Opinion
114511/05.
Decided August 2, 2006.
Defendant's motion to dismiss this legal malpractice complaint is granted.
BACKGROUND
The Parties
Plaintiff David H. Engelke (Engelke) is a resident and domiciliary of the State of Florida. See Notice of Motion, Exhibit A (complaint), ¶ 1. The defendant law firm of Brown, Rudnick, Berlack, Israels, L.L.P. (Brown, Rudnick) is incorporated in Massachusetts as a limited liability company; it conducts business in New York from an office that it maintains in New York County. Id., ¶ 2.
Engelke alleges that, in early 2000, he was the majority shareholder in a Florida corporation called Digital Editing Services, Inc. (DES), and was a one-third shareholder in a New Hampshire corporation called the Montage Group, Limited (Montage). Id., ¶¶ 6-7. Engelke states that a third corporation, Pinnacle Systems, Inc. (Pinnacle), made an offer to purchase all of the equity of both DES and Montage in early 2000. Id., ¶ 8. Engelke alleges that Pinnacle acquired DES on March 29, 2000 in a merger agreement (the DES merger agreement), and also acquired Montage on April 6, 2000 in a stock purchase agreement (the Montage stock purchase agreement). Id., ¶¶ 9, 14; Exhibits H, G. Engelke states that he and the other Montage shareholders retained Brown, Rudnick to represent them in connection with the Montage stock purchase agreement. Id., ¶ 12. However, Engelke states that another firm — Pillsbury, Winthrop, L.L.P. — represented him in connection with the DES merger agreement. See Engelke Affidavit in Opposition, ¶ 5.
The minority shareholder in DES was Engelke's brother, Bryan Engelke. See Notice of Motion, Exhibit A (complaint), ¶ 6.
The other two-thirds shareholders in Montage were two brothers named Seth Haberman and Simon Haberman (the Habermans). See Notice of Motion, Exhibit A (complaint), ¶ 7. Engelke alleges that the Habermans had had prior business dealings with Brown, Rudnick. Id., ¶ 13.
Under the DES merger agreement, Engelke became an employee of Pinnacle, and was made a vice president in charge of operating DES as a division of Pinnacle. See Notice of Motion, Exhibit A (complaint), ¶ 20. The DES merger agreement provided for the DES shareholders to receive $8.3 million worth of Pinnacle's common stock as payment for their interest in DES, and also granted the DES shareholders a contingent right to receive an additional quantity of Pinnacle's common stock, depending on DES's financial performance in the year following the merger. Id., ¶ 10. However, the DES merger agreement also included an indemnification clause that provided that the DES shareholders agreed to indemnify and hold Pinnacle harmless against any "losses" that Pinnacle might actually sustain as a result of "any inaccuracy or breach of representation, warranty or guarantee of the Company or Shareholder," or of "any failure by the Shareholder to perform or comply with any covenant contained herein." Id., ¶ 11; Exhibit H, at 30. For the purposes of this motion, the relevant portion of the DES merger agreement's indemnification clause is set forth in paragraph 7.2 (h), and provides that:
The DES merger agreement defines the term "loss" as "all damages, claims, losses, liabilities, deficiencies, costs and expenses, including reasonable attorneys' fees and expenses of investigation." See Notice of Motion, Exhibit H at 30.
(h) Third Party Claims. In the event an indemnified party [i.e., DES] becomes aware of a third-party claim which it believes may result in Losses, the indemnified party shall promptly notify the indemnifying party [i.e., Pinnacle] of such claim. The indemnifying party shall have the right at its expense to employ counsel of its choice to assume control of the defense of such claim and the indemnified party shall be entitled, at its expense, to participate in the defense of such claim. So long as the indemnifying party is defending such claim, the indemnifying party shall employ reasonable efforts to inform the indemnified party of material developments relating to such claim. So long as the indemnifying party is defending such claim, in good faith, the indemnified party will not settle such claim without the indemnifying party's written consent, which consent shall not be unreasonably withheld, and the indemnifying party shall not settle any claim on behalf of the indemnified party without the indemnified party's consent, which consent shall not be unreasonably withheld. In the event that the indemnifying party does not assume the defense of such claim or fails to defend the claim in good faith, the indemnified party shall have the right in its sole discretion to defend and settle any such claim; provided, however, that except with the consent of the indemnifying party, no settlement of any such claim with third-party claimants shall be determinative of the amount of any claim for indemnification pursuant to Sections 7.1 and 7.2 [of this agreement]. * * *
Id., Exhibit H, at 32.
