Epstein v Cantor

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Epstein v Cantor 2022 NY Slip Op 32860(U) August 19, 2022 Supreme Court, Kings County Docket Number: Index No. 506730/19 Judge: Larry D. Martin 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. INDEX NO. 506730/2019 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 RECEIVED NYSCEF: 08/23/2022 At anJAS Terrn,Part l.QoftheSuprerrie Court of the.State of New York held in and for the County of Kings, at the Courthouse, at 360 Adams Street, Brook)t)lNew York, on the day of 2022. "'f PRESENT; Larry D. Martin, J.S.G , ,qrd ____ ......... ---· ---------------. _,_ ____... ------- ---. ______ .. _______ ......-... ... . SCOTT EPSTEIN, individually and as a partner of CANTOR, EPSTEIN & MAZZOLA, LLP, No. 506730/19 Plaiht([f,· ""against- DECISION.& ORDER Motion Nos. 10, 11, 12 RoBERTl CANTOR, ROBERT I. CANTOR PLLC, BRYAN J. MAZZQLA, Tooo BOYD;BOYD RrCHARDS PARKER w. COLON ELLI, PL., and BOYD RICHARDS NY, LLC, Defendail(!,,·. . . ·.. . . --------------------------~~--------,-----------~--w•-~-----R----~~-----. The underlying dispute arises from a New York law firm's dissolution, A number of Plaintiffs' theories ofliability require this Court to determine whether the firm was a partnership, and whether Plaintiff was a partner at the firm. Ruling fo the negative, by Decision and Order dated Decen1ber 11, 2020 ('Decision I"), this Court dismissed the bulk of Plaintiff's claims pursuant to CPLR § .3211. 1 Seeking their reinstatement, Plaintiff moved for reargtunent and renewal pursuant to CPLR § 2221(d), (e), respectively. 2 Holding at bay two subsequently filed motions and the question of renewal, this Comt offered the parties leave to brief an apparent conflict between the Court of Appeals' decisions in Steinbeck v. Gerosa, 4 NY2d 302 (1958) and Cange! v. Maljitano,31 NY3d 272 (2018), I. By all accounts; Plaintiff Scott Epsteinand Defendant Robert l. Cantor wete involved in a law practice at the firm of Cantor, Ep~tein .& Mazzola, LLP ("CEM") since 1995. 3 In or around 2019, Plaintiff sued individually; and as an alleged partner.of now-dissolved CEM, charging that, without his consent, . Cantor· fotrn:ed his own ·firm4 (together, the ''Cantor Defendants") and I Decisi.on I, Ocie. 157. 2 Motion 10,.. 0oc. !71. 3 CEM was thei1 called Cantor&. Epstein LLC. See Ce1titicate of Registration, Doc .. 70. 4 Thefirm,Robert L Calltor PLLC, is also i:1.defondant ii1 this suit. [* 1] 1 of 7 INDEX NO. 506730/2019 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 RECEIVED NYSCEF: 08/23/2022 transferred nearly all ofCEM's clients to the law firms of Boyd, Richards Parker Colonelli, PL. and Boyd Richards NY;LLC, with the assistance of W. Todd Boyd and aforrnet CEM "partner," Bryan J. Mazzola ( collectively, the "Boyd Defendants"). Plaintiff thus ciaimed (l) bre::1.ch of contract ::1.gainst Cantor, (2) breach of fiduciary duty against Cantot and Mazzola, (3) violation of Partnership Law§ 20(3) against Cantor and Mazzola, (4) entitlement to an accounting from CEM, (5) conversion against Cantor, (6) faithless servant and {7) unjust enrichment against Mazzola; and, as against the Boyd Defendants; (8) corporate raiding, (9) aiding and abetting Cantor's breach of fiduciary duty, (l0)unfait competition; ru:1d (11) tortious interference with contract. 5 The Cantor Defendants moved to dismiss Plaintiffs second; third, and fourth claims arguing that CEM Was not a partnership, and that Plaii1tiff and Cantor were never partners. 6 TheBoyd Defendants moved to dismiss the Complaint in its entirety arguing that Cantor was CEM's sole principal, CEM was nqt a partnership, and that neither Plaintiff nor Mazzo la was a partner thereof. 7 In Decision I, adhering to Court of Appeals' precedent in Steinbeck; which heldthat "[a]n indispensable essential ofa contractof partnership ... both under collll110n law and statutory law, is a mutual promise or undertaking ofthe parties lo share in theprofits of the business and sublnit to the burden of making good the losses," NY2d at 317, this Comt dismissed Plaintiff's second through eleventh claims (the "Dismissed Claims;') reasoning that, despite an agreement with Cantor naming CEM a partnership and Plain tiff its pa:rtner (the "Agreement"), because it al! ocated profits and losses solely to Cantor, 8 CEM could not, as a matter of law, have been a partnership and Plaintiff could not have been a partner. Thereafter, the Defendants moved pursuant toCPLR 2304 to quash mid, pursuantto CPLR 3103, for a protective order from, Plaintiffs judicial subpoena ad testiflcandum on Mazzo la on October 06, 2021 (the "Subpoena") alleging that it was iniproperly served: 9 In addition, Defendants moved for costs and attorney fees pursuant to 22 NYCRR § 130-1.1 arguing that 5 Amended Comp!,, Doc. 18. 