A.R.K. Patent Intl., LLC v Levy

[*1] A.R.K. Patent Intl., LLC v Levy 2014 NY Slip Op 51949(U) Decided on December 8, 2014 Supreme Court, Monroe County Odorisi, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 8, 2014
Supreme Court, Monroe County

A.R.K. Patent International, LLC, et al., Plaintiffs,

against

Mark Levy, et al., Defendants.



07/14620



Lee Michaels, Esq.

Attorney for Plaintiffs

Christopher Albanese, Esq.

Attorney for Defendants
J. Scott Odorisi, J.

DECISION AND ORDER

Odorisi, J.

This legal malpractice lawsuit arises out of an alleged mishandling of a patent deal. Pending before the Court are: (1) Plaintiffs' motion for sanctions for Defendants' spoliation of evidence, and then summary judgment based upon that penalty; and, (2) Defendants' motion for summary judgment.

Based upon a review of all of the court filings on both motions, as well as upon oral argument heard at Special Term, this Court hereby: (1) DENIES IN PART AND GRANTS IN PART Plaintiffs' spoliation motion; and, (2) DENIES IN PART AND GRANTS IN PART Defendants' summary judgment motion.[FN1]

LAWSUIT FACTS

Background Information

Before October 22, 2004, Plaintiff A. Richard Koetzle ("Koetzle") created a patent for "Method To Increase Flash Points On Flammable Solvents" (hereinafter the "Patent"). The Patent was created while Koetzle was purportedly employed by Plaintiff Tarksol, Inc. ("Tarksol"), of which he was the President. Koetzle then used the Patent to create various products - the Tarksol Products called Tarksone and Tarkseal.

Koetzle filed a patent application with the United States Patent and Trademark Office ("PTO"). At about this time, Koetzle became involved with non-party Emmett Cotter ("Cotter"). In February of 2005, Cotter introduced Koetzle to non-party William F. Rexer, Jr. ("Rexer") to further the Patent and the Tarksol Products. In 2006, Koetzle sought financial support from Cotter and Rexer to perfect the Patent and market the Tarksol Products.

Starting in 2006, Koetzle, Cotter, and Rexer talked about going into business together and they met with the Hiscock & Barclay Law Firm. However, Rexer suggested working with Defendants, and Rexer agreed to pay the attorneys' fee for this joint team. This group ended up being the eventual formation of non-party Tarksol International, LLC ("Tarksol International"), but not until February 6, 2007.[FN2] Earlier, and on November 21, 2006, Koetzle, Cotter, and Rexer met with individual Defendant Mark Levy, Esq. ("Levy") and an associate of the Defendant law firm - Maxine Barasch ("Barasch"). According to Cotter, Rexer, Defendants, and Barasch, the purpose of the meeting was to discuss perfecting the Patent for Tarksol International as the client. To the contrary, Koetzle claims that only he had an interest in the Patent, and that he alone retained Defendants for himself and his companies to pursue the Patent.

In seeming conformance with Koetzle's understanding, and on February 6, 2007, Defendants filed a Power of Attorney ("POA") for Koetzle, as the inventor, with the PTO in regard to the Patent. See 37 CFR § 1.32.

On February 20, 2007, Koetzle - at Defendants' office - executed an "Assignment of Application" permanently transferring his ownership rights in the Patent to Plaintiff A.R.K. Patent International, LLC ("A.R.K.") - a recently formed company of Koetzle's.

The same day, Koetzle reviewed with Defendants an "Exclusive License Agreement" drafted by the Dee Law Firm of Buffalo, which was hired by Cotter - a fact which undermines Defendants' contention that it represented the Tarksol [*2]International team as a unit. The Agreement involved an assignment of the Patent by A.R.K. to Tarksol International, who in turn would sell and distribute the Tarksol Products to non-party Univar USA, Inc. ("Univar"). Koetzle conceded that Levy advised him not to execute the Agreement without a specific change Levy hand wrote onto the draft at Section 1.01, which would have permitted Koetzle to revoke the Patent license if sales figures were not met. Levy also hand wrote in a line crossing out the word "irrevocable," and added in other language in this section alone seemingly allowing A.R.K. rescission rights.