The Montage stock purchase agreement provided for Engelke and the other Montage shareholders to receive a total of $4 million of Pinnacle's common stock as payment for their interests in Montage, and granted them a contingent right to receive an additional amount of Pinnacle's common stock depending on Montage's financial performance in the two years that followed the merger. See Notice of Motion, Exhibit A (complaint), ¶ 15. However, the Montage stock purchase agreement permitted Pinnacle to cancel that contingent right by making a one-time buyout payment of $21 million worth of Pinnacle's common stock to Engelke and the other Montage shareholders. Id., ¶ 16. The indemnification clause in the Montage stock purchase agreement is identical to the one set forth in the DES merger agreement, supra. Id., ¶ 17; Exhibit G, at 30, 32.
The Florida Litigation
On August 29, 2000, after Pinnacle had completed its acquisition of DES and Montage, a corporation called Athle-Tech Computer Systems, Inc. (Athle-Tech) filed suit against DES and Montage for breach of contract in Florida Superior Court, Pinellas County (the Athle-Tech I action). See Notice of Motion, Exhibit A (complaint), ¶ 21. On February 23, 2001, Pinnacle served all of the shareholders of DES and Montage (including Engelke) with a notice stating that Pinnacle was invoking its right to indemnification against the shareholders. Id., ¶ 22. Thereafter, on April 4, 2001, Pinnacle also exercised its buy out option pursuant to the Montage stock purchase agreement. Id., ¶ 23. The discovery phase of the Athle-Tech I action continued for the rest of the year, during which time Engelke also commenced two arbitrations against Pinnacle. The first of these resulted from Pinnacle's failure to issue Engelke any more shares of its common stock as a result of DES's financial performance in the preceding year, and the second resulted from Pinnacle's termination of Engelke's employment as the vice president in charge of DES on December 11, 2001. Id., ¶ 31.
The contract at issue was signed by Engelke for Montage and obligated Montage to develop certain computer programs for Athle-Tech. See Notice of Motion, Exhibit C.
Engelke claims that Pinnacle withheld $918,500 of the $21 million worth of Pinnacle's common stock that he was supposed to receive in any buy out, pursuant to a set-off provision that is included in the Montage stock purchase agreement's indemnification clause. See Notice of Motion, Exhibit A (complaint), ¶ 25.
On May 25, 2002, Pinnacle and the DES and Montage shareholders (i.e., Engelke and the Habermans) executed an agreement, the terms of which were intended to coordinate their collective, ongoing defense of the Athle-Tech I action (the Common Interest Agreement). Id., ¶ 26; Exhibit D. The Common Interest Agreement states that it "shall be governed by and construed in accordance with the laws of the State of Florida without reference to its conflict of law rules." Id. Engelke states that Brown, Rudnick represented the Habermans — but not himself — during the negotiation of the Common Interest Agreement. Id., ¶ 28. The Common Interest Agreement provided, in pertinent part, as follows:
Engelke states that the firm of Pillsbury, Winthrop, L.L.P. again represented him in the negotiation of the Common Interest Agreement. See Engelke Affidavit in Opposition, ¶ 6.
3. Settlements. Nothing in this Agreement shall preclude one of the Parties from settling the claims asserted by the Plaintiff against him or it. However, any Party receiving a settlement demand or offer by the Plaintiff shall promptly communicate such information to the other Parties, and any Party intending to settle the claims against him or it shall give prior notice of such intention to the other Parties to this Agreement. * * *
Id., Exhibit D, at 4.
The complaint states that, in August of 2002, Pinnacle requested Brown, Rudnick to represent itself, DES and Montage in the Athle-Tech I action. See Notice of Motion, Exhibit A (complaint), ¶ 29. Engelke also states that, thereafter, on August 23, 2002, Brown, Rudnick sent a letter to himself and the Habermans wherein Brown, Rudnick requested that they consent to its representing them along with Pinnacle, DES and Montage. Id., ¶ 30; Engelke Affidavit in Opposition, Exhibit B. In the complaint, Engelke acknowledges that he refused to consent to Brown, Rudnick representing him in the Athle-Tech I action, and states that he did so because Brown, Rudnick represented Pinnacle, against which Engelke was prosecuting the two arbitrations discussed earlier. See Notice of Motion, Exhibit A (complaint), ¶ 31. Engelke also acknowledges that Brown, Rudnick represented Pinnacle, DES and Montage in the Athle-Tech I action despite his refusal to consent to Brown, Rudnick's representing him. Id., ¶ 32. The complaint then recites that: 1) the Florida Superior Court sanctioned Brown, Rudnick by striking its answer after Brown, Rudnick failed to provide certain documents that the court had ordered produced; 2) Brown, Rudnick failed to object to that sanction, and thereby forfeited the right to appeal the Florida Superior Court's ruling; 3) the jury returned a $13.6 million verdict against DES and Montage after a trial on the issue of damages; and that 4) Brown, Rudnick appealed that verdict to the Florida Second District Court of Appeals on behalf of Pinnacle, Des and Montage. Id., ¶¶ 33-39.
