Planet Verte. Thus, even assuming all the facts in the Complaint are true, Plaintiffs' claim and alleged damages as against Defendant is speculative at this juncture and insufficient to plead a cause of action for legal malpractice. Wherefore it is hereby ORDERED that defendant Stuart Perry, Esq.'s motion is granted and the Complaint is dismissed; and it is further ORDERED that the Clerk is directed to enter judgment accordingly. This constitutes the Decision and Order of the Court. All other relief requested is denied. 4 [* 6] DATED: EILEEN A. RAKOWER, J.S.C. 5

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