On February 27, 2007, Koetzle without Defendant's present, signed the Agreement, without Levy's recommended changes to Section 1.01. Shortly after the Agreement was executed, a dispute arose between Koetzle, Cotter, and Rexer. Defendants claim that they were never advised of the disagreement. In July, Defendants learned that the Hiscock Firm was appearing to handle the Patent per a POA filed with the PTO. Nevertheless, and per Rexer's instruction, Defendants filed the Agreement with the PTO, and a competing POA on behalf of Tarksol International as the applicant. Thereafter, objections were raised concerning proper representation, and potential conflicts of interest for Defendants - by which time the Koetzle, Cotter, Rexer dispute was evident. On August 1, 2007, Koetzle fired Defendants in favor of the Hiscock Firm.

On August 29, 2007, the Hiscock Firm petitioned the PTO to reject the Agreement and instead record the Patent in A.R.K.'s name. That petition was eventually denied on November 12, 2007, because the Agreement assigned all of ARK's rights in the Patent to Tarksol International without the ability to cancel the same [Albanese Aff., Ex. CC]. In that process, Defendants represented Tarksol International against Plaintiffs.

On September 10, 2007, Koetzle wrote a letter repudiating the Agreement given the failure to market the Tarksol Products - a circumstance identified by Levy but not a condition allowed for termination.

On September 11, 2007, Plaintiffs filed suit against Cotter, Rexer, and Tarksol International — A.R.K. Patent v. Tarksol International, LLC [Index No. 07/11921] - for breaching the Agreement and seeking rescission of the same. Cotter and Rexer moved for summary judgment, and Plaintiffs cross-moved for identical relief. Justice Kenneth R. Fisher found that the Agreement was a total and irrevocable assignment based upon a review of all of the Agreement's wording, not just Section 1.01 [Albanese Aff., Ex. C]. More specifically, Justice Fisher relied on Sections 3.03, 4.01, and 5.01 in coming to his assignment conclusion as well as introductory "WHEREAS" decretal paragraphs which stated that the Agreement was a "sale, assignment and transfer in full" [Albanese Aff., Ex. C, p. 3]. Given issues as to whether the [*3]Agreement was breached for not using best efforts to sell the Tarksol Products, the Court refused to dismiss Plaintiffs' case. On appeal, the Fourth Department affirmed Justice Fisher's denial of Plaintiffs' cross-motion for summary judgment on the assignment issue, and did not disturb the denial of summary judgment to Cotter and Rexer for breaching the Agreement. See A.R.K. Patent Intern., L.L.C. v. Tarksol Intern., L.L.C., 79 AD3d 1732 (4th Dept 2010). The case was remanded to Supreme Court and has been inactive ever since.

Procedural History

Plaintiffs commenced this action on October 30, 2007, and set forth causes of action for: legal malpractice; breach of fiduciary duty; intentional misrepresentation; and, negligent misrepresentation. Defendants answered denying all liability.

An Amended Complaint added a fifth claim for treble damages per Judiciary Law § 487 due to alleged deceit and collusion. Defendants again answered denying liability.

For damages, Plaintiffs claim attorneys' fee in the first action, lost sales, and lost licensing and royalty fees. On April 18, 2014, Plaintiffs re-calculated their damages to include lost business.

After commencement, the Levy Law Firm dissolved, effective March 1, 2008, at which time many of its files were discarded, including certain documents from the subject file for the Patent matter.

Discovery is now complete, and this case is set for a Day Certain Trial on January 14, 2015.

Motions Contentions Summary

Plaintiffs' Motion

Plaintiffs moved first for sanctions for spoliation of evidence, and then based on those sanctions, summary judgment. Plaintiff specifically faults Defendants for the loss of Letters of Engagement, billing records, attorney notes, and the physical file - all of which are relevant to a key issue of the scope of Defendants' representation.

Defendants oppose the motion on the ground that all information was turned over in the prior A.R.K. Patent v. Tarksol International, LLC case such that Plaintiffs have no recourse for spoliation of evidence.