The complaint next recites that, in December of 2004, Engelke received an award of $15.1 million against Pinnacle in the second of the two arbitration proceedings that he had commenced against Pinnacle. Id., ¶ 40. Engelke then claims that, in February of 2004, he and Pinnacle executed an agreement to settle both of those arbitration proceedings; however, he does not present a copy of that settlement agreement. Id., ¶ 41. Engelke asserts that one of the terms of the settlement between himself and Pinnacle required Pinnacle to seek his "reasonable consent . . . if at any point Pinnacle negotiated a settlement with Athle-Tech that exceeded $7.5 million." Id., ¶ 42.
The complaint next states that, on April 1, 2003, Athle-Tech commenced a second action in Florida Superior Court, Pinellas County, that named himself, his brother, Bryan Engelke, Pinnacle, DES and Montage as defendants (the Athle-Tech II action). Id., ¶ 43. It further states that, in December of 2004, Pinnacle — acting on behalf of itself, DES and Montage — executed two settlement agreements with Athle-Tech to dispose of the Athle-Tech I and II actions (the Athle-Tech settlement agreements). Id., ¶ 44; Exhibits E, F. Both Athle-Tech settlement agreements provide that they "shall be governed by the laws of the State of Florida." Id. The complaint alleges that Pinnacle did not disclose the existence of its settlement negotiations with Athle-Tech to Engelke or the Habermans, in violation of the indemnification clauses of the DES merger agreement and the Montage stock purchase agreement, and of the settlement clause of the Common Interest Agreement. Id., ¶ 46. The complaint also alleges that Brown, Rudnick represented Pinnacle, DES and Montage in the negotiation of the Athle-Tech settlement agreements, and that both of those agreements contain general release clauses that specifically exempt from coverage any former shareholders of DES or Montage — i.e., Engelke, his brother or the Habermans. Id., ¶¶ 45, 48. Finally, the complaint alleges that Engelke "has been forced to continue to defend Athle-Tech's claims against him and forced to pay Pinnacle indemnification in excess of the amounts he would have been required to pay had Brown, Rudnick not assisted Pinnacle to frustrate Engelke's contractual rights." Id., ¶ 51.
Prior Proceedings
Engelke commenced this action on October 17, 2005 by serving a summons and complaint that sets forth one cause of action for legal malpractice. Id. The complaint specifically alleges that Brown, Rudnick committed malpractice in connection with the Athle-Tech lawsuit: 1) by "failing to produce documents belonging to Montage which the Florida Superior Court ordered to be produced, which . . . resulted in liability being imposed on DES and Montage"; 2) by "failing to object to the Florida Superior Court's imposition of sanctions against DES based on the conduct of its co-defendant Montage, which . . . resulted in DES' waiver of a significant appeal right"; 3) by its "failures to exercise the skill and care of a reasonable attorney . . . [which] needlessly increased the losses incurred by Pinnacle and thereby increased Engelke's liability for indemnifying Pinnacle for such losses"; 4) by "advising Pinnacle on how to avoid its contractual obligations to Engelke to disclose the substance of its settlement negotiations with Athle-Tech and to obtain Engelke's consent to a settlement in excess of $7.5 million;" and 5) by "advising Pinnacle in contravention of the interests of . . . Engelke [and thereby forcing Engelke] to incur the on-going cost of defending [the Athle-Tech I and II actions]." Id., ¶¶ 55-59. Rather than file an answer, Brown, Rudnick now moves to dismiss the complaint.