6 Motion 2, Doc. 23. 7 Motion 3, Doc ..29. 8· ''A II· net profits. ;md losses generated by ·[CEM] shall be allocable to Cantor except that [Plaintiff] shall be entitled to. an interest in certain po11ions ofthe·gross income generated/' Agreement, § 6. f, Doc. i 89. 9 Motio11 JI, Doc. 187. [* 2] 2 of 7 INDEX NO. 506730/2019 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 RECEIVED NYSCEF: 08/23/2022 Plaintiffs arid his attorney's conduct have been frivolous. 10 The former was. subsequently withdrawn. 11 In moving for reargu1t1ent and renewal, Plaintiff pointed this Court to a 2018 Court of Appeals decision that seemed to abrogate its holding in Steinbeck. See Cange!, 31 NY3d at 288 ("The partners of either a general or limited partnership, as between themselves, may include in the partnership atticles any agreement they wish concerning the sharing of profits and losses.'l Temporarily declining to rnle on tenewal and sanctions, by Decision and Order dated March 14, 2022 ("Decision Tl"), this Court requested supplemental memoranda "reconciling Court of Appeals precedenLas to the indispensability of profit and loss sharing' 1 to the formation of a partnership. 12 II. A. Motim'is for leave to reargue must "be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion" but must "not indude any matters of fact not offered on the pdor motion:'' CPLR 2221 (d)(2). While the determination lies within the sound discretion of this Court, the motion is "not designed to provide art unsuccessful party with successive opportunities to reargue issues previously decided,•or to present arguments different from those originally presented.'' Ahined v. Pai1110ne, l 16AD3d 802, 805 (2d Dept 2014). Here, as art ii1itial rriatter, Plaintiffs claims against Mazzola; which hinge on Mazzola having been a partner at CEM atthe time ofthe alleged unlawful conduct, n1ust fail. As reflected in a January2dl 3 agreement between Plaintiff, Cantor, Mazzola, and rion-pa1ty Gmy Ehrlich (the "2013 Agreeme1U"), in or about 2007, Mazzola obtained a minor equity interest in CEM and the option, after five years, to buy Cantor's interest, which he ultimately did not to exercise. In the 2013 Agreement, Plaintiff expressly acknowledged that Mazzola had no equity interest in CEM, and that Mazzola (and Ehrlich) were solely W-2 employees; 13 Thus, this Court does not disturb its determinations in Decision I with respect to Plaintiffs SIXTH m1d SEVENTH claims, as well as his SECdND.and THIRD claims as against Mazzola. They·remaindismissed, 10 Motion 12, Doc. 198. 11 Withdrawal, Doc. l97. 12 Decision II, Doc. 221. 13 Boyd Ex. B,Doc. 32. [* 3] 3 of 7 INDEX NO. 506730/2019 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 RECEIVED NYSCEF: 08/23/2022 B. Attempting to retoricile Court of Appeals precedents, Defendants unavailingly argue that, in Congel, the Court merely quoted its own decision years from 79 years earlier, wherein itfirst announced the rule that "partners of either a general or limited partnership, as between the1nselves, may include inthe partnership articles any agteernent they wish concerning the shm'i11.g of profits and losses.'' Lanier v, Bowdoin, 282 NY 32, 38 (1939). In contrast, the Court's decision in Steinbeck-that profit and loss sharing is an "indispensable essential of a contract of partnE:rship"-was rendered 20 years after Lanier. Thus, the argument goes, last in time should prevail. But affirming a principle nearly 80 years later only indicates, if anything, that it has endured. On the other hand, Plaintiff asserts that there are actually two lines of cl'tses: one in which there is no written partnership agreement and one in which there is. Where there is no written partnership agreement, Steinbeck controls, In the Steinbeck line, com1s "must determine whether a pminership in fact existed from the condltct, intention, and relationship between the parties" by lookingto certain indicia of formation, Saibou v. Alidu, 187 AD3d 810, RIO (2d Dept2020); see Delidim;tropoulos v. Karantinidis, 186 AD3d 1489, 1490(2d Dept 2020). 