Defendants' Motion

Defendants moved second for summary judgment, and their contentions concerning the two remaining causes of action are set forth below.

Legal Malpractice

Defendants first contend, very cursorily, that they were hired to represent Tarksol International, not Plaintiffs, in the Patent prosecution; therefore, no attorney-client relationship existed on which to premise a professional negligence claim.

In the alternative, and more primarily, Defendants argue there is no proof that their conduct caused any damage as they advised Koetzle not to sign the Agreement without the revision, and that Koetzle signed the same anyway against their advice. Thus, Defendants claim that the proximate cause element is lacking to sustain any portion of the legal malpractice claim. Defendants further assail the legal malpractice claim to the extent that there is no proof that Plaintiffs would have won on the first lawsuit, and that they have no concrete damages, partially due to Plaintiffs' failure to pursue the first case. Defendants also submit that Plaintiffs are barred from recovering attorneys' fees absent a statute or a contract, neither of which exist in this case.

Judiciary Law

Defendants contend that there is no proof of deceit or collusion to support an award of treble damages. Further, the deceit or collusion must have taken place during a pending action, which was not the case here.

Plaintiffs' Response

Plaintiffs oppose the motion on the ground that Defendants failed to meet their burden of proof, or in the alternative, they successfully raised material issues of fact.

Legal Malpractice

Plaintiffs point out that Defendants' current position that they gave Koetzle legal advice, even if for free, concerning changing the Agreement is inconsistent with their earlier position that no attorney-client relationship existed.

Plaintiffs assert that Defendants failed to affirmatively disprove that they would not have won the first case. In any event, Plaintiffs claim that they raised an issue of fact given the entire language of the Agreement which still assigned the whole Patent to Tarksol International — a point relied upon by the PTO, Justice Fisher, and the Fourth Department. Given the overall wording of the Agreement, Plaintiffs dispute that Defendants proved as a matter of law a lack of a proximate cause. Plaintiffs discount the fact that the first lawsuit is "abandoned" by an affirmation from Paul Sander, Esq. from the Hiscock Firm. Plaintiffs clarify that they are not seeking the legal fees associated with this action, but the legal fees in the first action to the Hiscock Firm as they were incurred in an attempt to remedy Defendants' wrongdoing.

Judiciary Law

Plaintiffs assert that the litigation before the PTO, although quasi-judicial in nature, qualifies as a pending action on which treble damages can be awarded. Plaintiffs fault Levy for arguing before the PTO that the Agreement was an assignment when Levy told Koetzle it was only a license.

Defendants' Reply

Defendants insist that Plaintiffs failed to raise any issue of fact, and thus were [*4]unable to rebut that Koetzle's own actions severed any reliance on Defendants' advice.

LEGAL DISCUSSION

Plaintiffs' Motion

Plaintiffs are not entitled to their full sanction request for a partial summary judgment adjudication in their favor, but they are entitled to a lesser remedy as set forth hereinafter. See e.g. Hulett ex rel. Hulett v. Niagara Mohawk Power Corp., 1 AD3d 999, 1002 (4th Dept 2003) (ruling that both preclusion and an adverse jury instruction were proper remedies for loss of evidence).

The CPLR provides that "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof." CPLR 3101 (a). Given this broad standard, a trial court is vested with considerable discretion to supervise discovery. See CPLR 3104 (a); Kihl v. Pfeffer, 94 NY2d 118, 123 (1999); Iskalo Elec. Tower LLC v. Stantec Consulting Services, Inc., 113 AD3d 1105, 1106 (4th Dept 2014); Deleon v. State, 52 AD3d 1282 (4th Dept 2008) (same).

As to discovery sanctions, the CPLR provides that:

If any party . . . refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed pursuant to this article, the court may make such orders with regard to the failure or refusal as are just, among them:

1. an order that the issues to which the information is relevant shall be deemed resolved for purposes of the action in accordance with the claims of the party obtaining the order; or

2. an order prohibiting the disobedient party from supporting or opposing designated claims or defenses, from producing in evidence designated things or items of testimony, or from introducing any evidence of the physical, mental or blood condition sought to be determined, or from using certain witnesses; or

3. an order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or any part thereof, or rendering a judgment by default against the disobedient party.