DISCUSSION
Brown, Rudnick's motion recites that it seeks dismissal pursuant to CPLR 3211 (a) (1), (3) and (7). Its memorandum of law, however, sets forth arguments grouped under the following two general headings: 1) that Engelke "lacks standing" to assert a claim against Brown, Rudnick; and 2) that Brown, Rudnick committed no malpractice against Engelke, because it was only providing advice to its actual client, Pinnacle. See Memorandum of Law in Support of Motion, at 5-21. Engelke's opposition papers fail to address these arguments, but merely assert that Engelke's malpractice claim withstands scrutiny under the standard applicable to CPLR 3211 motions. After careful consideration, however, the court concludes that Brown, Rudnick's motion should be granted.
Brown, Rudnick's First Argument
Brown, Rudnick's first argument is a conflicts of law argument. It makes three points: 1) that the "application of New York law to this case would be unconstitutional"; 2) that "under New York's choice-of-law principles this action is governed by Florida law"; and 3) that "Florida law bars plaintiff's malpractice claim against Brown, Rudnick." See Memorandum of Law in Support of Motion, at 6-19.
Brown, Rudnick does not contest the court's exercise of in personam jurisdiction over it, and indeed acknowledges that "the fortuitous fact that Brown, Rudnick currently maintains a New York branch office . . . admittedly renders the Firm subject to personal jurisdiction in New York." See Memorandum of Law in Support of Motion, at 5. It is also clear that Brown, Rudnick would be subject to personal jurisdiction in the Florida courts if Engelke decided to prosecute his legal malpractice claim there. Thus, because both states' courts may properly exercise jurisdiction over Engelke's claim, it is evident that a conflicts of law issue exists in this action. See e.g. Cooney v. Osgood Machinery, Inc., 81 NY2d 66 (1993).
I. Conflicts of Law
In Matter of Allstate Ins. Co. (Stolarz) ( 81 NY2d 219), the Court of Appeals observed that "[t]he first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved." Id. at 223. Here, Florida law holds that:
In a legal malpractice action, a plaintiff must prove three elements: the attorney's employment, the attorney's neglect of a reasonable duty and that such negligence resulted in and was the proximate cause of loss to the plaintiff. Florida courts have uniformly limited attorneys' liability for negligence in the performance of their professional duties to clients with whom they share privity of contract." In a legal context, the term privity' is a word of art derived from the common law of contracts and used to describe the relationship of persons who are parties to a contract." The only instances in Florida where the rule of privity has been relaxed is where the plaintiff is an intended third party beneficiary of the employment contract.
Brennan v. Ruffner, 640 So2d 143, 145 (Fla App 4th Dist 1994) (citations omitted). Similarly, in New York, "[a]n action for legal malpractice requires proof of three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff's losses; and (3) proof of actual damages." Brooks v. Lewin, 21 AD3d 731, 734 (1st Dept 2005), citing Reibman v. Senie, 302 AD2d 290, 290 (1st Dept 2003). However, New York courts also hold that "privity [of an attorney-client relationship] does not depend on an express agreement or upon payment of a fee [emphasis added]." Jane Street Co. v. Rosenberg Estis, P.C., 192 AD2d 451, 451 (1st Dept 1993). In other words, it is not necessary that the parties formally execute a contract to create an attorney/client relationship in New York, and the courts are permitted to consider extrinsic circumstances to determine whether one has arisen. This disparity underscores the conclusion that a conflict exists as between New York and Florida law concerning privity of contract between attorneys and clients as relates to legal malpractice claims. Florida law enforces a strict policy that — with one infrequently arising exception — only allows clients to maintain legal malpractice claims against their attorneys if the parties have executed a formal contract. In contrast, New York law allows a court to consider a number of circumstantial factors to determine whether an attorney/client relationship may have arisen between two parties. This court must now determine whether the two states' laws would mandate different results in this particular action. It concludes that they do.