14 In that calcuh.is; profit and loss sharing is an "indispensable essential ofa contract of partnership." Steinbeck, NY2d al 317. But where, as here, there is a written partnership agreement, Cange! controls. In the Cange! line, "[i]n the agreement establishing a partnership, the partners can chart their own course." Congel, 31 NY3d at 278-79, In that calculus, "Partnership Law's ptovisions are ... default requirements that come into play in the absence of an agreement." Id. at 287 (quothlg EdeN2r v, Gursky, 9 NY3d 514, 526 (2007)). That is, Partnership Law "applies only whenthete is either no partnen.hip agreement governing the partnership's affairs, the agreement is silent on a particular point, or the agreement contains provisions contrary to law." Ibid: But"[w]here an agreement addresses a particular issue, the terms of the agreen1.ent control; and the rights and obligations of the parties are deterrnined by n~.ference to principles ofcontrac:t law." Ibid. Thus, b!!catise partners 14 "Whe11 there is no written partnership agl'eement between the paities, the courtmustdetermine whether a p~rtnership infact existed froin the ccinduct, intenfio11, ai"idrefationship beriveen the parties. Factors to.be considered in determining the existence of a pattnersh ip ind ude (I). sharhlg .of profits,. (2) sharing of] asses, (3) owne1'ship of partnership assets, (4)joint management and c:ontrol, ($)joint .liability to creditors, (6) intention ofthe parties, (7} compensation~ (8) contribution of capital, ..and (9) loans to the organization.'' [* 4] 4 of 7 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 INDEX NO. 506730/2019 RECEIVED NYSCEF: 08/23/2022 may make ''any agreement they ·wish concerning· the sharing of profits arid Iossest partne1's may agree to not share profits arid losses. Id. at 2 88 (emphasis added). In rebuttal, Defendants points to cases to suggest that, in the years since Corigel, New YOrk cOu11s have not hesitated to apply ,~teinbeck's rule even where awritten agreement govetns the paities' relationship. See; e.g., Shionogi Inc. v. AndrxLabs, LLC, 187 AD3d 422 (1st Dept 2020) Qoint venturenot formed where writtenagreement lacked "provision for loss-sharing"); Torello v. Dotmelley Fin Sols., Inc,; 1:20 ..CV-2667-GHW, 2022 WL 348412, at *7 {SDNY Feb 4, 2022) (quoting Steinbeck,A NY2d at 317-18) ("[I]t is riot enough that tvvo parties have agreed together to act in concert to achieve some stated economic objective. Such agreement, by itself, c1·eates no more than a contractual obligation; otherwise every stockholders' agreement would give rise to a jointventµre.''); see also Kidz Cloz, Inc. v. QfflciallyFor Kids, Inc.,320 F Supp 2d 164, 171-72, 2004 WL 1278068 (SDNY 2004) ("Ifthere was no agreement as to the manner in which the parties were to share in the pi·ofits and the losses, the agreement did not create a joint venture or a partnership."). Compellingly, sounding in dictum, Defendants further argue that, in Congel, as in Lanier, none ofthe parties disputed the existence of a pa11nership; hone of the subject agreements provided that no profits and losses would be shared; tlms, none required determining whether a partnership was fm·med, as is the question before this Court. Instead, those cases turned on whether an agreeni.ent's tenns prevailed over conflicting provisions of Partnership Law. The standard for dicta remains that''expressions, in every opinion, are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected; but ought not to control the judgment in a subsequent suit When the very point is presented for decision." Arkcmsas Game & Fish Commn. v. United States, 568 US 23, 35 (2012) (quoting Cohens V; Virginia, 6 Wheat. 264, 399, 5 L Ed 257 (1821); see also Crane i,. Bennett, 177 NY 106, 112 (1904) ("A judicial opinion . , . is only binding so far as it is relevant, and when it wanders from the pOiii.t at issue it no longer has: force as an official utterance."). In .such a jurisprudential framework, it is unclear that Cange! controls when the ve1y issue is whether a partnership was formed or whether a partnership agreement c:an include that no profits and losses would be shared. c. This Court must thus engage the indicia of partnership formation outlined in Steiilbeck and its progeny. · See Bi•odsky v. Stadlen, 138 AD2d 662; 663 (2d Dept 1988} ("Case law reveals a series of factors to be considered in determit1ing whether or not there is a partnership: (l) sharing [* 5] 5 of 7 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 INDEX NO. 506730/2019 RECEIVED NYSCEF: 08/23/2022 of profits, (2) sharing of losses, (3) ownership of partnership assets, (4) joint ntariagernent and control, (5) joint liability to creditors; (6) intention .of the: parties, U.) compensation, (8) contribution of capital, and (9) loans to the organization."). And here, CEM duly registered as a lintited liability partnership with the Secretary of State, ts CEM consistently held Plaintiff o.ut to the public and to clients as a founding partner of CEM. 16· The attorney who drafted the Agreement affinnedthat the parties intended their arrangement to comprise a: partnership.!? Plaintiff did not contribute startllp capital in the form of money but did contribute in the form of a client base. 18 Cantor was contractually barred from eliminating any area of practice requited to service CEM' s cHents withoutRlaintiff s consent. 