CPLR 3126. See also Wetzler v. Sisters of Charity Hosp., 17 AD3d 1088, 1089 (4th Dept 2005) (a party asserting that it is aggrieved by the spoliation of evidence may seek sanctions per CPLR 3126), op amended on rearg, 20 AD3d 944; Livingston v. State, 254 AD2d 694 (4th Dept 1998).

As apparent by the above Section, a wide panoply of options are available to this Court, which has considerable discretion in regard thereto. See Allen v. Wal-Mart Stores, Inc., 121 AD3d 1512 (4th Dept 2014); Mosey v. County of Erie, 117 AD3d 1381 (4th Dept 2014), rearg denied, 119 AD3d 1388. Further, and to warrant a more stringent sanction for the spoliation of evidence, the Fourth Department has decreed that:

A party seeking a sanction pursuant to CPLR 3126 such as preclusion or dismissal is required to demonstrate that a litigant, intentionally or negligently, dispose[d] of crucial items of evidence ... before the adversary ha[d] an opportunity to inspect them' ..., thus depriving the party seeking a sanction of the means of proving his claim or defense. The gravamen of this burden is a showing of prejudiceKoehler v. Midtown Athletic Club, LLP, 55 AD3d 1444, 1445 (4th Dept 2008) (emphasis added).

"Spoliation sanctions may be appropriate even if the destruction occurred through negligence rather than wilfulness.'" Enstrom v. Garden Place Hotel, 27 AD3d 1084, 1086 (4th Dept 2006).

This Court finds that some CPLR 3126 remedy is required because Defendants lost or destroyed evidence after this suit was commenced. Contrary to Defendants' contention that the subject records were all turned over in the prior litigation, Levy's deposition testimony confirms that those items were always missing [Plaintiffs' Ex. # 6, pp. 28, 34-35, 42, 53].

Nevertheless, this Court concludes that striking the answer and total issue preclusion, along with an accompanying summary judgment determination, is too severe. See Cason v. Smith, 120 AD3d 1554 (4th Dept 2014); Johnson v. Ayyub, 115 AD3d 1191 (4th Dept 2014). Even without the subject documents, Plaintiffs are not completely hampered in their ability to prove their case against Defendants. See e.g. Harrison v. Harrison, 57 AD3d 1406, 1408 (4th Dept 2008) (trial court properly refused to strike the answer because the lost physical evidence did not deprive the plaintiff of his means of proving his causes of action against the defendants).

Rather, and in its discretion, the Court elects to direct that Defendants are precluded from offering any evidence as to the precise contents of the lost evidence, and will also be subject to an adverse inference jury instruction. See PJI 1:77.1; Gallo v. Ricci, 28 AD3d 1110 (4th Dept 2006) (trial court should have issued spoliation jury instruction for party's post-commencement evidence destruction). This outcome best balances Defendants' rights to defend on the merits with Plaintiffs' rights to be compensated for the lost proof.

In all, this Court will not enter a summary judgment determination resolving the issue as a matter of law, but will circumscribe Defendants' trial proof and remedy the harm to Plaintiffs by a jury charge concerning the spoliation of evidence.

Defendants' Motion

Summary Judgment Standard

The starting place for analyzing Defendants' summary judgment motion is the CPLR itself, which provides in pertinent part that:

A motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action or defense has no merit. The motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party. Except as provided in subdivision [c] of this rule the motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact. CPLR 3212 (b) (emphasis added).

CPLR 3212 (b) means that "the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" necessitating a trial. Alvarez v. Prospect Hosp., 68 NY2d 320, 324 (1986). Proof offered by a moving party must be in admissible form. See Zuckerman v. City of New York, 49 NY2d 557, 562 (1980); Dix v. Pines Hotel, Inc., 188 AD2d 1007 (4th Dept 1992). Failure of the moving party to make the statutorily required prima facie case mandates denial of the motion, regardless of the sufficiency of the opposing papers. See Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853 (1985).