Brown, Rudnick argues that Engelke's malpractice claim would fail under Florida law because Engelke cannot plead the existence of an attorney/client relationship between Brown, Rudnick and himself in the absence of privity of contract between them. See Memorandum of Law in Support of Motion, at 6-19. Brown, Rudnick appears to be correct. As the court noted earlier, the complaint alleges that Brown, Rudnick committed five instances of legal malpractice during its prosecution and settlement of the Athle-Tech I and II actions. See Notice of Motion, Exhibit A (complaint), ¶ 55-59. However, the complaint also clearly states that Engelke refused to consent to Brown, Rudnick's representing him in the Athle-Tech I and II actions when it wrote to ask for his permission to do so. Id., ¶; Exhibit 31; Engelke Affidavit in Opposition, Exhibit B. Clearly, then, there was no contractual privity that would support a legal malpractice claim under Florida law. It is true that that state's law affords Engelke a narrow exception if he was an "intended third party beneficiary of the employment contract" between Brown, Rudnick and the other defendants that it represented in the Athle-Tech I and II actions. Brennan v. Ruffner, 640 So2d at 145. However, that exception may not be invoked unless "it can be demonstrated that the intent of the client in engaging the services of the lawyer was to benefit a third party." Id. at 146. Further, where the proponent of the exception admits that there was an inherent conflict of interest between his or her rights as an individual shareholder and the corporation, this admission expressly undercuts a third party beneficiary claim. Id. Here, because Pinnacle retained Brown, Rudnick, and Engelke admitted that he refused to be represented by Brown, Rudnick since he and Pinnacle had conflicting interests in the Athle-Tech I and II actions, it is clear that Engelke may not avail himself of the "intended third-party beneficiary" exception to Florida's privity requirement. See Notice of Motion, Exhibit A (complaint), ¶¶ 31-32. Under Florida law, Engelke's legal malpractice claim against Brown, Rudnick would plainly fail.
On the other hand, Engelke argues that his claim against Brown, Rudnick would withstand scrutiny under controlling New York State law — i.e., the standards that govern CPLR 3211. See Plaintiff's Memorandum of Law in Opposition, at 7-13. Under those standards, when a court evaluates a defendant's motion to dismiss pursuant to CPLR 3211 (a), the applicable test "is not whether the plaintiff has artfully drafted the complaint but whether, deeming the complaint to allege whatever can be reasonably implied from its statements, a cause of action can be sustained'." Jones Lang Wootton USA v. LeBoeuf, Lamb, Greene MacRae, 243 AD2d 168, 176 (1st Dept 1998), quoting Stendig, Inc. v. Thom Rock Realty Co., 163 AD2d 46, 48 (1st Dept 1990). To this end, a court must accept all of the facts alleged in the complaint as true, and determine whether they fit within any "cognizable legal theory." See e.g. Arnav Indus., Inc. Retirement Trust v. Brown, Raysman, Millstein, Felder Steiner, L.L.P., 96 NY2d 300, 303 (2001). As previously mentioned, New York law holds that "[a]n action for legal malpractice requires proof of three elements: (1) that the attorney was negligent; (2) that such negligence was a proximate cause of plaintiff's losses; and (3) proof of actual damages." Brooks v. Lewin, 21 AD3d at 734, citing Reibman v. Senie, 302 AD2d at 290. In assessing whether an attorney was negligent — i.e., whether the attorney owed a duty of care and breached it — the proponent of a legal malpractice claim must "establish the existence of an attorney-client relationship at the time of the alleged malpractice." Tabner v. Drake, 9 AD3d 606, 609 (3rd Dept 2004), citing Hansen v. Caffry, 280 AD2d 704, 705 (3rd Dept 2001). As was also previously mentioned, Engelke had refused Brown, Rudnick's representation "at the time of the alleged malpractice" — i.e., during the pendency of the Athle-Tech I and II actions. See Notice of Motion, Exhibit A (complaint), ¶¶ 31-32. However, as will be discussed later, the allegations in the complaint can be reasonably read to claim that Brown, Rudnick breached the contractual and/or fiduciary duties that it owed to Engelke in connection with the Montage stock purchase agreement. In such a claim, New York State would recognize a triable issue of fact as to whether Brown, Rudnick was in an attorney/client relationship with Engelke "at the time of the alleged malpractice." See e.g. Tabner v. Drake, 9 AD3d at 609. That claim — which may be reasonably implied from the allegations of the complaint — would survive the much less stringent standards that apply to a CPLR 3211 motion to dismiss. Because New York State law would seem to mandate a different result than Florida law, there is an irreconcilable conflict between Florida and New York law as to the viability of Engelke's legal malpractice claim.
II. Choice of Law
In Matter of Allstate Ins. Co. (Stolarz), the Court of Appeals held that, after a court "conclude[s] that there is a conflict [between two states' laws], we next address the choice of law issue." 81 NY2d at 225. In New York, the "preferred analytical tool in tort cases is to apply interest analysis,' where the policies underlying the competing laws are considered." Id. at 225. In applying "interest analysis," the Court of Appeals holds that:
An immediate distinction [is] drawn between laws that regulate primary conduct (such as standards of care) and those that allocate losses after the tort occurs (such as vicarious liability rules). If conflicting conduct-regulating laws are at issue, the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders. But if competing "postevent remedial rules" are at stake other factors are taken into consideration, chiefly the parties' domiciles.