19 On the other hand, year afteryear, CEM filed tax returns with the IRS wherein Schedule B1 shows that Cantor owned· 100¾ of CEM andK-1 shows that Cantor· owned 100% of CEM's capital. 20 Only Carttor could sign CEM bank account checks. 21 Only Cantor was responsible for maintaining CEM's books and records: 22 The admission of any new partner required only Cantor's consent 2j Lastly, implying that he was not one, the Agreement afforded Plaintiff the rightof election to become "a full and equal partner,'' which Plaintiff did not exercise.24 In short; issues of fact abound sufficient to wan-ant reinstating the claims against the Cantor Defendants, In Decision II, this Court did not reach the question of renewal reasoning that "the law alone seem [ed] to warrant reinstating• the Dismissed Claims.'' Renewal rn ust be based "upon new facts not offered on the prior motion" or a "change in the law" that "would change the prior determination.!' CPLR 222J(e)(2). 25 In supportof its motion, Plaintiff proffers a transcript of 15 Pl.'s Ex. 1,Doc. 70:, 16 Pl's Ex: 6, Doc. 75. l 7 Isaac Aff., Doc. 56. 18 Plaintiff "agrees to use his best effotts to bring to [CEM] Chubb/Federal Insurance Cotnpany and its insul'eds." Agreement,§ 5.2. 19 Id at Art. 2. 20 Pl..'s Ex.2, Docs. 71; Docs. 87--89. 21 Agreem~nt, § 7.3. . . . 22 Id. at§ 7.3. 23 Id. at§ 10. 24 Id. at§ 7.2. 25 Plaintiffsubmits for the. first time on renewal an affid~vit ofa former CEM·"non-equity partner'' wlm attests that Plafotiff furriished CEM with .mo.st .of its clients and had s1g11 ificant control of management, ovefru ling Mr.· Cai1tor on hiti ng and even the. ft 1111' s 11a:me>See Bailey Aff., Doc;. 174. However, oticirt for renewal 111ust."contain reasonablejustificatioi1 for .the failure to present such facts 01t the. prior rnotfoi1.'; CPLR 222l(e)(3). The instant motion. lacks "reasonable justification" for fa:iiure to procure and present Bailey's affidavit in the tfrst instance:. This Court, thus, does not considetthe.sai'ne. am [* 6] 6 of 7 INDEX NO. 506730/2019 FILED: KINGS COUNTY CLERK 08/23/2022 05:37 PM NYSCEF DOC. NO. 233 RECEIVED NYSCEF: 08/23/2022 Cantor's deposition in a related case wherein Cantor concedes that "CEM was a partnership" and that Plaintiff was a "non-equity partner" at CEM. 26 But, as a matter of law and text alike, "[a] partnership is an association of two or more persons to carry on as co-owners [of] a business for profit . . . ." P'ship Law§ 10 (emphasis added). If, as set forth above, Mazzola and Ehrlich were not partners at CEM, but CEM was a partnership, it is unclear who else, but Plaintiff, could have been a partner thereof. Nonetheless, Defendants contend that nothing here is new since, in the absence of profit and loss sharing, merely referring to Plaintiff as a "partner" or "calling an organization a partnership does not make it one." Brodsky, 138 AD2d at 663. While that may very well be the case, it is clear is that, as a matter of reargument, Plaintiffs claims against the Cantor Defendants-TWO, THREE, FOUR, FIVE- are ill-suited for pre-discovery dismissal. D. This Court does not, however, find occasion to disturb its determinations as to Plaintiff's claims against the Boyd Defendants-EIGHT, NINE, TEN, and ELEVEN. As to Defendants motion for costs and attorney fees pursuant to 22 NYCRR § 130-1.1 , this Court does not find that Plaintiffs attorney's conduct rises to the level of frivo lity. III. Accordingly, it is hereby ORDERED, as to MOTION 10, upon reargument, Plaintiffs FOURTH and FIFTH claims are reinstated; Plaintiff's SECOND and THIRD claims are reinstated as against Cantor only; Plaintiff's SIXTH, SEVENTH, EIGHTH, NINTH, TENTH, and ELEVENTH claims remain dismissed. That branch of MOTION 10, which was for renewal, is denied. MOTION 12 is denied. The Clerk of the Part is directed to note that MOTION 11 was withdrawn. L. . ,,.J, Dated: ~ tt1 ,2022 ;ytrk rv~,/I ) : ! ( Hon. i@y D _cMartin Supreme Court of the State of New York HON. LARRY MARTIN JUSTICE OF THE SUIIR!ME COURl 26 Cantor Dep. Tr. 291 - 92, Doc. 173. [* 7] 7 of 7

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