Once a prima facie showing has been made, then "the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action." Alvarez, 68 NY2d at 324.

In assessing a summary judgment motion, "the focus of the court's concern is issue finding, not issue determination, and the affidavits should be scrutinized carefully in the light most favorable to the party opposing the motion." Robinson v. Strong Mem. Hosp., 98 AD2d 976 (4th Dept 1983). See also Branham v. Loews Orpheum Cinemas, Inc., 8 NY3d 931, 932 (2007); Victor Temporary Services, a Div. of Victor United, Inc., a Subsidiary of Walter Kidde, Inc. v. Slattery, 105 AD2d 1115, 1117 (4th Dept 1984). Moreover, summary judgment is a drastic measure as it deprives a party of his or her day in court and will normally have res judicata effects. See Ugarriza v. Schmieder, 46 NY2d 471, 474 (1979); Harrigan v. Super Products Corp., 237 AD2d 882, 883 (4th Dept 1997).

The above standard will next be applied to each of the remaining claims.

Legal Malpractice

Defendants are not entitled to summary judgment on the legal malpractice cause of action. See e.g. Harris Beach PLLC v. Eber Bros. Wine & Liq. Corp., 121 AD3d 1524 (4th Dept 10-03-14) (reversing the grant of summary judgment to law firm on former client's legal malpractice counterclaim).

"A requisite element of a cause of action for legal malpractice is the existence of an attorney-client relationship." Shanley v. Welch, 31 AD3d 1127, 1128 (4th Dept 2006). "In determining whether such a relationship exists, a court must look to the actions of the parties'" Id. "An attorney-client relationship is established where there is an explicit undertaking to perform a specific task.'" Id.

Also, a "cause of action for legal malpractice requires proof that the attorney failed to exercise that degree of care, skill and diligence commonly possessed and exercised by an ordinary member of the legal community, that such negligence was the proximate cause of the actual damages sustained by the plaintiffs.'" Oot v. Arno, 275 AD2d 1023 (4th Dept 2000) (internal citation omitted). See also Ginther v. Rosenhoch, 57 AD3d 1414, 1415 (4th Dept 2008).

"To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages, but for the lawyer's negligence." Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 (2007). A plaintiff must establish that the defendant law firm was a proximate cause of damages, but need not establish that it was the lone proximate cause. See Utica Cutlery Co. v. Hiscock & Barclay, LLP, 109 AD3d 1161, 1162 (4th Dept 2013) (the defendant failed to establish that the plaintiff's conduct was an intervening and superseding cause such that its alleged negligence was not a proximate cause of any damages). See also Barnett v. Schwartz, 47 AD3d 197, 204 (2d Dept 2007) ("but for" causation is not synonymous with the phrase sole proximate cause).

"In addition, [t]he damages claimed in a legal malpractice action must be 'actual and ascertainable' resulting from the proximate cause of the attorney's negligence.'" Oot, 275 AD2d at 1023-1024 (internal citation omitted). "[S]peculative damages or conclusory claims of damage" may not be the basis for a valid legal malpractice claim. Russo v. Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP, 301 AD2d 63, 67 (1st Dept 2002).

Therefore, for a law firm "in a legal malpractice case to succeed on a motion for summary judgment, evidence must be presented in admissible form establishing that the plaintiff is unable to prove at least one of [the] essential elements." Oot, 275 AD2d at 1024. See also Robbins v. Harris Beach & Wilcox, LLP, 291 AD2d 797, 798 (4th Dept 2002) (reversing the defendant's award of summary judgment on legal [*5]malpractice claim).

Based upon the above legal principles, summary judgment is not appropriate in this case. See e.g. Williams v. Kublick, 41 AD3d 1193 (4th Dept 2007) (genuine issue of material fact existed as to whether the defendant law firm's negligence was a proximate cause of damages to the plaintiff client thereby precluding summary judgment).