Cooney v. Osgood Machinery, Inc., 81 NY2d at 72. Engelke's legal malpractice claim arises out of a law firm's professional conduct, and obviously implicates the interest that the state that licenses the law firm has in regulating its conduct. It is therefore evident that the laws that govern legal malpractice claims (in both Florida and New York) should be considered "conduct-regulating laws." This being so, the Court of Appeals' holding in Cooney v. Osgood Machinery, Inc. dictates that "the law of the jurisdiction where the tort occurred" should be applied. Here, that is the law of Florida. 81 NY2d at 72. Accordingly, under New York State's choice of law rules, the conflict that exists between Florida and New York law as to the viability of Engelke's legal malpractice claim against Brown, Rudnick should be resolved in favor of applying Florida law.
The same result is logically mandated with respect to any claims that Engelke might bring against Brown, Rudman based its representation of him in connection with the Montage stock purchase agreement. In any tort claim (i.e., legal malpractice), the locus of Brown, Rudman's tortious activity would clearly be Florida, while any contract claim would be subject to the Florida choice of law provision in the Montage stock purchase agreement.
III. Public Policy Considerations
The final step in a conflicts of law analysis is to determine whether New York's "public policy exception" should preclude the application of another state's laws when that result is otherwise dictated by "interest analysis." Cooney v. Osgood Machinery, Inc., 81 NY2d at 78.
The Court of Appeals holds that "[u]nder the public policy exception, when otherwise applicable foreign law would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal,' the court may refuse to enforce it." Id. at 78, quoting Loucks v. Standard Oil Co., 224 NY 99, 111 (1918). However, the Court also cautions that this exception should "apply only when New York's nexus with the case is substantial enough to threaten our public policy." Id. at 78, citing Schultz v. Boy Scouts of America, Inc., 65 NY2d 189, 202-203 (1985). Further, the Court of Appeals clearly holds that:
The party seeking to invoke the doctrine has the burden of proving that the foreign law is contrary to New York public policy. It is a heavy burden for public policy is not measured by individual notions of expediency and fairness or by a showing that the foreign law is unreasonable or unwise. Public policy is found in the State's Constitution, statutes and judicial decisions and the proponent of the exception must establish that to enforce the foreign law "would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal" expressed in them.
Schultz v. Boy Scouts of America, Inc., 65 NY2d at 202-203, quoting Loucks v. Standard Oil Co., 224 NY at 111. Here, Brown, Rudnick specifically asserts that Florida has the more compelling contacts with Engelke's instant malpractice claim because:
1) Engelke is domiciled in Florida;
2) Florida was the locus of the alleged legal malpractice;
3) That alleged malpractice arose from the Athle-Tech I and II actions, which were commenced in a Florida court by Athle-Tech, a Florida plaintiff;
4) The Athle-Tech I and II actions involved breach of contract claims, and the contract at issue (between Athle-Tech and Montage) was mailed to, and executed by, Athle-Tech in Florida;
5) Engelke and his co-defendants in the Athle-Tech I and II actions did not dispute that they were subject to personal jurisdiction in the Florida courts, or that Florida law governed the claims in those actions;
6) The Common Interest Agreement and both of the Athle-Tech Settlement Agreements contain Florida choice of law provisions;
7) Engelke's request for relief in this action includes a claim for his on-going costs of defending the Athle-Tech II action, which is still pending against him in a Florida court; and
8) It was a Florida court that issued the sanction against Brown, Rudman that Engelke claims led to the judgment against DES and Montage in the Athle-Tech I action that he now has to satisfy.
Id. at 7. Brown, Rudnick also asserts that New York State law is not implicated in either: 1) the Athle-Tech I action; 2) the Athle-Tech II action; 3) the Athle-Tech Settlement Agreements; or 4) the Common Interest Agreement. Id., at 8. In the absence of any opposition by Engelke, who bears the burden of proof on this point, the court finds that the "public policy exception" to New York State's choice of law rules is unavailable here. Because Engelke's legal malpractice claim against Brown, Rudman is not viable under Florida law, Brown, Rudnick's motion to dismiss it should therefore be granted.