As to the threshold issue of an attorney-client relationship between Koetzle and Defendants, this was not the main thrust of Defendants' motion, which was instead focused on proximate cause. However, even Defendants' own papers suggest a material issue of fact as to an attorney-client relationship. See Winegrad, 64 NY2d at 853; Boarman v. Siegel, Kelleher and Kahn, 41 AD3d 1247, 1248 (4th Dept 2007) (the defendants failed to establish their entitlement to judgment as a matter of law on legal malpractice claim). In particular, Defendants' motion is replete with proof that it offered Koetzle specific legal advice on the Agreement. See e.g. Shanley, 31 AD3d at 1128 ("the actions of the parties appear to establish an attorney-client relationship with respect to the drafting, preparation and execution of the separation agreement, and we thus conclude that there is an issue of fact concerning the existence of an attorney-client relationship"). As discussed at Special Term, even if Defendants volunteered their legal advice to Koetzle on the Agreement, that is still sufficient to create an attorney-client relationship. See e.g. Bloom v. Hensel, 59 AD3d 1026 (4th Dept 2009) (reversing grant of summary judgment to defendant lawyer on legal malpractice claim because an "attorney-client relationship may exist in the absence of a retainer or fee"). Per Bloom, Defendants' focus on who paid the legal bills is misplaced and thus not determinative of who was the true client thereby militating against summary judgment relief.

Moreover, the parties' allegations are in direct conflict in regard to the attorney-client relationship issue. See e.g. Town of Amherst v. Weiss, 120 AD3d 1550 (4th Dept 09-26-14) (the summary judgment opposition papers raised a triable issue of fact whether there was an attorney-client relationship). On the one hand, Defendants contend that they represented only Tarksol International - a not yet formed company. Plaintiffs, on the other hand, cite to the lack of retainer agreements for Cotter and Rexer, and the PTO POA filing as proof of Defendants' representation of Koetzle on an individual basis. See Patrolmen's Benev. Ass'n of City of New York, Inc. v. City of New York, 27 NY2d 410, 415 (1971) (on a motion for summary judgment, statements in affidavits must be accepted as true). These juxtaposed factual allegations are not proper subjects of a summary judgment adjudication, and to the extent that Defendants assail Koetzle's "self-serving" allegations concerning the scope of representation, such a credibility matter is reserved for a jury's exclusive [*6]consideration. See S. J. Capelin Assoc., Inc. v. Globe Mfg. Corp., 34 NY2d 338, 341 (1974); Craft v. Maier, 167 AD2d 933 (4th Dept 1990).

In regard to proximate cause, the crux of Defendants' motion, it too was not disproved as a matter of law. See e.g. Bihari v. Walentynowicz, 309 AD2d 1279 (4th Dept 2003) (genuine issue of material fact existed as to whether the defendant's professional negligence was a proximate cause of damages).

For starters, causation is normally a question of fact for a jury. See Johnson v. Ken-Ton Union Free School Dist., 48 AD3d 1276, 1277 (4th Dept 2008). Furthermore, and as emphasized and acknowledged by the Fourth Department in Utica Cutlery Co., Defendants' actions, or inactions, may not be the sole proximate cause of ensuing harm, but it is still questionable if they remain a proximate cause. See Utica Cutlery Co., 109 AD3d at 1162. See also Wright v. Shapiro, 16 AD3d 1042, 1043 (4th Dept 2005) (despite the defendant's contention that any negligence was not a proximate cause of the loss sustained by the plaintiff, summary judgment on the legal malpractice claim was not appropriate); PJI 2:36 (comparative fault) and 2:71 (concurrent proximate causes). Even though Koetzle likely bears some comparative fault, this does not completely exonerate Defendants. See Utica Cutlery Co., 109 AD3d at 1162.