Brown, Rudnick's Second Argument
Brown, Rudnick also argues that Engelke "cannot assert a legal malpractice claim based on legal advice [that] Brown, Rudnick provided to its fully disclosed client." See Memorandum of Law in Support of Motion, at 19-21. In making this argument, Brown, Rudman acknowledges that "[a]lthough [it is] not set forth as a separate cause of action, [Engelke] has also asserted that Brown, Rudnick was guilty of malpractice in connection with the events leading to its clients' settlement with Athle-Tech"; specifically, by failing "to disclose to [Engelke] the existence of its settlement negotiations with Athle-Tech in alleged violation of the [Common Interest Agreement]." Id. at 19. Brown, Rudnick concludes that these allegations, nonetheless, would not support a cause of action for legal malpractice by Engelke because Engelke was not Brown, Rudnick's client.
Mindful of its obligation to determine "whether, deeming the complaint to allege whatever can be reasonably implied from its statements, a cause of action can be sustained'" ( Jones Lang Wootton USA v. LeBoeuf, Lamb, Greene MacRae, 243 AD2d at 176 [citation omitted]), the court notes that the complaint sets forth the following allegations:
45.Pinnacle agreed to a general release that specifically exempted from its coverage any former shareholders of Montage or DES, including Engelke.
46.In breach of the Common Interest Agreement, Pinnacle failed to disclose to Engelke that settlement negotiations were underway with Athle-Tech or that Pinnacle subsequently entered into a settlement agreement with Athle-Tech.
47.Further, Pinnacle used the secrecy of its negotiations with Athle-Tech to structure a global settlement designed to frustrate Engelke's right to consent to the settlement.
48.On information and belief, Brown, Rudnick advised Pinnacle on its obligations under the Common Interest Agreement and its Settlement Agreement with Engelke in the context of the settlement negotiations with Athle-Tech and assisted Pinnacle to frustrate Engelke's rights under those agreements.
49.Brown, Rudnick thereby knowingly and intentionally provided advice adverse to the interests of Engelke, a former client from whom Brown, Rudnick failed to obtain consent to represent Pinnacle.
See Notice of Motion, Exhibit A (complaint), ¶¶ 45-49. The foregoing allegations may be reasonably read to support at least two additional causes of action against Brown, Rudman. First, because paragraph 46 plainly claims that Pinnacle breached the Common Interest Agreement, and because paragraph 48 further claims that Brown, Rudman advised Pinnacle in connection with this breach, the two paragraphs may also be reasonably read together as alleging that Brown, Rudman tortiously interfered with Engelke's rights under the Common Interest Agreement. Second, because paragraph 14 of the complaint states that Brown, Rudman represented Engelke in connection with the Montage stock purchase agreement, and because paragraph 49 plainly states that "Brown, Rudnick . . . knowingly and intentionally provided advice adverse to the interests of Engelke, a former client," the two paragraphs may also be reasonably read together as alleging that Brown, Rudman committed legal malpractice against Engelke in connection with his rights under the Montage stock purchase agreement. It is immaterial that Brown, Rudman owed Engelke no similar duties as attorney in connection with the Common Interest Agreement, and for this reason the court rejects Brown, Rudman's second dismissal argument. However, for the reasons discussed earlier, the court nonetheless grants Brown, Rudnick's motion in full.
The court notes in closing that its finding that the complaint adequately pleads two additional causes of action does not avail Engelke. Pursuant to the Court of Appeals holding in Cooney v. Osgood Machinery, Inc., discussed earlier, Engelke's additional tort claim would be governed by "the law of the jurisdiction where the tort occurred" (i.e., Florida) because it involves "conduct-regulating laws" (i.e., those that pertain to legal malpractice). 81 NY2d at 72. Further, the Common Interest Agreement, which Brown, Rudman may have tortiously interfered with, contains a Florida choice of law provision. See Notice of Motion, Exhibit D. The interests of judicial economy — if nothing else — would dictate that that additional contract-based claim be heard by the same forum that would presumptively have jurisdiction over Engelke's additional tort claim. For the foregoing reasons, it is hereby
ORDERED that the motion, pursuant to CPLR 3211 (a) (1), (3) and (7), of defendant Brown, Rudnick, Berlack, Israels, L.L.P. is granted and the complaint is dismissed with costs and disbursements to defendant as taxed by the Clerk of the Court; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.