The Utica Cutlery Co. case was cited by the Fourth Department in the very recent case of Harris Beach PLLC v. Eber Bros. Wine & Liq. Corp.. See Harris Beach PLLC, 121 AD3d 1524. Although Defendants contended at Special Term that the Harris Beach PLLC case was not controlling because the instant case involved no speculation, Defendants are incorrect. At oral argument, Defendants admitted that no entity - including the PTO, Justice Fisher, or the Fourth Department - ever analyzed the impact, if any, of Levy's proposed changes to Section 1.01 on the overall interpretation of the Agreement. See e.g. Long v. Cellino & Barnes, P.C., 59 AD3d 1062, 1063 (4th Dept 2009) (defendant law firm was not entitled to summary judgment given triable issues of fact as to whether the plaintiff would have succeeded on the underlying action). In the absence of such a ruling, Defendants are asking this Court to surmise the outcome had those changes been made and make a proximate cause determination. This was exactly the scenario in Harris Beach PLLC, and which the Fourth Department found to be reversible error. Pursuant to Harris Beach PLLC, this Court declines to engage in such conjecture to negate clear issues of fact.

Furthermore, Defendants' narrow focus on Section 1.01 alone is misplaced. Although Levy tried to alter some language in Section 1.01, other detrimental language remained in the rest of the Agreement [Rexer Aff., Ex. A1, Agreement]. As shown by Defendants' own submissions (see Winegrad, 64 NY2d at 853), the PTO, Justice Fisher, and the Fourth Department all found that the Agreement, when read as [*7]a whole, was a total assignment, not a mere license [Albanese Aff., Exs. C & CC]. For example, both the PTO and Justice Fisher relied on Sections 1.02, 3.03, 3.06, 4.01, and 5.01 in coming to their assignment conclusions [Albanese Aff., Exs. C & CC]. Those sections, when read together, conferred onto Tarksol International "all substantial rights . . . without limitation as to time or otherwise" [Albanese Aff., Ex. C, p. 4]. Additionally, a "WHEREAS" decretal paragraph in the Agreement indicated a "sale, assignment and transfer in full" [Albanse Aff., Ex. C, p. 3; Ex. CC, pp. 2-3]. This unequivocal introductory language, which is consistent with the ensuing specific provisions, reinforces the broad scope of the Agreement as a total assignment and not just a mere license. See Greenfield v. Philles Records, Inc., 98 NY2d 562, 569 (2002) (a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms); W.W.W. Assoc., Inc. v. Giancontieri, 77 NY2d 157, 162 (1990); Kula v. State Farm Fire and Cas. Co., 212 AD2d 16, 19 (4th Dept 1995). Therefore, this Court remains unconvinced that, as a matter of law, the Agreement would have been converted into a simple license by Levy's revisions to just Section 1.01. In other words, Plaintiff has a viable claim that Defendants committed malpractice by not addressing the Agreement on a global basis, as well as the alleged misrepresentations as to its true nature.

Lastly, and as to damages, this Court disagrees with Defendants that Plaintiffs have not suffered any compensable harm. See e.g. Hotaling v. Sprock, 107 AD3d 1446, 1447 (4th Dept 2013) (issue of fact existed as to whether the client sustained actual and ascertainable damages due to malpractice). Plaintiffs' efforts in the prior lawsuit, which sought to undo the Agreement and redress Defendants' errors, are compensable by an award of their attorneys' fees paid to the Hiscock Firm. As the Court of Appeals has recognized "[a] plaintiff's damages may include litigation expenses incurred in an attempt to avoid, minimize, or reduce the damage caused by the attorney's wrongful conduct.'" Rudolf, 8 NY3d at 443 (emphasis added). Under Rudolf, Plaintiffs have a legitimate claim for damages. Defendants' emphasis on the purported abandoned status of the first case, which is hotly contested, is more akin to a failure to mitigate damages claim which has no bearing on liability for legal malpractice. See Grace v. Law, 108 AD3d 1173, 1175 (4th Dept 2013) (a party who voluntarily discontinues an underlying action and does not appeal does not automatically abandon his or her right to pursue a claim for legal malpractice), aff'd, ___ NY3d ____, 2014 NY Slip Op 07089 (10-21-14).

In sum, Defendants may not obtain summary judgment on the professional negligence claim. See e.g. Rupert v. Gates & Adams, P.C., 48 AD3d 1221, 1222 (4th Dept 2008) (trial court erred in granting the defendants' cross-motion seeking summary judgment on professional negligence claim).

Judiciary Law

Defendants are entitled to summary judgment dismissing the Judiciary Law cause of action. See CPLR 3212 (b); Donaldson v. Bottar, 275 AD2d 897, 898 (4th Dept 2000) (granting summary judgment to the defendants on Judiciary Law § 487 claim).

The relevant portion of the Judiciary Law, entitled "Attorney Misconduct," provides that:

An attorney or counselor who:

1. Is guilty of any deceit or collusion, or consents to any deceit or collusion, with 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. Judiciary Law § 487 (emphasis added).

Because the deceit and collusion must be aimed at a court or a party, it must have occurred during the course of a "pending proceeding in which plaintiffs were parties." Sun Graphics Corp. v. Levy, Davis & Maher, LLP, 94 AD3d 669 (1st Dept 2012).

Defendants assail this last cause of action on two grounds, namely that there was no qualifying judicial proceeding and also that there was no deceit or collusion. Plaintiffs respond that the quasi-judicial/administrative proceedings before the PTO are a sufficient predicate proceeding on which to base Section 487 liability. Defendants' first contention, standing alone, warrants dismissal.

Although as argued by Plaintiffs that attorney conduct in administrative proceedings has been the subject of Section 487 claims (see A.G. Ship Maintenance Corp. v. Lezak, 69 NY2d 1, 3 (1986); Emery v. Parker, 107 AD3d 635, 636 (1st Dept 2013)), attorney conduct taking place outside of New York does not fall within the scope

of the Section. See Schertenleib v. Traum, 589 F2d 1156 (2d Cir 1978). In Schertenleib, the Second Circuit held that:

[Section 487 does] not to apply to acts by attorneys outside New York's territorial borders. We are cited to no case, and our own research reveals none, where this provision has been applied extraterritorially.

No one questions the power of the State of New York to impose disciplinary sanctions against New York attorneys for acts occurring outside the state that are deemed to render them unfit to practice inside the state . . . However, we believe that section 487 is not an exercise of that power, but is rather intended to regulate, through criminal and civil sanctions, the conduct of litigation before the New York courts. We doubt it was the purpose of the New York State legislature to fasten on its attorneys criminal liability and punitive damages for acts occurring outside the state. It seems more likely that the concern is for the integrity of the truth-seeking processes of the New York courts. . .

Schertenleib, 589 F2d at 1166 (emphasis added and internal citations omitted). See also Alliance Network, LLC v. Sidley Austin LLP, 43 Misc 3d 848, 864 (NY Co Sup Ct 2014) (dismissing Section 487 claim that had no connection to a New York court).

Per Schertenleib, Plaintiffs complaint concerning the extraterritorial proceedings before the PTO in Alexandria, Virginia is not a proper foundation for Section 487 liability.

In all, the Judiciary Law cause of action cannot survive summary judgment, and must be dismissed.

CONCLUSION

Based upon all of the foregoing, it is the Decision and Order of this Court that:

1.Plaintiffs' spoliation motion is DENIED as to the request for summary judgment, but is GRANTED to the extent that they are afforded relief in the form of evidence preclusion and an adverse inference jury charge.

2.Defendants' motion is DENIED as to the legal malpractice claim, but GRANTED as to all of the other causes of action, namely the breach of fiduciary duty, intentional misrepresentation, negligent misrepresentation, and Judiciary Law claims.

Signed at Rochester, New York on December 8, 2014.

___________________________________________

HONORABLE J. SCOTT ODORISI

Supreme Court Justice

Footnotes

Footnote 1:At Special Term, Plaintiffs stipulated to the dismissal of the repetitive breach of fiduciary duty cause of action, as well as both of the misrepresentation claims; therefore, those discrete portions of Defendants' motion are GRANTED. This leaves for the Court's consideration only the legal malpractice and Judiciary Law causes of action.

Footnote 2:Koetzle, Cotter, and Rexer each own one-third of Tarksol International through their own LLC's, and Rexer claims to be the Managing Member per operation of Nevada Law.